-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dGxSjMjg2tBqdnSc4KrL2NAkKakd9wTKJXiCsPkpLDcV71Sw3pFlInk4rxLU8Ybu PeeTpJk8zLRb9bl/L5yKgw== 0000912057-94-001227.txt : 19940404 0000912057-94-001227.hdr.sgml : 19940404 ACCESSION NUMBER: 0000912057-94-001227 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA HCA HEALTHCARE CORP/ CENTRAL INDEX KEY: 0000860730 STANDARD INDUSTRIAL CLASSIFICATION: 8062 IRS NUMBER: 752497104 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-11239 FILM NUMBER: 94519773 BUSINESS ADDRESS: STREET 1: 201 WEST MAIN STREET CITY: LOUISVILLE STATE: KY ZIP: 40202- BUSINESS PHONE: (502)-572-2000 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA HEALTHCARE CORP DATE OF NAME CHANGE: 19930830 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA HOSPITAL CORP DATE OF NAME CHANGE: 19930328 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K MARK ONE: /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ___________________ TO ___________________. COMMISSION FILE NUMBER 1-11239 ------------------------ COLUMBIA/HCA HEALTHCARE CORPORATION (FORMERLY COLUMBIA HEALTHCARE CORPORATION) (Exact Name of Registrant as Specified in its Charter) ------------------------ DELAWARE 75-2497104 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Indentification No.) 201 WEST MAIN STREET LOUISVILLE, KENTUCKY 40202 (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (502) 572-2000 Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - -------------------------------------------------------- -------------------------------------------------------- Common Stock, $.01 Par Value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None 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 /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. / / As of February 28, 1994, there were outstanding 318,289,550 shares of the Registrant's Common Stock and 18,989,999 shares of the Registrant's Nonvoting Common Stock. As of February 28, 1994 the aggregate market value of the Common Stock held by non-affiliates was $12,304,680,760. For purposes of the foregoing calculation only, the Registrant's directors, executive officers, and The Hospital Corporation of America Stock Bonus Plan have been deemed to be affiliates. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for its 1994 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. The Exhibit Index is on page 39. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. GENERAL Columbia/HCA Healthcare Corporation (the "Company") is a health care services company that is primarily engaged in buying, selling, owning and operating general, acute care and specialty hospitals and related health care facilities. As of March 28, 1994, the Company operated 196 hospitals located in 26 states and two foreign countries. On February 10, 1994, the Company acquired HCA-Hospital Corporation of America ("HCA") pursuant to a merger transaction accounted for as a pooling of interests (the "HCA Merger"). HCA was one of the leading hospital management companies in the United States. Effective September 1, 1993, the Company acquired Galen Health Care, Inc. ("Galen") pursuant to a merger transaction accounted for as a pooling of interests (the "Galen Merger"). Galen was a health care services company that primarily owned and operated acute care hospitals. Galen began operations as an independent publicly held corporation upon the distribution of all of its common stock (the "Spinoff") by its then 100% owner, Humana Inc. ("Humana"), on March 1, 1993. Unless otherwise noted, the historical financial and operating data contained in this Annual Report on Form 10-K have been restated to include the relevant data for both HCA and Galen for all periods presented. The Company, through various predecessor entities, began operations on July 1, 1988. The Company was incorporated in Nevada in January 1990 and reincorporated in Delaware in September 1993. The Company's principal executive offices are located at 201 West Main Street, Louisville, Kentucky 40202, and its telephone number at such address is (502) 572-2000. BUSINESS STRATEGY The Company's strategy is to become a significant, comprehensive provider of quality health care services in targeted markets. The Company pursues its strategy by acquiring the health care facilities necessary to develop a comprehensive health care network with wide geographic presence throughout the market. Typically, the Company enters a market by acquiring one or more mid-to large-size general, acute care hospitals (over 150 licensed beds), which have either desirable physical plants or ones which can be upgraded on an economically feasible basis. The Company then upgrades equipment and facilities and adds new services to increase the attractiveness of the hospital to local physicians and patient populations. The Company typically develops a network by acquiring additional health care facilities including additional general, acute care hospitals, psychiatric hospitals and outpatient facilities such as surgery centers, diagnostic centers, physical therapy centers and other treatment or wellness facilities including home health care services. By developing a comprehensive health care network in a local market, the Company achieves greater visibility and is better able to attract physicians and patients by offering a full range of services in the entire market area. The Company is also able to reduce operating costs by sharing certain services among several facilities in the same market and is better positioned to work with health maintenance organizations ("HMOs"), preferred provider organizations ("PPOs") and employers. Upon acquisition of a facility, the Company hires experienced executives to manage its operations and decentralizes operational decision making to the local level, while providing local physicians and managers the opportunity to purchase equity interests in the operations through a partnership or corporate structure. The Company is currently implementing this strategy with certain of the former Galen and HCA facilities. Management believes the Company's strategy of co-ownership of its facilities with physicians produces significant operational advantages. Physicians who have an ownership interest in a facility take a more active role in recruiting other physicians and in improving efficiency by containing costs and making more rational capital expenditure decisions, and often are more active supporters of operations and medical staff quality assurance activities, as they have a direct personal interest in the success and reputation of the facility. Moreover, because the Company's facilities are co- owned with and operated by prominent members of the local medical community, both community 2 support for the facilities and the Company's ability to recruit physicians to the facilities are enhanced. In addition, by giving local managers of its facilities the opportunity to purchase equity interests in such facilities, the Company creates incentives on the part of its local managers to operate their facilities successfully with a long-term perspective. HEALTH CARE FACILITIES The Company currently operates hospitals, ambulatory surgery centers, diagnostic centers, cardiac rehabilitation centers, physical therapy centers, radiation oncology centers, comprehensive outpatient rehabilitation centers and home health care agencies and programs. The Company currently operates 168 general, acute care hospitals with 39,886 licensed beds. Most of the Company's general, acute care hospitals provides medical and surgical services, including inpatient care, intensive and 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. A local advisory board, which usually includes members of the hospital's medical staff, generally makes recommendations concerning the medical, professional and ethical practices at each hospital and monitors such practices. However, the hospital is ultimately responsible for ensuring that these practices conform to established standards. When the Company acquires a hospital, it establishes quality assurance programs to support and monitor quality of care standards and to meet accreditation and regulatory requirements. Patient care evaluations and other quality of care assessment activities are monitored on a continuing basis. Like most hospitals, the Company's hospitals do not engage in extensive medical research and medical education programs. However, some of the Company's hospitals have an affiliation with medical schools, including the clinical rotation of medical students. The Company currently operates 28 psychiatric hospitals with 3,285 licensed beds. The Company's psychiatric hospitals provide therapeutic programs tailored to child psychiatric, adolescent psychiatric, adult psychiatric, adolescent alcohol or drug abuse and adult alcohol or drug abuse patients. The hospitals use the treatment team concept whereby the admitting physician, team psychologist, social workers, nurses, therapists and counselors coordinate each phase of therapy. Services provided by this team include crisis intervention, individual psychotherapy, group and family therapy, social services, chemical dependency counseling, behavioral modification and physical medicine. Family aftercare plans are actively promoted from the time of admission, through hospitalization and after discharge. An aftercare plan measures each patient's post-program progress and utilizes one or more self-help groups. Program procedures are designed to ensure that quality standards are achieved and maintained. Certain of the Company's general, acute care hospitals also have a limited number of licensed psychiatric beds. Other outpatient or related health care services operated by the Company include ambulatory surgery centers, diagnostic centers, outpatient physical therapy/rehabilitation centers, outpatient radiation therapy centers, cardiac rehabilitation centers, skilled nursing services and home health/ infusion services. These outpatient and related services are an integral component of the Company's strategy to develop a comprehensive health care network in each of its target markets. In addition to providing capital resources, the Company makes available a variety of management services to its health care facilities, most significantly: national supply and equipment purchasing and leasing contracts; financial policies; accounting, financial and clinical systems; governmental reimbursement assistance; construction planning and coordination; information systems; legal; personnel management; and internal audit. SOURCES OF REVENUE Hospital revenues depend upon inpatient occupancy levels, the extent to which ancillary services and therapy programs are ordered by physicians and provided to patients, the volume of outpatient procedures and the charges or negotiated payment rates for such services. Charges and reimbursement rates for inpatient routine services vary significantly depending on the type of service (e.g., 3 medical/surgical, intensive care or psychiatric) and the geographic location of the hospital. The Company has experienced an increase in the percentage of patient revenues attributable to outpatient services. This increase is primarily the result of advances in technology, which allow more services to be provided on an outpatient basis, acquisitions of additional outpatient facilities and increased pressures from Medicare, Medicaid, HMOs and PPOs and insurers to reduce hospital stays and provide services, where possible, on a less expensive outpatient basis. The Company receives payment for patient services from the federal government primarily under the Medicare program, state governments under their respective Medicaid programs, HMOs, PPOs and other private insurers and directly from patients. The approximate percentages of patient revenues of the Company's facilities from such sources during the periods specified below were as follows:
YEARS ENDED DECEMBER 31, ------------------------------------- 1993 1992 1991 ----------- ----------- ----------- Medicare........................................................... 34% 30% 29% Medicaid........................................................... 4 4 4 Other sources...................................................... 62 66 67 --- --- --- Total.............................................................. 100% 100% 100% --- --- --- --- --- ---
Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons and persons with end-stage renal disease. Medicaid is a federal-state program administered by the states which provides hospital benefits to qualifying individuals who are unable to afford care. Substantially all of the Company's hospitals are certified as providers of Medicare and Medicaid services. Amounts received under the Medicare and Medicaid programs are generally significantly less than the hospital's customary charges for the services provided. To attract additional volume, most of the Company's hospitals offer discounts from established charges to certain large group purchasers of health care services, including Blue Cross, other private insurance companies, employers, HMOs, PPOs and other managed care plans. Blue Cross is a private health care program that funds hospital benefits through independent plans that vary in each state. These discount programs limit the Company's ability to increase charges in response to increasing costs. See "Competition." Patients are generally not responsible for any difference between customary hospital charges and amounts reimbursed for such services under Medicare, Medicaid, some Blue Cross plans and HMOs or PPOs, but are responsible to the extent of any exclusions, deductibles or co-insurance features of their coverage. The amount of such exclusions, deductibles and co-insurance has generally been increasing each year. Collection of amounts due from individuals is more difficult than from governmental or business payors. MEDICARE Beginning in 1983, reimbursement to hospitals under the Medicare program changed significantly and these changes have had, and are expected to continue to have, significant effects on the Company's hospitals and the health care industry in general. Prior to 1983, Medicare reimbursed medical/surgical hospitals on a cost-based system. In 1983, Medicare established a prospective payment system under which inpatient discharges from medical/surgical hospitals are classified into categories of treatments, known as Diagnosis Related Groups ("DRGs"), which classify illnesses according to the estimated intensity of hospital resources necessary to furnish care for each principal diagnosis. At December 31, 1993, there were 489 DRGs. Hospitals generally receive a fixed amount per Medicare discharge based upon the assigned DRG (the "DRG rate") regardless of how long the patient remains in the hospital or the volume of ancillary services ordered by the attending physician. However, the DRG rate is adjusted for each hospital to reflect the relative severity of diagnosis, higher cost of certain geographical areas, disproportionate share of low income patients and indirect medical education costs. Also, Medicare pays an additional "outlier" payment for extraordinary Medicare 4 cases involving long hospital stays or significant amounts of costs incurred. Under the prospective payment system, hospitals generally are encouraged to operate with greater efficiency, since they may retain payments in excess of costs but must absorb costs in excess of such payments. The Secretary of the Department of Health and Human Services ("HHS") is required to establish annual increases in the DRG rates, effective October 1 of each year, to counter inflationary pressure after considering the recommendations of an independent panel of experts. In each year since 1984, however, the increases in the DRG rates have been determined by Congress as part of the federal budget process. The index used to adjust the DRG rates gives consideration to the inflation experienced by hospitals in purchasing the goods and services they need to provide inpatient services (the "market basket"). For several years the percentage increases to the DRG rates have been lower than the percentage increases in the market basket. Substantially all of the Company's general, acute care hospitals are classified as urban for Medicare purposes. For federal fiscal year ("FY") 1992 the net update of the DRG rates for urban hospitals set by Congress was 2.8% (market basket minus 1.6%); for FY 1993 the net update of the DRG rates for urban hospitals was 2.6% (market basket minus 1.6%); and for FY 1994 the net update of the DRG rates for urban hospitals will be 1.8% (market basket minus 2.5%). As a result of the Omnibus Budget Reconciliation Act of 1993 ("OBRA 1993"), the net update of DRG rates for future fiscal years is as follows: (i) FY 1995 -- urban hospitals will equal the market basket minus 2.5%; (ii) FY 1996 -- all hospitals will equal the market basket minus 2.0%; (iii) FY 1997 -- all hospitals will equal the market basket minus 0.5%; and (iv) FY 1998 and thereafter -- all hospitals will equal the market basket. Medicare payments for the majority of outpatient services generally are the lower of 94.2% of hospital costs, customary charges or a blend of 94.2% of hospital costs and a fee schedule (such fee schedule generally being lower than hospital costs). OBRA 1993 extended the 94.2% provision through FY 1998. HHS has indicated its intention to change reimbursement procedures for Medicare outpatients to a prospective payment system. The effect of a change to a prospective payment system or other changes to the existing payment system, if implemented, cannot be predicted by the Company at this time. Medicare outpatient revenues were approximately 21% of the Company's total outpatient revenues, or approximately 6% of the Company's total operating revenues, for the year ended December 31, 1993. In addition to the operating payments described above, the Medicare program provides reimbursement to hospitals for certain costs of capital (such as depreciation, property taxes, rent and interest). Pursuant to final HHS regulations issued in August 1991, reimbursement for capital expenditures related to inpatient care was incorporated into the prospective payment system and will be phased in over a ten-year period beginning October 1, 1991. The regulations establish a standard federal rate per discharge for capital-related inpatient hospital costs. The standard federal rate is based on the estimated FY 1992 national average Medicare inpatient capital-related cost per discharge under cost reimbursement. The rate will be adjusted for each hospital to reflect the relative severity of diagnosis, higher cost of certain geographic areas, disproportionate share of low income patients, indirect medical education costs and extremely high cost cases. As required by law, however, the standard federal rate will be adjusted in FY 1992 through FY 1995 so that aggregate payments for capital will not exceed 90% of the amounts that would have been payable under a reasonable cost reimbursement basis. High capital cost-per-discharge hospitals may qualify to continue to be paid based on a blend of old and new capital, with old capital being paid at 85% of reasonable cost. Based upon its analysis of the manner in which these regulations will be applied, the Company does not believe that, in the aggregate, its hospitals were materially affected by the regulations for the year ended December 31, 1993. Payments for future years, however, including those related to new capital expenditures, will be affected by annual updates in the federal payment rate. Management cannot predict the effect of such changes on the Company's results of operations or financial condition. The Medicare program reimburses each hospital on a reasonable cost basis for the Medicare program's pro rata share of the hospital's allowable capital costs related to outpatient services. Outpatient capital reimbursement was reduced by 15% (i.e., 85% of outpatient capital costs) during 5 FY 1990 and the Omnibus Budget Reconciliation Act of 1990 (the "1990 Budget Act") extended the 15% reduction through FY 1991. The 1990 Budget Act further directed that outpatient capital reimbursement be reduced by only 10% beginning in FY 1992 through FY 1995. OBRA 1993 extended the 10% reduction through FY 1998. In December 1985, the Gramm-Rudman-Hollings Amendment ("Gramm-Rudman") was enacted by Congress mandating progressively smaller projected federal budget deficits for FYs between 1986 and 1991. Gramm-Rudman provides for automatic spending cuts in governmental programs (including Medicare) if certain deficit targets are not met. Under Gramm-Rudman, Medicare payments were reduced in each of the FYs 1986 through 1988 and in 1990. The 1990 Budget Act restructured Gramm-Rudman and extended its term of effectiveness. For FY 1991 through FY 1993, fixed deficit targets were eliminated, but will be applied for FY 1994 and FY 1995 unless the President orders such targets eliminated. In addition to the possible fixed deficit targets for FY 1994 and FY 1995, the 1990 Budget Act created two new limitations on federal spending, the Discretionary Spending Limits and the "Pay As You Go" requirement. Each of the three spending limitations is enforceable by sequestration, and under the "Pay As You Go" limitation, the maximum reduction in Medicare payments is 4%. Management is unable to determine what effect, if any, such provisions of the 1990 Budget Act might have on the Company if implemented. Certain specialized hospitals, including psychiatric hospitals, are exempt from the Medicare prospective payment system and continue to be reimbursed on a cost-based system. Under the Tax Equity and Fiscal Responsibility Act of 1982, base year costs per Medicare case were determined for the Company's psychiatric hospitals in 1982. The target rate of permitted increases in cost per case is established each year by the increase in the cost of a market basket of hospital goods and services (the "Target Rate"). If a hospital's costs increase less than the Target Rate, the hospital receives a bonus of 50% of the difference between its allowed increase and its actual increase (limited to 5% of the Target Rate). These limits apply only to operating costs and do not apply to capital costs. The effective increase in the Target Rate per discharge was 4.3% for the year commencing October 1, 1993 and is expected to be market basket minus 1% for FYs 1995 through 1997. Beginning in FY 1998, the update will equal the percentage increase in the market basket. The 1990 Budget Act, however, reduces the penalty for hospitals that incur actual operating costs in excess of the Target Rate by reimbursing 50% of the cost in excess of the limit up to 110% of the limit, effective for cost reporting periods beginning on or after October 1, 1991. The 1990 Budget Act directed the Secretary of HHS to develop a new prospective payment methodology for exempt hospitals and to report to Congress on this matter by April 1, 1992. The report had not been made as of March 28, 1994. Considerable uncertainty surrounds the future determination of payment levels for DRGs and for other services currently being reimbursed on a cost basis. Congress could consider further legislation in the prospective payment area, such as further reducing or eliminating DRG rate increases or otherwise revising DRG rates. In addition, any automatic spending cuts mandated under Gramm-Rudman will further reduce payments to the Company's hospitals under the Medicare program. Also, substantial areas of the Medicare program are subject to legislative and regulatory changes, administrative rulings, interpretations, administrative discretion, governmental funding restrictions and requirements for utilization review (such as second opinions for surgery and preadmission criteria). These matters, as well as more general governmental budgetary concerns, may significantly reduce payments made to the Company's hospitals under such programs, and there can be no assurance that future Medicare payment rates will be sufficient to cover cost increases in providing services to Medicare patients. MEDICAID Most state Medicaid payments are made under a prospective payment system or under programs to negotiate payment levels with individual hospitals. Medicaid reimbursement is generally substantially less than a hospital's cost of services. Medicaid is currently funded approximately 50% by the states and approximately 50% by the federal government. The federal government and many states 6 are currently considering significant reductions in the level of Medicaid funding while at the same time expanding Medicaid benefits, which could adversely affect future levels of Medicaid reimbursement received by the Company's hospitals. On November 27, 1991, Congress enacted the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991 (the "Medicaid Amendments"), which limit the amount of voluntary contributions and provider-specific taxes that can be used by states to fund Medicaid and require the use of broad-based taxes for such funding. As a result of enactment of the Medicaid Amendments, certain states in which the Company operates have adopted broad-based provider taxes to fund their Medicaid programs. To date, the impact upon the Company of these new taxes has not been materially adverse. However, the Company is unable to predict whether any additional broad-based provider taxes will be adopted by the states in which it operates and, accordingly, is unable to assess the effect thereof on its results of operations or financial condition. ANNUAL COST REPORTS The Company's annual cost reports which are required under the Medicare and Medicaid programs are subject to audit which may result in adjustments to the amounts ultimately determined to be due the Company under these reimbursement programs. These audits often require several years to reach the final determination of amounts earned under the programs. Providers also have rights of appeal, and the Company is currently contesting certain issues raised in audits of prior years' reports. Management believes that adequate provision has been made in its financial statements for any material retroactive adjustments that might result from all of such audits and that final resolution of all of these issues will not have a material adverse effect upon the Company's results of operations or financial position. Since the inception of the Medicare prospective payment system in 1983, the amount of reimbursement to the Company's general, acute care hospitals potentially affected by audit adjustments has substantially diminished. COMMERCIAL INSURANCE The Company's hospitals provide services to individuals covered by private health care insurance. Private insurance carriers either reimburse their policy holders or make direct payments to the Company's hospitals based upon the particular hospital's established charges and the particular coverage provided in the insurance policy. Blue Cross is a health care financing program that provides its subscribers with hospital benefits through independent organizations that vary from state to state. The Company's hospitals are paid directly by local Blue Cross organizations on the basis agreed to by each hospital and Blue Cross by a written contract. Recently, several commercial insurers have undertaken efforts to limit the costs of hospital services by adopting prospective payment or DRG based systems. To the extent such efforts are successful, and to the extent that the insurers' systems fail to reimburse hospitals for the costs of providing services to their beneficiaries, such efforts may have a negative impact on the Company's hospitals. HOSPITAL UTILIZATION The Company believes that the two 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 providing patient care within the facility. Generally, the Company believes that 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 which impact utilization include the growth in local population, local economic conditions and market penetration of managed care programs. The following table sets forth certain operating statistics for hospitals owned and operated by the Company for each of the five most recent years. Medical/surgical hospital operations are subject to certain seasonal fluctuations, including decreases in patient utilization during holiday periods and 7 increases in the cold weather months. Psychiatric hospital operations are also subject to certain seasonal fluctuations, including decreases in patient occupancy during the summer months and holiday periods.
YEARS ENDED DECEMBER 31, --------------------------------------------------------------- 1993 1992 1991 1990 1989 ----------- ----------- ----------- ----------- ----------- Number of hospitals (1)...................... 193 200 219 221 218 Weighted average licensed beds (2)........... 41,263 40,608 42,437 42,264 41,452 Admissions (3)............................... 1,158,400 1,161,100 1,189,700 1,174,700 1,139,300 Average length of stay (days)................ 5.9 6.1 6.5 6.6 6.8 Average daily census......................... 18,702 19,253 21,255 21,351 21,155 Occupancy rate (4)........................... 45% 47% 50% 51% 51% Emergency room visits........................ 3,139,700 3,042,900 3,028,600 2,894,800 2,756,900 Outpatient revenues as a % of patient revenues.................................... 27% 26% 24% 22% 21% - ------------------------ (1) End of period. (2) Weighted average licensed beds is defined as the number of licensed beds after giving effect to the length of time the beds have been licensed during the period. (3) Admissions represent the number of patients admitted for inpatient treatment. (4) Occupancy rates are calculated by dividing average daily census by weighted average licensed beds.
Beginning in 1983, hospitals began experiencing significant shifts from inpatient to outpatient care as well as decreases in average lengths of inpatient stay primarily as a result of hospital payment changes by Medicare, insurance carriers and self-insured employers. These changes generally encouraged the utilization of outpatient, rather than inpatient, services whenever possible, and shortened lengths of stay for inpatient care. Another factor affecting hospital utilization levels is improved treatment protocols as a result of medical technology and pharmacological advances. COMPETITION Generally, other hospitals in the local markets served by most of the Company's hospitals provide services that are offered by the Company's hospitals. Additionally, in the past several years, the number of free-standing outpatient surgery and diagnostic centers in the geographic areas in which the Company operates has increased significantly. As a result, most of the Company's hospitals operate in an increasingly competitive environment. The rates charged by the Company's hospitals are intended to be competitive with those charged by other local hospitals for similar services. In some cases, competing hospitals are more established than the Company's hospitals. Also, some competing hospitals are owned by tax-supported government agencies and many others by tax-exempt corporations which may be supported by endowments and charitable contributions and which are exempt from sales, property and income taxes. Such exemptions and support are not available to the Company's hospitals. In addition, in certain localities served by the Company there are large teaching hospitals which provide highly specialized facilities, equipment and services which may not be available at most of the Company's hospitals. Psychiatric hospitals frequently attract patients from areas outside their immediate locale and, therefore, the Company's psychiatric hospitals compete with both local and regional hospitals, including the psychiatric units of general, acute care hospitals. The Company believes that its hospitals compete within local markets on the basis of many factors, including the quality of care, ability to attract and retain quality physicians, location, breadth of services and technology offered and prices charged. The competition among hospitals and other health care providers has intensified in recent years as hospital occupancy rates have declined. The Company's strategies are designed, and management believes that its hospitals are positioned, to be competitive under these changing circumstances. 8 One of the most significant factors in the competitive position of a hospital is the number and quality of physicians affiliated with the hospital. Although physicians may at any time terminate their affiliation with a hospital operated by the Company, the Company seeks to retain physicians of varied specialties on its hospitals' medical staffs and to attract other qualified physicians. The Company believes that physicians refer patients to a hospital primarily on the basis of the quality of services it renders to patients and physicians, the quality of other physicians on the medical staff, the location of the hospital and the quality of the hospital's facilities, equipment and employees. Accordingly, the Company strives to maintain high ethical and professional standards and quality facilities, equipment, employees and services for physicians and their patients. Another major factor in the competitive position of a hospital is its management's ability to negotiate service contracts with purchasers of group health care services. HMOs and PPOs attempt to direct and control the use of hospital services through managed care programs and to obtain discounts from hospitals' established charges. In addition, employers and traditional health insurers are increasingly interested in containing costs through negotiations with hospitals for managed care programs and discounts from established charges. Generally, hospitals compete for service contracts with group health care service purchasers on the basis of price, market reputation, geographic location, quality and range of services, quality of the medical staff and convenience. The importance of obtaining contracts with managed care organizations varies from market to market 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 add new equipment, may also have the effect of restricting competition. The application process for approval of covered services, facilities, changes in operations and capital expenditures is, therefore, highly competitive. 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. The Company has not experienced, and does not expect to experience, any material adverse effects from state CON requirements or from the imposition, elimination or relaxation of such requirements. See "Regulation and Other Factors." REGULATION AND OTHER FACTORS LICENSURE, CERTIFICATION AND ACCREDITATION Health care facility construction and operation is subject to federal, state and local regulation relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, fire prevention, rate-setting and compliance with building codes and environmental protection laws. Facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. All of the Company's health care facilities are properly licensed under appropriate state laws. Substantially all of the Company's general, acute care hospitals are certified under the Medicare program or are accredited by the Joint Commission on Accreditation of Health Care Organizations ("Joint Commission"), the effect of which is to permit the facilities to participate in the Medicare and Medicaid programs. A few of the Company's psychiatric hospitals do not participate in these programs. Should any facility lose its Joint Commission accreditation, or otherwise lose its certification under the Medicare program, the facility would be unable to receive reimbursement from the Medicare and Medicaid programs. Management believes that the Company's 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 be necessary for the Company to effect changes in its facilities, equipment, personnel and services. CERTIFICATES OF NEED The construction of new facilities, the acquisition of existing facilities, and the addition of new beds or services may be reviewable by state regulatory agencies under a CON program. The Company operates hospitals in some states that require approval under a CON program. Such laws generally 9 require appropriate state agency determination of public need and approval prior to beds or services being added, or a related capital amount being spent. Failure to obtain necessary state approval can result in the inability to complete an acquisition or change of ownership, the imposition of civil or, in some cases, criminal sanctions, the inability to receive Medicare or Medicaid reimbursement or the revocation of a facility's license. STATE RATE REVIEW A few states in which the Company owns hospitals 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 Florida, a budget review process and a ceiling on net revenue increases per admission has been in effect with respect to the Company's hospitals since January 1, 1986. The ceiling on net revenue increases per admission limits hospital net revenue per admission increases to an annually-determined percentage increase in costs that Florida hospitals pay for goods and services plus a statutory 2%, plus additional amounts to recognize the hospital's Medicare patient days and Medicaid and uncompensated charity care days. This law limits the ability of Florida hospitals to increase rates to maintain operating margins. The Company owned 47 hospitals aggregating 11,596 beds in Florida as of March 28, 1994. In the aggregate, state rate or budget review and indigent tax provisions have not materially adversely affected the Company's results of operations. The Company is unable to predict whether any additional state rate or budget review or indigent tax provisions will be adopted and, accordingly, is unable to assess the effect thereof on its results of operations or financial condition. 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 Medicare and Medicaid patients must be reviewed by peer review organizations ("PROs"), which review 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. While no PROs have ever taken any material adverse action against any of the Company's hospitals, PROs may deny payment for services provided, assess fines and also have the authority to recommend to HHS that a provider which is in substantial noncompliance with the standards of the PRO be excluded from participating in the Medicare program. MEDICARE REGULATIONS AND FRAUD AND ABUSE Participation in the Medicare program is heavily regulated by federal statute and regulation. If a hospital provider fails substantially to comply with the numerous conditions of participation in the Medicare program or performs certain prohibited acts (e.g., (i) making false claims to Medicare for services not rendered or misrepresenting actual services rendered in order to obtain higher reimbursement; (ii) paying remuneration for Medicare referrals (so called "fraud and abuse" which is prohibited by the "anti-kickback" provisions of the Social Security Act); (iii) failing to stabilize all individuals who come to its emergency room who have an "emergency medical condition," whether or not any such individual is eligible for Medicare; (iv) transferring any stabilized patient to another health care facility before such other facility has agreed to the transfer of such patient, while such other facility does not have sufficient room and staff to treat the patient, without the patient's emergency department medical records, or without appropriate life support equipment; and (v) transferring any unstabilized patient except those transferred at the patient's request or with physician certification that the medical risks from the transfer are less harmful than continued treatment at the transferring facility), such hospital's participation in the Medicare program may be terminated or civil or criminal penalties may be imposed upon such hospital under certain provisions of the Social Security Act. 10 Moreover, HHS and the courts have interpreted the "fraud and abuse" anti-kickback provisions of the Social Security Act (presently codified in Section 1128B(b) of the Social Security Act) broadly to include the intentional offer, payment, solicitation or receipt of anything of value if one purpose of the payment is to induce the referral of Medicare business. Health care providers generally are concerned that many relatively innocuous, or even beneficial, commercial arrangements with their physicians may technically violate this strict interpretation of Section 1128B(b). In 1976 Congress established the Office of Inspector General ("OIG") at HHS to identify and eliminate fraud, abuse and waste in HHS programs and to promote efficiency and economy in HHS departmental operations. The OIG carries out this mission through a nationwide program of audits, investigations and inspections. In order to provide guidance to health care providers on ways to engage in legitimate business practices and avoid scrutiny under the fraud and abuse statute, the OIG has from time to time issued "fraud alerts" identifying features of transactions, which, if present, may indicate that the transaction violates the fraud and abuse law. In May 1992, the OIG issued a special fraud alert regarding hospital incentives to physicians. The alert identified the following incentive arrangements as potential violations of the statute: (a) payment of any sort of incentive by the 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, CPT coding and laboratory techniques, (e) guarantees which provide that, if the physician's income fails to reach a predetermined level, the hospital will supplement the remainder up to a certain amount, (f) low-interest or interest-free loans, or loans which may be forgiven if a physician refers patients (or some number of 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 and (i) payment for services (which may include consultations at the hospital) which require few, if any, substantive duties by the physician, or payment for services in excess of the fair market value of services rendered. In this fraud alert the OIG encouraged persons having information about hospitals who offer the above types of incentives to physicians to contact any of the eleven regional OIG offices or to report information to the OIG. In addition, on July 29, 1991, the OIG issued final regulations outlining certain "safe harbor" practices, which, although potentially capable of inducing prohibited referrals of business under Medicare or state health programs, would not be subject to enforcement action under the Social Security Act. The practices covered by the regulations include certain physician joint venture transactions, rental of space and equipment, personal services and management contracts, sales of physician practices, referral services, warranties, discounts, payments to employees, group purchasing organizations and waivers of beneficiary deductibles and co-payments. Additional proposed safe harbors are expected to be published in the near future by the OIG, including a safe harbor regulation for physician recruitment. Certain of the Company's current arrangements with physicians, including joint ventures, do not qualify for the current safe harbor exemptions. Although the Company exercises care in an effort to structure its arrangements with physicians to comply in all material respects with these laws, and although management believes that the Company is in compliance with Section 1128B(b) of the Social Security Act, there can be no assurance that (i) government officials charged with responsibility for enforcing the prohibitions of Section 1128B(b) of the Social Security Act will not assert that the Company or certain transactions in which it is involved are in violation of Section 1128B(b) of the Social Security Act and (ii) such statute will ultimately be interpreted by the courts in a manner consistent with the practices of the Company. The federal Medicaid regulations also prohibit fraudulent and abusive practices and authorize the exclusion from such program of providers in violation of such regulations. 11 STATE LEGISLATION Some of the states in which the Company operates also have laws that prohibit corporations and other entities from employing physicians and practicing medicine for a profit or that prohibit certain direct and indirect payments or fee-splitting arrangements between health care providers that are designed to induce or encourage the referral of patients to, or the recommendation of, particular providers for medical products and services. In addition, some states restrict certain business relationships between physicians and pharmacies. Possible sanctions for violation of these restrictions include loss of licensure and civil and criminal penalties. These statutes vary from state to state, are often vague and have seldom been interpreted by the courts or regulatory agencies. Although the Company exercises care in an effort to structure its arrangements with health care providers to comply with the relevant state statutes, and although management believes that the Company is in compliance with these laws, there can be no assurance that (i) governmental officials charged with responsibility for enforcing these laws will not assert that the Company or certain transactions in which it is involved are in violation of such laws and (ii) such state laws will ultimately be interpreted by the courts in a manner consistent with the practices of the Company. HEALTH CARE REFORM In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the health care system, either nationally or at the state level. Among the proposals under consideration are cost controls on hospitals, insurance market reforms to increase the availability of group health insurance to small businesses, requirements that all businesses offer health insurance coverage to their employees and the creation of a single government health insurance plan that would cover all citizens. President Clinton has stated that one of his primary objectives is to reform the nation's health care system to insure universal coverage and address the rising costs of care. In early 1993, President Clinton appointed Hillary Rodham Clinton to lead a health care reform task force with the objective of developing a health care reform proposal which could be submitted by the President. On September 22, 1993, before a Joint Session of Congress, President Clinton outlined the basic principles of his upcoming health care reform proposal. President Clinton's health care reform bill, introduced as legislation on November 22, 1993, includes certain measures that could be viewed as advancing the scope of government regulation on the health care industry. Key elements in the President's proposal include various insurance market reforms, the requirement that businesses provide health insurance coverage for their full-time and part-time employees, significant reductions in future Medicare and Medicaid payments to providers, and stringent government cost controls that would directly control insurance premiums and indirectly affect the fees of hospitals, physicians and other health care providers. In addition to the President's reform proposal, several other health care reform bills have recently been introduced, including The Managed Competition Act of 1993, Affordable Health Care Now Act of 1993 and Health Equity & Access Reform Today. While the Company cannot predict whether any such proposals will be adopted, or if adopted what effect, if any, such proposals would have on its business, the Company believes that it is implementing measures to respond to such prospective changes by expanding its network strategy, building integrated health care delivery systems, negotiating with managed care providers and controlling its costs. ENVIRONMENTAL MATTERS The Company is subject to various federal, state and local statutes and ordinances regulating the discharge of materials into the environment. Management does not believe that the Company will be required to expend any material amounts in order to comply with these laws and regulations or that compliance will materially affect its capital expenditures, earnings or competitive position. INSURANCE As is typical in the health care industry, the Company is subject to claims and legal actions by patients in the ordinary course of business. Through two wholly-owned insurance subsidiaries, the Company insures substantially all of its general and professional liability risks. Subject to various 12 deductibles, the Company's hospitals are insured by these insurance subsidiaries for losses of up to $25 million per occurrence for the former HCA hospitals and up to $5 million per occurrence for the former Columbia Healthcare Corporation hospitals. The Company currently carries general and professional liability insurance from unrelated commercial carriers for losses in excess of amounts insured by its insurance subsidiaries. The Company and its insurance subsidiaries maintain allowances for loss for professional and general liability risks which totalled $817 million at December 31, 1993. Management considers such allowances, which are based on actuarially determined estimates, to be adequate for such liability risks. Any losses incurred in excess of the established allowances for loss will be reflected as a charge to earnings of the Company. Any losses incurred within the deductible(s) or in excess of amounts funded and commercial excess liability insurance will be funded from the Company's working capital. While the Company's cash flow has been adequate to provide for alleged and unforeseen liability claims in the past, there can be no assurance that such amounts will continue to be adequate. If payments for general and professional liabilities exceed anticipated losses, the results of operations and financial condition of the Company could be adversely affected. EMPLOYEES AND MEDICAL STAFFS At December 31, 1993, the Company had approximately 131,600 employees, including approximately 33,500 part-time employees. Three hospitals have employees represented by various labor unions. The Company considers its employee relations to be satisfactory. While the Company's hospitals experience union organizational activity from time to time, the Company does not expect such efforts to materially affect its future operations. The Company's hospitals, like most hospitals, have experienced labor costs rising faster than the general inflation rate. In recent years, the Company generally has not experienced material difficulty in recruiting and retaining employees, including nurses and professional staff members, primarily as a result of staff retention programs and general economic conditions. There can be no assurance as to future availability and cost of qualified medical personnel. As of December 31, 1993, approximately 56,000 licensed physicians were active members of the medical staffs of the Company's hospitals. With limited exceptions, physicians generally are not employees of the Company's hospitals. However, some physicians provide services in the Company's 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 admitted to the medical staff of any of the Company's hospitals, but admission to the staff must be approved by the hospital's medical staff and the appropriate governing board of the hospital in accordance with established credentialling criteria. Members of the medical staffs of the Company's hospitals often also serve on the medical staffs of other hospitals, and may terminate their affiliation with a hospital at any time. INTERNAL REVENUE SERVICE EXAMINATIONS AND TAX LITIGATION As a result of examinations by the Internal Revenue Service (the "Service") of HCA's federal income tax returns, HCA received statutory notices of deficiency for the years 1981 through 1988. HCA has filed petitions in the U.S. Tax Court opposing these claimed deficiencies. Additionally, the Service completed its examination for the years 1989 and 1990 and has issued proposed adjustments, which HCA has protested. The principal issues involved are: (a) METHOD OF ACCOUNTING. For the taxable years 1981 through 1986, most of HCA's hospital subsidiaries (the "Subsidiaries") reported taxable income using primarily the cash method of accounting. The cash method was prevalent within the hospital industry and the Subsidiaries applied the method in accordance with prior agreements reached with the Service. The Service now asserts that the accrual method of accounting should have been used. The Tax Reform Act of 1986 (the "1986 Act") requires most large corporate taxpayers (including the Company) to use the accrual method of accounting beginning in 1987. Consequently, the Subsidiaries changed to the accrual method beginning January 1, 1987. In accordance with the provisions of the 1986 Act, 13 income that was deferred by use of the cash method at the end of 1986 is being recognized as taxable income by the Subsidiaries in equal annual installments over ten years (1987 through 1996). If the Service should ultimately prevail in its claim that the Subsidiaries should have used the accrual method for 1981 through 1986, HCA would be entitled to an offset as a result of the prior inclusion of such installments for 1987 and thereafter. Furthermore, the sale by HCA of numerous Subsidiaries in 1987 that had used the cash method resulted in the recognition of substantial gain which would not have been recognized had they been using the accrual method. Giving effect to these offsets, as of December 31, 1993, the net effect to HCA of the Service prevailing would be $110 million in additional income taxes plus interest of $432 million. (b) HOSPITAL ACQUISITIONS. (i) In connection with hospitals acquired by HCA in 1981, the Service asserts that certain assets claimed by HCA to have an ascertainable useful life have no ascertainable useful life and are therefore nonamortizable, and that the values assigned by HCA's independent appraisers to certain assets acquired were excessive and that such amounts actually constitute goodwill, a nondepreciable and nonamortizable asset. If the Service ultimately prevails with regard to every assertion, the additional income taxes owed through December 31, 1993 would be $55 million plus interest of $97 million. (ii) Similarly, in connection with assets acquired in 1985, the Service is asserting that the relevant appraised values were excessive, with a corresponding limitation on the resulting deductions. With regard to these issues, the Service claims $58 million of additional income taxes and $42 million of interest through December 31, 1993. (c) INSURANCE SUBSIDIARY. (i) Based on a Sixth Circuit Court of Appeals decision (the Court having jurisdiction over HCA's issues), HCA has claimed that insurance premiums paid to Parthenon Insurance Company ("Parthenon"), a wholly-owned subsidiary of HCA, are deductible, while the Service maintains that such premiums are not deductible and that corresponding losses are only deductible at the time and to the extent that claims are actually paid. HCA has claimed the additional deductions in its Tax Court petitions. Through December 31, 1993, HCA is seeking an income tax refund of $51 million, plus interest of $93 million with respect to this issue. (ii) As an alternative to HCA's position set forth in (c)(i) above, HCA has taken the position that in connection with its sale of hospitals to HealthTrust, Inc. -- The Hospital Company ("HealthTrust") in 1987, premiums paid to Parthenon by the hospitals sold, if not deductible as described in (c)(i) above, became deductible by HCA upon the sale and HCA claimed such deduction in its 1987 federal income tax return. The Service has disallowed the deduction and is claiming an additional $5 million in income taxes and $15 million in interest. A final determination that the premiums are not deductible either when paid or upon the sale would increase HCA's taxable basis in the hospitals sold, reducing HCA's gain realized on the sale. (d) HEALTHTRUST SALE. (i) In its 1987 sale of certain hospitals to HealthTrust in exchange for cash, HealthTrust preferred stock and stock purchase warrants, HCA calculated its gain based on the valuation of such stock and warrants by an independent appraiser. The Service claims a higher aggregate valuation, based on the face amount of the preferred stock and a separate appraisal HealthTrust obtained for the stock purchase warrants. Application of the higher valuation would increase the gain recognized by HCA on the sale. If, however, the Service succeeds in its assertion, HCA's tax basis in its HealthTrust preferred stock and warrants will be increased accordingly, thereby substantially reducing the tax from the sale of such preferred stock and warrants by a corresponding amount. By the end of 1992, HCA had sold its entire interest in the HealthTrust preferred stock and warrants. Taking into consideration the sales, the Service is claiming interest of $64 million through December 31, 1993. (ii) Also in connection with the 1987 sale of certain hospitals to HealthTrust, the Service claims that HCA's basis in the stock of the subsidiaries owning such hospitals sold to HealthTrust should be calculated by adjusting such basis to reflect accelerated rather than straight-line depreciation. This would reduce HCA's basis in the stock sold, increasing its taxable gain on the 14 sale. The Service's position is contrary to a Tax Court decision which HCA believes to be controlling. The Service is claiming additional income taxes of $79 million and interest of $66 million through December 31, 1993 based on its position. (iii) In connection with the 1987 HealthTrust transactions, the Service further asserts that, to the extent the Subsidiaries were properly on the cash method through 1986, and therefore were properly including deferred income over a 10-year transition period, HCA should have additional income in 1987 equal to the unamortized portion of the deferred income. It is HCA's position that no additional income need be included in 1987 and that the deferred income continues to qualify for the 10-year transition period after the sale. Should the Service prevail, HCA would owe $11 million of additional income taxes and $17 million of interest through December 31, 1993. This position of the Service is an alternative to its denial of the use of the cash method of accounting as discussed in (a) above. (e) DOUBTFUL ACCOUNTS. For 1986 the Service asserts that HCA is not entitled to include charity care writeoffs in the formula used to calculate its deduction for doubtful accounts. For the years 1987 and 1988, the Service asserts that HCA is not entitled to exclude from income amounts which are unlikely to be collected. Management believes that such exclusions are permissible under an accrual method of accounting, and furthermore, because HCA is a "service business" and not a "merchandising business", it is entitled to a special exclusion provided to service businesses by the 1986 Act. The Service disagrees, asserting that HCA is engaged, at least in part, in a "merchandising business" and that even if HCA is engaged in a "service business," the exclusion taken by HCA is excessive under applicable Temporary Treasury Regulations. HCA believes that the formula in the Temporary Treasury Regulations which provides for the calculation of the exclusion is inaccurate, in that it does not permit HCA to calculate the exclusion in accordance with the controlling statute. If the Service prevails, HCA would owe additional income taxes of $102 million and interest of $48 million through December 31, 1993. (f) LEVERAGED BUY-OUT EXPENSES. With respect to 1989 and 1990, the Service has claimed that certain expense and amortization deductions claimed with respect to the leveraged buy-out of HCA are not deductible. If the Service were to prevail with respect to all of these items, additional income taxes of $94 million would be owed, together with interest in the amount of $24 million as of December 31, 1993. (g) OTHER ISSUES. Additional federal income tax issues primarily concern disputes over the depreciable lives utilized by HCA for constructed hospital facilities, investment tax credits, vacation pay deductions and income from foreign operations. Many of these items, such as depreciation, investment tax credits and foreign issues, have been resolved favorably in previous settlements and management believes the previous settlement methodology should be followed again by the Service. The Service is claiming an additional $44 million in income taxes and $28 million in interest through December 31, 1993 with respect to these issues. Management is of the opinion that HCA has properly reported its income and paid its taxes in accordance with applicable laws and in accordance with agreements established with the Service during previous examinations. In management's opinion, the final outcome resulting from the Service's examinations of prior years' income taxes will not have a material adverse effect on the Company's results of operations, financial position or liquidity. If all or a majority of the positions of the Service are upheld, however, the results of operations, financial position and liquidity of the Company would be materially adversely affected. Management believes that any cash payments necessary as a result of such final outcome would be funded with cash from operations and, if necessary, with amounts available under the Company's revolving credit or other borrowing facilities. 15 EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company as of March 28, 1994, were as follows:
NAME AGE POSITION(S) - ------------------------------ --- ---------------------------------------------------------------------------- Thomas F. Frist, Jr., M.D. 55 Chairman of the Board Richard L. Scott 41 President and Chief Executive Officer David T. Vandewater 43 Chief Operating Officer Stephen T. Braun 38 Senior Vice President and General Counsel Victor L. Campbell 47 Senior Vice President Thomas H. Cato 51 Senior Vice President -- Information Systems David C. Colby 40 Senior Vice President, Chief Financial Officer and Treasurer Samuel A. Greco 42 Senior Vice President -- Financial Operations Neil D. Hemphill 40 Senior Vice President -- Human Resources Richard A. Lechleiter 35 Vice President and Controller Joseph D. Moore 47 Senior Vice President -- Development Lindy B. Richardson 47 Senior Vice President -- Marketing/Public Affairs Russell D. Schneider 40 Senior Vice President -- Market Organization Richard A. Schweinhart 44 Senior Vice President -- Finance
Thomas F. Frist, Jr., M.D. has served as Chairman of the Board of the Company since February 1994. Dr. Frist, a founder of HCA, served as Chairman of the Board, President and Chief Executive Officer of HCA from September 1987 to February 1994. Dr. Frist was Chairman and Chief Executive Officer of HCA from August 1985 until September 1987. Dr. Frist is also a director of International Business Machines Corporation. Richard L. Scott has served as President, Chief Executive Officer and a director of the Company since September 1993. Mr. Scott was Chairman, Chief Executive Officer and a director of the Company or its predecessors from July 1988 to September 1993. David T. Vandewater has served as Chief Operating Officer of the Company since September 1993. Mr. Vandewater was President of the Company from February 1991 to September 1993 and served as its Executive Vice President from May 1990 until February 1991. From July 1988 until February 1990, Mr. Vandewater was an Executive Vice President and Chief Operating Officer of Republic Health Corporation (presently called OrNda Healthcorp). Stephen T. Braun has served as Senior Vice President and General Counsel of the Company since September 1993. Mr. Braun served as Vice President and General Counsel of the Company from October 1991 until September 1993. From July 1987 to October 1991, Mr. Braun practiced law with the law firm of Doherty, Rumble & Butler, Professional Association, Saint Paul, Minnesota. Victor L. Campbell has served as Senior Vice President of the Company since February 1994. For more than five years prior to that time, Mr. Campbell served as HCA's Vice President for Investor, Corporate, and Government Relations. Mr. Campbell is currently Chairman of the Board of the Federation of American Health Systems. Thomas H. Cato has served as Senior Vice President -- Information Systems of the Company since February 1994. Mr. Cato was Senior Vice President -- Information Services of HCA from April 1992 to February 1994. Mr. Cato was Vice President -- Information Services of HCA from 1987 until April 1992. 16 David C. Colby has served as Senior Vice President, Chief Financial Officer and Treasurer of the Company since February 1994. Mr. Colby has served as Chief Financial Officer of the Company or its predecessors since July 1988. Mr. Colby was elected Treasurer of the Company in November 1991. Samuel A. Greco has served as Senior Vice President -- Financial Operations of the Company since July 1992. Mr. Greco served as Senior Vice President of Finance -- South Florida Division of the Company from November 1990 to July 1992. Mr. Greco was Chief Financial Officer of University Hospital, Tamarac, Florida, which is owned and operated by the Company, from January 1990 to November 1990. From 1980 to 1989, Mr. Greco held various administrative positions with Florida Medical Center and several diagnostic centers and physician offices. Neil D. Hemphill has served as Senior Vice President -- Human Resources of the Company since February 1994. Mr. Hemphill served as Vice President -- Human Resources of the Company from June 1992 to February 1994. Mr. Hemphill was a Director of Human Resources of OrNda Healthcorp from January 1985 to June 1992. Richard A. Lechleiter has served as Vice President and Controller of the Company since September 1993. Mr. Lechleiter served in the same capacity at both Galen and Humana from September 1990 to September 1993. From July 1988 until September 1990, Mr. Lechleiter was the Controller of Humana. Joseph D. Moore has served as Senior Vice President -- Development of the Company since February 1994. Mr. Moore was Senior Vice President -- Finance and Development of HCA from January 1993 to February 1994. Mr. Moore was Senior Vice President -- Development of HCA from April 1992 until January 1993 and Vice President -- Development of HCA from 1980 until April 1992. Lindy B. Richardson has served as Senior Vice President -- Marketing/Public Affairs of the Company since February 1994. Ms. Richardson served as Vice President -- Marketing/Public Affairs of the Company from September 1993 to February 1994. Ms. Richardson served as Director of Marketing/Public Affairs for both Galen and Humana from 1988 to September 1993. Russell D. Schneider has served as Senior Vice President -- Market Organization of the Company since September 1993. Mr. Schneider served as President of the Company's Southwest Division from May 1990 to September 1993, and as President of the Company's El Paso Division from May 1988 to May 1990. Richard A. Schweinhart has served as Senior Vice President -- Finance of the Company since September 1993. Mr. Schweinhart served as Senior Vice President -- Finance for both Galen and Humana from November 1992 to September 1993. Mr. Schweinhart also served as Vice President -- Finance of Humana from 1988 until November 1992. 17 ITEM 2. PROPERTIES. The location and name of, and the number of licensed beds in, each of the health care facilities owned by the Company or its subsidiaries at March 28, 1994, grouped by state, are set forth in the following table:
NUMBER OF STATE CITY NAME LICENSED BEDS TYPE - --------- ------------------------- -------------------------------------------------------- ------------- --------- AK Anchorage Alaska Regional Hospital 238 M AL Enterprise Medical Center Enterprise 135 M Florence Florence Hospital 155 M Montgomery East Montgomery Medical Center 150 M Montgomery Montgomery Regional Medical Center 250 M Muscle Shoals Medical Center Shoals 128 M Russellville Northwest Medical Center 100 M AR Little Rock Doctors Hospital (1) 341 M AZ Phoenix Healthwest Regional Medical Center 302 M Phoenix Paradise Valley Hospital 140 M CA Anaheim West Anaheim Medical Center 243 M Canoga Park West Hills Regional Medical Center 236 M Huntington Beach Huntington Beach Medical Center 135 M Pasadena Las Encinas Hospital 153 P San Leandro San Leandro Hospital 136 M Thousand Oaks Los Robles Regional Medical Center 204 M CO Aurora Aurora Regional Medical Center 200 M Littleton Columbine Psychiatric Center 80 P Thornton North Suburban Medical Center 200 M DE Newark Rockford Center 74 P FL Aventura Aventura Hospital and Medical Center 458 M Bradenton L.W. Blake Hospital 383 M Brandon Brandon Hospital 250 M Coral Springs Outpatient Surgery Center at Coral Springs -- OS Crestview Okaloosa Cancer Care Center -- O Dade City Dade City Hospital 120 M Daytona Beach Daytona Medical Center 214 M Destin Destin Hospital 50 M Englewood Englewood Community Hospital 100 M Ft. Myers Southwest Florida Regional Medical Center 400 M Ft. Myers Gulf Coast Hospital 120 M Ft. Pierce Lawnwood Regional Medical Center 335 M Ft. Walton Beach Ft. Walton Beach Medical Center 247 M Gainesville North Florida Regional Medical Center 267 M Hudson Bayonet Point/Hudson Medical Center 256 M Kissimmee Osceola Regional Hospital 169 M Largo Medical Center Hospital 256 M Margate Northwest Regional Hospital 150 M Miami Cedars Medical Center 585 M Miami Deering Hospital 260 M Miami Grant Center of Deering 140 P Miami Kendall Regional Medical Center (1) 412 M Miami Kendall Therapy Center -- O Miami Medical Park Diagnostic Center -- OD
18
NUMBER OF STATE CITY NAME LICENSED BEDS TYPE - --------- ------------------------- -------------------------------------------------------- ------------- --------- FL Miami Surgical Park Center -- OS Miami Victoria Pavilion 300 M Miami Beach Miami Heart Institute-North 273 M Miami Beach Miami Heart Institute-South 258 M Naples Naples Rehab Center -- R New Port Richey New Port Richey Hospital 414 M Niceville Twin Cities Hospital 75 M North Miami Beach North Miami Beach Surgical Center -- OS Ocala Marion Community Hospital 230 M Okeechobee Raulerson Hospital 101 M Orange Park Orange Park Medical Center 224 M Orlando Lucerne Medical Center 267 M Palatka Putnam Community Hospital 161 M Panama City Gulf Coast Hospital 176 M Pembroke Pines Pembroke Pines Hospital 301 M Pensacola West Florida Regional Medical Center 547 M Plantation Westside Regional Medical Center 204 M Pompano Beach Pompano Beach Medical Center 273 M Port Charlotte Fawcett Memorial Hospital 254 M Port St. Lucie Medical Center of Port St. Lucie 150 M Sanford Central Florida Regional Hospital 226 M Sarasota Doctors Hospital of Sarasota (2) 168 M Spring Hill Oak Hill Hospital 204 M St. Petersburg Northside Hospital 301 M St. Petersburg St. Petersburg General Hospital 219 M Tallahassee Tallahassee Community Hospital 180 M Tamarac University Hospital 269 M Tamarac University Pavilion 60 P West Palm Beach Palm Beaches Medical Center 250 M Winter Park Winter Park Memorial Hospital 339 M GA Albany Palmyra Medical Centers 248 M Atlanta Northlake Regional Medical Center 120 M Atlanta West Paces Medical Center (1)(3) 294 M Augusta Augusta Oncology Center -- O Augusta Augusta Regional Medical Center 374 M Augusta Columbia County Ambulatory Surgery Center -- OS Augusta West Augusta Imaging Center -- OD Cartersville Cartersville Medical Center 80 M Columbus Hughston Sports Medicine Hospital 100 M Dublin Fairview Park Hospital (3) 190 M Lithia Springs Parkway Medical Center 304 M Macon Coliseum Medical Centers 250 M Macon Coliseum Psychiatric Hospital 92 P Newnan Peachtree Regional Hospital 144 M Rome Redmond Regional Medical Center 201 M Snellville Eastside Medical Center 122 M IL Chicago Chicago Lakeshore Hospital 150 P Chicago Grant Hospital 479 M Chicago Michael Reese Hospital and Medical Center 955 M Forest Park Riveredge Hospital 210 P
19
NUMBER OF STATE CITY NAME LICENSED BEDS TYPE - --------- ------------------------- -------------------------------------------------------- ------------- --------- IL Hoffman Estates Hoffman Estates Medical Center 356 M Hoffman Estates Woodland Hospital 100 P IN Indianapolis The Women's Hospital -- Indianapolis 182 M KS Dodge City Western Plains Regional Hospital 100 M Overland Park Overland Park Regional Medical Center 400 M Wichita Wesley Medical Center 760 M KY Bowling Green Greenview Hospital 211 M Frankfort King's Daughters Memorial Hospital 190 M Louisville Audubon Regional Medical Center 480 M Louisville Southwest Hospital 150 M Louisville Suburban Medical Center 380 M Louisville University of Louisville Hospital (1) 404 M Somerset Lake Cumberland Regional 227 M LA Lafayette Cypress Hospital 116 P Lake Charles Lake Area Medical Center 80 M Lake Charles Surgicare of Lake Charles -- OS Marksville Avoyelles Hospital 55 M Monroe North Monroe Hospital 228 M New Orleans DePaul Hospital 309 P New Orleans Lakeland Medical Center 150 M Oakdale Oakdale Community Hospital 60 M Shreveport Highland Hospital 126 M Springhill Springhill Medical Center 86 M Ville Platte Ville Platte Medical Center 124 M Winnfield Winn Parish Medical Center 103 M MO Independence Independence Regional Health Center 366 M Kansas City Research Psychiatric Center 100 P NH Derry Parkland Medical Center 86 M Portsmouth Portsmouth Regional Hospital (3) 144 M Portsmouth Portsmouth Pavilion 65 P NM Albuquerque Heights Psychiatric Hospital 92 P Carlsbad Guadalupe Medical Center 138 M Hobbs Lea Regional Hospital 250 M NV Las Vegas Sunrise Hospital & Medical Center 688 M NC Fayetteville Highsmith-Rainey Memorial Hospital (1) 150 M Raleigh Holly Hill Hospital 108 P Raleigh Raleigh Community Hospital 230 M OK Enid St. Mary's Hospital (1)(3) 277 M Oklahoma City Presbyterian Hospital 396 M SC Aiken Aiken Regional Medical Center 225 M Charleston Trident Regional Medical Center 281 M Myrtle Beach Grand Strand General Hospital 172 M Summerville Summerville Medical Center 80 M Summerville Summerville Medical Center -- Downtown -- O TN Athens Athens Community Hospital 118 M Chattanooga Parkridge Medical Center 296 M Chattanooga Valley Psychiatric Hospital 118 P
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NUMBER OF STATE CITY NAME LICENSED BEDS TYPE - --------- ------------------------- -------------------------------------------------------- ------------- --------- TN East Ridge East Ridge Hospital 128 M Jackson Regional Hospital of Jackson 166 M Kingsport Indian Path Medical Center 295 M Kingsport Indian Path Pavilion 61 P Martin Volunteer General Hospital 100 M Nashville Centennial Medical Center 656 M Nashville Centennial Medical Center/Parthenon Pavilion 162 P Nashville Donelson Hospital 218 M Nashville Southern Hills Medical Center 180 M Nashville Vanderbilt Child and Adolescent Psychiatric Hospital (1)(3) 88 P TX Abilene Abilene Regional Medical Center 160 M Arlington Arlington Medical Center 287 M Austin South Austin Medical Center 164 M Beaumont Beaumont Neurological Hospital 131 P Beaumont Beaumont Regional Medical Center 250 M Bryan Brazos Valley Medical Center 100 M Bryan Brazos Valley Surgical Center -- OS Corpus Christi Bay Area Medical Center 144 M Corpus Christi Bayview Hospital 68 P Corpus Christi Doctors Regional Medical Center 271 M Corpus Christi Rehabilitation Hospital of South Texas 80 R Corpus Christi Surgicare Specialty Hospital of Corpus Christi -- OS Corsicana Navarro Regional Hospital 185 M Dallas Medical City Dallas Hospital (1) 555 M Denton Denton Community Hospital 104 M El Paso Columbia Back Institute -- O El Paso Columbia Behavioral Center 125 P El Paso Columbia Diagnostic Centers -- OD El Paso Columbia Life Care Center -- O El Paso Columbia Medical Center -- East 235 M El Paso Columbia Medical Center -- West 252 M El Paso Columbia Physical Therapy Centers -- R El Paso Columbia Regional Oncology Center -- O El Paso Columbia Rehabilitation Hospital 40 R Ft. Worth Medical Plaza Hospital 338 M Houston Bellaire General Hospital 349 M Houston Champions Residential Treatment Center 48 P Houston Heights Hospital 209 M Houston Medical Center Hospital 281 M Houston MRI Southwest -- OD Houston Rosewood Medical Center 231 M Houston Sam Houston Memorial Hospital 256 M Houston Spring Branch Medical Center 365 M Houston West Houston Medical Center 232 M Houston Women's Hospital of Texas 198 M Lewisville Lewisville Hospital (1) 148 M McAllen Rio Grande Regional Hospital 220 M North Richland Hills North Hills Medical Center 152 M Plano Medical Center of Plano 267 M
21
NUMBER OF STATE CITY NAME LICENSED BEDS TYPE - --------- ------------------------- -------------------------------------------------------- ------------- --------- TX San Antonio Metropolitan Hospital 273 M San Antonio San Antonio Regional Hospital 416 M San Antonio Village Oaks Medical Center 112 M San Antonio Women's and Children's Hospital 150 M Silsbee Silsbee Doctors Hospital 69 M Webster Clear Lake Regional Medical Center 459 M UT Layton Davis Hospital and Medical Center 120 M Salt Lake City St. Mark's Hospital 306 M VA Falls Church Dominion Hospital 100 P Hampton Peninsula Hospital 125 P Petersburg Poplar Springs Hospital 100 P Reston Reston Hospital Center 127 M Richlands Clinch Valley Medical Center 200 M Richmond Chippenham Hospital 470 M Richmond Henrico Doctors Hospital 340 M Richmond Johnston-Willis Hospital 292 M Salem Lewis-Gale Hospital 406 M Salem Lewis-Gale Psychiatric Center (1) 145 P WV Beckley Raleigh General Hospital 275 M Bluefield St. Luke's Hospital 79 M Huntington River Park Hospital 165 P Hurricane Putnam General Hospital 68 M Ronceverte Greenbrier Valley Medical Center 122 M INTERNATIONAL UK London The Wellington Hospital 121 M London The Wellington Hospital II 124 M SZ Geneva Hopital de la Tour et Pavillon Gourgas 242 M
M -- General, Acute Care P -- Psychiatric OD -- Outpatient Diagnostics/Imaging OS -- Outpatient Surgery O -- Outpatient Care R -- Rehabilitation/Physical Therapy - ------------------------ (1) Held pursuant to lease. The Company has options to purchase many of its leased hospitals at the end of the lease terms. (2) On October 1, 1990 the Company contributed this hospital to a limited partnership (the "LP") in which it is a 35% limited partner. The LP currently is seeking regulatory approval to build a replacement facility for the current hospital facility. The Company receives a fixed percentage of cash flow from the current hospital and will receive 35% of all cash distributions from operations of the replacement hospital and any ancillary businesses of the LP. The Company also manages the current hospital and will manage the replacement hospital on a fixed fee basis. On March 4, 1994, the Company entered into an agreement to purchase the assets of the hospital from the LP. (3) The former owner of this hospital or a successor thereto or affiliate thereof either has a current option to purchase the hospital from the Company at a previously agreed-upon amount or will have such option during certain future periods.
22 The Company owns and maintains its headquarters in approximately 110,000 square feet of office space located in Louisville, Kentucky. In addition, the Company maintains offices in approximately 400,000 square feet of office space in four office buildings owned by the Company in Nashville, Tennessee. The Company also operates medical office buildings in conjunction with its hospitals. These office buildings are primarily occupied by physicians who practice at the Company's hospitals. These office buildings are generally operated at a loss. The Company's headquarters, hospitals and other facilities are suitable for their respective uses and are, in general, adequate for the Company's present needs. ITEM 3. LEGAL PROCEEDINGS. The Company is currently, and from time to time, subject to claims and suits arising in the ordinary course of business, including claims for damages for personal injuries or for wrongful restriction of, or interference with, physicians' staff privileges. In certain of these actions the claimants have asked for punitive damages against the Company, which are usually not covered by insurance. In the opinion of management, the ultimate resolution of any of these pending claims and legal proceedings will not have a material adverse effect on the Company's results of operations or financial position. On December 10, 1992 and December 15, 1992, respectively, two virtually identical purported class action lawsuits (BERGER V. ROGER E. MICK ET AL., 92 CIV. 8960, United States District Court, Southern District of New York and FOX V. ROGER E. MICK ET AL., 92 CIV 9139, United States District Court, Southern District of New York) were filed by, respectively, holders of 400 and 500 shares of HCA's Class A Common Stock against HCA, three of its officers and/or directors (Messrs. Thomas F. Frist, Jr., Roger E. Mick and Donald J. Israel) and the underwriters of its February 1992 initial public offering of Class A Common Stock, on behalf of all purchasers of HCA's Class A Common Stock from the time of the initial public offering (February 26, 1992) until HCA issued a press release in respect of its psychiatric division restructuring on September 18, 1992. In the lawsuits it is alleged that HCA failed to disclose material adverse financial information regarding its psychiatric division in its February 1992 offering prospectus in respect of such initial public offering and in HCA's subsequent Forms 10-Q for the quarters ended March 31 and June 30, 1992. Violations of the Securities Act of 1933 and of the Securities Exchange Act of 1934 are alleged. Damages are unspecified. In June 1993 the court granted HCA's motion to transfer both lawsuits to the United States District Court for the Middle District of Tennessee. After such transfer, the Tennessee District Court dismissed the FOX lawsuit and joined the plaintiff of the FOX lawsuit as a party plaintiff to the BERGER lawsuit. HCA's motion to dismiss the BERGER lawsuit is still pending. While the Company cannot predict with certainty the outcome of this proceeding, the Company, based upon information currently available, believes that this proceeding is without merit. A class action styled MARY FORSYTH ET AL. V. HUMANA INC. ET AL., Case #CV-S-89-249-PMP (L.R.L.), was filed on March 29, 1989, in the United States District Court for the District of Nevada (the "Forsyth" case). On August 12, 1991, a Second Amended Complaint was filed in the Forsyth case which significantly increased the amount of damages claimed by the plaintiffs in previously filed complaints. The claimed damages increased from $10 million to $84,520,143 in connection with a count which alleges a violation of the Employee Retirement Income Security Act (the "ERISA Count"); from $10 million to $181,034,570 (before trebling) in connection with an alleged violation of the Sherman Anti-Trust Act (the "Anti-Trust Count"); and from $10 million to $181,034,570 (before trebling) for an alleged violation of the Racketeer Influenced and Corrupt Organization Act (the "RICO Count"). In late March 1992, as part of the discovery process, the plaintiffs provided information in regard to their calculation of damages which indicates they are seeking recovery of $49,440,000 of damages plus approximately $15,396,000 of interest in the ERISA Count and $103,562,165 of damages (before trebling) plus approximately $31,800,000 of interest in the RICO Count. Specific amounts were not readily apparent for the Anti-Trust Count but it appears the plaintiffs believe their 23 claimed damages in the Anti-Trust Count would be similar to those in the RICO Count. The ERISA Count, which is being asserted by the Co-Payer Class, claims that Humana Inc. ("Humana") violated a fiduciary duty in connection with (i) the calculation of co-insurance payments required under policies issued by Humana's insurance subsidiary ("Humana Insurance") for insureds who were treated at Sunrise Hospital in Las Vegas (now owned by the Company), and (ii) payments to the hospital by Humana Insurance. The Anti-Trust Count, which is being asserted by the Premium Payer Class, alleges that Sunrise Hospital has monopolized or has attempted to monopolize the for-profit, acute care hospital services market in Clark County, Nevada, and that Humana Insurance engaged in predatory pricing in connection with the sale of insurance policies to members of such class. The plaintiffs have also indicated damages with respect to the Co-Payer Class. The RICO Count, which is being asserted by both the Premium Payer and Co-Payer Classes, alleges fraud in connection with (i) the sale of insurance policies to members of the Premium Payer Class and (ii) the calculation of the co-insurance payments. On June 22, 1992, defendants filed a Motion for Summary Judgment on all three counts of the Complaint. On July 21, 1993, Summary Judgment was entered in favor of defendants on all counts, although the Court allowed the Co-Payer Class to file a Third Amended Complaint. On August 24, 1993, the plaintiffs filed a Third Amended Complaint against Humana Insurance, seeking to recover at least $2,000,000, plus interest, which represents the difference between their co-insurance payments and what the payments would have been if calculated based on the discounted payments made by Humana Insurance to Sunrise Hospital. Pursuant to an Assumption of Liabilities and Indemnification Agreement entered into in connection with the Spinoff, Humana assumed approximately 39% and Galen assumed approximately 61% of all liabilities, costs and expenses arising out of certain identified legal proceedings and claims, including the Forsyth case. On April 22, 1993, an alleged stockholder of Galen filed a purported stockholder derivative action in the Court of Chancery of the State of Delaware, County of New Castle, styled LEWIS V. AUSTEN, ET AL., Civil Action No. 12937. The action was purportedly brought on behalf of Galen and Humana against all of the directors of both companies at the time of the Spinoff alleging, among other things, that the defendants had improperly amended Humana's existing stock option plans in connection with the Spinoff. The plaintiff claims that the amendment to the stock option plans constituted a waste of corporate assets to the extent that employees of such company received options in the stock of the other company. (The challenged amendment to the plans was approved by Humana's stockholders at the 1993 Annual Meeting of Stockholders, at which time Galen was a wholly owned subsidiary of Humana.) The plaintiff requests, among other things, an injunction prohibiting the exercise of Humana stock options by Company personnel and the exercise of Company stock options by Humana personnel and an award of damages. The Company believes that the complaint is without merit. A purported class action has been filed against HCA, the directors of HCA, and the Company, in the Delaware Court of Chancery entitled 7547 PARTNERS V. HCA HOSPITAL CORP. OF AMERICA, JACK O. BOVENDER, JR., THOMAS F. FRIST, JR., CHARLES T. HARRIS, III, CHARLES J. KANE, RICHARD E. RAINWATER, CARL E. REICHARDT, FRANK S. ROYAL AND COLUMBIA HEALTHCARE CORPORATION, C.A. No. 13159. The complaint, brought by a purported stockholder of HCA, alleges that the defendants breached their fiduciary duties to plaintiff and other members of the purported class and also alleges that the defendants aided and abetted a gross abuse of trust. The complaint alleges that the directors of HCA wrongfully failed to hold an open auction and encourage bona fide bids for HCA and failed to take action to maximize value to HCA stockholders. The complaint seeks rescission of the HCA Merger or rescissionary damages. The complaint also seeks monetary damages of an unspecified amount and attorneys' and experts' fees. The Company believes that the complaint is without merit. 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 1993. 24 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock has been primarily traded on the New York Stock Exchange (the "NYSE") (symbol "COL") since July 14, 1993. Prior to that date, the Company's Common Stock was traded through the National Association of Securities Dealers Automated Quotation National Market System ("NASDAQ/NMS"). The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share reported on the NYSE Composite Tape or NASDAQ/NMS for the Company's Common Stock. The information with respect to NASDAQ/NMS quotations was obtained from the National Association of Securities Dealers, Inc. and reflects interdealer prices, without retail markup, markdown or commissions and may not represent actual transactions.
HIGH LOW --------- --------- 1992: First Quarter.................................................................. $ 21.25 $ 16.50 Second Quarter................................................................. 22.00 16.25 Third Quarter.................................................................. 19.25 16.25 Fourth Quarter................................................................. 21.75 13.75 1993: First Quarter.................................................................. 24.50 16.25 Second Quarter................................................................. 27.75 19.25 Third Quarter.................................................................. 31.00 25.38 Fourth Quarter................................................................. 33.88 27.00
The Company's registrar and transfer agent for its Common Stock is First Union National Bank of North Carolina. At the close of business on February 28, 1994, there were 15,600 holders of record of the Company's Common Stock and one holder of record of the Company's Nonvoting Common Stock. The Company commenced the payment of a quarterly dividend of $.03 per share in the fourth quarter of 1993. Prior to that time, the Company did not pay any cash dividends. While it is the present intention of the Company's Board of Directors to continue paying a quarterly dividend of $.03 per share, the declaration and payment of future dividends by the Company will depend upon many factors, including the Company's earnings, financial condition, business needs, capital and surplus and regulatory considerations. 25 ITEM 6. SELECTED FINANCIAL DATA. COLUMBIA HEALTHCARE CORPORATION SELECTED FINANCIAL DATA AS OF AND FOR THE YEARS ENDED DECEMBER 31 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- SUMMARY OF OPERATIONS: Revenues................................ $ 5,130 $ 4,806 $ 4,612 $ 4,010 $ 3,450 ---------- ---------- ---------- ---------- ---------- Salaries, wages and benefits............ 2,217 2,069 2,004 1,666 1,366 Supplies................................ 842 788 720 624 513 Other operating expenses................ 916 833 717 653 600 Provision for doubtful accounts......... 282 285 277 233 203 Depreciation and amortization........... 298 276 248 220 196 Interest expense........................ 129 117 111 119 147 Investment income....................... (34) (39) (34) (34) (34) Non-recurring transactions.............. 151 138 - - (13) ---------- ---------- ---------- ---------- ---------- 4,801 4,467 4,043 3,481 2,978 ---------- ---------- ---------- ---------- ---------- Income from continuing operations before minority interests and income taxes.... 329 339 569 529 472 Minority interests in earnings of consolidated entities.................. 9 10 9 4 4 ---------- ---------- ---------- ---------- ---------- Income from continuing operations before income taxes........................... 320 329 560 525 468 Provision for income taxes.............. 127 118 202 190 167 ---------- ---------- ---------- ---------- ---------- Income from continuing operations....... 193 211 358 335 301 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit).............. 16 (108) 16 (6) (18) Costs associated with discontinuance of health plan segment, net of income tax benefit.......................... - (17) - - - Extraordinary loss on extinguishment of debt, net of income tax benefit........ (70) - - - (9) Cumulative effect on prior years of a change in accounting for income taxes.................................. - 51 - - - ---------- ---------- ---------- ---------- ---------- Net income.......................... $ 139 $ 137 $ 374 $ 329 $ 274 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings per common share (a): Income from continuing operations..... $ 1.28 $ 1.45 $ 2.58 $ 2.51 Discontinued operations: Income (loss) from operations of discontinued health plan segment... .10 (.75) .11 (.04) Costs associated with discontinuance of health plan segment............. - (.12) - - Extraordinary loss on extinguishment of debt.............................. (.46) - - - Cumulative effect on prior years of a change in accounting for income taxes................................ - .36 - - ---------- ---------- ---------- ---------- Net income.......................... $ .92 $ .94 $ 2.69 $ 2.47 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Shares used in earnings per common share computations (in thousands)............ 150,017 144,897 138,936 134,128 Net cash provided by continuing operations............................. $ 493 $ 668 $ 655 $ 552 $ 456 Cash dividends per common share......... .06 - - - - FINANCIAL POSITION: Assets.................................. $ 4,619 $ 4,891 $ 4,541 $ 4,100 $ 3,583 Working capital......................... 374 392 374 374 353 Net assets of discontinued operations... - 376 411 303 312 Long-term debt, including amounts due within one year........................ 1,651 1,288 1,159 1,144 1,239 Minority interests in equity of consolidated entities.................. 57 31 23 16 10 Common stockholders' equity............. 1,656 2,276 2,168 1,836 1,371 OPERATING DATA: Number of hospitals at end of period.... 97 101 91 93 87 Number of licensed beds at end of period................................. 21,742 21,922 19,992 19,393 18,254 Weighted average licensed beds.......... 21,733 21,019 20,132 19,237 18,288 Average daily census.................... 9,249 9,277 9,502 9,145 8,719 Occupancy............................... 43% 44% 47% 48% 48% Admissions.............................. 596,300 586,500 587,800 566,200 529,800 Length of stay.......................... 5.7 5.8 5.9 5.9 6.0 Surgery cases........................... 424,200 437,300 425,900 399,000 374,000 Emergency room visits................... 1,563,200 1,537,400 1,519,700 1,432,000 1,330,900 Outpatient registrations................ 2,541,900 2,537,100 2,401,600 1,899,300 1,666,400 Outpatient revenues as a percentage of patient revenues....................... 26% 26% 24% 23% 22% - ------------------------------ (a) Earnings per common share are not presented for periods prior to the initial public offering of Columbia Hospital Corporation common stock in May 1990.
26 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SELECTED FINANCIAL DATA AS OF AND FOR THE YEARS ENDED DECEMBER 31 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- SUMMARY OF OPERATIONS: Revenues................................................................... $ 10,252 $ 9,932 $ 9,598 $ 8,641 $ 7,724 --------- --------- --------- --------- --------- Salaries, wages and benefits............................................... 4,215 4,112 3,976 3,510 3,066 Supplies................................................................... 1,664 1,613 1,467 1,314 1,135 Other operating expenses................................................... 1,893 1,849 1,739 1,586 1,483 Provision for doubtful accounts............................................ 542 515 508 444 407 Depreciation and amortization.............................................. 554 541 524 499 468 Interest expense........................................................... 321 401 597 694 667 Investment income.......................................................... (66) (81) (64) (69) (103) Non-recurring transactions................................................. 151 439 300 22 (10) --------- --------- --------- --------- --------- 9,274 9,389 9,047 8,000 7,113 --------- --------- --------- --------- --------- Income from continuing operations before minority interests and income taxes..................................................................... 978 543 551 641 611 Minority interests in earnings of consolidated entities.................... 9 10 9 4 4 --------- --------- --------- --------- --------- Income from continuing operations before income taxes...................... 969 533 542 637 607 Provision for income taxes................................................. 394 294 189 240 223 --------- --------- --------- --------- --------- Income from continuing operations.......................................... 575 239 353 397 384 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit).................................................... 16 (108) 16 (6) (18) Costs associated with discontinuance of health plan segment, net of income tax benefit...................................................... - (17) - - - Extraordinary loss on extinguishment of debt, net of income tax benefit................................................................. (84) - - - (9) Cumulative effect on prior years of a change in accounting for income taxes................................................................... - 51 - - - --------- --------- --------- --------- --------- Net income............................................................. $ 507 $ 165 $ 369 $ 391 $ 357 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Earnings per common and common equivalent share (a): Income from continuing operations........................................ $ 1.70 $ .73 $ 1.20 $ 1.28 Discontinued operations: Income (loss) from operations of discontinued health plan segment........ .04 (.33) .05 (.02) Costs associated with discontinuance of health plan segment.............. - (.06) - - Extraordinary loss on extinguishment of debt............................. (.24) - - - Cumulative effect on prior years of a change in accounting for income taxes................................................................... - .16 - - --------- --------- --------- --------- Net income............................................................. $ 1.50 $ .50 $ 1.25 $ 1.26 --------- --------- --------- --------- --------- --------- --------- --------- Shares used in earnings per common and common equivalent share computations (in thousands)............................................................ 339,222 328,564 279,954 262,552 Net cash provided by continuing operations................................. $ 1,298 $ 1,287 $ 1,257 $ 1,191 $ 919 FINANCIAL POSITION: Assets................................................................... $ 10,216 $ 10,347 $ 10,843 $ 10,391 $ 10,461 Working capital.......................................................... 573 606 635 482 379 Net assets of discontinued operations.................................... - 376 411 303 312 Long-term debt, including amounts due within one year.................... 3,698 3,656 5,158 5,139 6,022 Minority interests in equity of consolidated entities.................... 57 31 23 16 10 Common stockholders' equity.............................................. 3,471 3,691 2,822 2,099 1,585 OPERATING DATA (B): Number of hospitals at end of period..................................... 193 200 219 221 218 Number of licensed beds at end of period................................. 42,237 42,245 43,231 42,789 42,433 Weighted average licensed beds........................................... 41,263 40,608 42,437 42,264 41,452 Average daily census..................................................... 18,702 19,253 21,255 21,351 21,155 Occupancy................................................................ 45% 47% 50% 51% 51% Admissions............................................................... 1,158,400 1,161,100 1,189,700 1,174,700 1,139,300 Length of stay........................................................... 5.9 6.1 6.5 6.6 6.8 Emergency room visits.................................................... 3,139,700 3,042,900 3,028,600 2,894,800 2,756,900 Outpatient revenues as a percentage of patient revenues.................. 27% 26% 24% 22% 21% - ------------------------------ (a) Earnings per common and common equivalent share are not presented for periods prior to the initial public offering of Columbia Hospital Corporation common stock in May 1990. Earnings per common and common equivalent share include the effect of preferred stock dividend requrements totaling $18 million in 1991 and $63 million in 1990. (b) Operating data for 1992 exclude the twenty-two divested psychiatric hospitals discussed in Note 5 of the Notes to Supplemental Consolidated Financial Statements.
27 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. COLUMBIA HEALTHCARE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Selected Financial Data in Item 6 set forth certain information with respect to the financial position, results of operations and cash flows of Columbia Healthcare Corporation ("Columbia") which should be read in conjunction with the following discussion and analysis. HCA MERGER The HCA Merger was completed on February 10, 1994. Although the HCA Merger will be treated as a pooling of interests for accounting purposes, the accompanying consolidated financial statements and financial and operating data included in this discussion and analysis do not include the retroactive effect of the HCA Merger. See Note 3 of the Notes to Consolidated Financial Statements of Columbia and the Supplemental Consolidated Financial Statements of Columbia/HCA Healthcare Corporation ("Columbia/HCA") included herein for further information. BACKGROUND INFORMATION AND BUSINESS STRATEGY As discussed in Notes 1 and 2 of the Notes to the Consolidated Financial Statements, Columbia began operations on September 1, 1993 as a result of a merger involving Columbia Hospital Corporation ("CHC") and Galen Health Care, Inc. ("Galen") (the "Galen Merger"), which was accounted for as a pooling of interests. Accordingly, the accompanying financial statements and financial and operating data included in this discussion and analysis give retroactive effect to the Galen Merger and include the combined operations of CHC and Galen for all periods presented. In addition, the historical financial information related to Galen (which prior to the Galen Merger was reported on a fiscal year ending August 31) has been recast to conform to Columbia's annual reporting period ending December 31. Prior to the merger with CHC, Galen became a publicly held corporation as a result of a spinoff transaction by Humana Inc. ("Humana") which was completed on March 1, 1993 (the "Spinoff"). The Spinoff separated Humana's previously integrated hospital and managed care health plan businesses and was effected through the distribution of Galen common stock to then current Humana common stockholders on a one-for-one basis. For accounting purposes, because of the relative significance of the hospital business, the pre-Spinoff financial statements of Galen (and now those of Columbia) include the separate results of Humana's hospital business, while the operating results and net assets of Humana's managed care health plans have been classified as discontinued operations. At the time of the Galen Merger, CHC operated 22 hospitals (5,226 licensed beds) and certain ancillary health care facilities in five major markets located in Florida and Texas. Annualized revenues of CHC were in excess of $1 billion. Galen operated 71 hospitals (16,251 licensed beds) located in 18 states and two foreign countries with annualized revenues of approximately $4 billion. Columbia primarily operates hospitals and ancillary health care facilities through either (i) wholly owned subsidiaries or (ii) ownership of controlling interests in various partnerships in which subsidiaries of Columbia serve as the managing general partner. Columbia's business strategy centers on the development of comprehensive, integrated health care delivery networks with physicians and other health care providers in targeted markets, which typically involves significant health care facility acquisition and consolidation activities. During the past several years, hospital inpatient admission trends have been adversely impacted by cost containment efforts initiated by federal and state governments and various third-party payers, including HMOs, PPOs, commercial insurance companies and employer-sponsored networks. In addition, a significant number of medical procedures have shifted from inpatient to less expensive outpatient settings as a result of both cost containment pressures and advances in medical technology. 28 In response to changes in the health care industry, Columbia has developed the following operating strategy to provide the highest quality health care services at the lowest possible cost: BECOME A SIGNIFICANT PROVIDER OF SERVICES -- Columbia attempts to (i) consolidate services to reduce costs and (ii) develop the geographic coverage necessary for inclusion in most managed care and employer-sponsored networks in each market. PROVIDE A COMPREHENSIVE RANGE OF SERVICES -- In addition to the operation of general, acute care hospitals, Columbia also operates psychiatric and rehabilitation facilities, outpatient surgery and diagnostic centers, home health agencies and other services. This strategy enables Columbia to attract business from managed care plans and major employers seeking efficient access to a wide array of health care services. DELIVER HIGH QUALITY SERVICES -- Through the use of clinical information systems, Columbia focuses on patient outcomes and strives to continuously improve the quality of care and service provided to patients. INTEGRATE FRAGMENTED DELIVERY SYSTEMS -- Through its networks, Columbia focuses on coordinating pricing, contracting, information systems and quality assurance activities among providers in each market. Management intends to implement its strategy discussed above in a substantial number of former Galen markets as well as new markets, and further develop the integrated health care networks in its five pre-Galen Merger markets. 29 RESULTS OF OPERATIONS Revenues increased 7% to $5.1 billion in 1993 and 4% to $4.8 billion in 1992. Increases in both periods resulted primarily from price increases, acquisitions and, in 1992, growth in outpatient services. During 1992 and 1993, Columbia acquired or constructed 21 hospitals containing 3,474 licensed beds and sold or closed 14 hospitals containing 1,682 licensed beds. The following table summarizes percentage changes in same-hospital admissions and outpatient registrations for each respective period of 1993 compared to the same period of 1992, and changes in same-hospital admissions and outpatient registrations for each period of 1992 compared to the same period of 1991.
1993 VS. 1992 1992 VS. 1991 ------------------------------------- --------------------------------------- CHC GALEN COMBINED CHC GALEN COMBINED --------- ----------- ------------- ----- ----------- ------------- ADMISSIONS: Quarter: First...................... 6.7 (2.1) (1.5) 8.4 - 0.6 Second..................... 8.9 (1.3) (0.5) 2.4 (4.8) (4.3) Third...................... 5.9 (1.0) (0.4) 4.6 (4.1) (3.5) Fourth..................... 5.9 1.3 1.7 4.6 (3.6) (3.0) Year..................... 6.8 (0.8) (0.2) 5.0 (3.1) (2.5) OUTPATIENT REGISTRATIONS: Quarter: First...................... 10.1 (7.2) (5.0) 54.5 4.6 8.7 Second..................... 8.0 (4.2) (2.6) 35.1 (3.6) (0.2) Third...................... 13.3 (2.1) (0.1) 35.8 (4.4) (1.5) Fourth..................... 6.8 (0.9) 0.2 31.9 (2.3) 0.9 Year..................... 9.5 (3.6) (1.9) 39.0 (1.5) 1.9
Since it began operations in 1988, CHC had experienced significant growth in patient volumes, revenues and net income, primarily as a result of successful implementation of its strategy. The historical operating results of Galen's hospitals (which include the hospital operations of Humana prior to the Spinoff) had been adversely impacted as a result of such hospitals' pre-Spinoff relationship with Humana's managed care health plan business in certain markets. Management believes that this relationship caused some physicians to discontinue referrals of their patients to the company's hospitals, and had precluded these hospitals from contracting with unaffiliated insurers. In addition, Galen's volume of patients covered by traditional insurance (who pay amounts which more closely approximate established charges) declined significantly in 1992 due in part to increased price consciousness of patients and physicians with respect to Galen's pricing policies. Same-hospital volume trends at former Galen facilities have improved in 1993 primarily as a result of increased volumes from discounted managed care health plans other than Humana. Income from continuing operations before non-recurring transactions, depreciation, interest, minority interests, income taxes and amortization ("EBDITA") increased 4% to $907 million in 1993 from $870 million in 1992. The decline in EBDITA margins to 17.7% from 18.1% resulted primarily from deterioration in payer mix. Medicare admissions as a percentage of total admissions increased from 35% in 1992 to 36% in 1993, while discounted and managed care admissions grew from 44% to 45%, respectively. EBDITA declined 6% in 1992 from 1991 due to a decline in same-hospital admissions at former Galen facilities and deterioration in Galen's payer mix. During the third quarter of 1993, Columbia recorded non-recurring charges of $151 million ($98 million net of tax) of costs related to the Galen Merger. Results of operations in 1992 include $138 million ($86 million net of tax) of costs incurred in connection with the Spinoff. See Note 5 of the Notes to Consolidated Financial Statements. 30 Excluding the effects of the non-recurring transactions, income from continuing operations declined 2% to $291 million ($1.95 per share) in 1993 and 17% to $297 million ($2.05 per share) in 1992. During the third quarter of 1993, in an effort to reduce future interest expense and eliminate certain restrictive covenants, Columbia effected the refinancing of $787 million of its long-term debt bearing interest at an average rate of 8.5% primarily through the issuance of commercial paper. After-tax losses from these refinancing activities aggregated $70 million or $.46 per share. DISCONTINUED OPERATIONS Results of operations include income from discontinued operations of $16 million in 1993, a loss of $125 million in 1992 and income of $16 million in 1991. Losses from discontinued operations in 1992 include costs of $135 million (net of tax) incurred by Humana in connection with the Spinoff. LIQUIDITY Cash provided by continuing operations totaled $493 million in 1993 compared to $668 million in 1992 and $655 million in 1991. The decrease in 1993 resulted primarily from a slower decline in the number of days of revenues in accounts receivable, and an acceleration in the payment of income taxes and funding of retirement plan obligations. Working capital totaled $374 million at December 31, 1993 compared to $392 million at December 31, 1992. Management believes that cash flows from operations and amounts available under Columbia's revolving credit facilities and related commercial paper programs are sufficient to meet expected future liquidity needs. Investments of Columbia's professional liability insurance subsidiary to maintain statutory equity and pay claims totaled $376 million and $347 million at December 31, 1993 and 1992, respectively. In September 1993 the Board of Directors initiated the payment of a regular quarterly cash dividend of $.03 per common share. Management anticipates that this dividend policy will continue after consummation of the HCA Merger. CAPITAL RESOURCES Excluding acquisitions, capital expenditures totaled $382 million in 1993 compared to $359 million in 1992 and $453 million in 1991. Planned capital expenditures in 1994 (excluding acquisitions) are expected to approximate $400 million. Management believes that its capital expenditure program is adequate to expand, improve and equip existing health care facilities. In addition, Columbia expended $79 million, $36 million and $96 million for acquisitions during 1993, 1992 and 1991, respectively. See Note 6 of the Notes to Consolidated Financial Statements for a description of these activities. As part of its business strategy, Columbia intends to acquire additional health care facilities in the future. Since December 31, 1993, Columbia has expended $114 million toward the purchase of four hospitals (or controlling interests therein) containing 1,264 licensed beds. These transactions, which will be accounted for by the purchase method, were financed through the use of internally generated funds and issuance of long-term debt. Columbia expects to finance all capital expenditures with internally generated and borrowed funds. Available sources of capital include public or private debt, commercial paper, unused bank revolving credits and equity. At December 31, 1993, there were projects under construction which had an estimated additional cost to complete of approximately $149 million. In connection with the Spinoff, common stockholders' equity was reduced by $802 million in 1993 as a result of the following transactions with Humana: (i) distribution of the net assets of the health plan business ($392 million) and the net assets of a hospital facility ($25 million), (ii) payment of cash 31 ($135 million) and (iii) issuance of notes ($250 million). The notes were refinanced in September 1993. Including the pro forma effect of the Spinoff, the ratio of debt to debt plus common stockholders' equity improved from 53% at December 31, 1992 to 50% at December 31, 1993. Upon consummation of the HCA Merger in February 1994, Columbia entered into revolving credit agreements in the aggregate amount of $3 billion and refinanced certain HCA and other long-term debt. The refinancings were effected primarily through the issuance of commercial paper, $175 million of 6 1/2% Notes due 1999 and $150 million of 7.15% Notes due 2004. Management anticipates that losses resulting from these refinancing activities will reduce the combined entity's first quarter 1994 net income by approximately $80 million. Columbia's credit facilities contain customary covenants which include (i) limitations on additional debt, (ii) limitations on sales of assets, mergers and changes of ownership and (iii) maintenance of certain interest coverage ratios. Columbia was in compliance with all such covenants at December 31, 1993. EFFECTS OF INFLATION AND CHANGING PRICES Various federal, state and local laws have been enacted that, in certain cases, limit Columbia's ability to increase prices. Revenues for hospital services rendered to Medicare patients are established under the federal government's prospective payment system. Medicare revenues approximated 33%, 31% and 30% of revenues in 1993, 1992 and 1991, respectively. Management believes that hospital operating margins have been, and may continue to be, under significant pressure because of deterioration in inpatient volumes and payer mix, and growth in operating expenses in excess of the increase in prospective payments under the Medicare program. Columbia expects that the average rate of increase in Medicare prospective payments will approximate 2% in 1994. In addition, as a result of increasing regulatory and competitive pressures, Columbia's ability to maintain operating margins through price increases to non-Medicare patients is limited. HEALTH CARE REFORM In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and some state legislatures that would significantly affect health care systems in Columbia's markets. Proposals under consideration include cost controls on hospitals, insurance market reforms that increase the availability of group health insurance to small businesses, requirements that all businesses offer health insurance to their employees and creation of a single government health insurance plan that would cover all citizens. President Clinton's health care reform bill, introduced as legislation in November 1993, includes certain measures that could significantly reduce future payments to providers of health care services. OTHER INFORMATION Resolution of various loss contingencies, including litigation pending against Columbia in the ordinary course of business, is not expected to have a material adverse effect on its financial position or results of operations. During 1992 Columbia adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which increased last year's first quarter net income by $51 million or $.36 per share. See Note 7 of the Notes to Consolidated Financial Statements. Columbia expects to incur certain expenses related to the HCA Merger, the amounts of which have not been determined. These costs will include, among other things, amounts for investment advisory and professional fees, expenses of printing and distributing proxy materials, severance payments and provisions for loss related to the consolidation of the operations of Columbia and HCA. Management anticipates that these expenses will be recorded in the first quarter of 1994. 32 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Supplemental Selected Financial Data in Item 6 set forth certain information with respect to the financial position, results of operations and cash flows of Columbia/HCA which should be read in conjunction with the following discussion and analysis. BACKGROUND INFORMATION AND BUSINESS STRATEGY HCA MERGER As discussed in Notes 1 and 2 of the Notes to Supplemental Consolidated Financial Statements of Columbia/HCA, on October 2, 1993, Columbia entered into a definitive agreement to merge with HCA. This transaction was completed on February 10, 1994 and will be accounted for as a pooling of interests. Accordingly, the accompanying supplemental consolidated financial statements and financial and operating data included in this supplemental discussion and analysis give retroactive effect to the combined operations of Columbia and HCA for all periods presented. GALEN MERGER The Galen Merger was completed on September 1, 1993 and was also accounted for as a pooling of interests. Accordingly, the accompanying financial statements and financial and operating data included in this supplemental discussion and analysis give retroactive effect to the Galen Merger and include the combined operations of CHC and Galen for all periods presented. In addition, the historical financial information related to Galen (which prior to the Galen Merger was reported on a fiscal year ending August 31) has been recast to conform to Columbia/HCA's annual reporting period ending December 31. SPINOFF TRANSACTION Prior to the merger with CHC, Galen became a publicly held corporation as a result of the Spinoff which was completed on March 1, 1993. The Spinoff separated Humana's previously integrated hospital and managed care health plan businesses and was effected through the distribution of Galen common stock to then current Humana common stockholders on a one-for-one basis. For accounting purposes, because of the relative significance of the hospital business, the pre-Spinoff financial statements of Galen (and now those of Columbia/HCA) include the separate results of Humana's hospital business, while the operating results and net assets of Humana's managed care health plans have been classified as discontinued operations. BUSINESS STRATEGY Columbia/HCA primarily operates hospitals and ancillary health care facilities through either (i) wholly owned subsidiaries or (ii) ownership of controlling interests in various partnerships in which subsidiaries of Columbia/HCA serve as the managing general partner. Columbia/HCA's business strategy centers on the development of comprehensive, integrated health care delivery networks with physicians and other health care providers in targeted markets, which typically involves significant health care facility acquisition and consolidation activities. During the past several years, hospital inpatient admission trends have been adversely impacted by cost containment efforts initiated by federal and state governments and various third-party payers, including HMOs, PPOs, commercial insurance companies and employer-sponsored networks. In addition, a significant number of medical procedures have shifted from inpatient to less expensive outpatient settings as a result of both cost containment pressures and advances in medical technology. In response to changes in the health care industry, Columbia/HCA has developed the following operating strategy to provide the highest quality health care services at the lowest posible cost: 33 BECOME A SIGNIFICANT PROVIDER OF SERVICES -- Columbia/HCA attempts to (i) consolidate services to reduce costs and (ii) develop the geographic coverage necessary for inclusion in most managed care and employer-sponsored networks in each market. PROVIDE A COMPREHENSIVE RANGE OF SERVICES -- In addition to the operation of general, acute care hospitals, Columbia/HCA also operates psychiatric and rehabilitation facilities, outpatient surgery and diagnostic centers, home health agencies and other services. This strategy enables Columbia/HCA to attract business from managed care plans and major employers seeking efficient access to a wide array of health care services. DELIVER HIGH QUALITY SERVICES -- Through the use of clinical information systems, Columbia focuses on patient outcomes and strives to continuously improve the quality of care and service provided to patients. INTEGRATE FRAGMENTED DELIVERY SYSTEMS -- Through its networks, Columbia/HCA focuses on coordinating pricing, contracting, information systems and quality assurance activities among providers in each market. Management intends to implement its strategy discussed above in a substantial number of former Galen and HCA markets as well as new markets, and further develop the integrated health care networks in its five pre-Galen Merger markets. RESULTS OF OPERATIONS At the time of the HCA Merger, Columbia/HCA operated 195 hospitals (43,075 licensed beds) and certain ancillary health care facilities in forty major markets located in twenty-six states and two foreign countries. Operating data related to the pre-HCA Merger entities follows (dollars in millions):
COLUMBIA HCA COMBINED ---------- ---------- ----------- Revenues: 1993........................................................... $ 5,130 $ 5,122 $ 10,252 1992........................................................... 4,806 5,126 9,932 1991........................................................... 4,612 4,986 9,598 EBDITA (a): 1993........................................................... $ 907 $ 1,097 $ 2,004 1992........................................................... 870 1,054 1,924 1991........................................................... 928 1,044 1,972 Income from continuing operations (b): 1993........................................................... $ 291 $ 382 $ 673 1992........................................................... 297 300 597 1991........................................................... 358 156 514 Admissions (in thousands): 1993........................................................... 596.3 562.1 1,158.4 1992........................................................... 586.5 574.6 1,161.1 1991........................................................... 587.8 601.9 1,189.7 Emergency room visits (in thousands): 1993........................................................... 1,563.2 1,576.5 3,139.7 1992........................................................... 1,537.4 1,505.5 3,042.9 1991........................................................... 1,519.7 1,508.9 3,028.6 - ------------------------ (a) Income from continuing operations before non-recurring transactions, depreciation, interest, minority interests, income taxes and amortization. (b) Excludes the after-tax effect of non-recurring transactions. See Note 5 of the Notes to Supplemental Consolidated Financial Statements for a description of these transactions.
Revenues increased 3% to $10.3 billion in 1993 and 3% to $9.9 billion in 1992. Increases in both periods resulted primarily from price increases, acquisitions and growth in outpatient services. 34 During 1992 and 1993, Columbia/HCA completed numerous acquisitions and divestitures of hospitals, most of which are discussed in Notes 5 and 6 of the Notes to Supplemental Consolidated Financial Statements. The following table summarizes percentage changes in same-hospital volumes for each respective period of 1993 compared to the same period of 1992, and changes in same-hospital volumes in for period of 1992 compared to the same period of 1991.
1993 VS 1992 1992 VS 1991 -------------------------------- -------------------------------- COLUMBIA COLUMBIA ------------ ------------ CHC GALEN HCA COMBINED CHC GALEN HCA COMBINED ---- ------ ----- --------- ---- ------ ----- --------- ADMISSIONS: Quarter: First................ 6.7 (2.1) (1.5) (1.5) 8.4 -- 3.5 2.1 Second............... 8.9 (1.3) (2.5) (1.6) 2.4 (4.8) 1.2 (1.5) Third................ 5.9 (1.0) (3.0) (1.8) 4.6 (4.1) (0.4) (1.9) Fourth............... 5.9 1.3 (0.4) 0.6 4.6 (3.6) (2.2) (2.6) Year............... 6.8 (0.8) (1.8) (1.1) 5.0 (3.1) 0.6 (1.0) EMERGENCY ROOM VISITS: Quarter: First................ 19.2 4.4 9.0 7.3 6.3 2.2 0.9 1.7 Second............... 11.7 (0.1) 4.2 2.6 8.0 (1.8) -- (0.5) Third................ 5.8 (2.2) 1.9 0.3 16.5 0.2 7.0 4.0 Fourth............... 6.9 2.4 5.7 4.3 8.9 (2.2) (0.5) (1.0) Year............... 10.6 1.1 5.1 3.6 9.1 (0.4) 1.8 1.0
In addition to the above, same-hospital outpatient volumes for CHC facilities increased 9.5% in 1993 and 39% in 1992, while such volumes for Galen facilities declined 3.6% and 1.5%, respectively. Same-hospital outpatient volumes for HCA (denominated differently than those of CHC and Galen) increased 9.6% in 1993 and 14.6% in 1992 compared to the respective prior year. Since it began operations in 1988, CHC had experienced significant growth in patient volumes, revenues and net income, primarily as a result of successful implementation of its strategy. The historical operating results of Galen's hospitals (which include the hospital operations of Humana prior to the Spinoff) had been adversely impacted as a result of such hospitals' pre-Spinoff relationship with Humana's managed care health plan business in certain markets. Management believes that this relationship caused some physicians to discontinue referrals of their patients to the company's hospitals, and had precluded these hospitals from contracting with unaffiliated insurers. In addition, Galen's volume of patients covered by traditional insurance (who pay amounts which more closely approximate established charges) declined significantly in 1992 due in part to increased price consciousness of patients and physicians with respect to Galen's pricing policies. Same-hospital volume trends at former Galen facilities have improved in 1993 primarily as a result of increased volumes from discounted managed care health plans other than Humana. During 1993 HCA facilities experienced declines in inpatient admissions and increases in outpatient volumes primarily as a result of the previously discussed cost containment efforts and outpatient utilization trends. In addition, volumes in HCA's psychiatric facilities had been adversely impacted in both 1992 and 1993 as a result of negative publicity in the psychiatric hospital industry. Despite declines in same-hospital admissions and deterioration in payer mix, EBDITA for Columbia/HCA increased 4% to $2 billion in 1993 from $1.9 billion in 1992. EBDITA margins improved slightly to 19.5% from 19.4% primarily as a result of improvements in staffing levels and increased medical supply discounts. Medicare admissions as a percentage of total admissions increased from 37% in 1992 to 39% in 1993, while discounted and managed care admissions grew from 32% to 35%, respectively. EBDITA declined 3% in 1992 from 1991 due to a decline in same-hospital admissions at former Galen facilities and deterioration in Galen's payer mix. 35 During the third quarter of 1993, Columbia/HCA recorded non-recurring charges of $151 million ($98 million net of tax) of costs related to the Galen Merger. Results of operations in 1992 include (i) $394 million ($330 million net of tax) of losses associated with divestitures of certain hospitals, (ii) $138 million ($86 million net of tax) of costs related primarily to the Spinoff and (iii) a gain of $93 million ($58 million net of tax) on the sale of HealthTrust common stock. Income from continuing operations in 1991 includes (i) a charge of $413 million ($256 million net of tax) in connection with the acceleration of vesting of stock options under the HCA Nonqualified Stock Option Plan and the establishment of exercise prices at levels substantially less than the then fair value of the underlying common stock, (ii) a charge of $159 million ($99 net of tax) primarily in connection with the anticipated loss on the disposition of certain hospitals and other assets, (iii) a gain of $51 million ($32 million net of tax) on the sale of a hospital, and (iv) a gain of $221 million ($162 million net of tax) on the sale of an investment in preferred stock and warrants of HealthTrust. See Note 5 of the Notes to Supplemental Consolidated Financial Statements for a discussion of non-recurring transactions. Excluding the effects of the non-recurring transactions, income from continuing operations increased 13% to $673 million ($1.99 per share) in 1993 and 16% to $597 million ($1.82 per share) in 1992. Improvements in both years resulted primarily from reductions in interest expense, and in 1993, growth in EBDITA. During the third quarter of 1993, in an effort to reduce future interest expense and eliminate certain restrictive covenants, Columbia/HCA effected the refinancing of $787 million of its long-term debt (bearing interest at an average rate of 8.5%) primarily through the issuance of commercial paper, and renegotiated HCA's bank credit agreement (subsequently replaced upon consummation of the HCA Merger). After-tax losses from these refinancing activities aggregated $84 million or $.24 per share. DISCONTINUED OPERATIONS Results of operations include income from discontinued operations of $16 million in 1993, a loss of $125 million in 1992 and income of $16 million in 1991. Losses from discontinued operations in 1992 include costs of $135 million (net of tax) incurred by Humana in connection with the Spinoff. LIQUIDITY Cash provided by continuing operations totaled $1.3 billion in each of the last three years. Cash flows in excess of Columbia/HCA's capital expenditure program were used primarily to reduce long-term debt. Working capital totaled $573 million at December 31, 1993 compared to $606 million at December 31, 1992. Management believes that cash flows from operations and amounts available under Columbia/HCA's revolving credit facilities and related commercial paper programs are sufficient to meet expected future liquidity needs. Investments of the Columbia/HCA's professional liability insurance subsidiaries to maintain statutory equity and pay claims totaled $778 million and $709 million at December 31, 1993 and 1992, respectively. In September 1993 the Board of Directors initiated the payment of a regular quarterly cash dividend of $.03 per common share. Management anticipates that this dividend policy will continue after consummation of the HCA Merger. CAPITAL RESOURCES Excluding acquisitions, capital expenditures totaled $836 million in 1993 compared to $668 million in 1992 and $645 million in 1991. Planned capital expenditures in 1994 (excluding acquisitions) are expected to approximate $800 million. Management believes that its capital expenditure program is adequate to expand, improve and equip existing health care facilities. 36 In addition, Columbia/HCA expended $79 million, $36 million and $96 million for acquisitions during 1993, 1992 and 1991, respectively. See Note 6 of the Notes to Supplemental Consolidated Financial Statements for a description of these activities. As part of its business strategy, Columbia/HCA intends to acquire additional health care facilities in the future. Since December 31, 1993, Columbia/HCA has expended $114 million toward the purchase of four hospitals (or a controlling interest therein) containing 1,264 licensed beds. These transactions, which will be accounted for by the purchase method, were financed through the use of internally generated funds and issuance of long-term debt. Columbia/HCA expects to finance all capital expenditures with internally generated and borrowed funds. Available sources of capital include public or private debt, commercial paper, unused bank revolving credits and equity. At December 31, 1993, there were projects under construction which had an estimated additional cost to complete of approximately $299 million. In connection with the Spinoff, common stockholders' equity was reduced by $802 million in 1993 as a result of the following transactions with Humana: (i) distribution of the net assets of the health plan business ($392 million) and the net assets of a hospital facility ($25 million), (ii) payment of cash ($135 million) and (iii) issuance of notes ($250 million). The notes were refinanced in September 1993. Including the pro forma effect of the Spinoff, the ratio of debt to debt plus common stockholders' equity improved from 58% at December 31, 1992 to 52% at December 31, 1993. Upon consummation of the HCA Merger in February 1994, Columbia/HCA entered into revolving credit agreements in the aggregate amount of $3 billion and refinanced certain HCA and other long-term debt. The refinancings were effected primarily through the issuance of commercial paper, $175 million of 6 1/2% Notes due 1999 and $150 million of 7.15% Notes due 2004. Management anticipates that losses resulting from these refinancing activities will reduce Columbia/HCA's first quarter 1994 net income by approximately $80 million. Columbia's credit facilities contain customary covenants which include (i) limitations on additional debt, (ii) limitations on sales of assets, mergers and changes of ownership and (iii) maintenance of certain interest coverage ratios. Columbia/HCA was in compliance with all such covenants at December 31, 1993. EFFECTS OF INFLATION AND CHANGING PRICES Various federal, state and local laws have been enacted that, in certain cases, limit Columbia/ HCA's ability to increase prices. Revenues for hospital services rendered to Medicare patients are established under the federal government's prospective payment system. Medicare revenues approximated 34%, 30% and 29% of revenues in 1993, 1992 and 1991, respectively. Management believes that hospital operating margins have been, and may continue to be, under significant pressure because of deterioration in inpatient volumes and payer mix, and growth in operating expenses in excess of the increase in prospective payments under the Medicare program. Columbia expects that the average rate of increase in Medicare prospective payments will approximate 2% in 1994. In addition, as a result of increasing regulatory and competitive pressures, Columbia/HCA's ability to maintain operating margins through price increases to non-Medicare patients is limited. HEALTH CARE REFORM In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and some state legislatures that would significantly affect health care systems in Columbia/HCA's markets. Proposals under consideration include cost controls on hospitals, insurance market reforms that increase the availability of group health insurance to small businesses, requirements that all businesses offer health insurance to their employees and creation of a single government health insurance plan that would cover all citizens. 37 President Clinton's health care reform bill, introduced as legislation in November 1993, includes certain measures that could significantly reduce future payments to providers of health care services. OTHER INFORMATION As discussed in Note 7 of the Notes to Supplemental Consolidated Financial Statements, Columbia/HCA is contesting certain income taxes and related interest aggregating $1.3 billion at December 31, 1993 proposed by the Internal Revenue Service (the "Service") for prior years. Management believes that final resolution of these disputes will not have a material adverse effect on the financial position, results of operations or liquidity of Columbia/HCA. However, if all or a majority of the positions of the Service are upheld, the financial position, results of operations and liquidity of Columbia/HCA would be materially adversely affected. On March 24, 1994, Columbia/HCA made an advance payment to the IRS of approximately $75 million in connection with certain disputed prior year income taxes and related interest. This transaction will not have a material effect on 1994 earnings. Resolution of various other loss contingencies, including litigation pending against Columbia/ HCA in the ordinary course of business, is not expected to have a material adverse effect on its financial position or results of operations. During 1992 Columbia/HCA adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which increased last year's first quarter net income by $51 million or $.16 per share. See Note 7 of the Notes to Supplemental Consolidated Financial Statements. Columbia/HCA expects to incur certain expenses related to the HCA Merger, the amounts of which have not been determined. These costs will include, among other things, amounts for investment advisory and professional fees, expenses of printing and distributing proxy materials, severance payments and provisions for loss related to the consolidation of the operations of Columbia and HCA. Management anticipates that these expenses will be recorded in the first quarter of 1994. 38 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Information with respect to this Item 8 is contained in the Consolidated Financial Statements and Financial Statement Schedules of Columbia Healthcare Corporation and the Supplemental Consolidated Financial Statements and Financial Statement Schedules of the Company included in the Indexes on Pages F-1 and F-30, respectively, of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this Item is set forth under the heading "Election of Directors" in the definitive proxy materials of the Company to be filed in connection with its 1994 Annual Meeting of Stockholders, except for the information regarding executive officers of the Company, which is contained in Item 1 of Part I of this Annual Report on Form 10-K. The information required by this Item contained in such definitive proxy materials is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is set forth under the heading "Executive Compensation" in the definitive proxy materials of the Company to be filed in connection with its 1994 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is set forth under the heading "Principal Stockholders" in the definitive proxy materials of the Company to be filed in connection with its 1994 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is set forth under the heading "Certain Transactions" in the definitive proxy materials of the Company to be filed in connection with its 1994 Annual Meeting of Stockholders, which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents filed as part of the report: 1. and 2.LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES. The accompanying Index to Consolidated Financial Statements and Financial Statement Schedules of Columbia Healthcare Corporation and Index to Supplemental Consolidated Financial Statements and Financial Statement Schedules of the Company on Pages F-1 and F-30, respectively, of this Annual Report on Form 10-K are provided in response to this Item. 3. LIST OF EXHIBITS. 3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3(a) to the Company's Current Report on Form 8-K dated February 11, 1994, and incorporated herein by reference). 3.2(a) By-laws of the Company (filed as Exhibit 2.2 to the Company's Registration Statement on Form 8-A dated August 31, 1993, and incorporated herein by reference). 3.2(b) Amendment to By-laws of the Company (filed as Exhibit 3(b).1 to the Company's Current Report on Form 8-K dated February 11, 1994, and incorporated herein by reference).
39 4.1 Specimen Certificate for shares of Common Stock, par value $.01 per share, of the Company (filed as Exhibit 4.1 to the Company's Form SE to Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference). 4.2 Columbia Hospital Corporation 9% Subordinated Mandatory Convertible Note Due June 30, 1999 (filed as Exhibit 4.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated herein by reference). 4.3 Registration Rights Agreement between the Company and The 1818 Fund, L.P. dated March 18, 1991 (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated herein by reference). 4.4 Securities Purchase Agreement by and between the Company and The 1818 Fund, L.P. dated as of March 18, 1991 (filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated herein by reference). 4.5 Warrant to purchase shares of Common Stock, par value $.01 per share, of the Company (filed as Exhibit 4.7 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated herein by reference). 4.6 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). 4.7 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. 4.8 Amended and Restated Rights Agreement dated February 10, 1994 between the Company and Mid-America Bank of Louisville and Trust Company. 4.9 $1 Billion Credit Agreement dated as of February 10, 1994, among the Company, the Several Banks and Other Financial Institutions, and Chemical Bank as Agent and as CAF Loan Agent. 4.10 $2 Billion Credit Agreement dated as of February 10, 1994, among the Company, the Several Banks and Other Financial Institutions, and Chemical Bank as Agent and as CAF Loan Agent. 4.11 Indenture dated as of December 15, 1993 between the Company and The First National Bank of Chicago, as Trustee. 10.1 Agreement and Plan of Merger among the Company, CHOS Acquisition Corporation and HCA-Hospital Corporation of America dated as of October 2, 1993 (filed as Exhibit 2 to the Company's Registration Statement on Form S-4 (File No. 33-50735), and incorporated herein by reference). 10.2 Agreement and Plan of Merger between Galen Health Care, Inc. and the Company dated as of June 10, 1993 (filed as Exhibit 2 to the Company's Registration Statement on Form S-4 (File No. 33-49773), and incorporated herein by reference).
40 10.3 Agreement and Plan of Merger among Hospital Corporation of America, HCA-Hospital Corporation of America and TF Acquisition, Inc. dated November 21, 1988 PLUS a list identifying the contents of all omitted exhibits to the Agreement and Plan of Merger PLUS an agreement of Hospital Corporation of America to furnish supplementally to the Securities and Exchange Commission upon request a copy of all omitted exhibits (filed as Exhibit 2 to Hospital Corporation of America's Current Report on Form 8-K dated November 21, 1988, and incorporated herein by reference). 10.4 Amendment No. 1 to Agreement and Plan of Merger dated as of February 7, 1989, among Hospital Corporation of America, HCA-Hospital Corporation of America and TF Acquisition, Inc. (filed as Exhibit 2(b) to Hospital Corporation of America's Annual Report on Form 10-K for the year ended December 31, 1988, and incorporated herein by reference). 10.5 Columbia Hospital Corporation Stock Option Plan (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated herein by reference).* 10.6 Columbia Hospital Corporation 1992 Stock and Incentive Plan (filed as Exhibit 10.14 to the Company's Registration Statement on Form S-1 (Reg. No. 33-48886), and incorporated herein by reference).* 10.7 Columbia Hospital Corporation Outside Directors Nonqualified Stock Option Plan (filed as Exhibit 28.1 to the Company's Registration Statement on Form S-8 (File No. 33-55272), and incorporated herein by reference).* 10.8 HCA-Hospital Corporation of America 1989 Nonqualified Stock Option Plan, as amended through December 16, 1991 (filed as Exhibit 10(g) to HCA-Hospital Corporation of America's Registration Statement on Form S-1 (File No. 33-44906), and incorporated herein by reference).* 10.9 Form of Stock Option Agreement under the HCA-Hospital Corporation of America 1989 Nonqualified Stock Option Plan (filed as Exhibit 10(j) to HCA-Hospital Corporation of America's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference).* 10.10 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).* 10.11 Termination Agreement between the Company and Carl F. Pollard dated December 16, 1993.* 10.12 Termination Agreement between the Company and James D. Bohanon dated December 16, 1993.* 10.13 Form of Indemnity Agreement between Galen Health Care, Inc. and 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). 10.14 Form of Severance Pay Agreement between Galen Health Care, Inc. and certain executives (filed as Exhibit 10(jj) to Galen Health Care, Inc.'s Registration Statement on Form 10, as amended, and incorporated herein by reference).* 10.15 Form of Severance Agreement between HCA-Hospital Corporation of America and certain executives dated as of November 1, 1993.* 10.16 Assumption Agreement among the Company, CHOS Acquisition Corporation and HCA-Hospital Corporation of America dated as of February 10, 1994, relating to the Severance Agreements.*
41 10.17 Form of Severance Pay Agreement between the Company and certain executives dated as of June 10, 1993.* 10.18 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).* 10.19 Columbia/HCA Healthcare Corporation Annual Incentive Plan.* 10.20 Columbia/HCA Healthcare Corporation Directors' Retirement Policy.* 10.21 Baxter Supply Agreement dated as of December 1, 1989, among Hospital Corporation of America, Baxter Healthcare Corporation, HealthTrust, Inc. -- The Hospital Company and Healthcare Management Corporation (filed as Exhibit 10(u) filed with Hospital Corporation of America's Annual Report on Form 10-K, for the year ended December 31, 1989, and incorporated herein by reference). 10.22 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).* 11 Supplemental Statement re Computation of Earnings Per Common and Common Equivalent Share. 12.1 Statement re Computation of Ratio of Earnings to Fixed Charges. 12.2 Supplemental Statement re Computation of Ratio of Earnings to Fixed Charges. 21 List of Subsidiaries. 23 Consent of Coopers & Lybrand. - ------------------------ * Management compensatory plan or arrangement.
(b) Reports on Form 8-K.
DATE OF CURRENT REPORT ITEM(S) REPORTED - ----------------------- ----------------------------------------------------------------------------------- October 4, 1993 Announced approval by the Board of Directors of the HCA Merger November 5, 1993 Earnings release for the quarter and nine months ended September 30, 1993 and 1992 November 10, 1993 Consolidated financial statements of HCA for the years ended December 31, 1993, 1992 and for the six months ended June 30, 1993 and 1992 November 15, 1993 Consolidated financial statements of the Company for the quarter and nine months ended September 30, 1993 and 1992 December 15, 1993 Underwriting Agreement in connection with the Company's 6 1/8% Notes due December 15, 2000 and the Company's 7 1/2% Debentures due December 15, 2023 February 11, 1994 Announced completion of the HCA Merger, the composition of the Company's Board of Directors and a Bylaw amendment February 21, 1994 Supplemental pro forma consolidated financial statements of the Company for the three years ended December 31, 1992, 1991 and 1990, and for the nine months ended September 30, 1993 and 1992 March 1, 1994 Earnings release for the quarter and year ended December 31, 1993 and 1992 March 14, 1994 Underwriting Agreement in connection with the Company's 6 1/2% Notes due March 15, 1999 March 18, 1994 Underwriting Agreement in connection with the Company's 7.15% Notes due March 30, 2004 March 22, 1994 Assumption of HCA long-term debt
42 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. Dated: March 31, 1994 COLUMBIA/HCA HEALTHCARE CORPORATION By: _______/s/_RICHARD L. SCOTT_______ Richard L. Scott President and Chief Executive Officer 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/ THOMAS F. FRIST, JR., M.D. ------------------------------------------- Chairman of the Board March 31, 1994 Thomas F. Frist, Jr., M.D. /s/ RICHARD L. SCOTT ------------------------------------------- President, Chief Executive March 31, 1994 Richard L. Scott Officer and Director /s/ DAVID C. COLBY Senior Vice President, Chief ------------------------------------------- Financial Officer and Treasurer March 31, 1994 David C. Colby (Principal Financial Officer) /s/ RICHARD A. LECHLEITER Vice President and Controller ------------------------------------------- (Principal Accounting March 31, 1994 Richard A. Lechleiter Officer) /s/ MAGDALENA AVERHOFF, M.D. ------------------------------------------- Director March 31, 1994 Magdalena Averhoff, M.D. /s/ J. DAVID GRISSOM ------------------------------------------- Director March 31, 1994 J. David Grissom /s/ ETHAN JACKSON ------------------------------------------- Director March 31, 1994 Ethan Jackson
43
SIGNATURE TITLE DATE - ------------------------------------------------------ ------------------------------------ ------------------- /s/ CHARLES J. KANE ------------------------------------------- Director March 31, 1994 Charles J. Kane /s/ JOHN W. LANDRUM ------------------------------------------- Director March 31, 1994 John W. Landrum /s/ T. MICHAEL LONG ------------------------------------------- Director March 31, 1994 T. Michael Long /s/ DARLA D. MOORE ------------------------------------------- Director March 31, 1994 Darla D. Moore /s/ RODMAN W. MOORHEAD III ------------------------------------------- Director March 31, 1994 Rodman W. Moorhead III /s/ CARL F. POLLARD ------------------------------------------- Director March 31, 1994 Carl F. Pollard /s/ CARL E. REICHARDT ------------------------------------------- Director March 31, 1994 Carl E. Reichardt /s/ FRANK S. ROYAL, M.D. ------------------------------------------- Director March 31, 1994 Frank S. Royal, M.D. /s/ ROBERT D. WALTER ------------------------------------------- Director March 31, 1994 Robert D. Walter /s/ WILLIAM T. YOUNG ------------------------------------------- Director March 31, 1994 William T. Young
44 COLUMBIA HEALTHCARE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE --------- Report of Independent Accountants.......................................................................... F-2 Consolidated Financial Statements: Consolidated Statement of Income for the years ended December 31, 1993, 1992 and 1991........................................................................ F-3 Consolidated Balance Sheet, December 31, 1993 and 1992................................................... F-4 Consolidated Statement of Common Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991.................................................................................................... F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1993, 1992 and 1991........................................................................ F-6 Notes to Consolidated Financial Statements............................................................... F-7 Quarterly Consolidated Financial Information (Unaudited)................................................. F-21 Financial Statement Schedules (a): Schedule I -- Marketable Securities -- Other Security Investments, December 31, 1993..................... F-22 Schedule II -- Amounts Receivable From Related Parties and Underwriters, Promoters and Employees Other Than Related Parties for the years ended December 31, 1993, 1992 and 1991............................... F-23 Schedule V -- Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991......... F-26 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991........................................................ F-27 Schedule VIII -- Valuation and Qualifying Accounts for the years ended December 31, 1993, 1992 and 1991.................................................................................................... F-28 Schedule X -- Supplementary Income Statement Information for the years ended December 31, 1993, 1992 and 1991.................................................................................................... F-29 - ------------------------ (a) All other schedules have been omitted because the required information is not present or not present in material amounts.
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Columbia/HCA Healthcare Corporation We have audited the consolidated financial statements and financial statement schedules of Columbia Healthcare Corporation listed in the index on page F-1 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbia Healthcare Corporation as of December 31, 1993 and 1992, and the consolidated results of operations and cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Note 7 to the consolidated financial statements, effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." COOPERS & LYBRAND Louisville, Kentucky February 28, 1994 F-2 COLUMBIA HEALTHCARE CORPORATION CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 --------- --------- --------- Revenues........................................................................... $ 5,130 $ 4,806 $ 4,612 --------- --------- --------- Salaries, wages and benefits....................................................... 2,217 2,069 2,004 Supplies........................................................................... 842 788 720 Other operating expenses........................................................... 916 833 717 Provision for doubtful accounts.................................................... 282 285 277 Depreciation and amortization...................................................... 298 276 248 Interest expense................................................................... 129 117 111 Investment income.................................................................. (34) (39) (34) Non-recurring transactions......................................................... 151 138 - --------- --------- --------- 4,801 4,467 4,043 --------- --------- --------- Income from continuing operations before minority interests and income taxes....... 329 339 569 Minority interests in earnings of consolidated entities............................ 9 10 9 --------- --------- --------- Income from continuing operations before income taxes.............................. 320 329 560 Provision for income taxes......................................................... 127 118 202 --------- --------- --------- Income from continuing operations.................................................. 193 211 358 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit) of $9 in 1993, ($46) in 1992 and $9 in 1991....................... 16 (108) 16 Costs associated with discontinuance of health plan segment, net of income tax benefit of $2................................................. - (17) - Extraordinary loss on extinguishment of debt, net of income tax benefit of $42..... (70) - - Cumulative effect on prior years of a change in accounting for income taxes...................................................................... - 51 - --------- --------- --------- Net income................................................................... $ 139 $ 137 $ 374 --------- --------- --------- --------- --------- --------- Earnings per common share: Income from continuing operations................................................ $ 1.28 $ 1.45 $ 2.58 Discontinued operations: Income (loss) from operations of discontinued health plan segment....................................................................... .10 (.75) .11 Costs associated with discontinuance of health plan segment.................... - (.12) - Extraordinary loss on extinguishment of debt..................................... (.46) - - Cumulative effect on prior years of a change in accounting for income taxes...... - .36 - --------- --------- --------- Net income................................................................... $ .92 $ .94 $ 2.69 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of the consolidated financial statements. F-3 COLUMBIA HEALTHCARE CORPORATION CONSOLIDATED BALANCE SHEET DECEMBER 31, 1993 AND 1992 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ASSETS
1993 1992 --------- --------- Current assets: Cash and cash equivalents................................................................. $ 72 $ 95 Accounts receivable less allowance for loss of $160 -- 1993 and $166 -- 1992............................................................................. 787 827 Inventories............................................................................... 139 138 Other..................................................................................... 217 204 --------- --------- 1,215 1,264 Property and equipment, at cost: Land...................................................................................... 273 268 Buildings................................................................................. 2,402 2,269 Equipment................................................................................. 1,785 1,663 Construction in progress (estimated cost to complete and equip after December 31, 1993 -- $149).................................................................................... 121 109 --------- --------- 4,581 4,309 Accumulated depreciation.................................................................. (1,792) (1,651) --------- --------- 2,789 2,658 Net assets of discontinued operations....................................................... - 376 Investments of professional liability insurance subsidiary.................................. 318 302 Intangible assets........................................................................... 225 195 Other....................................................................................... 72 96 --------- --------- $ 4,619 $ 4,891 --------- --------- --------- --------- LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................................................... $ 232 $ 199 Salaries, wages and other compensation.................................................... 141 124 Other accrued expenses.................................................................... 375 425 Income taxes.............................................................................. 22 92 Long-term debt due within one year........................................................ 71 32 --------- --------- 841 872 Long-term debt.............................................................................. 1,580 1,256 Deferred credits and other liabilities...................................................... 485 456 Minority interests in equity of consolidated entities....................................... 57 31 Contingencies Common stockholders' equity: Common stock $.01 par; authorized 400,000,000 shares; issued and outstanding 151,060,400 shares -- 1993 and 148,927,400 shares -- 1992............................................ 2 1 Capital in excess of par value............................................................ 784 740 Other..................................................................................... (2) (9) Retained earnings......................................................................... 872 1,544 --------- --------- 1,656 2,276 --------- --------- $ 4,619 $ 4,891 --------- --------- --------- ---------
The accompanying notes are an integral part of the consolidated financial statements. F-4 COLUMBIA HEALTHCARE CORPORATION CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
COMMON STOCK -------------- CAPITAL IN SHARES PAR EXCESS OF RETAINED (000) VALUE PAR VALUE OTHER EARNINGS TOTAL ------- ----- ---------- ----- -------- ------ Balances, December 31, 1990........................... 136,122 $ 1 $ 523 $ (2) $ 1,314 $1,836 Net income.......................................... 374 374 Cash dividends (Galen Health Care, Inc.)............ (138) (138) Issuance of common stock............................ 4,310 61 61 Stock options exercised and related tax benefits, net of 224,000 shares tendered in partial payment therefor............... 797 24 24 Other............................................... 24 2 9 11 ------- ----- ----- ----- -------- ------ Balances, December 31, 1991........................... 141,253 1 610 7 1,550 2,168 Net income.......................................... 137 137 Cash dividends (Galen Health Care, Inc.)............ (143) (143) Issuance of common stock............................ 7,227 119 119 Stock options exercised and related tax benefits, net of 30,000 shares tendered in partial payment therefor............... 430 9 9 Other............................................... 17 2 (16) (14) ------- ----- ----- ----- -------- ------ Balances, December 31, 1992........................... 148,927 1 740 (9) 1,544 2,276 Net income.......................................... 139 139 Cash dividends (Columbia Healthcare Corporation -- $.06 per share).................................... (9) (9) Stock options exercised and related tax benefits, net of 81,000 shares tendered in partial payment therefor............... 1,728 1 30 31 Spinoff transaction with Humana Inc.: Cash payment to Humana Inc........................ (135) (135) Noncash transactions: Issuance of notes payable....................... (250) (250) Distribution of net investment in discontinued health plan operations............ (392) (392) Transfer of a hospital facility................. (25) (25) Net unrealized gains on investment securities....... 9 9 Other............................................... 405 14 (2) 12 ------- ----- ----- ----- -------- ------ Balances, December 31, 1993........................... 151,060 $ 2 $ 784 $ (2) $ 872 $1,656 ------- ----- ----- ----- -------- ------ ------- ----- ----- ----- -------- ------
The accompanying notes are an integral part of the consolidated financial statements. F-5 COLUMBIA HEALTHCARE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 --------- --------- --------- Cash flows from continuing operations: Net income.......................................................................... $ 139 $ 137 $ 374 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations........................................................... (16) 127 (16) Minority interests in earnings of consolidated entities........................... 9 10 9 Non-recurring transactions........................................................ 151 138 - Depreciation and amortization..................................................... 298 276 248 Deferred income taxes............................................................. (51) (41) 27 Change in operating assets and liabilities: (Increase) decrease in accounts receivable...................................... 9 115 (17) (Increase) decrease in inventories and other assets............................. 1 (49) (28) Decrease in income taxes........................................................ (50) (12) (15) Increase (decrease) in other liabilities........................................ (99) 36 82 Change in accounting for income taxes............................................. - (51) - Extraordinary loss on extinguishment of debt...................................... 112 - - Other............................................................................. (10) (18) (9) --------- --------- --------- Net cash provided by continuing operations...................................... 493 668 655 --------- --------- --------- Cash flows from investing activities: Purchase of property and equipment.................................................. (382) (359) (453) Acquisition of hospitals and health care facilities................................. (79) (36) (96) Sale of assets...................................................................... 130 53 116 Investment in discontinued operations............................................... - (71) (76) Change in investments............................................................... 33 3 (35) Other............................................................................... (22) (2) (6) --------- --------- --------- Net cash used in investing activities........................................... (320) (412) (550) --------- --------- --------- Cash flows from financing activities: Issuance of long-term debt.......................................................... 400 239 194 Net change in commercial paper borrowings and lines of credit....................... 342 (143) 161 Repayment of long-term debt......................................................... (779) (150) (354) Payment to Humana Inc. in spinoff transaction....................................... (135) - - Payment of cash dividends........................................................... (40) (143) (134) Issuance of common stock............................................................ 30 7 71 Other............................................................................... (14) (13) (6) --------- --------- --------- Net cash used in financing activities........................................... (196) (203) (68) --------- --------- --------- Change in cash and cash equivalents................................................... (23) 53 37 Cash and cash equivalents at beginning of period...................................... 95 42 5 --------- --------- --------- Cash and cash equivalents at end of period............................................ $ 72 $ 95 $ 42 --------- --------- --------- --------- --------- --------- Interest payments..................................................................... $ 122 $ 111 $ 114 Income tax payments, net of refunds................................................... 186 169 190
The accompanying notes are an integral part of the consolidated financial statements. F-6 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ACCOUNTING POLICIES Columbia Healthcare Corporation ("Columbia") is a Delaware corporation which began operations on September 1, 1993 as a result of a merger involving Columbia Hospital Corporation ("CHC") and Galen Health Care, Inc. ("Galen") (the "Galen Merger"). See Note 2 for a description of the specific terms of the Galen Merger. Columbia primarily operates hospitals and ancillary health care facilities through either (i) wholly owned subsidiaries or (ii) ownership of controlling interests in various partnerships in which subsidiaries of Columbia serve as the managing general partner. BASIS OF PRESENTATION The consolidated financial statements include all subsidiaries and partnerships controlled by Columbia as the managing general partner. Significant intercompany transactions have been eliminated. For accounting purposes, the Galen Merger has been treated as a pooling of interests. Accordingly, the consolidated financial statements included herein give retroactive effect to the transaction and include the combined operations of CHC and Galen for all periods presented. In addition, the historical financial information related to Galen (which prior to the Galen Merger was reported on a fiscal year ending August 31) has been recast to conform to Columbia's annual reporting period ending December 31. On February 10, 1994, Columbia consummated a merger with HCA -- Hospital Corporation of America ("HCA") (the "HCA Merger"). Although the HCA Merger will be treated as a pooling of interests for accounting purposes, the accompanying consolidated financial statements do not give retroactive effect to this transaction. See Note 3 for a description of the HCA Merger. REVENUES Columbia's health care facilities have entered into agreements with third-party payers, including government programs and managed care health plans, under which Columbia is paid based upon established charges, cost of providing services, predetermined rates by diagnosis, fixed per diem rates or discounts from established charges. Revenues are recorded at estimated amounts due from patients and third-party payers for health care services provided, including anticipated settlements under reimbursement agreements with third-party payers. CASH AND CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Carrying values of cash and cash equivalents approximate fair value due to the short-term nature of these instruments. ACCOUNTS RECEIVABLE Accounts receivable consist primarily of amounts due from the Medicare and Medicaid programs, other government programs, managed care health plans, commercial insurance companies and individual patients. INVENTORIES Inventories are stated at the lower of cost (last-in, first-out) or market. PROPERTY AND EQUIPMENT Depreciation expense, computed by the straight-line method, was $279 million in 1993, $264 million in 1992 and $241 million in 1991. Columbia uses component depreciation for buildings. Depreciation rates for buildings are equivalent to useful lives ranging generally from 20 to 25 years. Estimated useful lives of equipment vary from 3 to 10 years. F-7 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 -- ACCOUNTING POLICIES (CONTINUED) INVESTMENTS On December 31, 1993, Columbia adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), which requires that investments in debt and equity securities be classified according to certain criteria. INTANGIBLE ASSETS Intangible assets consist primarily of costs in excess of the fair value of identifiable net assets of acquired entities and are amortized using the straight-line method over periods ranging from 10 to 40 years. Noncompete agreement and debt issuance costs are amortized based upon the lives of the respective contracts or loans. PROFESSIONAL LIABILITY INSURANCE CLAIMS Provisions for loss for professional liability risks are based upon actuarially determined estimates. To the extent that subsequent claims information varies from management's estimates, earnings are charged or credited. MINORITY INTERESTS IN CONSOLIDATED ENTITIES The consolidated financial statements include all assets, liabilities and earnings of Columbia's partnerships, certain partnership interests of which are not owned by Columbia. Accordingly, management has recorded minority interests in the earnings and equity of such partnerships. EARNINGS PER COMMON SHARE Earnings per common share are based upon the weighted average number of common shares outstanding, retroactively adjusted for the exchange of common shares in connection with the Galen Merger. Shares used in computing earnings per common share in 1993 were 150,017,000. The following is a summary of shares used in the computation for periods prior to the Galen Merger (amounts in thousands):
1992 1991 --------- --------- CHC weighted average shares outstanding.......................................... 21,967 16,540 --------- --------- Galen weighted average shares outstanding........................................ 158,620 157,931 Merger exchange ratio............................................................ 0.775 0.775 --------- --------- Adjusted Galen weighted average shares outstanding............................. 122,930 122,396 --------- --------- Shares used in computation of earnings per common share.......................... 144,897 138,936 --------- --------- --------- ---------
NOTE 2 -- GALEN MERGER On August 31, 1993, the stockholders of both CHC and Galen approved the Galen Merger, effective as of September 1, 1993. In connection with the Galen Merger, CHC, a Nevada corporation, was merged into Columbia. Each CHC share of common stock was converted on a tax-free basis into one share of Columbia common stock. Immediately subsequent thereto, a wholly owned subsidiary of Columbia was merged into Galen, at which time Galen became a wholly owned subsidiary of Columbia. In connection with this transaction, Columbia issued approximately 123,830,000 shares of common stock in a tax-free exchange for all of the outstanding common shares of Galen (an exchange ratio of 0.775 of a share of Columbia common stock for each share of Galen common stock). F-8 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- GALEN MERGER (CONTINUED) The Galen Merger has been accounted for as a pooling of interests, and accordingly, the consolidated financial statements give retroactive effect to the combined operations of CHC and Galen for all periods presented. The following is a summary of the results of operations of the separate entities for periods prior to the Galen Merger (dollars in millions):
CHC GALEN COMBINED --------- --------- ----------- Eight months ended August 31, 1993 (unaudited): Revenues...................................................... $ 823 $ 2,600 $ 3,423 Income from continuing operations............................. 17 176 193 Net income.................................................... 17 192 209 1992: Revenues...................................................... $ 819 $ 3,987 $ 4,806 Income from continuing operations............................. 26 185 211 Net income.................................................... 26 111 137 1991: Revenues...................................................... $ 499 $ 4,113 $ 4,612 Income from continuing operations............................. 15 343 358 Net income.................................................... 15 359 374
NOTE 3 -- HCA MERGER On October 2, 1993, Columbia entered into a definitive agreement to merge with HCA. This transaction was completed on February 10, 1994. In connection with the HCA Merger, Columbia stockholders approved an amendment to Columbia's Certificate of Incorporation changing the name of the corporation to Columbia/HCA Healthcare Corporation ("Columbia/HCA"). HCA was then merged into a wholly owned subsidiary of Columbia/HCA. Shares of HCA Class A voting common stock and Class B nonvoting common stock were converted on a tax-free basis into approximately 166,846,000 shares of Columbia/HCA voting common stock and approximately 18,990,000 shares of Columbia/HCA nonvoting common stock, respectively (an exchange ratio of 1.05 shares of Columbia/ HCA common stock for each share of HCA voting and nonvoting common stock). These financial statements do not give retroactive effect to the HCA Merger, which will be accounted for as a pooling of interests. See the Supplemental Consolidated Financial Statements of Columbia/HCA Healthcare Corporation included elsewhere herein for additional information regarding the HCA Merger. NOTE 4 -- SPINOFF TRANSACTION AND DISCONTINUED OPERATIONS Prior to the Galen Merger, Galen began operating its hospital business as an independent publicly held corporation on March 1, 1993 as a result of a tax-free spinoff transaction (the "Spinoff") by Humana Inc. ("Humana"), which retained its managed care health plan business. The Spinoff separated Humana's previously integrated hospital and managed care health plan businesses and was effected through the distribution of Galen common stock to then current Humana common stockholders on a one-for-one basis. For accounting purposes, because of the relative significance of the hospital business, the pre-Spinoff consolidated financial statements of Galen (and now those of Columbia) include the separate results of Humana's hospital business, while the operations and net assets of Humana's managed care health plans have been classified as discontinued operations. F-9 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 -- SPINOFF TRANSACTION AND DISCONTINUED OPERATIONS (CONTINUED) In connection with the Spinoff, Galen entered into various agreements with Humana which were intended to facilitate orderly changes for both the hospital and managed care health plan businesses in a way which would be minimally disruptive to each entity. Principal contracts are summarized below: OPERATIONS -- Certain former Galen hospitals will provide medical services to insureds of Humana for three years subsequent to the Spinoff. The contract includes, among other things, established payment rates for various inpatient and outpatient services and annual increases therein, and hospital utilization guarantees and related penalties. LIABILITIES AND INDEMNIFICATION -- Each entity assumed liability for specified claims. The entities will also share risks with respect to certain litigation and other contingencies, both identified and unknown. INCOME TAXES -- Each entity entered into risk-sharing arrangements in connection with the ultimate resolution of various income tax disputes. FINANCING -- In January 1993 certain subsidiaries issued $250 million of notes payable to Humana, and paid to Humana $135 million in cash on March 1, 1993 which was financed principally through the issuance of commercial paper. The $250 million of notes were repaid in September 1993 in connection with the refinancing of certain long-term debt. ADMINISTRATION -- These arrangements relate to leasing of certain administrative facilities, division of information systems, employee benefit and stock option plans, and various administrative service arrangements. Revenues of the discontinued managed care health plan business (included in discontinued operations in the accompanying consolidated statement of income) were $523 million in 1993, $2.9 billion in 1992 and $2.5 billion in 1991. NOTE 5 -- NON-RECURRING TRANSACTIONS In September 1993 Columbia recorded the following charges in connection with the Galen Merger (dollars in millions): Investment advisory and professional fees, and employee benefit plan costs... $ 62 Writedown of assets in connection with the consolidation of the combined entity's operations......................................................... 63 Administrative facility asset writedowns and conversion costs associated with the transaction............................................................. 16 Provision for loss on planned sales of assets................................ 10 --------- $ 151 --------- ---------
Income from continuing operations in 1992 includes $138 million of charges incurred primarily in connection with the Spinoff, including a provision for loss on the planned sale of hospitals, writedowns of assets in markets with significant declines in operations, administrative facility asset writedowns and certain other costs associated with the separation of the hospital and health plan businesses. Costs aggregating $171 million (before income taxes) incurred by Humana primarily in connection with the Spinoff are included in discontinued operations in 1992. Continuing operations in 1991 include a gain of $51 million on the sale of a hospital, a provision for loss of $46 million primarily in connection with the planned disposition of certain hospitals, and charitable contributions of $5 million. F-10 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- OTHER BUSINESS COMBINATIONS During the past three years, Columbia has acquired various hospitals and related ancillary health care facilities (or controlling interests in such facilities), all of which have been accounted for by the purchase method. Accordingly, the aggregate purchase price of these transactions has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed based upon their respective fair values. The consolidated financial statements include the operations of acquired entities since the respective acquisition dates. The following is a summary of acquisitions consummated during the last three years (dollars in millions):
1993 1992 1991 --------- --------- --------- Number of hospitals.................................................... 3 15 2 Number of licensed beds................................................ 903 2,345 1,420 Purchase price information: Fair value of assets acquired........................................ $ 164 $ 490 $ 165 Liabilities assumed.................................................. (76) (279) (48) --------- --------- --------- Net assets acquired................................................ 88 211 117 --------- --------- --------- Issuance of common stock............................................. - 119 1 Cash acquired........................................................ 9 15 15 Cash received from sale of certain acquired assets................... - 40 - Other................................................................ - 1 5 --------- --------- --------- 9 175 21 --------- --------- --------- Net cash paid for acquisitions..................................... $ 79 $ 36 $ 96 --------- --------- --------- --------- --------- ---------
In July 1992 Columbia acquired Basic American Medical, Inc. ("BAMI") (included in the table above) through a merger into a wholly owned subsidiary. The assets of BAMI included eight hospitals containing 1,203 licensed beds and certain other health care businesses. The transaction was financed through the assumption of approximately $140 million of long-term debt, issuance of 6,995,000 shares of common stock and payment of $38 million in cash to BAMI stockholders. The purchase price paid in excess of the fair value of identifiable net assets of acquired entities aggregated $7 million in 1993, $97 million in 1992 and $19 million in 1991. The pro forma effect of Columbia's acquisitions on its results of operations was not significant. NOTE 7 -- INCOME TAXES Provision for income taxes consists of the following (dollars in millions):
1993 1992 1991 --------- --------- --------- Current: Federal.............................................................. $ 153 $ 135 $ 151 State................................................................ 25 24 24 --------- --------- --------- 178 159 175 --------- --------- --------- Deferred: Federal.............................................................. (47) (36) 19 State................................................................ (4) (5) 8 --------- --------- --------- (51) (41) 27 --------- --------- --------- $ 127 $ 118 $ 202 --------- --------- --------- --------- --------- ---------
F-11 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) Reconciliation of federal statutory rate to effective income tax rate follows:
1993 1992 1991 --------- --------- --------- Federal statutory rate................................................... 35.0% 34.0% 34.0% State income taxes, net of federal income tax benefit............................................................. 3.5 2.9 2.8 Merger costs............................................................. 1.8 - - Tax exempt investment income............................................. (1.3) (1.4) (0.6) Other items, net......................................................... 0.6 0.3 (0.2) --------- --------- --------- Effective income tax rate................................................ 39.6% 35.8% 36.0% --------- --------- --------- --------- --------- ---------
In August 1993 Congress enacted the Omnibus Budget Reconciliation Act of 1993 which included, among other things, an increase in corporate income tax rates retroactive to January 1, 1993. This legislation had no material effect on 1993 net income. Effective January 1, 1992, Columbia adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires, among other things, recognition of deferred income taxes using statutory rates at which temporary differences in the tax and book bases of assets and liabilities are expected to affect taxable income in future years. The cumulative effect of this change as of the beginning of the year increased 1992 net income by $51 million. A summary of deferred income taxes by source included in the consolidated balance sheet at December 31, 1993 and 1992 follows (dollars in millions):
1993 1992 ---------------------- ---------------------- ASSETS LIABILITIES ASSETS LIABILITIES --------- ----------- --------- ----------- Depreciation.................................................. $ - $ 316 $ - $ 297 Professional liability risks.................................. 99 - 109 - Doubtful accounts............................................. 30 - 32 - Property losses............................................... 63 - 48 - Cash basis.................................................... - 5 - 18 Compensation.................................................. 24 - 18 - Capitalized leases............................................ 11 - 12 - Other......................................................... 57 7 32 2 --------- ----- --------- ----- $ 284 $ 328 $ 251 $ 317 --------- ----- --------- ----- --------- ----- --------- -----
Management believes that the deferred tax assets in the table above will ultimately be realized. Management's conclusion is based primarily on its expectation of future taxable income and the existence of sufficient taxable income within the allowable carryback periods to realize the tax benefits of deductible temporary differences recorded at December 31, 1993. Deferred income taxes totaling $119 million and $96 million at December 31, 1993 and 1992, respectively, are included in other current assets. Noncurrent deferred income taxes, included in deferred credits and other liabilities, totaled $163 million and $162 million at December 31, 1993 and 1992, respectively. F-12 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS Columbia insures a substantial portion of its professional liability risks through a wholly owned insurance subsidiary. Provisions for such risks underwritten by the subsidiary and deductibles at certain hospitals, including expenses incident to claim settlements, were $64 million for 1993 and $58 million for both 1992 and 1991. Amounts approximating the provision for loss are funded annually. Allowances for professional liability risks, included principally in deferred credits and other liabilities, were $327 million and $290 million at December 31, 1993 and 1992, respectively. As discussed in Note 1, Columbia adopted the provisions of SFAS 115 on December 31, 1993. Accordingly, common stockholders' equity was increased by $9 million (net of deferred income taxes) to reflect the net unrealized gain on investments classified as available for sale. Prior to the adoption of SFAS 115, debt securities were recorded at amortized cost (which approximated fair value), while equity securities were recorded at the lower of aggregate cost or fair value. The adoption of SFAS 115 had no effect on earnings in 1993. The provisions of SFAS 115 require that investments in debt and equity securities be classified according to the following criteria: TRADING ACCOUNT -- Assets held for resale in anticipation of short-term changes in market conditions are recorded at fair value and gains and losses, both realized and unrealized, are included in income. Columbia does not maintain a trading account portfolio. HELD TO MATURITY -- Certain debt securities of Columbia's professional liability insurance subsidiary are expected to be held to maturity as a result of management's intent and ability to do so. These investments are carried at amortized cost. AVAILABLE FOR SALE -- Debt and equity securities not classified as either trading securities or held to maturity are classified as available for sale and recorded at fair value. Unrealized gains and losses are excluded from income and recorded as a separate component of common stockholders' equity. F-13 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) The following is a summary of the insurance subsidiary's investments at December 31, 1993 and 1992 (dollars in millions):
DECEMBER 31, 1993 ------------------------------------------ UNREALIZED AMOUNTS -------------------- FAIR COST GAINS LOSSES VALUE --------- --------- --------- --------- Held to maturity: United States Government obligations.............................. $ 44 $ - $ - $ 44 --------- --------- --------- --------- Available for sale: Bonds: United States Government........................................ 16 1 - 17 States and municipalities....................................... 143 4 - 147 Mortgage-backed securities...................................... 47 1 - 48 Corporate and other............................................. 23 1 - 24 Redeemable preferred stocks....................................... 17 1 - 18 --------- --------- --------- --------- 246 8 - 254 --------- --------- --------- --------- Equity securities: Adjustable rate preferred stocks................................ 13 1 - 14 Common stocks................................................... 59 6 (1) 64 --------- --------- --------- --------- 72 7 (1) 78 --------- --------- --------- --------- $ 362 $ 15 $ (1) 376 --------- --------- --------- --------- --------- --------- Amounts classified as current assets................................ (58) --------- Investment carrying value........................................... $ 318 --------- ---------
F-14 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED)
DECEMBER 31, 1992 ------------------------------------------ UNREALIZED AMOUNTS -------------------- FAIR COST GAINS LOSSES VALUE --------- --------- --------- --------- Held to maturity: United States Government obligations.............................. $ 19 $ - $ - $ 19 Certificates of deposit........................................... 20 - - 20 --------- --------- --------- --------- 39 - - 39 --------- --------- --------- --------- Available for sale: Bonds: United States Government........................................ 22 1 - 23 States and municipalities....................................... 102 2 - 104 Mortgage-backed securities...................................... 55 - - 55 Corporate and other............................................. 25 2 - 27 Redeemable preferred stocks....................................... 18 - - 18 --------- --------- --------- --------- 222 5 - 227 --------- --------- --------- --------- Equity securities: Adjustable rate preferred stocks................................ 20 1 - 21 Common stocks................................................... 66 6 (4) 68 --------- --------- --------- --------- 86 7 (4) 89 --------- --------- --------- --------- 347 $ 12 $ (4) $ 355 --------- --------- --------- --------- --------- --------- Amounts classified as current assets................................ (45) --------- Investment carrying value........................................... $ 302 --------- ---------
The cost and estimated fair value of debt and equity securities at December 31, 1993 by contractual maturity are shown below (dollars in millions). Expected and contractual maturities will differ because the issuers of certain securities may have the right to prepay or otherwise redeem such obligations without penalty.
FAIR COST VALUE ----------- --------- Held to maturity: Due in one year or less......................................................... $ 44 $ 44 ----- --------- Available for sale: Due in one year or less......................................................... 14 14 Due after one year through five years........................................... 45 47 Due after five years through ten years.......................................... 78 81 Due after ten years............................................................. 109 112 ----- --------- 246 254 Equity securities............................................................... 72 78 ----- --------- 318 332 ----- --------- $ 362 $ 376 ----- --------- ----- ---------
The fair value of the subsidiary's investments is based generally on quoted market prices. F-15 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) The average life of the above investments (excluding common stocks) approximated four years at December 31, 1993 and three years at December 31, 1992, and the tax equivalent yield on such investments averaged 9% for the last three years. Tax equivalent yield is the rate earned on invested assets, excluding unrealized gains and losses, adjusted for the benefit of nontaxable investment income. Sales of securities for the year ended December 31, 1993 are summarized below (dollars in millions):
TYPE OF SECURITY ------------------------ DEBT EQUITY ----------- ----------- Cash proceeds..................................................................... $ 70 $ 67 Gross realized gains.............................................................. 2 8 Gross realized losses............................................................. - 7
NOTE 9 -- LONG-TERM DEBT A summary of long-term debt at December 31 follows (dollars in millions):
1993 1992 --------- --------- Senior collateralized debt, 5% to 13.8% (rates generally fixed) payable in periodic installments through 2034......................................................... $ 136 $ 338 6 1/8% Notes due 2000.............................................................. 149 - 7 1/2% Notes due 2023.............................................................. 147 - 10 7/8% Senior Subordinated Notes due 2002......................................... 2 99 11 1/2% Senior Subordinated Notes due 2002......................................... 1 134 Other senior debt, 8% to 13.3% (rates generally fixed) payable in periodic installments through 1998......................................................... 194 132 Commercial paper (rates fixed under interest rate agreements averaging four years at 7.9%).......................................................................... 380 380 Commercial paper (floating rates averaging 3.4%)................................... 495 153 Bank line of credit (floating rates averaging 3.6%)................................ 100 - 9% Subordinated Mandatory Convertible Note due 1999................................ 40 40 Other subordinated debt, 10% to 15% (rates generally fixed) payable in periodic installments through 2000............................................. 7 12 --------- --------- Total debt, average life of five years (rates averaging 5.3%)...................... 1,651 1,288 Amounts due within one year........................................................ 71 32 --------- --------- Long-term debt..................................................................... $ 1,580 $ 1,256 --------- --------- --------- ---------
Borrowings under the commercial paper programs are classified as long-term debt due to the credit available under the revolving credit agreements discussed below and management's intention to refinance these borrowings on a long-term basis. Maturities of long-term debt (including maturities of short-term debt supported by the revolving credit agreements) in years 1995 through 1998 are $73 million, $13 million, $32 million and $1.1 billion, respectively. Approximately 10% of Columbia's property and equipment is pledged on senior collateralized debt. During the past three years Columbia has reduced interest costs and eliminated certain restrictive covenants by refinancing or prepaying high interest rate debt, primarily through the use of F-16 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- LONG-TERM DEBT (CONTINUED) existing cash and cash equivalents and issuance of long-term debt and commercial paper. Amounts refinanced or prepaid totaled $787 million in 1993, $116 million in 1992 and $275 million in 1991. After-tax losses from refinancing activities in 1993 aggregated $70 million or $.46 per share. In February 1994 Columbia entered into revolving credit agreements (the "Credit Facilities") in the aggregate amount of $3 billion. The Credit Facilities comprise a four-year $1 billion revolving credit agreement and a 364-day $2 billion revolving credit agreement. The Credit Facilities were established to support Columbia's commercial paper programs and replace $3.2 billion of prior revolving credit agreements associated with HCA ($1.6 billion) and Columbia ($1.6 billion). Interest is payable generally at either LIBOR plus 1/4% to 1/2% (depending on Columbia's credit rating), or the higher of prime, the bank certificate of deposit rate plus 1% or the Federal Funds rate plus 1/2%. In December 1993 Columbia issued $150 million of 6 1/8% Notes due 2000 and $150 million of 7 1/2% Notes due 2023. During 1992 Columbia sold $100 million face amount of 10 7/8% Senior Subordinated Notes due 2002 and $135 million face amount of 11 1/2% Senior Subordinated Notes due 2002. In September 1993 Columbia retired $232 million face amount of these notes through the completion of a tender offer. In connection with the acquisition of BAMI in 1992, Columbia assumed approximately $140 million of long-term debt, including approximately $64 million of senior collateralized notes payable in quarterly installments through 1998 at interest rates ranging from 10.7% to 11.7%. In September 1993 Columbia effected the defeasance of these notes. In 1991 one of Columbia's partnerships issued $95 million of 11.45% Senior Secured Notes due 2001. Proceeds from the issuance were used to repay $66 million of bank debt and finance expansion. These notes were retired in connection with Columbia's refinancing of debt in September 1993. Columbia also issued in 1991 a $40 million face amount 9% Subordinated Mandatory Convertible Note due 1999. The note is convertible at the option of the holder into Columbia common stock at a price of $18.50 per share (adjusted for stock splits, recapitalizations and reorganizations). The note will be automatically converted into common stock if the average per share market price for four months preceding the July 1 anniversary exceeds a specified amount ranging from $27.00 in 1994 to $34.00 in 1996. Columbia's credit facilities contain customary covenants which include (i) limitations on additional debt, (ii) limitations on sales of assets, mergers and changes of ownership and (iii) maintenance of certain interest coverage ratios. The estimated fair value of Columbia's long-term debt was $1.7 billion and $1.46 billion at December 31, 1993 and 1992, respectively, compared to carrying amounts aggregating $1.65 billion and $1.29 billion. Certain subsidiaries of Columbia have entered into agreements which reduce the impact of changes in interest rates on $380 million of floating rate long-term debt. At December 31, 1993 and 1992, the fair value of Columbia's net payable position under these agreements (included in the aggregate fair value amounts above) totaled $34 million and $29 million, respectively. The estimate of fair value is based upon the quoted market prices for the same or similar issues of long-term debt, or on rates available to Columbia as a result of the Galen Merger for debt of the same remaining maturities. As discussed in Note 4, in connection with the Spinoff, certain subsidiaries issued notes payable ($250 million) and paid cash ($135 million financed primarily through the issuance of commercial paper) to Humana in 1993. If the Spinoff had occurred on December 31, 1992, Columbia's ratio of debt to debt plus common stockholders' equity would have increased from 36% to 53%. F-17 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10 -- LEASES Columbia leases real estate and equipment under cancelable and non-cancelable arrangements. Future minimum payments under non-cancelable operating leases are as follows (dollars in millions): 1994......................................................................... $ 50 1995......................................................................... 43 1996......................................................................... 34 1997......................................................................... 31 1998......................................................................... 21 Thereafter................................................................... 127
Rent expense aggregated $79 million, $82 million and $72 million for the years ended December 31, 1993, 1992 and 1991, respectively. NOTE 11 -- CONTINGENCIES Management continually evaluates contingencies based upon the best available evidence. In addition, allowances for loss are provided currently for disputed items that have continuing significance, such as certain third-party reimbursements and deductions that continue to be claimed in current cost reports and tax returns. Management believes that allowances for loss have been provided to the extent necessary and that its assessment of contingencies is reasonable. Management believes that resolution of contingencies will not materially affect Columbia's financial position or results of operations. Principal contingencies are described below: REVENUES -- Certain third-party payments are subject to examination by agencies administering the programs. Columbia is contesting certain issues raised in audits of prior year cost reports. PROFESSIONAL LIABILITY RISKS -- Columbia has provided for loss for professional liability risks based upon actuarially determined estimates. Actual settlements and expenses incident thereto may differ from the provisions for loss. INTEREST RATE AGREEMENTS -- Certain subsidiaries of Columbia are parties to agreements which reduce the impact of changes in interest rates on its floating rate long-term debt. In the event of nonperformance by other parties to these agreements, Columbia may incur a loss on the difference between market rates and contract rates. INCOME TAXES -- Columbia is contesting adjustments proposed by the Internal Revenue Service for years 1987 through 1989. SPINOFF -- Certain subsidiaries of Columbia are parties to risk-sharing arrangements with Humana. LITIGATION -- Various suits and claims arising in the ordinary course of business are pending against Columbia. F-18 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 -- CAPITAL STOCK The following shares of common stock were reserved at December 31, 1993 (amounts in thousands): Stock option plans......................................................... 4,139 Retirement and savings plans............................................... 5,285 Other...................................................................... 2,853 --------- 12,277 --------- ---------
Columbia has plans under which options to purchase common stock may be granted to officers, employees and directors. Options have been granted at not less than market price on the date of grant. Exercise provisions vary, but most options are exercisable in whole or in part beginning one to four years after grant and ending four to ten years after grant. Activity in the plans is summarized below (share amounts in thousands):
SHARES UNDER OPTION PRICE OPTION PER SHARE --------- -------------------- Balances, December 31, 1990............................................. 3,631 $7.21 to $37.00 Granted............................................................... 1,188 11.75 to 25.24 Exercised............................................................. (1,021) 7.21 to 23.37 Cancelled or lapsed................................................... (51) 8.50 to 37.00 --------- Balances, December 31, 1991............................................. 3,747 8.23 to 25.71 Granted............................................................... 758 15.00 to 22.62 Conversion of BAMI stock options...................................... 466 3.18 to 11.59 Exercised............................................................. (460) 3.18 to 17.25 Cancelled or lapsed................................................... (74) 8.50 to 23.37 --------- Balances, December 31, 1992............................................. 4,437 3.18 to 25.71 Granted............................................................... 982 19.50 to 33.38 Exercised............................................................. (1,835) 3.18 to 23.37 Cancelled or lapsed................................................... (152) 3.18 to 25.71 --------- Balances, December 31, 1993............................................. 3,432 $3.18 to $33.38 --------- ---------
At December 31, 1993, options for 2,028,900 shares were exercisable. Shares of common stock available for future grants were 707,300 at December 31, 1993 and 2,721,000 at December 31, 1992. In connection with the Galen Merger, Columbia redeemed certain preferred stock purchase rights previously issued to Galen common stockholders. The cost of this transaction was not significant. In addition, Columbia adopted a stockholder rights plan (similar to that of Galen) upon consummation of the Galen Merger under which common stockholders have the right to purchase Series A Preferred Stock in the event of accumulation of or tender offer for certain percentages of Columbia's common stock. The rights will expire in 2003 unless redeemed earlier by Columbia. In September 1993 the Board of Directors initiated a regular quarterly cash dividend on common stock of $.03 per share. In connection with the HCA Merger, Columbia stockholders voted to increase the aggregate number of authorized voting shares of common stock from 400 million to 800 million, and the number of authorized nonvoting shares of common stock was established at 25 million. In addition, authorized shares of preferred stock (none of which are outstanding) were increased from 10 million to 25 million. F-19 COLUMBIA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13 -- EMPLOYEE BENEFIT PLANS Certain subsidiaries of Columbia maintain a noncontributory defined contribution retirement plan covering substantially all Columbia employees. Benefits are determined as a percentage of a participant's earned income and are vested annually. Retirement plan expense was $40 million for 1993, $37 million for 1992 and $34 million for 1991. Amounts equal to retirement plan expense are funded annually. Columbia maintains various contributory savings plans which are available to employees who meet certain minimum requirements. The plans require that Columbia match an amount ranging from 50% to 60% of a participant's contribution up to certain maximum levels. The cost of these plans totaled $20 million for 1993, $19 million for 1992 and $15 million for 1991. Columbia contributions are funded periodically during the year. NOTE 14 -- ACCRUED EXPENSES The following is a summary of other accrued expenses at December 31 (dollars in millions):
1993 1992 --------- --------- Workers' compensation................................................................... $ 82 $ 70 Taxes other than income................................................................. 73 51 Professional liability risks............................................................ 54 45 Retirement plan......................................................................... 15 48 Dividends............................................................................... 5 36 Interest................................................................................ 33 37 Other................................................................................... 113 138 --------- --------- $ 375 $ 425 --------- --------- --------- ---------
F-20 COLUMBIA HEALTHCARE CORPORATION QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 ---------------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- Revenues................................................... $1,329 $1,262 $1,238 $1,301 Net income (loss): Continuing operations (a)................................ 90 70 (45) 78 Discontinued operations.................................. 16 - - - Extraordinary loss on extinguishment of debt............. - - (70) - Net income (loss).................................... 106 70 (115) 78 Per common share: Earnings (loss): Continuing operations (a).............................. .61 .46 (.31) .52 Discontinued operations................................ .10 - - - Extraordinary loss on extinguishment of debt........... - - (.46) - Net income (loss).................................... .71 .46 (.77) .52 Market prices (b): High................................................... 24 1/2 27 3/4 31 33 7/8 Low.................................................... 16 1/4 19 1/4 25 3/8 27
1992 -------------------------------------------------------- FIRST SECOND THIRD FOURTH ----------- ----------- ----------- ----------- Revenues................................................... $ 1,227 $ 1,163 $ 1,182 $ 1,234 Net income (loss): Continuing operations.................................... 97 73 (32) 73 Discontinued operations.................................. 3 (2) (132) 6 Change in accounting for income taxes.................... 51 - - - Net income (loss) (c)................................ 151 71 (164) 79 Per common share: Earnings (loss): Continuing operations.................................. .69 .51 (.24) .49 Discontinued operations................................ .02 (.01) (.93) .05 Change in accounting for income taxes.................. .36 - - - Net income (loss) (c)................................ 1.07 .50 (1.17) .54 Market prices (b): High................................................... 21 1/4 22 19 1/4 21 3/4 Low.................................................... 16 1/2 16 1/4 16 1/4 13 3/4 - ------------------------ (a) Third quarter loss includes $98 million ($.67 per share) of costs related to the Galen Merger. See Note 5 of the Notes to Consolidated Financial Statements. (b) Represents high and low sales prices of CHC common stock for periods prior to the Galen Merger. Columbia common stock is traded on the New York Stock Exchange (ticker symbol -- COL). (c) Third quarter net loss includes $221 million ($1.54 per share) related primarily to the Spinoff, of which $86 million ($.60 per share) is included in continuing operations and $135 million ($.94 per share) is included in discontinued operations. See Note 5 of the Notes to Consolidated Financial Statements.
F-21 COLUMBIA HEALTHCARE CORPORATION SCHEDULE I -- MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS DECEMBER 31, 1993 (DOLLARS IN MILLIONS)
AMOUNT AT WHICH EACH PORTFOLIO OF NUMBER OF SHARES EQUITY SECURITY OR UNITS -- MARKET VALUE OF ISSUE AND EACH PRINCIPAL AMOUNT EACH ISSUE AT OTHER SECURITY OF BONDS AND COST OF EACH BALANCE SHEET ISSUE CARRIED IN NAME OF ISSUER AND TITLE OF EACH ISSUE NOTES ISSUE DATE THE BALANCE SHEET - -------------------------------------------------- ----------------- ------------- --------------- ------------------- Short-term investments of professional liability insurance subsidiary (a): United States Government and government agency obligations.................................... $ 44 $ 44 $ 44 $ 44 State and municipal obligations................. $ 14 14 14 14 ----- ----- ----- $ 58 $ 58 $ 58 ----- ----- ----- ----- ----- ----- Long-term investments: United States Government and government agency bonds.......................................... $ 17 $ 16 $ 17 $ 17 State and municipal bonds....................... $ 139 129 133 133 Mortgage-backed securities...................... $ 46 47 48 48 Corporate and other bonds....................... $ 22 23 24 24 Redeemable preferred stocks..................... 17 18 18 Adjustable rate preferred stocks................ 13 14 14 Common stocks................................... 59 64 64 ----- ----- ----- Investments of professional liability insurance subsidiary......................... $ 304 $ 318 $ 318 ----- ----- ----- ----- ----- ----- - ------------------------ (a) Included in current assets.
F-22 COLUMBIA HEALTHCARE CORPORATION SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT END OF PERIOD BALANCE AT ---------------------- BEGINNING AMOUNTS NOT OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT ----------- ----------- ----------- ----------- --------- Year ended December 31, 1991: Mark Aanonson............................................ $ 46 $ (46) James Bohanon............................................ 200 (200) James Bohanon............................................ 16 (16) Daniel Brothman.......................................... 135 $ 135 Craig Cooper............................................. 170 (120) 50 William Heburn........................................... $ 558 $ 558 Gary Hill................................................ 50 (50) Samuel Holtzman.......................................... 120 20 100 Ronald Hytoff............................................ 106 (4) 102 Ira Korman............................................... 50 (50) Ira Korman............................................... 30 (30) Ruben Perez.............................................. 884 (144) 740 Doris Porth.............................................. 135 135 George Schneider......................................... 148 (1) 1 146 George Schneider......................................... 550 550 George Schneider......................................... 150 150 Russell Schneider........................................ 764 3 (158) 609 Donald Stewart........................................... 100 (100) Donald Stewart........................................... 3 3 Charles Stokes........................................... 75 75 Charles Stokes........................................... 40 (1) 39 Charles Stokes........................................... 100 100 ----------- ----- ----------- ----- --------- $ 3,502 $ 931 $ (920) $ 579 $ 2,934 ----------- ----- ----------- ----- --------- ----------- ----- ----------- ----- ---------
F-23 COLUMBIA HEALTHCARE CORPORATION SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT BALANCE AT END OF PERIOD BEGINNING AMOUNTS ------------------------ OF PERIOD ADDITIONS COLLECTED CURRENT NOT CURRENT ----------- ----------- --------- ----------- ----------- Year ended December 31, 1992: Daniel Brothman........................................... $ 135 $ 135 Craig Cooper.............................................. 50 $ (50) William Heburn............................................ 558 (558) Gary Hill................................................. $ 127 $ 127 Samuel Holtzman........................................... 120 (20) 100 Ronald Hytoff............................................. 102 (102) Ruben Perez............................................... 740 (740) Doris Porth............................................... 135 135 George Schneider.......................................... 147 (147) George Schneider.......................................... 550 (550) George Schneider.......................................... 150 (150) Russell Schneider......................................... 609 (609) Donald Stewart............................................ 100 100 Donald Stewart............................................ 3 (3) Charles Stokes............................................ 75 (75) Charles Stokes............................................ 39 (39) Charles Stokes............................................ 100 (100) ----------- ----- --------- ----- ----- $ 3,513 $ 227 $ (3,143) $ 127 $ 470 ----------- ----- --------- ----- ----- ----------- ----- --------- ----- -----
F-24 COLUMBIA HEALTHCARE CORPORATION SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT BALANCE AT END OF PERIOD BEGINNING AMOUNTS ------------------------- OF PERIOD ADDITIONS COLLECTED CURRENT NOT CURRENT ----------- ----------- ----------- ----------- ------------ Year ended December 31, 1993: Daniel Brothman......................................... $ 135 $ 135(a) Gary Hill............................................... 127 $ (127) Samuel Holtzman......................................... 100 100(a) Doris Porth............................................. 135 135(a) Donald Stewart.......................................... 100 100(a) ----- ----------- ----------- ----------- ----- $ 597 $ - $ (127) $ - $ 470 ----- ----------- ----------- ----------- ----- ----- ----------- ----------- ----------- ----- - ------------------------ (a) Noninterest bearing; generally collateralized by deed of trust on personal residence; payable either in periodic installments or upon termination of employment, sale of residence or default on any collateralized instrument having priority over Columbia's deed of trust.
F-25 COLUMBIA HEALTHCARE CORPORATION SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
BALANCE AT BALANCE BEGINNING ADDITIONS RETIREMENTS TRANSLATION AT END OF PERIOD AT COST OR SALES ADJUSTMENTS OTHER OF PERIOD ----------- ----------- ------------- ------------- ------------- ----------- Year ended December 31, 1991: Land..................................... $ 221 $ 25 $ (8) $ - $ - $ 238 Buildings................................ 1,973 220 (56) (3) (31)(a) 2,103 Equipment................................ 1,333 262 (68) (2) - 1,525 Construction in progress................. 86 37 (1) - - 122 ----------- ----- ------ ------ ------ ----------- $ 3,613 $ 544 $ (133) $ (5) $ (31) $ 3,988 ----------- ----- ------ ------ ------ ----------- ----------- ----- ------ ------ ------ ----------- Year ended December 31, 1992: Land..................................... $ 238 $ 37 $ (5) $ (1) $ (1)(b) $ 268 Buildings................................ 2,103 301 (24) (13) (98)(b) 2,269 Equipment................................ 1,525 238 (67) (6) (27)(b) 1,663 Construction in progress................. 122 (12) (1) - - 109 ----------- ----- ------ ------ ------ ----------- $ 3,988 $ 564 $ (97) $ (20) $ (126) $ 4,309 ----------- ----- ------ ------ ------ ----------- ----------- ----- ------ ------ ------ ----------- Year ended December 31, 1993: Land..................................... $ 268 $ 14 $ (9) $ - $ - $ 273 Buildings................................ 2,269 300 (133) (1) (33)(c) 2,402 Equipment................................ 1,663 263 (119) (1) (21)(c) 1,785 Construction in progress................. 109 15 (2) - (1)(c) 121 ----------- ----- ------ ------ ------ ----------- $ 4,309 $ 592 $ (263) $ (2) $ (55) $ 4,581 ----------- ----- ------ ------ ------ ----------- ----------- ----- ------ ------ ------ ----------- - ------------------------ (a) During the third quarter of 1991, Columbia provided for the estimated costs and expenses associated with the planned disposition of certain hospitals. (b) During the third quarter of 1992, Columbia provided for the estimated costs and expenses associated with the planned disposition of certain hospitals, recorded writedowns of assets in markets with significant declines in operations and wrote off assets destroyed by Hurricane Andrew. (c) During the third quarter of 1993, Columbia recorded provisions for loss in connection with the Galen Merger, including writedowns of assets in connection with the consolidation of operations and expected losses on the sale of certain assets.
F-26 COLUMBIA HEALTHCARE CORPORATION SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND RETIREMENTS TRANSLATION AT END OF PERIOD EXPENSES OR SALES ADJUSTMENTS OF PERIOD ----------- ------------- ------------- ------------- ----------- Year ended December 31, 1991: Buildings........................................ $ 603 $ 96 $ (25) $ (1) $ 673 Equipment........................................ 691 145 (48) (1) 787 ----------- ----- ------ ----- ----------- $ 1,294 $ 241 $ (73) $ (2) $ 1,460 ----------- ----- ------ ----- ----------- ----------- ----- ------ ----- ----------- Year ended December 31, 1992: Buildings........................................ $ 673 $ 103 $ (14) $ (4) $ 758 Equipment........................................ 787 161 (52) (3) 893 ----------- ----- ------ ----- ----------- $ 1,460 $ 264 $ (66) $ (7) $ 1,651 ----------- ----- ------ ----- ----------- ----------- ----- ------ ----- ----------- Year ended December 31, 1993: Buildings........................................ $ 758 $ 110 $ (56) $ (1) $ 811 Equipment........................................ 893 169 (81) - 981 ----------- ----- ------ ----- ----------- $ 1,651 $ 279 $ (137) $ (1) $ 1,792 ----------- ----- ------ ----- ----------- ----------- ----- ------ ----- -----------
F-27 COLUMBIA HEALTHCARE CORPORATION SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND DEDUCTIONS AT END OF PERIOD EXPENSES OR PAYMENTS OF PERIOD ----------- ------------- ------------- ----------- Allowances for loss on accounts receivable: Year ended December 31, 1991................................... $ 215 $ 277 $ (340) $ 152 Year ended December 31, 1992................................... 152 285 (271) 166 Year ended December 31, 1993................................... 166 282 (288) 160
F-28 COLUMBIA HEALTHCARE CORPORATION SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 --------- --------- --------- Maintenance and repairs.................................................................. $ 116 $ 105 $ 95 Taxes other than payroll and income taxes................................................ 121 106 91
F-29 COLUMBIA/HCA HEALTHCARE CORPORATION INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE --------- Report of Independent Accountants......................................................................... F-31 Supplemental Consolidated Financial Statements: Supplemental Consolidated Statement of Income for the years ended December 31, 1993, 1992 and 1991...... F-32 Supplemental Consolidated Balance Sheet, December 31, 1993 and 1992..................................... F-33 Supplemental Consolidated Statement of Common Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991.................................................................................... F-34 Supplemental Consolidated Statement of Cash Flows for the years ended December 31, 1993, 1992 and 1991................................................................................................... F-35 Notes to Supplemental Consolidated Financial Statements................................................. F-36 Supplemental Quarterly Consolidated Financial Information (Unaudited)................................... F-54 Supplemental Financial Statement Schedules (a): Schedule I -- Marketable Securities -- Other Security Investments, December 31, 1993...................................................................................... F-55 Schedule II -- Amounts Receivable From Related Parties and Underwriters, Promoters and Employees Other Than Related Parties for the years ended December 31, 1993, 1992 and 1991.............................. F-56 Schedule V -- Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991........ F-59 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991....................................................... F-60 Schedule VIII -- Valuation and Qualifying Accounts for the years ended December 31, 1993, 1992 and 1991................................................................................................... F-61 Schedule X -- Supplementary Income Statement Information for the years ended December 31, 1993, 1992 and 1991................................................................................................... F-62 - ------------------------ (a) All other schedules have been omitted because the required information is not present or not present in material amounts.
F-30 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Columbia/HCA Healthcare Corporation We have audited the supplemental consolidated financial statements and financial statement schedules of Columbia/HCA Healthcare Corporation listed in the index on page F-30 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The supplemental consolidated financial statements and financial statement schedules give retroactive effect to the merger of Columbia Healthcare Corporation and HCA -- Hospital Corporation of America on February 10, 1994, which will be accounted for as a pooling of interests as described in Notes 1 and 2 to the supplemental consolidated financial statements. Generally accepted accounting principles proscribe giving effect to a consummated business combination accounted for by the pooling of interests method in financial statements that do not include the date of consummation. These financial statements and financial statement schedules do not extend through the date of consummation; however, they will become the historical consolidated financial statements and financial statement schedules of Columbia/HCA Healthcare Corporation after financial statements and financial statement schedules covering the date of consummation of the merger are issued. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbia/HCA Healthcare Corporation as of December 31, 1993 and 1992, and the consolidated results of operations and cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles applicable after financial statements are issued for the period which includes the date of consummation of the merger. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Note 7 to the supplemental consolidated financial statements, effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." COOPERS & LYBRAND Louisville, Kentucky February 28, 1994, except for Note 15, as to which the date is March 24, 1994 F-31 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 --------- --------- --------- Revenues.......................................................................... $ 10,252 $ 9,932 $ 9,598 --------- --------- --------- Salaries, wages and benefits...................................................... 4,215 4,112 3,976 Supplies.......................................................................... 1,664 1,613 1,467 Other operating expenses.......................................................... 1,893 1,849 1,739 Provision for doubtful accounts................................................... 542 515 508 Depreciation and amortization..................................................... 554 541 524 Interest expense.................................................................. 321 401 597 Investment income................................................................. (66) (81) (64) Non-recurring transactions........................................................ 151 439 300 --------- --------- --------- 9,274 9,389 9,047 --------- --------- --------- Income from continuing operations before minority interests and income taxes...... 978 543 551 Minority interests in earnings of consolidated entities........................... 9 10 9 --------- --------- --------- Income from continuing operations before income taxes............................. 969 533 542 Provision for income taxes........................................................ 394 294 189 --------- --------- --------- Income from continuing operations................................................. 575 239 353 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit) of $9 in 1993, ($46) in 1992 and $9 in 1991...................... 16 (108) 16 Costs associated with discontinuance of health plan segment, net of income tax benefit of $2.................................................... - (17) - Extraordinary loss on extinguishment of debt, net of income tax benefit of $51.... (84) - - Cumulative effect on prior years of a change in accounting for income taxes....... - 51 - --------- --------- --------- Net income.................................................................... $ 507 $ 165 $ 369 --------- --------- --------- --------- --------- --------- Earnings per common and common equivalent share: Income from continuing operations............................................... $ 1.70 $ .73 $ 1.20 Discontinued operations: Income (loss) from operations of discontinued health plan segment............. .04 (.33) .05 Costs associated with discontinuance of health plan segment................... - (.06) - Extraordinary loss on extinguishment of debt.................................... (.24) - - Cumulative effect on prior years of a change in accounting for income taxes..... - .16 - --------- --------- --------- Net income.................................................................. $ 1.50 $ .50 $ 1.25 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of the supplemental consolidated financial statements. F-32 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL CONSOLIDATED BALANCE SHEET DECEMBER 31, 1993 AND 1992 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ASSETS
1993 1992 --------- --------- Current assets: Cash and cash equivalents...................................................................... $ 224 $ 217 Accounts receivable less allowance for loss of $513 -- 1993 and $475 -- 1992................... 1,566 1,624 Inventories.................................................................................... 245 238 Other.......................................................................................... 453 496 --------- --------- 2,488 2,575 Property and equipment, at cost: Land........................................................................................... 568 553 Buildings...................................................................................... 4,049 3,741 Equipment...................................................................................... 3,442 3,133 Construction in progress (estimated cost to complete and equip after December 31, 1993 -- $299)......................................................................................... 333 258 --------- --------- 8,392 7,685 Accumulated depreciation....................................................................... (2,792) (2,437) --------- --------- 5,600 5,248 Net assets of discontinued operations............................................................ - 376 Investments of professional liability insurance subsidiaries..................................... 700 644 Intangible assets net of accumulated amortization of $178 -- 1993 and $233 -- 1992................................................................................ 1,232 1,247 Other............................................................................................ 196 257 --------- --------- $ 10,216 $ 10,347 --------- --------- --------- --------- LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................................................... $ 445 $ 410 Salaries, wages and other compensation......................................................... 232 211 Other accrued expenses......................................................................... 853 903 Income taxes................................................................................... 22 92 Long-term debt due within one year............................................................. 363 353 --------- --------- 1,915 1,969 Long-term debt................................................................................... 3,335 3,303 Deferred credits and other liabilities........................................................... 1,438 1,353 Minority interests in equity of consolidated entities............................................ 57 31 Contingencies Common stockholders' equity: Common stock $.01 par; authorized 800,000,000 voting shares and 25,000,000 nonvoting shares; issued and outstanding 317,686,800 voting shares and 18,990,000 nonvoting shares -- 1993 and 308,252,100 voting shares and 23,421,700 nonvoting shares -- 1992............................. 3 3 Capital in excess of par value................................................................. 2,164 2,070 Other.......................................................................................... 59 69 Retained earnings.............................................................................. 1,245 1,549 --------- --------- 3,471 3,691 --------- --------- $ 10,216 $ 10,347 --------- --------- --------- ---------
The accompanying notes are an integral part of the supplemental consolidated financial statements. F-33 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
COMMON STOCK -------------- CAPITAL IN SHARES PAR EXCESS OF RETAINED (000) VALUE PAR VALUE OTHER EARNINGS TOTAL ------- ----- ---------- ----- -------- ------ Balances, December 31, 1990......................... 255,276 $ 3 $ 734 $ 48 $ 1,314 $2,099 Net income........................................ 369 369 Cash dividends (Galen Health Care, Inc.).......... (138) (138) Paid-in-kind dividend on cumulative exchangeable preferred stock.................................. (18) (18) Issuance of common stock.......................... 4,310 61 61 Stock options exercised and related tax benefits, net of 224,000 shares tendered in partial payment therefor......................................... 797 24 24 Accumulated credit under stock option contract.... 413 413 Other............................................. 24 2 10 12 ------- ----- ---------- ----- -------- ------ Balances, December 31, 1991......................... 260,407 3 821 471 1,527 2,822 Net income........................................ 165 165 Cash dividends (Galen Health Care, Inc.).......... (143) (143) Issuance of common stock.......................... 48,282 916 916 Stock options exercised and related tax benefits, net of 30,000 shares tendered in partial payment therefor......................................... 22,967 331 (386) (55) Other............................................. 18 2 (16) (14) ------- ----- ---------- ----- -------- ------ Balances, December 31, 1992......................... 331,674 3 2,070 69 1,549 3,691 Net income........................................ 507 507 Cash dividends (Columbia Healthcare Corporation)..................................... (9) (9) Stock options exercised and related tax benefits, net of 81,000 shares tendered in partial payment therefor......................................... 4,000 71 (35) 36 Spinoff transaction with Humana Inc.: Cash payment to Humana Inc...................... (135) (135) Noncash transactions: Issuance of notes payable..................... (250) (250) Distribution of net investment in discontinued health plan operations....................... (392) (392) Transfer of a hospital facility............... (25) (25) Net unrealized gains on investment securities..... 27 27 Other............................................. 1,003 23 (2) 21 ------- ----- ---------- ----- -------- ------ Balances, December 31, 1993......................... 336,677 $ 3 $ 2,164 $ 59 $ 1,245 $3,471 ------- ----- ---------- ----- -------- ------ ------- ----- ---------- ----- -------- ------
The accompanying notes are an integral part of the supplemental consolidated financial statements. F-34 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 --------- --------- --------- Cash flows from continuing operations: Net income........................................................................ $ 507 $ 165 $ 369 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations......................................................... (16) 127 (16) Minority interests in earnings of consolidated entities......................... 9 10 9 Non-recurring transactions...................................................... 151 439 300 Depreciation and amortization................................................... 554 541 524 Amortization of debt discounts and loan costs................................... 45 78 116 Noncash interest on exchange debentures......................................... - 4 57 Deferred income taxes........................................................... (28) 34 (210) Change in operating assets and liabilities: (Increase) decrease in accounts receivable.................................... 19 98 (53) Increase in inventories and other assets...................................... (7) (58) (42) Increase (decrease) in income taxes........................................... 19 (160) 53 Increase (decrease) in other liabilities...................................... (87) 83 164 Change in accounting for income taxes........................................... - (51) - Extraordinary loss on extinguishment of debt.................................... 135 - - Other........................................................................... (3) (23) (14) --------- --------- --------- Net cash provided by continuing operations.................................... 1,298 1,287 1,257 --------- --------- --------- Cash flows from investing activities: Purchase of property and equipment................................................ (836) (668) (645) Acquisition of hospitals and health care facilities............................... (79) (36) (96) Sale of assets.................................................................... 191 225 860 Investment in discontinued operations............................................. - (71) (76) Change in investments............................................................. 21 (35) (33) Other............................................................................. (34) (8) (25) --------- --------- --------- Net cash used in investing activities......................................... (737) (593) (15) --------- --------- --------- Cash flows from financing activities: Issuance of long-term debt........................................................ 1,586 240 216 Net change in commercial paper borrowings and lines of credit..................... 342 (176) 124 Repayment of long-term debt....................................................... (2,325) (1,799) (890) Payment to Humana Inc. in spinoff transaction..................................... (135) - - Payment of cash dividends......................................................... (40) (143) (134) Issuance of common stock.......................................................... 43 741 71 Other............................................................................. (25) (15) (6) --------- --------- --------- Net cash used in financing activities......................................... (554) (1,152) (619) --------- --------- --------- Change in cash and cash equivalents................................................. 7 (458) 623 Cash and cash equivalents at beginning of period.................................... 217 675 52 --------- --------- --------- Cash and cash equivalents at end of period.......................................... $ 224 $ 217 $ 675 --------- --------- --------- --------- --------- --------- Interest payments................................................................... $ 278 $ 319 $ 469 Income tax payments, net of refunds................................................. 347 360 385
The accompanying notes are an integral part of the supplemental consolidated financial statements. F-35 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ACCOUNTING POLICIES Columbia/HCA Healthcare Corporation ("Columbia/HCA") is a Delaware corporation which began operations on February 10, 1994 as a result of a merger involving Columbia Healthcare Corporation ("Columbia") and HCA -- Hospital Corporation of America ("HCA") (the "HCA Merger"). See Note 2 for a description of the specific terms of the HCA Merger. Prior to the HCA Merger, Columbia began operations on September 1, 1993 as a result of a merger involving Columbia Hospital Corporation ("CHC") and Galen Health Care, Inc. ("Galen") (the "Galen Merger"). See Note 3 for a description of the specific terms of the Galen Merger. Columbia/HCA primarily operates hospitals and ancillary health care facilities through either (i) wholly owned subsidiaries or (ii) ownership of controlling interests in various partnerships in which subsidiaries of Columbia/HCA serve as the managing general partner. BASIS OF PRESENTATION The supplemental consolidated financial statements include substantially all subsidiaries and partnerships controlled by Columbia/HCA as the managing general partner. Significant intercompany transactions have been eliminated. The HCA Merger and the Galen Merger have been accounted for by the pooling-of-interests method. Accordingly, the supplemental consolidated financial statements included herein give retroactive effect to these transactions and include the combined operations of CHC, Galen and HCA for all periods presented. In addition, the historical financial information related to Galen (which prior to the Galen Merger was reported on a fiscal year ending August 31) has been recast to conform to Columbia's annual reporting period ending December 31. Generally accepted accounting principles proscribe giving effect to a consummated business combination accounted for by the pooling-of-interests method in financial statements that do not include the date of consummation. These financial statements do not extend through the date of consummation of the HCA Merger; however, they will become the historical consolidated financial statements of Columbia/HCA after the financial statements including the date of consummation of the HCA Merger are issued. REVENUES Columbia/HCA's health care facilities have entered into agreements with third-party payers, including government programs and managed care health plans, under which Columbia/HCA is paid based upon established charges, cost of providing services, predetermined rates by diagnosis, fixed per diem rates or discounts from established charges. Revenues are recorded at estimated amounts due from patients and third-party payers for health care services provided, including anticipated settlements under reimbursement agreements with third-party payers. CASH AND CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Carrying values of cash and cash equivalents approximate fair value due to the short-term nature of these instruments. ACCOUNTS RECEIVABLE Accounts receivable consist primarily of amounts due from the Medicare and Medicaid programs, other government programs, managed care health plans, commercial insurance companies and individual patients. F-36 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 -- ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. PROPERTY AND EQUIPMENT Depreciation expense, computed by the straight-line method, was $504 million in 1993, $493 million in 1992 and $478 million in 1991. Columbia/HCA uses component depreciation for buildings. Depreciation rates for buildings are equivalent to useful lives ranging generally from 20 to 25 years. Estimated useful lives of equipment vary generally from 3 to 10 years. INVESTMENTS On December 31, 1993, Columbia/HCA adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), which requires that investments in debt and equity securities be classified according to certain criteria. INTANGIBLE ASSETS Intangible assets consist primarily of costs in excess of the fair value of identifiable net assets of acquired entities and are amortized using the straight-line method over periods ranging from 10 to 40 years. Noncompete and debt issuance costs are amortized based upon the lives of the respective contracts or loans. PROFESSIONAL LIABILITY INSURANCE CLAIMS Provisions for loss for professional liability risks are based upon actuarially determined estimates. To the extent that subsequent claims information varies from management's estimates, earnings are charged or credited. MINORITY INTERESTS IN CONSOLIDATED ENTITIES The supplemental consolidated financial statements include all assets, liabilities and earnings of Columbia/HCA's partnerships, certain partnership interests of which are not owned by Columbia/ HCA. Accordingly, management has recorded minority interests in the earnings and equity of such partnerships. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Earnings per common and common equivalent share are based upon the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock equivalents consisting primarily of stock options. The computation also gives retroactive effect to the exchange of common shares in connection with the HCA Merger. F-37 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 -- ACCOUNTING POLICIES (CONTINUED) The following is a summary of shares used in the computation of earnings per common and common equivalent share (amounts in thousands):
1993 1992 1991 --------- --------- --------- Columbia: Weighted average shares outstanding................................ 150,017 144,897 138,936 Common stock equivalents........................................... 966 718 750 --------- --------- --------- Columbia common and common equivalent shares....................... 150,983 145,615 139,686 --------- --------- --------- HCA: Weighted average shares outstanding................................ 175,374 149,547 113,480 Common stock equivalents........................................... 3,901 24,690 20,109 --------- --------- --------- HCA common and common equivalent shares............................ 179,275 174,237 133,589 Merger exchange ratio.............................................. 1.05 1.05 1.05 --------- --------- --------- Adjusted HCA common and common equivalent shares................... 188,239 182,949 140,268 --------- --------- --------- Shares used in computation of earnings per common and common equivalent share.................................................. 339,222 328,564 279,954 --------- --------- --------- --------- --------- ---------
Fully diluted earnings per common and common equivalent share is not presented because it approximates earnings per common and common equivalent share. NOTE 2 -- HCA MERGER On October 2, 1993, Columbia entered into a definitive agreement to merge with HCA. This transaction was completed on February 10, 1994. In connection with the HCA Merger, Columbia stockholders approved an amendment to Columbia's Certificate of Incorporation changing the name of the corporation to Columbia/HCA Healthcare Corporation. HCA was then merged into a wholly owned subsidiary of Columbia/HCA. Shares of HCA Class A voting common stock and Class B nonvoting common stock were converted on a tax-free basis into approximately 166,846,000 shares of Columbia/HCA voting common stock and approximately 18,990,000 shares of Columbia/HCA nonvoting common stock, respectively (an exchange ratio of 1.05 shares of Columbia/HCA common stock for each share of HCA voting and nonvoting common stock). F-38 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- HCA MERGER (CONTINUED) The HCA Merger has been accounted for as a pooling of interests, and accordingly, the supplemental consolidated financial statements give retroactive effect to the combined operations of Columbia and HCA for all periods presented. The following is a summary of the results of operations of the separate entities for periods prior to the HCA Merger (dollars in millions):
COLUMBIA HCA COMBINED ----------- --------- --------- 1993: Revenues............................................................. $ 5,130 $ 5,122 $ 10,252 Income from continuing operations.................................... 193 382 575 Net income........................................................... 139 368 507 1992: Revenues............................................................. $ 4,806 $ 5,126 $ 9,932 Income from continuing operations.................................... 211 28 239 Net income........................................................... 137 28 165 1991: Revenues............................................................. $ 4,612 $ 4,986 $ 9,598 Income (loss) from continuing operations............................. 358 (5) 353 Net income (loss).................................................... 374 (5) 369
NOTE 3 -- GALEN MERGER On August 31, 1993, the stockholders of both CHC and Galen approved the Galen Merger, effective as of September 1, 1993. In connection with the Galen Merger, CHC, a Nevada corporation, was merged into Columbia. Each CHC share of common stock was converted on a tax-free basis into one share of Columbia common stock. Immediately subsequent thereto, a wholly owned subsidiary of Columbia was merged into Galen, at which time Galen became a wholly owned subsidiary of Columbia. In connection with this transaction, Columbia issued approximately 123,830,000 shares of common stock in a tax-free exchange for all of the outstanding common shares of Galen (an exchange ratio of 0.775 of a share of Columbia common stock for each share of Galen common stock). The Galen Merger has been accounted for as a pooling of interests, and accordingly, the supplemental consolidated financial statements give retroactive effect to the combined operations of CHC and Galen for all periods presented. The following is a summary of the results of operations of the separate entities for periods prior to the Galen Merger (dollars in millions):
CHC GALEN COMBINED --------- --------- ----------- Eight months ended August 31, 1993 (unaudited): Revenues................................................................ $ 823 $ 2,600 $ 3,423 Income from continuing operations....................................... 17 176 193 Net income.............................................................. 17 192 209 1992: Revenues................................................................ $ 819 $ 3,987 $ 4,806 Income from continuing operations....................................... 26 185 211 Net income.............................................................. 26 111 137 1991: Revenues................................................................ $ 499 $ 4,113 $ 4,612 Income from continuing operations....................................... 15 343 358 Net income.............................................................. 15 359 374
F-39 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 -- SPINOFF TRANSACTION AND DISCONTINUED OPERATIONS Prior to the Galen Merger, Galen began operating its hospital business as an independent publicly held corporation on March 1, 1993 as a result of a tax-free spinoff transaction (the "Spinoff") by Humana Inc. ("Humana"), which retained its managed care health plan business. The Spinoff separated Humana's previously integrated hospital and managed care health plan businesses and was effected through the distribution of Galen common stock to then current Humana common stockholders on a one-for-one basis. For accounting purposes, because of the relative significance of the hospital business, the pre-Spinoff consolidated financial statements of Galen (and now those of Columbia/HCA) include the separate results of Humana's hospital business, while the operations and net assets of Humana's managed care health plans have been classified as discontinued operations. In connection with the Spinoff, Galen entered into various agreements with Humana which were intended to facilitate orderly changes for both the hospital and managed care health plan businesses in a way which would be minimally disruptive to each entity. Principal contracts are summarized below: OPERATIONS -- Certain former Galen hospitals will provide medical services to insureds of Humana for three years subsequent to the Spinoff. The contract includes, among other things, established payment rates for various inpatient and outpatient services and annual increases therein, and hospital utilization guarantees and related penalties. LIABILITIES AND INDEMNIFICATION -- Each entity assumed liability for specified claims. The entities will also share risks with respect to certain litigation and other contingencies, both identified and unknown. INCOME TAXES -- Each entity entered into risk-sharing arrangements in connection with the ultimate resolution of various income tax disputes. FINANCING -- In January 1993 certain subsidiaries issued $250 million of notes payable to Humana, and paid to Humana $135 million in cash on March 1, 1993 which was financed principally through the issuance of commercial paper. The $250 million of notes were repaid in September 1993 in connection with the refinancing of certain long-term debt. ADMINISTRATION -- These arrangements relate to leasing of certain administrative facilities, division of information systems, employee benefit and stock option plans, and various administrative service arrangements. Revenues of the discontinued managed care health plan business (included in discontinued operations in the accompanying supplemental consolidated statement of income) were $523 million in 1993, $2.9 billion in 1992 and $2.5 billion in 1991. F-40 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5 -- NON-RECURRING TRANSACTIONS 1993 In September 1993 the following charges were recorded in connection with the Galen Merger (dollars in millions): Investment advisory and professional fees, and employee benefit plan costs............................................................... $ 62 Writedown of assets in connection with the consolidation of the combined entity's operations........................................ 63 Administrative facility asset writedowns and conversion costs associated with the transaction..................................... 16 Provision for loss on planned sales of assets........................ 10 --------- $ 151 --------- ---------
1992 In September 1992 a pretax charge of $394 million was recorded in connection with the planned divestiture of twenty-two psychiatric hospitals and the unrelated sale of two other facilities. The charge included the writedown to estimated net realizable value of the hospitals to be sold, a $231 million writeoff of permanently impaired cost in excess of net assets acquired, and the costs associated with the replacement of certain credit agreements. Income from continuing operations in 1992 also includes a gain of $93 million on the sale of an investment in common stock of HealthTrust, Inc. -- The Hospital Company ("HealthTrust"). Income from continuing operations in 1992 includes $138 million of charges incurred primarily in connection with the Spinoff, including a provision for loss on the planned sale of hospitals, writedowns of assets in markets with significant declines in operations, administrative facility asset writedowns and certain other costs associated with the separation of the hospital and health plan businesses. Costs aggregating $171 million (before income taxes) incurred by Humana primarily in connection with the Spinoff are included in discontinued operations in 1992. 1991 Income from continuing operations in 1991 includes (i) a charge of $413 million in connection with the acceleration of vesting of stock options under the HCA Nonqualified Stock Option Plan and the establishment of exercise prices at levels substantially less than the then fair value of the underlying common stock, (ii) a charge of $159 million primarily in connection with the anticipated loss on the disposition of certain hospitals and other assets, (iii) a gain of $51 million on the sale of a hospital, and (iv) a gain of $221 million on the sale of an investment in preferred stock and warrants of HealthTrust. NOTE 6 -- OTHER BUSINESS COMBINATIONS During the past three years, Columbia/HCA has acquired various hospitals and related ancillary health care facilities (or controlling interests in such facilities), all of which have been accounted for by the purchase method. Accordingly, the aggregate purchase price of these transactions has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed based upon their respective fair values. The supplemental consolidated financial statements include the operations of acquired entities since the respective acquisition dates. F-41 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- OTHER BUSINESS COMBINATIONS (CONTINUED) The following is a summary of acquisitions consummated during the last three years (dollars in millions):
1993 1992 1991 --------- --------- --------- Number of hospitals........................................................ 3 15 2 Number of licensed beds.................................................... 903 2,345 1,420 Purchase price information: Fair value of assets acquired............................................ $ 164 $ 490 $ 165 Liabilities assumed...................................................... (76) (279) (48) --------- --------- --------- Net assets acquired.................................................... 88 211 117 --------- --------- --------- Issuance of common stock................................................. - 119 1 Cash acquired............................................................ 9 15 15 Cash received from sale of certain acquired assets....................... - 40 - Other.................................................................... - 1 5 --------- --------- --------- 9 175 21 --------- --------- --------- Net cash paid for acquisitions......................................... $ 79 $ 36 $ 96 --------- --------- --------- --------- --------- ---------
In July 1992 Columbia/HCA acquired Basic American Medical, Inc. ("BAMI") (included in the table above) through a merger into a wholly owned subsidiary. The assets of BAMI included eight hospitals containing 1,203 licensed beds and certain other health care businesses. The transaction was financed through the assumption of approximately $140 million of long-term debt, issuance of 6,995,000 shares of common stock and payment of $38 million in cash to BAMI stockholders. The purchase price paid in excess of the fair value of identifiable net assets of acquired entities aggregated $7 million in 1993, $97 million in 1992 and $19 million in 1991. The pro forma effect of these acquisitions on Columbia/HCA's results of operations was not significant. NOTE 7 -- INCOME TAXES Provision for income taxes consists of the following (dollars in millions):
1993 1992 1991 --------- --------- --------- Current: Federal..................................................................... $ 357 $ 232 $ 375 State....................................................................... 69 34 64 --------- --------- --------- 426 266 439 --------- --------- --------- Deferred: Federal..................................................................... (36) 22 (218) State....................................................................... 4 6 (32) --------- --------- --------- (32) 28 (250) --------- --------- --------- $ 394 $ 294 $ 189 --------- --------- --------- --------- --------- ---------
F-42 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) Reconciliation of federal statutory rate to effective income tax rate follows:
1993 1992 1991 --------- --------- --------- Federal statutory rate..................................................... 35.0% 34.0% 34.0% State income taxes, net of federal income tax benefit...................... 4.6 4.4 2.9 Gain on sale of HealthTrust investments.................................... - - (3.5) Merger costs............................................................... 0.6 - - Costs in excess of net assets acquired..................................... 1.2 16.6 2.3 Tax exempt investment income............................................... (0.9) (1.7) (1.5) Other items, net........................................................... 0.1 1.8 0.7 --- --- --- Effective income tax rate.................................................. 40.6% 55.1% 34.9% --- --- --- --- --- ---
In August 1993 Congress enacted the Omnibus Budget Reconciliation Act of 1993 which included, among other things, an increase in corporate income tax rates retroactive to January 1, 1993. This legislation had no material effect on 1993 net income. Columbia/HCA adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), as of January 1, 1992, the effect of which increased 1992 net income by $51 million. The provisions of SFAS 109 require, among other things, recognition of deferred income taxes using statutory rates at which temporary differences in the tax and book bases of assets and liabilities are expected to affect taxable income in future years. A summary of deferred income taxes by source included in the consolidated balance sheet at December 31, 1993 and 1992 follows (dollars in millions):
1993 1992 ---------------------- ---------------------- ASSETS LIABILITIES ASSETS LIABILITIES --------- ----------- --------- ----------- Depreciation................................................ $ - $ 766 $ - $ 748 Long-term debt.............................................. - 26 - 71 Professional liability risk................................. 329 - 336 - Doubtful accounts........................................... 91 - 85 - Property losses............................................. 87 - 111 - Cash basis.................................................. - 60 - 89 Compensation................................................ 24 - 18 - Capitalized leases.......................................... 11 - 12 - Other....................................................... 215 167 202 106 --------- ----------- --------- ----------- $ 757 $ 1,019 $ 764 $ 1,014 --------- ----------- --------- ----------- --------- ----------- --------- -----------
Management believes that the deferred tax assets in the table above will ultimately be realized. Management's conclusion is based primarily on its expectation of future taxable income and the existence of sufficient taxable income within the allowable carryback periods to realize the tax benefits of deductible temporary differences recorded at December 31, 1993. Deferred income taxes totaling $295 million and $257 million at December 31, 1993 and 1992, respectively, are included in other current assets. Noncurrent deferred income taxes, included in deferred credits and other liabilities, totaled $557 million and $507 million at December 31, 1993 and 1992, respectively. The Internal Revenue Service (the "Service") has issued statutory notices of deficiency in connection with its examinations of HCA's federal income tax returns for 1981 through 1988. Columbia/HCA is currently contesting these claimed deficiencies in the United States Tax Court. In addition, the F-43 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) Service has proposed certain adjustments in connection with its examinations of HCA's 1989 and 1990 federal income tax returns. The following is a discussion of the disputed items with respect to these years. METHOD OF ACCOUNTING For years 1981 through 1986, most of HCA's hospital subsidiaries (the "Subsidiaries") reported taxable income primarily using the cash method of accounting. This method was prevalent within the hospital industry and the Subsidiaries applied the method in accordance with prior agreements with the Service. The Service now asserts that the accrual method of accounting should have been used by the Subsidiaries. The Tax Reform Act of 1986 (the "1986 Act") requires the use of the accrual method of accounting beginning in 1987. Consequently, the Subsidiaries changed to the accrual method beginning January 1, 1987. In accordance with the provisions of the 1986 Act, income that had been deferred at the end of 1986 is being recognized as taxable income by the Subsidiaries in equal annual installments over ten years. If the Service should ultimately prevail in its claim that the Subsidiaries should have used the accrual method for 1981 through 1986, the claim would be reduced to the extent that HCA has recognized as taxable income a portion of such deferred income taxes since 1986. In addition, the sale by HCA of numerous Subsidiaries in 1987 that had been using the cash method resulted in the recognition of a substantial gain that would not have been recognized had the Subsidiaries been using the accrual method. If the Service were successful with respect to this issue, Columbia/HCA would owe an additional $110 million in income taxes and $432 million in interest as of December 31, 1993. HOSPITAL ACQUISITIONS In connection with hospitals acquired by HCA in 1981 and 1985, the Service has asserted that a portion of the costs allocated to identifiable assets with ascertainable useful lives should be reclassified as nondeductible goodwill. If the Service ultimately prevails in this regard, Columbia/HCA would owe an additional $113 million in income taxes and $139 million in interest as of December 31, 1993. INSURANCE SUBSIDIARY Based on a Sixth Circuit Court of Appeals decision (the Court having jurisdiction over the HCA issues), HCA has claimed that insurance premiums paid to its wholly owned insurance subsidiary ("Parthenon") are deductible, while the Service asserts that such premiums are not deductible and that corresponding losses are only deductible at the time and to the extent that claims are actually paid. HCA has claimed the additional deductions in its Tax Court petitions. Through December 31, 1993, Columbia/HCA is seeking a refund totaling $51 million in income taxes and $93 million in interest in connection with this issue. As an alternative to its position, HCA has asserted that in connection with the sale of hospitals to HealthTrust in 1987, premiums paid to Parthenon by the sold hospitals, if not deductible as discussed above, became deductible at the time of the sale. Accordingly, HCA claimed such deduction in its 1987 federal income tax return. The Service has disallowed the deduction and is claiming an additional $5 million in income taxes and $15 million in interest. A final determination that the premiums are not deductible either when paid to Parthenon or upon the sale of certain hospitals to HealthTrust would increase the taxable basis in the hospitals sold, thereby reducing HCA's gain realized on the sale. HEALTHTRUST SALE In connection with its sale of certain Subsidiaries to HealthTrust in 1987 in exchange for cash, HealthTrust preferred stock and stock purchase warrants, HCA calculated its gain based on the valuation of such stock and warrants by an independent appraiser. The Service claims a higher F-44 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) aggregate valuation, based on the face amount of the preferred stock and a separate appraisal HealthTrust obtained for the stock purchase warrants. Application of the higher valuation would increase the gain recognized by HCA on the sale. However, if the Service succeeds in its assertion, HCA's tax basis in its HealthTrust preferred stock and warrants will be increased accordingly, thereby substantially reducing the tax from the sale of such preferred stock and warrants by a corresponding amount. By December 31, 1992, HCA had sold its entire interest in the HealthTrust preferred stock and warrants. Including the effect of the sales of these securities, the Service is claiming additional interest of $64 million through December 31, 1993. Also in connection with the 1987 sale of certain Subsidiaries to HealthTrust, the Service claims that HCA's basis in the stock of the Subsidiaries sold to HealthTrust should be calculated by adjusting such basis to reflect accelerated rather than straight-line depreciation, which would reduce HCA's basis in the stock sold and increase the taxable gain on the sale. The Service position is contrary to a Tax Court decision in a similar case. The Service is claiming additional income taxes of $79 million and interest of $66 million through December 31, 1993. In connection with the 1987 HealthTrust transactions, the Service further asserts that, to the extent the Subsidiaries were properly on the cash method through 1986, and therefore properly recognizing taxable income over the ten-year transition period, HCA should have additional income in 1987 equal to the unamortized portion of the deferred income. It is HCA's position that no additional income need be included in 1987 and that the deferred income continues to qualify for the ten-year transition period after the sale. Should the Service prevail, Columbia/HCA would owe $11 million of additional income taxes and $17 million of interest through December 31, 1993. The position of the Service is an alternative to its denial of the use of the cash method of accounting previously discussed. DOUBTFUL ACCOUNTS The IRS is asserting that in 1986 HCA was not entitled to include charity care writeoffs in the formula used to calculate its deduction for doubtful accounts. For years 1987 and 1988, the Service is asserting that HCA was not entitled to exclude from income amounts which are unlikely to be collected. Management believes that such exclusions are permissible under an accrual method of accounting, and because HCA is a "service business" and not a "merchandising business," it is entitled to a special exclusion provided to service businesses by the 1986 Act. The Service disagrees, asserting that HCA is engaged, at least in part, in a merchandising business. Notwithstanding this assertion, the Service contends that the exclusion taken by HCA is excessive under applicable Temporary Treasury Regulations. Columbia/HCA believes that the calculation of the exclusion is inaccurate since it does not permit the exclusion in accordance with the controlling statute. If the Service prevails, Columbia/HCA would owe additional income taxes of $102 million and interest of $48 million through December 31, 1993. LEVERAGED BUY-OUT EXPENSES The Service has asserted that no deduction is allowed for various expenses incurred in connection with HCA's leveraged buy-out transaction in 1989, including the amortization of loan costs incurred to borrow funds to acquire the stock of the former shareholders, certain fees incurred by the Special Committee of HCA's Board of Directors to evaluate the buy-out proposal, compensation payments to cancel employee stock plans, and various other costs incurred after the buy-out which have been treated as part of the transaction by the Service. Columbia/HCA believes that all of these costs are deductible. If the Service prevails on these issues, Columbia/HCA would owe income taxes of $94 million and interest of $24 million through December 31, 1993. F-45 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) OTHER ISSUES Additional federal income tax issues primarily concern disputes over the depreciable lives utilized by HCA for constructed hospital facilities, investment tax credits, vacation pay deductions and income from foreign operations. Many of these items, including depreciation, investment tax credits and foreign issues, have been resolved favorably in previous settlements. The Service is claiming an additional $44 million in income taxes and $28 million in interest through December 31, 1993 with respect to these issues. Management believes that HCA had properly reported its income and paid its taxes in accordance with applicable laws and agreements established with the Service during previous examinations, and that final resolution of these disputes will not have a material adverse effect on the results of operations or financial position of Columbia/HCA. NOTE 8 -- PROFESSIONAL LIABILITY RISKS Columbia/HCA insures a substantial portion of its professional liability risks through wholly owned insurance subsidiaries. Provisions for such risks underwritten by the subsidiaries and deductibles at certain hospitals, including expenses incident to claim settlements, were $96 million for 1993, $102 million for 1992 and $111 million for 1991. Amounts funded to the insurance subsidiaries were $62 million for 1993, $55 million for 1992 and $56 million for 1991. Allowances for professional liability risks, included principally in deferred credits and other liabilities, were $817 million and $791 million at December 31, 1993 and 1992, respectively. As discussed in Note 1, Columbia/HCA adopted the provisions of SFAS 115 on December 31, 1993. Accordingly, common stockholders' equity was increased by $27 million (net of deferred income taxes) to reflect the net unrealized gain on investments classified as available for sale. Prior to the adoption of SFAS 115, debt securities were recorded at amortized cost (which approximated fair value), while equity securities were recorded at the lower of aggregate cost or fair value. The adoption of SFAS 115 had no effect on earnings in 1993. The provisions of SFAS 115 require that investments in debt and equity securities be classified according to the following criteria: TRADING ACCOUNT -- Assets held for resale in anticipation of short-term changes in market conditions are recorded at fair value and gains and losses, both realized and unrealized, are included in income. Columbia/HCA does not maintain a trading account portfolio. HELD TO MATURITY -- Certain debt securities of Columbia/HCA's professional liability insurance subsidiaries are expected to be held to maturity as a result of management's intent and ability to do so. These investments are carried at amortized cost. AVAILABLE FOR SALE -- Debt and equity securities not classified as either trading securities or held to maturity are classified as available for sale and recorded at fair value. Unrealized gains and losses are excluded from income and recorded as a separate component of common stockholders' equity. F-46 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) The following is a summary of the insurance subsidiaries' investments at December 31, 1993 and 1992 (dollars in millions):
DECEMBER 31, 1993 ---------------------------- UNREALIZED AMOUNTS -------------- FAIR COST GAINS LOSSES VALUE ---- ----- ------- ----- Held to maturity: United States Government obligations................................. $ 44 $ - $ - $ 44 ---- ----- ------- ----- Available for sale: Bonds: United States Government........................................... 19 1 - 20 States and municipalities.......................................... 372 16 - 388 Mortgage-backed securities......................................... 54 1 - 55 Corporate and other................................................ 51 2 (1) 52 Money market funds................................................... 31 - - 31 Redeemable preferred stocks.......................................... 17 1 - 18 ---- ----- ------- ----- 544 21 (1) 564 ---- ----- ------- ----- Equity securities: Adjustable rate preferred stocks................................... 13 1 - 14 Common stocks...................................................... 133 27 (4) 156 ---- ----- ------- ----- 146 28 (4) 170 ---- ----- ------- ----- $734 $ 49 $ (5) 778 ---- ----- ------- ---- ----- ------- Amounts classified as current assets................................... (78) ----- Investment carrying value.............................................. $ 700 ----- -----
F-47 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED)
DECEMBER 31, 1992 ---------------------------- UNREALIZED AMOUNTS -------------- FAIR COST GAINS LOSSES VALUE ---- ----- ------- ----- Held to maturity: United States Government obligations................................. $ 19 $ - $ - $ 19 Certificates of deposit.............................................. 20 - - 20 ---- ----- ------- ----- 39 - - 39 ---- ----- ------- ----- Available for sale: Bonds: United States Government........................................... 22 1 - 23 States and municipalities.......................................... 312 9 - 321 Mortgage-backed securities......................................... 55 - - 55 Corporate and other................................................ 39 2 - 41 Money market funds................................................... 68 - - 68 Redeemable preferred stocks.......................................... 18 - - 18 ---- ----- ------- ----- 514 12 - 526 ---- ----- ------- ----- Equity securities: Adjustable rate preferred stocks................................... 20 1 - 21 Common stocks...................................................... 136 21 (9) 148 ---- ----- ------- ----- 156 22 (9) 169 ---- ----- ------- ----- 709 $ 34 $ (9) $ 734 ----- ------- ----- ----- ------- ----- Amounts classified as current assets................................... (65) ---- Investment carrying value.............................................. $644 ---- ----
The cost and estimated fair value of debt and equity securities at December 31, 1993 by contractual maturity are shown below (dollars in millions). Expected and contractual maturities will differ because the issuers of certain securities may have the right to prepay or otherwise redeem such obligations without penalty.
FAIR COST VALUE --------- --------- Held to maturity: Due in one year or less..................................................... $ 44 $ 44 --------- --------- Available for sale: Due in one year or less..................................................... 34 34 Due after one year through five years....................................... 134 136 Due after five years through ten years...................................... 131 137 Due after ten years......................................................... 245 257 --------- --------- 544 564 Equity securities........................................................... 146 170 --------- --------- 690 734 --------- --------- $ 734 $ 778 --------- --------- --------- ---------
The fair value of the subsidiaries' investments is based generally on quoted market prices. F-48 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) The average life of the above investments (excluding common stocks) approximated five years at December 31, 1993 and four years at December 31, 1992, and the tax equivalent yield on such investments averaged 10% for the last three years. Tax equivalent yield is the rate earned on invested assets, excluding unrealized gains and losses, adjusted for the benefit of nontaxable investment income. Sales of securities for the year ended December 31, 1993 are summarized below (dollars in millions):
TYPE OF SECURITY ---------------------- DEBT EQUITY --------- ----------- Cash proceeds....................................................................... $ 185 $ 106 Gross realized gains................................................................ 4 19 Gross realized losses............................................................... - 10
NOTE 9 -- LONG-TERM DEBT A summary of long-term debt at December 31 follows (dollars in millions):
1993 1992 --------- --------- Senior collateralized debt, 5% to 13.8% (rates generally fixed) payable in periodic installments through 2034......................................................... $ 211 $ 401 Senior debt, 8% to 13.3% (rates generally fixed) payable in periodic installments through 2023...................................................................... 1,158 1,166 Fixed rate note agreement (13% rate)............................................... 100 100 Commercial paper (rates fixed under interest rate agreements averaging four years at 7.9%).......................................................................... 380 380 Commercial paper (floating rates averaging 3.4%)................................... 495 153 Bank credit agreement (floating rates averaging 4.4%).............................. 1,172 1,067 Bank line of credit (floating rates averaging 3.6%)................................ 100 - Subordinated credit agreement (floating rates averaging 5.9%)...................... - 300 Subordinated debt, 8.5% to 15% (rates generally fixed) payable in periodic installments through 2008......................................................... 82 89 --------- --------- Total debt, average life of six years (rates averaging 6.7%)....................... 3,698 3,656 Amounts due within one year........................................................ 363 353 --------- --------- Long-term debt..................................................................... $ 3,335 $ 3,303 --------- --------- --------- ---------
Borrowings under the commercial paper programs are classified as long-term debt due to the credit available under the revolving credit agreements discussed below and management's intention to refinance these borrowings on a long-term basis. Maturities of long-term debt in years 1995 through 1998 are $1.1 billion, $161 million, $64 million and $1.1 billion, respectively. Such amounts reflect maturities of debt issued for refinancings through March 24, 1994 and, as to short-term debt classified as long-term, are based upon maturities of the revolving credit agreements. Approximately 8% of Columbia/HCA's property and equipment is pledged on senior collateralized debt. During the past three years Columbia/HCA has reduced interest costs and eliminated certain restrictive covenants by refinancing or prepaying high interest rate debt, primarily through the use of existing cash and cash equivalents and issuance of long-term debt, commercial paper and equity. Amounts refinanced or prepaid totaled $787 million in 1993, $1 billion in 1992 and $275 million in 1991. After-tax losses from refinancing activities in 1993 aggregated $84 million or $.24 per share. F-49 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- LONG-TERM DEBT (CONTINUED) In February 1994 Columbia/HCA entered into revolving credit agreements (the "Credit Facilities") in the aggregate amount of $3 billion. The Credit Facilities comprise a four-year $1 billion revolving credit agreement and a 364-day $2 billion revolving credit agreement. The Credit Facilities were established to support Columbia/HCA's commercial paper programs and replace $3.2 billion of prior revolving credit agreements associated with HCA ($1.6 billion) and Columbia ($1.6 billion). Interest is payable generally at either LIBOR plus 1/4% to 1/2% (depending on Columbia/HCA's credit rating), or the higher of prime, the bank certificate of deposit rate plus 1% or the Federal Funds rate plus 1/2%. In December 1993 Columbia/HCA issued $150 million of 6 1/8% Notes due 2000 and $150 million of 7 1/2% Notes due 2023. During 1992 Columbia/HCA sold $100 million face amount of 10 7/8% Senior Subordinated Notes due 2002 and $135 million face amount of 11 1/2% Senior Subordinated Notes due 2002. In September 1993 $232 million face amount of these notes were retired through the completion of a tender offer. Proceeds from the public offering of 41,055,000 shares of voting common stock in 1992 were used to repay $352 million of debt outstanding under a bank credit agreement and redeem the 15 3/4% Subordinated Discount Debentures and related interest aggregating $444 million. In connection with the acquisition of BAMI in 1992, Columbia/HCA assumed approximately $140 million of long-term debt, including approximately $64 million of senior collateralized notes payable in quarterly installments through 1998 at interest rates ranging from 10.7% to 11.7%. In September 1993 Columbia/HCA effected the defeasance of these notes. In 1991 one of Columbia/HCA's partnerships issued $95 million of 11.45% Senior Secured Notes due 2001. Proceeds from the issuance were used to repay $66 million of bank debt and finance expansion. These notes were retired in connection with the refinancing of debt in September 1993. Columbia/HCA also issued in 1991 a $40 million face amount 9% Subordinated Mandatory Convertible Note due 1999. The note is convertible at the option of the holder into Columbia/HCA voting common stock at a price of $18.50 per share (adjusted for stock splits, recapitalizations and reorganizations). The note will be automatically converted into common stock if the average per share market price for four months preceding the July 1 anniversary exceeds a specified amount ranging from $27.00 in 1994 to $34.00 in 1996. In 1991 Columbia/HCA exchanged its Cumulative Exchangeable Preferred Stock for 17 1/2% Junior Subordinated Exchangeable Debentures due 2005. These debentures were redeemed in 1992 from proceeds on the 1991 sale of HealthTrust preferred stock and warrants. Columbia/HCA's credit facilities contain customary covenants which include (i) limitations on additional debt, (ii) limitations on sales of assets, mergers and changes of ownership and (iii) maintenance of certain interest coverage ratios. The estimated fair value of Columbia/HCA's long-term debt was $4.1 billion at both December 31, 1993 and 1992, compared to carrying amounts aggregating $3.7 billion at the end of each year. Certain subsidiaries of Columbia/HCA have entered into agreements which reduce the impact of changes in interest rates on $380 million of floating rate long-term debt. At December 31, 1993 and 1992, the fair value of Columbia/HCA's net payable position under these agreements (included in the aggregate fair value amounts above) totaled $34 million and $29 million, respectively. The estimate of fair value is based upon the quoted market prices for the same or similar issues of long-term debt, or on rates available to Columbia/HCA as a result of the HCA Merger for debt of the same remaining maturities. F-50 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- LONG-TERM DEBT (CONTINUED) As discussed in Note 4, in connection with the Spinoff, certain subsidiaries issued notes payable ($250 million) and paid cash ($135 million financed primarily through the issuance of commercial paper) to Humana in 1993. If the Spinoff had occurred on December 31, 1992, Columbia/HCA's ratio of debt to debt plus common stockholders' equity would have increased from 50% to 58%. NOTE 10 -- LEASES Columbia/HCA leases real estate and equipment under cancelable and non-cancelable arrangements. Future minimum payments under non-cancelable operating leases are as follows (dollars in millions): 1994................................................................. $ 123 1995................................................................. 102 1996................................................................. 78 1997................................................................. 63 1998................................................................. 43 Thereafter........................................................... 242
Rent expense aggregated $196 million, $190 million and $170 million for the years ended December 31, 1993, 1992 and 1991, respectively. NOTE 11 -- CONTINGENCIES Management continually evaluates contingencies based upon the best available evidence. In addition, allowances for loss are provided currently for disputed items that have continuing significance, such as certain third-party reimbursements and deductions that continue to be claimed in current cost reports and tax returns. Management believes that allowances for loss have been provided to the extent necessary and that its assessment of contingencies is reasonable. Management believes that resolution of contingencies will not materially affect Columbia/HCA's financial position or results of operations. Principal contingencies are described below: REVENUES -- Certain third-party payments are subject to examination by agencies administering the programs. Columbia/HCA is contesting certain issues raised in audits of prior year cost reports. PROFESSIONAL LIABILITY RISKS -- Columbia/HCA has provided for loss for professional liability risks based upon actuarially determined estimates. Actual settlements and expenses incident thereto may differ from the provisions for loss. INTEREST RATE AGREEMENTS -- Certain subsidiaries of Columbia/HCA are parties to agreements which reduce the impact of changes in interest rates on its floating rate long-term debt. In the event of nonperformance by other parties to these agreements, Columbia/HCA may incur a loss on the difference between market rates and contract rates. INCOME TAXES -- Columbia/HCA is contesting adjustments proposed by the IRS. SPINOFF -- Certain subsidiaries of Columbia/HCA are parties to risk-sharing arrangements with Humana. REGULATORY REVIEW -- Federal regulators are investigating certain financial arrangements with physicians at two psychiatric hospitals. LITIGATION -- Various suits and claims arising in the ordinary course of business are pending against Columbia/HCA. F-51 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 -- CAPITAL STOCK The terms and conditions associated with each class of Columbia/HCA common stock are substantially identical except for voting rights. All nonvoting common stockholders may convert their shares on a one-for-one basis into voting common stock, subject to certain limitations. In addition, certain voting common stockholders may convert their shares on a one-for-one basis into nonvoting common stock. The following shares of common stock were reserved at December 31, 1993 (amounts in thousands): Stock option plans......................................................... 20,118 Retirement and savings plans............................................... 8,887 Other...................................................................... 2,853 --------- 31,858 --------- ---------
Columbia/HCA has plans under which options to purchase common stock may be granted to officers, employees and directors. Except for those discussed in Note 5, options have been granted at not less than market price on the date of grant. Exercise provisions vary, but most options are exercisable in whole or in part beginning one to four years after grant and ending four to fifteen years after grant. Activity in the plans is summarized below (share amounts in thousands):
SHARES UNDER OPTION PRICE OPTION PER SHARE --------- ------------------ Balances, December 31, 1990.......................................... 37,163 $ 0.22 to $37.00 Granted............................................................ 4,078 0.60 to 25.24 Exercised.......................................................... (1,021) 7.21 to 23.37 Cancelled or lapsed................................................ (1,142) 0.60 to 37.00 --------- Balances, December 31, 1991.......................................... 39,078 0.22 to 25.71 Granted............................................................ 3,950 0.60 to 22.62 Conversion of BAMI stock options................................... 466 3.18 to 11.59 Exercised.......................................................... (22,998) 0.22 to 17.25 Cancelled or lapsed................................................ (7,399) 0.22 to 23.37 --------- Balances, December 31, 1992.......................................... 13,097 0.22 to 25.71 Granted............................................................ 1,660 0.60 to 33.38 Exercised.......................................................... (4,018) 0.22 to 23.37 Cancelled or lapsed................................................ (709) 0.22 to 25.71 --------- Balances, December 31, 1993.......................................... 10,030 $ 0.22 to $33.38 --------- ---------
At December 31, 1993, options for 4,026,700 shares were exercisable. Shares of common stock available for future grants were 10,088,000 at December 31, 1993 and 11,442,900 at December 31, 1992. In connection with the Galen Merger, certain preferred stock purchase rights were redeemed which were previously issued to Galen common stockholders. The cost of this transaction was not significant. In addition, a stockholder rights plan was adopted upon consummation of the Galen Merger (similar to that of Galen) under which common stockholders have the right to purchase Series A Preferred Stock in the event of accumulation of or tender offer for certain percentages of Columbia/HCA's common stock. The rights will expire in 2003 unless redeemed earlier by Columbia/ HCA. F-52 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 -- CAPITAL STOCK (CONTINUED) In September 1993 the Board of Directors initiated a regular quarterly cash dividend on common stock of $.03 per share. In March 1992 Columbia/HCA issued 41,055,000 shares of voting common stock, the net proceeds from which ($796 million) were used to reduce long-term debt. Assuming that these shares were issued and the proceeds therefrom were used to reduce long-term debt at the beginning of the year, earnings per common and common equivalent share would have been $.53 in 1992. In connection with the HCA Merger, Columbia/HCA stockholders voted to increase the aggregate number of authorized voting shares of common stock from 400 million to 800 million, and the number of authorized nonvoting common shares was established at 25 million. In addition, authorized shares of preferred stock (none of which are outstanding) were increased from 10 million to 25 million. NOTE 13 -- EMPLOYEE BENEFIT PLANS Columbia/HCA maintains noncontributory defined contribution retirement plans covering substantially all employees. Benefits are determined as a percentage of a participant's earned income and are vested over specified periods of employee service. Retirement plan expense was $97 million for 1993, $102 million for 1992 and $86 million for 1991. Amounts equal to retirement plan expense are funded annually. Columbia/HCA maintains various contributory savings plans which are available to employees who meet certain minimum requirements. Certain of the plans require that Columbia/HCA match an amount ranging from 50% to 60% of a participant's contribution up to certain maximum levels. The cost of these plans totaled $20 million for 1993, $19 million for 1992 and $15 million for 1991. Columbia/HCA contributions are funded periodically during the year. NOTE 14 -- ACCRUED EXPENSES The following is a summary of other accrued expenses at December 31 (dollars in millions):
1993 1992 --------- --------- Workers' compensation................................................................ $ 102 $ 90 Taxes other than income.............................................................. 143 118 Professional liability risks......................................................... 89 80 Employee benefit plans............................................................... 158 197 Interest............................................................................. 181 167 Other................................................................................ 180 251 --------- --------- $ 853 $ 903 --------- --------- --------- ---------
NOTE 15 -- SUBSEQUENT EVENTS INCOME TAXES On March 24, 1994, Columbia/HCA made an advance payment to the IRS of approximately $75 million in connection with certain disputed prior year income taxes and related interest. This transaction will not have a material effect on 1994 earnings. LONG-TERM DEBT Since completion of the HCA Merger, certain HCA and other long-term debt has been refinanced in an effort to reduce future interest expense. These transactions were financed primarily through the issuance of commercial paper, $175 million of 6 1/2% Notes due 1999 and $150 million of 7.15% Notes due 2004. Management anticipates that losses resulting from these refinancing activities will reduce Columbia/HCA's first quarter 1994 net income by approximately $80 million. F-53 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 -------------------------------------------------------- FIRST SECOND THIRD FOURTH ----------- ----------- ----------- ----------- Revenues................................................... $ 2,654 $ 2,536 $ 2,491 $ 2,571 Net income (loss): Continuing operations (a)................................ 205 166 28 176 Discontinued operations.................................. 16 - - - Extraordinary loss on extinguishment of debt.................................................... - - (84) - Net income (loss)...................................... 221 166 (56) 176 Per common share: Earnings (loss): Continuing operations (a).............................. .61 .49 .08 .52 Discontinued operations................................ .04 - - - Extraordinary loss on extinguishment of debt.................................................. - - (.24) - Net income (loss).................................... .65 .49 (.16) .52 Market prices (b): High................................................... 24 1/2 27 3/4 31 33 7/8 Low.................................................... 16 1/4 19 1/4 25 3/8 27 1992 -------------------------------------------------------- FIRST SECOND THIRD FOURTH ----------- ----------- ----------- ----------- Revenues................................................... $ 2,559 $ 2,450 $ 2,451 $ 2,472 Net income (loss): Continuing operations (c)(d)............................. 174 158 (300) 207 Discontinued operations (c).............................. 3 (2) (132) 6 Change in accounting for income taxes.................... 51 - - - Net income (loss)...................................... 228 156 (432) 213 Per common share: Earnings (loss): Continuing operations (c)(d)........................... .57 .48 (.89) .61 Discontinued operations (c)............................ .02 (.02) (.39) .02 Change in accounting for income taxes.................. .16 - - - Net income (loss).................................... .75 .46 (1.28) .63 Market prices (b): High................................................... 21 1/4 22 19 1/4 21 3/4 Low.................................................... 16 1/2 16 1/4 16 1/4 13 3/4 - ------------------------ (a) Third quarter loss includes $98 million ($.29 per share) of costs related to the Galen Merger. See Note 5 of the Notes to Supplemental Consolidated Financial Statements. (b) Represents high and low sales prices of CHC common stock for periods prior to the Galen Merger and Columbia common stock prior to the HCA Merger. Columbia/HCA common stock is traded on the New York Stock Exchange (ticker symbol -- COL). (c) Third quarter net loss includes charges of $221 million ($.65 per share) related primarily to the Spinoff, of which $86 million ($.25 per share) is included in continuing operations and $135 million ($.40 per share) is included in discontinued operations. The loss also includes $330 million ($.98 per share) associated with divestitures of certain assets. See Note 5 of the Notes to Supplemental Consolidated Financial Statements. (d) Fourth quarter net income includes a gain of $58 million ($.17 per share) on the sale of HealthTrust common stock. See Note 5 of the Notes to Supplemental Consolidated Financial Statements.
F-54 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE I -- MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS DECEMBER 31, 1993 (DOLLARS IN MILLIONS)
AMOUNT AT WHICH EACH PORTFOLIO OF NUMBER OF SHARES EQUITY SECURITY OR UNITS - MARKET VALUE ISSUE AND EACH PRINCIPAL AMOUNT OF EACH ISSUE OTHER SECURITY OF BONDS AND COST OF AT BALANCE ISSUE CARRIED IN NAME OF ISSUER AND TITLE OF EACH ISSUE NOTES EACH ISSUE SHEET DATE THE BALANCE SHEET - -------------------------------------------------------- ----------------- ----------- ------------- ----------------- Short-term investments of professional liability insurance subsidiaries (a): United States Government and government agency obligations.......................................... $ 44 $ 44 $ 44 $ 44 State and municipal obligations....................... $ 14 14 14 14 Money market funds.................................... 20 20 20 ----------- ------------- ------- $ 78 $ 78 $ 78 ----------- ------------- ------- ----------- ------------- ------- Long-term investments: United States Government and government agency bonds................................................ $ 20 $ 19 $ 20 $ 20 State and municipal bonds............................. $ 365 358 374 374 Mortgage-backed securities............................ $ 52 54 55 55 Corporate and other bonds............................. $ 49 51 52 52 Money market funds.................................... 11 11 11 Redeemable preferred stocks........................... 17 18 18 Adjustable rate preferred stocks...................... 13 14 14 Common stocks......................................... 133 156 156 ----------- ------------- ------- Investments of professional liability insurance subsidiaries....................................... $ 656 $ 700 $ 700 ----------- ------------- ------- ----------- ------------- ------- - ------------------------ (a) Included in current assets.
F-55 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT END OF PERIOD BALANCE AT ---------------------- BEGINNING AMOUNTS NOT OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT ----------- ----------- ----------- ----------- --------- Year ended December 31, 1991: Mark Aanonson.................................................. $ 46 $ (46) James Bohanon.................................................. 200 (200) James Bohanon.................................................. 16 (16) Daniel Brothman................................................ 135 $ 135 Craig Cooper................................................... 170 (120) 50 William Heburn................................................. $ 558 $ 558 Gary Hill...................................................... 50 (50) Samuel Holtzman................................................ 120 20 100 Ronald Hytoff.................................................. 106 (4) 102 Ira Korman..................................................... 50 (50) Ira Korman..................................................... 30 (30) Ruben Perez.................................................... 884 (144) 740 Doris Porth.................................................... 135 135 George Schneider............................................... 148 (1) 1 146 George Schneider............................................... 550 550 George Schneider............................................... 150 150 Russell Schneider.............................................. 764 3 (158) 609 Donald Stewart................................................. 100 (100) Donald Stewart................................................. 3 3 Charles Stokes................................................. 75 75 Charles Stokes................................................. 40 (1) 39 Charles Stokes................................................. 100 100 ----------- ----- ----------- ----- --------- $ 3,502 $ 931 $ (920) $ 579 $ 2,934 ----------- ----- ----------- ----- --------- ----------- ----- ----------- ----- ---------
F-56 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT BALANCE AT END OF PERIOD BEGINNING AMOUNTS ------------------------ OF PERIOD ADDITIONS COLLECTED CURRENT NOT CURRENT ----------- ----------- --------- ----------- ----------- Year ended December 31, 1992: Daniel Brothman................................................. $ 135 $ 135 Craig Cooper.................................................... 50 $ (50) William Heburn.................................................. 558 (558) Gary Hill....................................................... $ 127 $ 127 Samuel Holtzman................................................. 120 (20) 100 Ronald Hytoff................................................... 102 (102) Ruben Perez..................................................... 740 (740) Doris Porth..................................................... 135 135 George Schneider................................................ 147 (147) George Schneider................................................ 550 (550) George Schneider................................................ 150 (150) Russell Schneider............................................... 609 (609) Donald Stewart.................................................. 100 100 Donald Stewart.................................................. 3 (3) Charles Stokes.................................................. 75 (75) Charles Stokes.................................................. 39 (39) Charles Stokes.................................................. 100 (100) ----------- ----- --------- ----- ----- $ 3,513 $ 227 $ (3,143) $ 127 $ 470 ----------- ----- --------- ----- ----- ----------- ----- --------- ----- -----
F-57 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT BALANCE AT END OF PERIOD BEGINNING AMOUNTS ------------------------ OF PERIOD ADDITIONS COLLECTED CURRENT NOT CURRENT ----------- ----------- ----------- ----------- ----------- Year ended December 31, 1993: Daniel Brothman........................................... $ 135 $ 135(a) Gary Hill................................................. 127 $ (127) Samuel Holtzman........................................... 100 100(a) Doris Porth............................................... 135 135(a) Donald Stewart............................................ 100 100(a) ----- --- ----------- --- ----- $ 597 $ - $ (127) $ - $ 470 ----- --- ----------- --- ----- ----- --- ----------- --- ----- - ------------------------ (a) Noninterest bearing; generally collateralized by deed of trust on personal residence; payable either in periodic installments or upon termination of employment, sale of residence or default on any collateralized instrument having priority over Columbia/HCA's deed of trust.
F-58 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
BALANCE AT BALANCE BEGINNING ADDITIONS RETIREMENTS TRANSLATION AT END OF PERIOD AT COST OR SALES ADJUSTMENTS OTHER OF PERIOD --------- -------- ----------- ----------- ----- --------- Year ended December 31, 1991: Land.................................. $ 525 $ 29 $ (10) $ - $ - $ 544 Buildings............................. 3,563 269 (96) (3) (85)(a) 3,648 Equipment............................. 2,690 396 (129) (2) - 2,955 Construction in progress.............. 130 40 (1) - - 169 --------- -------- ----------- --- ----- --------- $ 6,908 $ 734 $ (236) $ (5) $ (85) $ 7,316 --------- -------- ----------- --- ----- --------- --------- -------- ----------- --- ----- --------- Year ended December 31, 1992: Land.................................. $ 544 $ 48 $ (11) $ (1) $ (27)(b) $ 553 Buildings............................. 3,648 365 (48) (13) (211)(b) 3,741 Equipment............................. 2,955 384 (94) (6) (106)(b) 3,133 Construction in progress.............. 169 94 (4) - (1) 258 --------- -------- ----------- --- ----- --------- $ 7,316 $ 891 $ (157) $ (20) $(345) $ 7,685 --------- -------- ----------- --- ----- --------- --------- -------- ----------- --- ----- --------- Year ended December 31, 1993: Land.................................. $ 553 $ 24 $ (9) $ - $ - $ 568 Buildings............................. 3,741 476 (134) (1) (33)(c) 4,049 Equipment............................. 3,133 464 (133) (1) (21)(c) 3,442 Construction in progress.............. 258 78 (2) - (1)(c) 333 --------- -------- ----------- --- ----- --------- $ 7,685 $ 1,042 $ (278) $ (2) $ (55) $ 8,392 --------- -------- ----------- --- ----- --------- --------- -------- ----------- --- ----- --------- - ------------------------ (a) During the third and fourth quarters of 1991, Columbia/HCA provided for the estimated costs and expenses associated with the disposition of certain hospitals and other assets. (b) During the third quarter of 1992, Columbia/HCA provided for the estimated costs and expenses associated with the disposition of certain hospitals, recorded writedowns of assets in markets with significant declines in operations and wrote off assets destroyed by Hurricane Andrew. (c) During the third quarter of 1993, Columbia/HCA recorded provisions for loss in connection with the Galen Merger, including writedowns of assets in connection with the consolidation of operations and expected losses on the sale of certain assets.
F-59 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
ADDITIONS CHARGED BALANCE TO AT COSTS BALANCE BEGINNING AND RETIREMENTS TRANSLATION AT END OF PERIOD EXPENSES OR SALES ADJUSTMENTS OTHER OF PERIOD --------- -------- ----------- ----------- -------- --------- Year ended December 31, 1991: Buildings........................... $ 719 $ 162 $ (29) $ (1) $ - $ 851 Equipment........................... 983 316 (65) (1) - 1,233 --------- -------- ----------- --- --- --------- $ 1,702 $ 478 $ (94) $ (2) $ - $ 2,084 --------- -------- ----------- --- --- --------- --------- -------- ----------- --- --- --------- Year ended December 31, 1992: Buildings........................... $ 851 $ 168 $ (19) $ (4) $(21)(a) $ 975 Equipment........................... 1,233 325 (67) (3) (26)(a) 1,462 --------- -------- ----------- --- --- --------- $ 2,084 $ 493 $ (86) $ (7) $(47) $ 2,437 --------- -------- ----------- --- --- --------- --------- -------- ----------- --- --- --------- Year ended December 31, 1993: Buildings........................... $ 975 $ 173 $ (56) $ (1) $ - $ 1,091 Equipment........................... 1,462 331 (92) - - 1,701 --------- -------- ----------- --- --- --------- $ 2,437 $ 504 $ (148) $ (1) $ - $ 2,792 --------- -------- ----------- --- --- --------- --------- -------- ----------- --- --- --------- - ------------------------ (a) During the third quarter of 1992, Columbia/HCA provided for the estimated costs and expenses associated with the disposition of certain hospitals, recorded writedowns of assets in markets with significant declines in operations and wrote off assets destroyed by Hurricane Andrew.
F-60 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND DEDUCTIONS AT END OF PERIOD EXPENSES OR PAYMENTS OF PERIOD ----------- ------------- ------------- ----------- Allowances for loss on accounts receivable: Year ended December 31, 1991................................... $ 499 $ 508 $ (560) $ 447 Year ended December 31, 1992................................... 447 515 (487) 475 Year ended December 31, 1993................................... 475 542 (504) 513
F-61 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 --------- --------- --------- Maintenance and repairs.................................................................. $ 220 $ 205 $ 188 Taxes other than payroll and income taxes................................................ 217 185 155
F-62 EX-4.7 2 EXHIBIT 4.7 ASSIGNMENT AND ASSUMPTION ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement is dated as of February 10, 1994, by and between HCA-Hospital Corporation of America ("HCA") and Columbia Healthcare Corporation ("Columbia"). WHEREAS, on October 2, 1993, HCA, Columbia and CHOS Acquisition Corporation ("CHOS") entered into an Agreement and Plan of Merger (the "Merger Agreement") in which Columbia agreed to acquire HCA by means of a merger of HCA and CHOS (the "Merger"). WHEREAS, as a result of completion of the Merger, each stockholder of HCA will receive for each share of (i) HCA Class A Common Stock owned as of the effective time of the Merger (the "Effective Time") 1.05 shares of the Common Stock, $.01 par value, of Columbia (the "Columbia Common Stock") and (ii) HCA Class B Common Stock owned as of the Effective Time 1.05 shares of the Nonvoting Common Stock, $.01 par value, of Columbia (the "Columbia Nonvoting Common Stock"). WHEREAS, HCA and certain of its stockholders are parties to a Registration Rights Agreement, dated as of March 16, 1989, as amended by (i) a First Amendment to Registration Rights Agreement, dated as of April 20, 1992 and (ii) a Second Amendment to Registration Rights Agreement, dated as of July 15, 1993 (such Agreement as so amended called herein, collectively, the "RRA"). WHEREAS, Section 7.18 of the Merger Agreement provides that, as of the Effective Time, Columbia shall assume all obligations of HCA under the RRA to provide for the registration of the shares of Columbia Common Stock held by the stockholders of HCA who are parties to the RRA. NOW, THEREFORE, for good and valid consideration, the parties hereto hereby agree as follows: 1. ASSIGNMENT. Effective as of the Effective Time, HCA hereby assigns to Columbia all right, title and interest of HCA in and to the RRA. 2. ASSUMPTION. Effective as of the Effective Time, Columbia hereby assumes the obligations of HCA under the RRA. 3. AGREED MEANING OF CERTAIN PROVISIONS OF RRA SUBSEQUENT TO EFFECTIVE TIME. HCA and Columbia agree that, effective upon and after the Effective Time, when the terms "Registrable Securities" and "equity securities" (in reference to HCA's equity securities) are used in the RRA, such terms shall mean and refer to (without altering the other provisions of the definition of "Registrable Securities" set forth in the RRA) the equity securities of Columbia, including, without limitation, the Columbia Common Stock and the Columbia Nonvoting Common Stock, but excluding the debt securities of Columbia which are convertible into or exchangeable for, or which carry warrants or rights to subscribe for or purchase, an equity security of Columbia; PROVIDED, HOWEVER, it is understood that Columbia shall have no obligation under the RRA and this Assignment and Assumption Agreement to register with the Securities and Exchange Commission under the Securities Act of 1933, as amended, any shares of the Columbia Nonvoting Common Stock since the Columbia Nonvoting Common Stock has not been registered by Columbia pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, but Columbia shall be required under the RRA and this Assignment and Assumption Agreement to register shares of the Columbia Common Stock issued or issuable upon conversion of the Columbia Nonvoting Common Stock. 4. BENEFICIARIES. This Assignment and Assumption is being made for the benefit of, and may be enforced by, those persons that are parties to the RRA. IN WITNESS WHEREOF, the undersigned have executed this Assignment and Assumption Agreement as of the date first set forth above. HCA-HOSPITAL CORPORATION OF AMERICA By: _______________________________ COLUMBIA HEALTHCARE CORPORATION By: _______________________________ 2 EX-4.8 3 EXHIBIT 4.8 - -------------------------------------------------------------------------------- COLUMBIA/HCA HEALTHCARE CORPORATION AND MID-AMERICA BANK OF LOUISVILLE & TRUST COMPANY, RIGHTS AGENT AMENDED AND RESTATED RIGHTS AGREEMENT DATED AS OF FEBRUARY 10, 1994 - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ---- Section 1. Certain Definitions............................................ 1 Section 2. Appointment of Rights Agent.................................... 5 Section 3. Issuance of Right Certificates................................. 5 Section 4. Form of Right Certificates..................................... 7 Section 5. Countersignature and Registration.............................. 8 Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate.................................................... 9 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.. 9 Section 8. Cancellation and Destruction of Right Certificates............. 12 Section 9. Reservation and Availability of Preferred Stock................ 13 Section 10. Preferred Stock Record Date.................................... 14 Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights............................................... 14 Section 12. Certificate of Adjusted Purchase Price or Number of Shares..... 23 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.................................................. 24 Section 14. Fractional Rights and Fractional Shares........................ 26 Section 15. Rights of Action............................................... 28 Section 16. Agreement of Right Holders..................................... 29 Section 17. Right Certificate Holder Not Deemed a Stockholder.............. 30 Section 18. Concerning the Rights Agent.................................... 30 Section 19. Merger or Consolidation or Change of Name of Rights Agent...... 30 Section 20. Duties of Rights Agent......................................... 31 Section 21. Change of Rights Agent......................................... 34 Section 22. Issuance of New Right Certificates............................. 35 Section 23. Redemption and Termination..................................... 35 Section 24. Notice of Certain Events....................................... 37 Section 25. Notices........................................................ 38 Section 26. Supplements and Amendments..................................... 39 Section 27. Determination and Actions by the Board of Directors, etc....... 39 Section 28. Successors..................................................... 40 Section 29. Benefits of this Agreement..................................... 40 Section 30. Severability................................................... 40 Section 31. Governing Law.................................................. 40 Section 32. Counterparts................................................... 40 Section 33. Descriptive Headings........................................... 41 Appendix A -- Relative rights, preferences and limitations of the Series A Participating Preferred Stock and Series B Participating Preferred Stock Exhibit 1 -- Form of Right Certificate DEFINED TERM CROSS REFERENCE SHEET Acquiring Person..................................................Section 1(a) Act...............................................................Section 1(b) Adjustment Shares............................................Section 11(a)(ii) Adjusted Number of Shares...................................Section 11(a)(iii) Adjusted Purchase Price.....................................Section 11(a)(iii) Affiliate.........................................................Section 1(c) Agreement..............................................................Preface Associate.........................................................Section 1(c) Beneficial Owner..................................................Section 1(d) Beneficially Own..................................................Section 1(d) Business Day......................................................Section 1(e) capital stock equivalent....................................Section 11(a)(iii) close of business.................................................Section 1(f) Common Stock......................................................Section 1(g) Corporation...........................................................Recitals current per share market price................................Section 11(d)(i) Distribution Date.................................................Section 3(a) Exchange Act......................................................Section 1(c) Final Expiration Date.............................................Section 7(a) Nonvoting Common Stock............................................Section 1(j) Nonvoting Right.......................................................Recitals Permitted Offer...................................................Section 1(k) Person............................................................Section 1(l) Preferred Stock...................................................Section 1(m) preferred stock equivalents......................................Section 11(b) Principal Party..................................................Section 13(b) Proration Factor............................................Section 11(a)(iii) Purchase Price....................................................Section 4(a) Record Date...........................................................Recitals Redemption Date...................................................Section 7(a) Redemption Price....................................................Section 23 Right.................................................................Recitals Right Certificate.................................................Section 3(a) Rights Agent..........................................................Recitals Rights Agreement.....................................................Section 3 Section 11(a)(ii) Event......................................Section 11(a)(ii) Section 13 Event.................................................Section 13(a) Security......................................................Section 11(d)(i) Series A Preferred Stock..........................................Section 1(m) i Series B Preferred Stock..........................................Section 1(m) Stock Acquisition Date............................................Section 1(q) Subsidiary........................................................Section 1(r) Then outstanding.............................................Section 1(d)(iii) Trading Day...................................................Section 11(d)(i) Triggering Event..................................................Section 1(s) Voting Right..........................................................Recitals voting securities................................................Section 13(a) ii AMENDED AND RESTATED RIGHTS AGREEMENT AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of February 10, 1994 (the "Agreement"), between COLUMBIA/HCA HEALTHCARE CORPORATION, a Delaware corporation (the "Corporation"), and MID-AMERICA BANK OF LOUISVILLE & TRUST COMPANY, a banking and trust corporation organized under the laws of Kentucky (the "Rights Agent"). WHEREAS, the Board of Directors of the Corporation authorized and declared a dividend of one preferred stock purchase right (a "Voting Right") for each share of Common Stock, $.01 par value (the "Common Stock"), of the Corporation outstanding on September 1, 1993 (the "Record Date"), upon the terms and subject to the conditions set forth in the Rights Agreement dated as of September 1, 1993, between the Corporation and the Rights Agent (the "Original Agreement"); WHEREAS, in connection with the merger of HCA-Hospital Corporation of America ("HCA") into a wholly owned subsidiary of the Corporation, the Corporation is issuing in exchange for shares of nonvoting common stock of HCA shares of Nonvoting Common Stock, $.01 par value (the "Nonvoting Common Stock"), of the Corporation; and WHEREAS, the Board of Directors of the Corporation has determined to issue one nonvoting preferred stock purchase right (a "Nonvoting Right" and, collectively with the Voting Rights, the "Rights") with each share of Nonvoting Common Stock and accordingly desires to amend and restate the Original Agreement to provide for the issuance of Nonvoting Rights; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the then outstanding shares of Common Stock (other than as a result of a Permitted Offer (as hereinafter defined)) or was such a Beneficial Owner at any time after the date hereof, whether or not such Person continues to be the Beneficial Owner of 15% or more of the then outstanding shares of Common Stock. Notwithstanding the foregoing, (A) the term "acquiring person" shall not include (i) the Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee benefit plan of the Corporation or of any Subsidiary of the Corporation, (iv) any Person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan or (v) any Person who or which, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 15% or more of the then outstanding shares of Common Stock as a result of the acquisition of shares of Common Stock directly from the Corporation and (B) no Person shall be deemed to be an "Acquiring Person" either (x) as a result of the acquisition of shares of Common Stock by the Corporation which, by reducing the number of shares of Common Stock outstanding, increases the proportional number of shares beneficially owned by such Person; except that if (i) a Person would become an Acquiring Person (but for the operation of this subclause (x)) as a result of the acquisition of shares of Common Stock by the Corporation and (ii) after such share acquisition by the Corporation, such Person becomes the Beneficial Owner of any additional shares of Common Stock, then such Person shall be deemed an Acquiring Person or (y) if (i) within 5 days after such Person would otherwise have become an Acquiring Person (but for the operation of this subclause (y)), such Person notifies the Board of Directors that such Person did so inadvertently and (ii) within 2 days after such notification, such Person is the Beneficial Owner of less than 15% of the outstanding shares of Common Stock. (b) "Act" shall mean the Securities Act of 1933, as amended and as in effect on the date of this Agreement. (c) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"). (d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has: (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, 2 arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1)(x) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (y) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report) or (2) arises solely from actions of such Person which are within the exemption set forth in paragraph (b)(1) of Rule 14a-2 under the Exchange Act (or any comparable or successor provision); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) relating to the acquisition, holding, voting (except to the extent contemplated by the proviso to Section l(d)(ii)(B)) or disposing of any securities of the Corporation. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Corporation, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. (e) "Business Day" shall mean any day other than a Saturday, Sunday or United States federal holiday. (f) "close of business" on any given date shall mean 5:00 P.M., New York time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day. (g) "Common Stock" when used with reference to the Corporation shall mean the shares of Common Stock of the Corporation referred to in the recitals hereof or, in the event of a subdivision, combination or consolidation with respect to such shares of Common Stock, the shares of Common Stock resulting from such subdivision, combination or consolidation. "Common Stock" when used with reference to any Person other than the Corporation shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such 3 other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. (h) "Distribution Date" shall have the meaning set forth in Section 3 hereof. (i) "Final Expiration Date" shall have the meaning set forth in Section 7 hereof. (j) "Nonvoting Common Stock" shall mean the shares of Nonvoting Common Stock of the Corporation referred to in the recitals hereof or, in the event of a subdivision, combination or consolidation with respect to such shares of Nonvoting Common Stock, the shares of Nonvoting Common Stock resulting from such subdivision, combination or consolidation. "Nonvoting Common Stock" when used with reference to any Person other than the Corporation shall mean nonvoting capital stock of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person, which is identical to the Common Stock of such Person or Persons, except that such stock shall have substantially the same voting rights as the Nonvoting Common Stock of the Corporation. (k) "Permitted Offer" shall mean a tender or exchange offer which is for all outstanding shares of Common Stock at a price and on terms determined, prior to the purchase of shares under such tender or exchange offer, by at least a majority of the members of the Board of Directors who are not officers of the Corporation and who are not Acquiring Persons or Affiliates, Associates, nominees or representatives of an Acquiring Person, to be adequate (taking into account all factors that such directors deem relevant including, without limitation, prices that could reasonably be achieved if the Corporation or its assets were sold on an orderly basis designed to realize maximum value) and otherwise in the best interests of the Corporation and its stockholders (other than the Person or any Affiliate or Associate thereof on whose behalf the offer is being made) taking into account all factors that such directors may deem relevant. (l) "Person" shall mean any individual, firm, partnership, corporation, trust, association, joint venture or other entity, and shall include any successor (by merger or otherwise) of such entity. (m) "Preferred Stock" shall mean, individually and collectively, the shares of Series A Participating Preferred Stock ("Series A Preferred Stock") and Series B Participating Preferred Stock ("Series B Preferred Stock"), par value $.01 per share, of the Corporation, having the relative rights, preferences and limitations set forth in Appendix A hereto. 4 (n) "Redemption Date" shall have the meaning set forth in Section 7 hereof. (o) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) hereof. (p) "Section 13 Event" shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof. (q) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to the Exchange Act) by the Corporation or an Acquiring Person that an Acquiring Person has become such; provided, that, if such Person is determined not to have become an Acquiring Person pursuant to Section 1(a)(B)(y) hereof, then no Stock Acquisition Date shall be deemed to have occurred. (r) "Subsidiary" of any Person shall mean any corporation or other Person of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by such Person. (s) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Corporation hereby appoints the Rights Agent to act as agent for the Corporation and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of shares of Common Stock or Nonvoting Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Corporation may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. SECTION 3. ISSUANCE OF RIGHT CERTIFICATES. (a) Until the earlier of (i) the Stock Acquisition Date or (ii) the close of business on the tenth day (or such later date as may be determined by action of the Corporation's Board of Directors) after the date of the commencement by any Person (other than the Corporation, any Subsidiary of the Corporation, any employee benefit plan of the Corporation or of any Subsidiary of the Corporation or any Person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan) of, or of the first public announcement of the intention of any Person (other than the Corporation, any Subsidiary of the Corporation, any employee benefit plan of the Corporation or of any Subsidiary of the Corporation or any Person or entity 5 organized, appointed or established by the Corporation for or pursuant to the terms of any such plan) to commence (which intention to commence remains in effect for five Business Days after such announcement), a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person (including, in the case of both (i) and (ii), any such date which is after the date of this Agreement and prior to the issuance of the Rights), the earlier of such dates being herein referred to as the "Distribution Date," (x) the Rights will be evidenced by the certificates for shares of Common Stock or Nonvoting Common Stock registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates and shall represent, in the case of certificates for shares of Common Stock, the same number of Voting Rights or, in the case of certificates for shares of Nonvoting Common Stock, the same number of Nonvoting Rights) and not by separate Right Certificates and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of the underlying shares of Common Stock or Nonvoting Common Stock (including a transfer to the Corporation); provided, however, that if a tender offer is terminated prior to the occurrence of a Distribution Date, then no Distribution Date shall occur as a result of such tender offer. As soon as practicable after the Distribution Date, the Corporation will prepare and execute, the Rights Agent will countersign, and the Corporation will send or cause to be sent by first-class, postage-prepaid mail, to each record holder of shares of Common Stock or Nonvoting Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Corporation, a Right Certificate, substantially in the form of Exhibit I hereto (a "Right Certificate"), evidencing one Voting Right for each share of Common Stock or one Nonvoting Right for each share of Nonvoting Common Stock so held. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) Certificates for shares of Common Stock or Nonvoting Common Stock which are outstanding on the Record Date or which become outstanding (including, without limitation, reacquired shares of Common Stock or Nonvoting Common Stock referred to in the last sentence of this paragraph (b)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date, shall be deemed also to be certificates for Rights, and shall bear the following legend (or any similar legend required by the original Rights Agreement dated as of September 1, 1993): This certificate also evidences and entitles the holder hereof to certain rights as set forth in an Amended and Restated Rights Agreement between Columbia/HCA Healthcare Corporation and Mid-America Bank of Louisville & Trust Company, as Rights Agent, dated as of February 10, 1994 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Columbia/HCA Healthcare 6 Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Columbia/HCA Healthcare Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and certain related persons, whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the shares of Common Stock or Nonvoting Common Stock represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the shares of Common Stock or Nonvoting Common Stock represented thereby. In the event that the Corporation purchases or acquires any shares of Common Stock or Nonvoting Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock or Nonvoting Common Stock shall be deemed canceled and retired so that the Corporation shall not be entitled to exercise any Rights associated with the shares of Common Stock or Nonvoting Common Stock which are no longer outstanding. SECTION 4. FORM OF RIGHT CERTIFICATES. (a) The Right Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall be substantially in the form set forth in Exhibit I hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Corporation may deem appropriate and as are not inconsistent with the provisions of this Agreement, as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one-hundredths of a share of, in the case of Voting Rights, Series A Preferred Stock or, in the case of Nonvoting Rights, Series B Preferred Stock, as shall be set forth therein at the price per one one-hundredth of a share set forth therein (the "Purchase Price"), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Right Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights which are null and void pursuant to Section 7(e) of 7 this Agreement and any Right Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Right Certificate and the Rights represented hereby are null and void. The provisions of Section 7(e) of this Rights Agreement shall be operative whether or not the foregoing legend is contained on any such Right Certificate. SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates shall be executed on behalf of the Corporation by its Chairman of the Board, its Chief Executive Officer, its President, any of its Vice Presidents, or its Treasurer, either manually or by facsimile signature, shall have affixed thereto the Corporation's seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Corporation, either manually or by facsimile signature. The Right Certificates shall be countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Corporation who shall have signed any of the Right Certificates shall cease to be such officer of the Corporation before countersignature by the Rights Agent and issuance and delivery by the Corporation, such Right Certificates may nevertheless be countersigned by the Rights Agent and issued and delivered by the Corporation with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Corporation; and any Right Certificate may be signed on behalf of the Corporation by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Corporation to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender or transfer of such Right Certificate, books for registration and transfer of the Right Certificates issued thereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the certificate number and the date of each of the Right Certificates. 8 SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a share of Preferred Stock (or, following a Triggering Event, other securities, as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Corporation shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Corporation shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Corporation may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. Upon receipt by the Corporation and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Corporation's request, reimbursement to the Corporation and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Corporation will make and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a) Subject to Section 7(e) hereof, the registered holder of any Right Certificate may 9 exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price for the total number of one one-hundredths of a share of Preferred Stock (or other securities, as the case may be) as to which such surrendered Rights are exercised, at or prior to the earliest of (i) the close of business on September 1, 2003 (the "Final Expiration Date") and (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"). (b) The Purchase Price for each one one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $100, shall be subject to adjustment from time to time as provided in the next two sentences and in Sections 11 and 13(a) hereof and shall be payable in accordance with Section 7(c) below. Anything in this Agreement to the contrary notwithstanding, in the event that at any time after the date of this Agreement and prior to the Distribution Date, the Corporation shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or (ii) effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in any such case, each share of Common Stock outstanding following such subdivision, combination or consolidation shall continue to have a Right associated therewith and the Purchase Price following any such event shall be proportionately adjusted to equal the result obtained by multiplying the Purchase Price immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event. The same adjustment shall be made with respect to each share of Nonvoting Common Stock and the associated Right in the case of (i) any dividend on the Nonvoting Common Stock payable in shares of Nonvoting Common Stock or (ii) any subdivision, combination, or consolidation of the Nonvoting Common Stock (by reclassification or otherwise than by payment of dividends in shares of Nonvoting Common Stock). The adjustments provided for in the two preceding sentences shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied 10 by payment of the Purchase Price for the shares of Preferred Stock (or other securities, as the case may be) to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 6 hereof by certified check, cashier's check or money order payable to the order of the Corporation, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock certificates for the number of shares of Preferred Stock to be purchased and the Corporation hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Corporation, in its sole discretion, shall have elected to deposit the shares of Preferred Stock issuable upon exercise of the Rights thereunder into a depository, requisition from the depository agent depository receipts representing such number of one one-hundredths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depository agent) and the Corporation will direct the depository agent to comply with such requests, (ii) when appropriate, requisition from the Corporation the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depository receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Right Certificate. In the event that the Corporation is obligated to issue other securities (including Common Stock and/or Nonvoting Common Stock) of the Corporation pursuant to Section 11(a) hereof, the Corporation will make all arrangements necessary so that such other securities are available for distribution by the Rights Agent, if and when appropriate. In addition, in the case of an exercise of the Rights by a holder pursuant to Section 11(a)(ii), the Rights Agent shall return such Right Certificate to the registered holder thereof after imprinting, stamping or otherwise indicating thereon that the rights represented by such Right Certificate no longer include the rights provided by Section 11(a)(ii) of the Rights Agreement and if less than all the Rights represented by such Right Certificate were so exercised, the Rights Agent shall indicate on the Right Certificate the number of Rights represented thereby which continue to include the rights provided by Section 11(a)(ii). (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof, or the Rights Agent shall place an 11 appropriate notation on the Right Certificate with respect to those Rights exercised. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate or Associate thereof) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any Affiliate or Associate thereof) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has a continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Corporation has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Corporation shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Corporation shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Corporation shall reasonably request. SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Corporation or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Corporation shall deliver to the Rights Agent for 12 cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Corporation otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Corporation, or shall, at the written request of the Corporation, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Corporation. SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK. The Corporation covenants and agrees that at all times prior to the occurrence of a Section 11(a)(ii) Event it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock, or any authorized and issued shares of Preferred Stock held in its treasury, the number of shares of Preferred Stock that will be sufficient to permit the exercise in full of all outstanding Rights and, after the occurrence of a Section 11(a)(ii) Event, shall, to the extent reasonably practicable, so reserve and keep available a sufficient number of shares of Common Stock and Nonvoting Common Stock (and/or other securities) which may be required to permit the exercise in full of the Rights pursuant to this Agreement. So long as the shares of Preferred Stock (and, after the occurrence of a Section 11(a)(ii) Event, Common Stock, Nonvoting Common Stock or any other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange, the Corporation shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. The Corporation covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares or other securities (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and non-assessable shares or securities. The Corporation further covenants and agrees that it will pay when due and payable any and all United States federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any shares of Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Corporation shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates or depository 13 receipts for the shares of Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise, or to issue or to deliver any certificates or depository receipts for shares of Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) upon the exercise of any Rights, until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Corporation's reasonable satisfaction that no such tax is due. The Corporation shall use its best efforts to (i) file, as soon as practicable following the Stock Acquisition Date, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act and the rules and regulations thereunder) until the date of the expiration of the rights provided by Section 11(a)(ii). The Corporation shall also take such action as may be appropriate under the blue sky laws of the various states. SECTION 10. PREFERRED STOCK RECORD DATE. Each person in whose name any certificate for shares of Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares of Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) transfer books of the Corporation are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock, Nonvoting Common Stock and/or other securities, as the case may be) transfer books of the Corporation are open. SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. 14 (a) (i) In the event the Corporation shall at any time after the date of this Agreement (A) declare a dividend on the shares of Preferred Stock payable in Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Corporation is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Corporation were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Corporation issuable upon exercise of one Right. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii). (ii) In the event any Person, alone or together with its Affiliates and Associates, shall become an Acquiring Person, then proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall, for a period of 60 days after the later of the occurrence of any such event or the effective date of an appropriate registration statement under the Act pursuant to Section 9 hereof, have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price, in accordance with the terms of this Agreement, such number of shares of (in the case of Voting Rights) Common Stock or (in the case of Nonvoting Rights) Nonvoting Common Stock (or, in the discretion of the Board of Directors, one one-hundredths of a share of Preferred Stock (which shall be Series A Preferred Stock in the case of Voting Rights and Series B Preferred Stock in the case of Nonvoting Rights)) as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a 15 Section 11(a)(ii) Event and dividing that product by (y) 50% of the then current per share market price of the Corporation's Common Stock (determined pursuant to Section 11(d) hereof) on the date of such first occurrence (such number of shares being referred to as the "Adjustment Shares"); provided, however, that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii). (iii) In the event that there shall not be sufficient treasury shares or authorized but unissued (and unreserved) shares of Common Stock and Nonvoting Common Stock to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) and the Rights become so exercisable (and the Board has determined to make the Rights exercisable into fractions of a share of Preferred Stock), notwithstanding any other provision of this Agreement, to the extent necessary and permitted by applicable law, each Right shall thereafter represent the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, (x) a number of (or fractions of) shares of Common Stock or Nonvoting Common Stock, as the case may be (up to the maximum number of shares of Common Stock or Nonvoting Common Stock which may permissibly be issued), and (y) one one-hundredths of a share of Preferred Stock (which shall be Series A Preferred Stock in the case of Voting Rights and Series B Preferred Stock in the case of Nonvoting Rights) or a number of, or fractions of other equity securities of the Corporation (or, in the discretion of the Board of Directors, debt) which the Board of Directors of the Corporation has determined to have the same aggregate current market value (determined pursuant to Section 11(d)(i) and (ii) hereof, to the extent applicable) as one share of Common Stock (such number of shares of, or fractions of a share of, Preferred Stock, debt, or other equity securities (provided that, in the case of other equity securities issuable upon exercise of Nonvoting Rights, the Board of Directors shall use its best efforts to issue nonvoting equity securities) or debt of the Corporation being referred to as a "capital stock equivalent"), equal in the aggregate to the number of Adjustment Shares; provided, however, if sufficient shares of Common Stock, Nonvoting Common Stock and/or capital stock equivalents are unavailable, then the Corporation shall, to the extent permitted by applicable law, take all such action as may be necessary to authorize additional shares of Common Stock, Nonvoting Common Stock or capital stock equivalents for issuance upon exercise of the Rights, including the calling of a meeting of stockholders; and provided, further, that if the Corporation is unable to cause sufficient shares of Common Stock, 16 Nonvoting Common Stock and/or capital stock equivalents to be available for issuance upon exercise in full of the Rights, then each Right shall thereafter represent the right to receive the Adjusted Number of Shares upon exercise at the Adjusted Purchase Price (as such terms are hereinafter defined). As used herein, the term "Adjusted Number of Shares" shall mean that number of shares (or fractions of shares) of Common Stock, Nonvoting Common Stock and/or capital stock equivalents equal to the product of (x) the number of Adjustment Shares and (y) a fraction, the numerator of which is the number of shares of Common Stock, Nonvoting Common Stock and/or capital stock equivalents available for issuance upon exercise of the Rights and the denominator of which is the aggregate number of Adjustment Shares otherwise issuable upon exercise in full of all Rights (assuming there were a sufficient number of shares of Common Stock and Nonvoting Common Stock available) (such fraction being referred to as the "Proration Factor"). The "Adjusted Purchase Price" shall mean the product of the Purchase Price and the Proration Factor. In the event that there are insufficient shares of Common Stock, Nonvoting Common Stock and capital stock equivalents available for issuance upon exercise of the Rights, the Board of Directors shall establish procedures to allocate the right to receive shares of Common Stock, Nonvoting Common Stock and capital stock equivalents upon exercise of the Rights pro rata among holders of Voting Rights and Nonvoting Rights, provided that, to the extent consistent with such proration, shares of Nonvoting Common Stock and other nonvoting capital stock shall be allocated to holders of Nonvoting Rights and shares of Common Stock and other voting capital stock shall be allocated to holders of Voting Rights. (b) In case the Corporation shall fix a record date for the issuance of rights (other than the Rights), options or warrants to all holders of shares of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase shares of Preferred Stock (or shares having the same rights, privileges and preferences as the Preferred Stock ("preferred stock equivalents")) or securities convertible into shares of Preferred Stock or preferred stock equivalents at a price per share of Preferred Stock or preferred stock equivalent (or having a conversion price per share, if a security convertible into shares of Preferred Stock or preferred stock equivalents) less than the then current per share market price of the Preferred Stock (as determined pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock which the aggregate 17 offering price of the total number of shares of Preferred Stock and/or preferred stock equivalents so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current per share market price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of additional shares of Preferred Stock and/or preferred stock equivalents to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Corporation issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be determined in good faith by the Board of Directors of the Corporation, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. Shares of Preferred Stock owned by or held for the account of the Corporation shall not be deemed outstanding for the purpose of any such computation. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Corporation shall fix a record date for the making of a distribution to all holders of shares of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Corporation is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in shares of Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price (as determined pursuant to Section 11(d) hereof) of the Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Corporation, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of Preferred Stock and the denominator of which shall be such current per share market price of the Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Corporation to be issued upon exercise of one Right. Such adjustments shall be 18 made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of thirty (30) Trading Days after the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Corporation. If on any such date no such market maker is making a market in the Security, the fair value of the Security on such date as determined in good faith by the Board of Directors of the Corporation shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is 19 open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. (ii) For the purpose of any computation hereunder, the "current per share market price" of the Preferred Stock shall be determined in accordance with the method set forth in Section 11(d)(i). If the shares of Preferred Stock are not publicly traded, the "current per share market price" of the Preferred Stock shall be conclusively deemed to be the current per share market price of the shares of Common Stock as determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Corporation, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. For the purposes of this Agreement, the "current per share market price" or "current market value" of the Series B Preferred Stock shall conclusively be deemed to equal the "current per share market price" or "current market value" of the Series A Preferred Stock. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-hundredth of a share of Preferred Stock or one ten-thousandth of any other share or security, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment or (ii) the Final Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Corporation other than Preferred Stock, thereafter the number of other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares. 20 (g) All Rights originally issued by the Corporation subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) The Corporation may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-hundredths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Corporation shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(h), the Corporation shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Corporation, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Corporation, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (i) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a share of Preferred Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of 21 a share of Preferred Stock which were expressed in the initial Right Certificates issued hereunder. (j) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the number of one one-hundredths of a share of Preferred Stock, shares of Common Stock, Nonvoting Common Stock or other securities issuable upon exercise of the Rights, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue such number of fully paid and non-assessable one one-hundredths of a share of Preferred Stock, shares of Common Stock, Nonvoting Common Stock or other securities at such adjusted Purchase Price. (k) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Corporation may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the shares of Preferred Stock, Common Stock, Nonvoting Common Stock or other securities of the Corporation, if any, issuable upon such exercise over and above the shares of Preferred Stock, Common Stock, Nonvoting Common Stock or other securities of the Corporation, if any, issuable upon exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Corporation shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (l) Anything in this Section 11 to the contrary notwithstanding, the Corporation shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that (i) any consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of Preferred Stock at less than the current market price, (iii) issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable for Preferred Stock, (iv) stock dividend or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Corporation to holders of its Preferred Stock shall not be taxable to such stockholders. (m) The Corporation covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Corporation in a transaction which does not violate Section 11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Corporation 22 in a transaction which does not violate Section 11(n) hereof) or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Corporation and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Corporation and/or any of its Subsidiaries in one or more transactions each of which does not violate Section 11(n) hereof), if (x) at the time of or immediately after such consolidation, merger, sale or transfer there are any charter or by-law provisions or any rights, warrants or other instruments or securities outstanding or agreements in effect or other actions taken, which would materially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. The Corporation shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Corporation and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 11(m). (n) The Corporation covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any action the purpose of which is to, or if at the time such action is taken it is reasonably foreseeable that the effect of such action is to, materially diminish or otherwise eliminate the benefits intended to be afforded by the Rights. (o) The exercise of Rights under Section 11(a)(ii) shall only result in the loss of rights under Section 11(a)(ii) to the extent so exercised and shall not otherwise affect the rights represented by the Rights under this Agreement, including the rights represented by Section 13. SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the Corporation shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Stock, the Nonvoting Common Stock and the Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to 23 have knowledge of such adjustment unless and until it shall have received such certificate. SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER. (a) In the event that, on or following the Stock Acquisition Date, directly or indirectly, (x) the Corporation shall consolidate with, or merge with and into, any Person, (y) the Corporation shall consolidate with, or merge with, any Person, and the Corporation shall be the continuing or surviving corporation of such consolidation or merger (other than, in a case of any transaction described in (x) or (y), a merger or consolidation which would result in all of the securities generally entitled to vote in the election of directors ("voting securities") of the Corporation outstanding immediately prior thereto, continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity) all of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation and the holders of such securities not having changed as a result of such merger or consolidation) or (z) the Corporation shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Corporation and its Subsidiaries (taken as a whole) to any Person, then, and in each such case (except as provided in Section 13(d) hereof), proper provision shall be made so that (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price, in accordance with the terms of this Agreement and in lieu of shares of Preferred Stock, such number of freely tradable shares of Common Stock (or, in the case of Nonvoting Rights, shares of Nonvoting Common Stock) of the Principal Party (as hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a share of Preferred Stock for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a)(ii)) and dividing that product by (B) 50% of the then current per share market price of the Common Stock of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Corporation pursuant to this Agreement; (iii) the term "Corporation" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; and (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock and Nonvoting 24 Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the shares of Common Stock or Nonvoting Common Stock thereafter deliverable upon the exercise of the Rights. (b) "Principal Party" shall mean (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Corporation are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation (including, if applicable, the Corporation if it is the surviving corporation); and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any of the foregoing cases, (1) if the shares of Common Stock of such Person are not at such time and have not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act and such Person is a direct or indirect Subsidiary of another Person the shares of Common Stock of which are and have been so registered, "Principal Party" shall refer to such other Person; (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the shares of Common Stock of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the shares of Common Stock having the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a "Subsidiary" of both or all of such joint ventures and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. (c) The Corporation shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of shares of its authorized Common Stock and Nonvoting Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in 25 accordance with this Section 13 and unless prior thereto the Corporation and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger, sale or transfer mentioned in paragraph (a) of this Section 13, the Principal Party at its own expense shall: (i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form and use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Final Expiration Date; (ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; and (iii) deliver to holders of the Rights historical financial statements for the Principal Party which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. The rights under this Section 13 shall be in addition to the rights to exercise Rights and adjustments under Section 11(a)(ii) and shall survive any exercise thereof. (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if: (i) such transaction is consummated with a Person or Persons who acquired shares of Common Stock pursuant to a Permitted Offer (or a wholly owned Subsidiary of any such Person or Persons); (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of shares of Common Stock whose shares were purchased pursuant to such Permitted Offer; and (iii) the form of consideration offered in such transaction is the same as the form of consideration paid pursuant to such Permitted Offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights thereunder shall expire. SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Corporation shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be 26 paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Corporation. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Corporation shall be used. For the purposes of this Agreement, the current market value of a Nonvoting Right shall conclusively be deemed to equal the current market value of a Voting Right. (b) The Corporation shall not be required to issue fractions of a share of Preferred Stock (other than fractions which are one one-hundredth or integral multiples of one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are one one-hundredth or integral multiples of one one-hundredth of a share of Preferred Stock). Fractions of a share of Preferred Stock in integral multiples of one one-hundredth of a share of Preferred Stock may, at the election of the Corporation, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Corporation and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have the rights, privileges and preferences to which they are entitled as beneficial owners of the shares of Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not one one-hundredth or integral multiples of one one-hundredth of a share of Preferred Stock, the Corporation shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in 27 cash equal to the same fraction of the current market value of one share of Preferred Stock. For the purposes of this Section 14(b), the current market value of a share of Preferred Stock shall be the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) Following the occurrence of one of the transactions or events specified in Section 11 giving rise to the right to receive shares of Common Stock, Nonvoting Common Stock, capital stock equivalents (other than Preferred Stock) or other securities upon the exercise of a Right, the Corporation shall not be required to issue fractions of shares or units of such Common Stock, Nonvoting Common Stock, capital stock equivalents or other securities upon exercise of the Rights or to distribute certificates which evidence fractions of such Common Stock, Nonvoting Common Stock, capital stock equivalents or other securities. In lieu of fractional shares or units of such Common Stock, Nonvoting Common Stock, capital stock equivalents or other securities, the Corporation may pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a share or unit of such Common Stock, Nonvoting Common Stock, capital stock equivalents or other securities. For purposes of this Section 14(c), the current market value shall be determined in the manner set forth in Section 11(d) hereof for the Trading Day immediately prior to the date of such exercise and, if such capital stock equivalent is not traded, each such capital stock equivalent shall have the value of one one-hundredth of a share of Preferred Stock. For the purposes of this Agreement, the current market value of the Nonvoting Common Stock shall conclusively be deemed to equal the current market value of the Common Stock. (d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Right or any fractional share upon exercise of a Right (except as provided above). SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock and Nonvoting Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock or Nonvoting Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock or Nonvoting Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Corporation to 28 enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting the same, consents and agrees with the Corporation and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the associated Common Stock or Nonvoting Common Stock; (b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate form fully executed; (c) subject to Section 6 and Section 7(f) hereof, the Corporation and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Stock or Nonvoting Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated Common Stock or Nonvoting Common Stock certificate made by anyone other than the Corporation or the Rights Agent) for all purposes whatsoever, and neither the Corporation nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be bound by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Corporation nor the Rights Agent shall have any liability to any holder of a Right or a beneficial interest in a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining 29 performance of such obligation; provided, however, that the Corporation shall use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of Preferred Stock or any other securities of the Corporation which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Corporation or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24 hereof), or to receive dividends or other distributions or to exercise any preemptive or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. SECTION 18. CONCERNING THE RIGHTS AGENT. The Corporation agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The indemnity provided for herein shall survive the expiration of the Rights and the termination of this Agreement. The Rights Agent shall be protected and shall incur no liability for, or in respect of, any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for shares of Common Stock or Nonvoting Common Stock or other securities of the Corporation, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. 30 SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or all or substantially all of the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes only those duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Corporation and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Corporation), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of an Acquiring Person and the 31 determination of the current market price of any Security) be proved or established by the Corporation prior to taking or suffering any action thereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Corporation and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable thereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature on such Right Certificates) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Corporation only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Corporation of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of the certificate described in Section 12 hereof); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock, Common Stock or Nonvoting Common Stock to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of Preferred Stock, Common Stock or Nonvoting Common Stock will, when issued, be validly authorized and issued, fully paid and non-assessable. (f) The Corporation agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required 32 by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Corporation, and to apply to such officers for advice or instructions in connection with its duties, and shall not be liable for any action taken or suffered by it in good faith or lack of action in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Corporation may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Corporation actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Corporation or become pecuniarily interested in any transaction in which the Corporation may be interested, or contract with or lend money to the Corporation or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Corporation or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Corporation resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance 33 of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has not been completed, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Corporation. SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Corporation and to each transfer agent of the Common Stock, Nonvoting Common Stock or Preferred Stock by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Corporation may remove the Rights Agent or any successor Rights Agent upon sixty (60) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock, Nonvoting Common Stock or Preferred Stock by registered or certified mail, and to holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Corporation shall appoint a successor to the Rights Agent. If the Corporation shall fail to make such appointment within a period of sixty (60) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Corporation), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Corporation or by such a court, shall be a corporation organized and doing business under the laws of the United States or of any state of the United States so long as such corporation is in good standing and is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Corporation shall file notice thereof in writing 34 with the predecessor Rights Agent and each transfer agent of the Common Stock, Nonvoting Common Stock or Preferred Stock, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Corporation may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock or Nonvoting Common Stock following the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Corporation (a) shall with respect to shares of Common Stock or Nonvoting Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Corporation and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Corporation, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Corporation shall not be obligated to issue any such Right Certificates if, and to the extent that, the Corporation shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Corporation or the Person to whom such Right Certificate would be issued and (ii) no Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. SECTION 23. REDEMPTION AND TERMINATION. (a) (i) The Board of Directors of the Corporation may, at its option, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"), at any time prior to the earlier of (x) the occurrence of a Section 11(a)(ii) Event or (y) the Final Expiration Date. 35 (ii) In addition, the Board of Directors of the Corporation may, at its option, at any time following the occurrence of a Section 11(a)(ii) Event and the expiration of any period during which the holder of Rights may exercise the rights under Section 11(a)(ii) but prior to any Section 13 Event redeem all but not less than all of the then outstanding Rights at the Redemption Price (x) in connection with any merger, consolidation or sale or other transfer (in one transaction or in a series of related transactions) of assets or earning power aggregating 50% or more of the earning power of the Corporation and its subsidiaries (taken as a whole) in which all holders of shares of Common Stock are treated alike and not involving (other than as a holder of shares of Common Stock being treated like all other such holders) an Acquiring Person or (y)(aa) if and for so long as the Acquiring Person is not thereafter the Beneficial Owner of 15% of the shares of Common Stock and (bb) at the time of redemption no other Persons are Acquiring Persons. (b) In the case of a redemption permitted under Section 23(a)(i), immediately upon the date for redemption set forth (or determined in the manner specified) in a resolution of the Board of Directors of the Corporation ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights shall terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. In the case of a redemption permitted only under Section 23(a)(ii), evidence of which shall have been filed with the Rights Agent, the right to exercise the Rights will terminate and represent only the right to receive the Redemption Price upon the later of ten Business Days following the giving of such notice or the expiration of any period during which the rights under Section 11(a)(ii) may be exercised. The Corporation shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within ten (10) days after such date for redemption set forth in a resolution of the Board of Directors ordering the redemption of the Rights, the Corporation shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock and Nonvoting Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Corporation nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 and other than in connection with the 36 purchase of shares of Common Stock or Nonvoting Common Stock prior to the Distribution Date. (c) The Corporation may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights in accordance with this Agreement and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent of the Common Stock and Nonvoting Common Stock, and upon such action, all outstanding Rights and Right Certificates shall be null and void without any further action by the Corporation. SECTION 24. NOTICE OF CERTAIN EVENTS. (a) In case the Corporation shall propose (i) to pay any dividend payable in stock of any class to the holders of shares of its Preferred Stock or to make any other distribution to the holders of shares of its Preferred Stock (other than a regularly quarterly cash dividend), (ii) to offer to the holders of shares of its Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Corporation in a transaction which does not violate Section 11(n) hereof) or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer) in one or more transactions, of 50% or more of the assets or earning power of the Corporation and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Corporation and/or any of its Subsidiaries in one or more transactions each of which does not violate Section 11(n) hereof) or (v) to effect the liquidation, dissolution or winding up of the Corporation, then, in each such case, the Corporation shall give to each holder of a Right Certificate, in accordance with Section 25 hereof, a notice of such proposed action to the extent feasible and file a certificate with the Rights Agent to that effect, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed 37 action or the date of participation therein by the holders of the shares of Preferred Stock, whichever shall be the earlier. (b) In case of a Section 11(a)(ii) Event, then (i) the Corporation shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 25 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof and (ii) all references in the preceding paragraph (a) to shares of Preferred Stock shall be deemed thereafter to refer also to Common Stock, Nonvoting Common Stock and/or, if appropriate, other securities of the Corporation. SECTION 25. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Corporation shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Columbia/HCA Healthcare Corporation 201 West Main Street Louisville, Kentucky 40202 Attention: Chief Executive Officer Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Corporation or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Corporation) as follows: Mid-America Bank of Louisville & Trust Company 500 West Broadway Louisville, Kentucky 40202 Attention: Orson Oliver, President Notices or demands authorized by this Agreement to be given or made by the Corporation or the Rights Agent to the holder of any Right Certificate or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock or Nonvoting Common Stock shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Corporation. 38 SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, the Corporation and the Rights Agent shall, if the Corporation so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock or Nonvoting Common Stock. From and after the Distribution Date, the Corporation and the Rights Agent shall, if the Corporation so directs, supplement or amend this Agreement without the approval of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period thereunder or (iv) to change or supplement the provisions thereunder in any manner which the Corporation may deem necessary or desirable and which shall not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, however, that this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Corporation which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment, provided that such supplement or amendment does not adversely affect the rights or obligations of the Rights Agent under Section 18 or Section 20 of this Agreement. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of shares of Common Stock and Nonvoting Common Stock. SECTION 27. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. The Board of Directors of the Corporation shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or the Corporation, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including, without limitation, a determination to redeem or not redeem the Rights or to amend the Agreement and whether any proposed amendment adversely affects the interests of the holders of Right Certificates). For all purposes of this Agreement, any calculation of the number of shares of Common Stock, Nonvoting Common Stock or other securities outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock, Nonvoting Common Stock or any other securities of 39 which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Corporation, the Rights Agent, the holders of the Right Certificates and all other parties and (y) not subject the Board to any liability to the holders of the Right Certificates. SECTION 28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Corporation or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Corporation, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the shares of Common Stock or Nonvoting Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Corporation, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the shares of Common Stock or Nonvoting Common Stock). SECTION 30. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 31. GOVERNING LAW. This Agreement, each Right and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. SECTION 32. COUNTERPARTS. This Agreement may be executed in counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 40 SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 41 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the date and year first above written. COLUMBIA/HCA HEALTHCARE CORPORATION By STEPHEN T. BRAUN ------------------------------------- Name: Stephen T. Braun Title: Sr. Vice President MID-AMERICA BANK OF LOUISVILLE & TRUST COMPANY By LOU ANN ATLAS ------------------------------------- Name: Lou Ann Atlas Title: Vice President 42 APPENDIX A RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SERIES A PARTICIPATING PREFERRED STOCK AND SERIES B PARTICIPATING PREFERRED STOCK 1. ISSUANCE. The Board of Directors is authorized, subject to limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in one or more series, to establish the number of shares to be included in each such series, and to fix the designations, powers, preferences, and rights of the shares of each such series, and any qualifications, limitations or restrictions thereof. 2. SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK. Section 1. DESIGNATION AND AMOUNT. Eight million (8,000,000) shares of the Preferred Stock of the Corporation shall be designated as "Series A Participating Preferred Stock," par value $.01 per share (the "SERIES A PREFERRED STOCK") and two hundred fifty thousand (250,000) shares of the Preferred Stock of the Corporation shall be designated as "Series B Participating Preferred Stock," par value $.01 per share (the "SERIES B PREFERRED STOCK"). The number of shares of each such series of Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of either of such series of Preferred Stock to a number less than that of the shares of such series then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. A-1 Section 2. DIVIDENDS AND DISTRIBUTIONS. (A) Subject to the prior and superior rights of the holders of any shares of stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock and Series B Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock and Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of assets legally available for the purpose, quarterly dividends payable in cash on the first business day of January, April, July and October in each year (each such date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock or Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock or Series B Preferred Stock; provided that no dividend shall be declared on the shares of Series A Preferred Stock or Series B Preferred Stock unless at the same time a dividend is declared on the outstanding shares of the other series in the same amount and having the same record and payment dates. In the event the Corporation shall at any time after September 1, 1993 (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of Common Stock in a reclassification or change of the outstanding shares of Common Stock (including any such reclassification or change in connection with a merger in which the Corporation is the continuing or surviving Corporation), then in each such case the amount to which holders of shares of Series A Preferred Stock and Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock and Series B Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock and Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock and Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock or Series B Preferred Stock, as the case may be, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date for such shares, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock or Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock and Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all shares of Series A Preferred Stock and Series B Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the A-2 determination of holders of shares of Series A Preferred Stock and Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 30 days prior to the date fixed for the payment thereof. Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock and Series B Preferred Stock shall have the following voting rights: (A) (i) Except as provided in paragraph C of this Section 3 and subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. (ii) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (B) (i) Except as otherwise required by applicable law, each outstanding share of Series B Preferred Stock shall not be entitled to vote on any matter on which the stockholders of the Corporation shall be entitled to vote, and shares of Series B Preferred Stock shall not be included in determining the number of shares voting or entitled to vote on any such matters. (ii) On any matter on which the holders of shares of Common Stock are entitled to vote and on which the holders of shares of Series B Preferred Stock are also entitled to vote, except as otherwise required by law, the Series B Preferred Stock shall vote together with the Common Stock (and each other class or series of capital stock then entitled to vote with the Common Stock); provided that each share of Series B Preferred Stock shall entitle the holder thereof to 100 votes on any matter on which the Series B Preferred Stock shall vote together with the Common Stock. (C) (i) If, on the date used to determine stockholders of record for any meeting of stockholders for the election of directors, a default in preference dividends (as defined in subparagraph (v) below) on the Series A Preferred Stock shall exist, the holders of the Series A Preferred Stock shall have the right, voting as a class as described in subparagraph (ii) below, to elect two directors (in addition to the directors elected by holders of Common Stock of the Corporation). Such right may be exercised (a) at any meeting of stockholders for the election of directors or (b) at a meeting of the holders of shares of Voting Preferred Stock (as hereinafter defined), called for the purpose in accordance with the Bylaws of the Corporation, until all such cumulative dividends (referred to above) shall have been paid in full or until non-cumulative dividends have been paid regularly for at least one year. (ii) The right of the holders of Series A Preferred Stock to elect two directors, as described above, shall be exercised as a class concurrently with the rights of holders of any other series of any class of preferred stock of the Corporation upon which voting rights to elect such directors have been conferred and are then exercisable. The Series A Preferred Stock and any additional series of such preferred stock which the Corporation may issue and which may provide for the right to vote with the Series A Preferred Stock are collectively referred to herein as "VOTING PREFERRED STOCK." (iii) Each director elected by the holders of shares of Voting Preferred Stock shall be referred to herein as a "PREFERRED DIRECTOR." A Preferred Director so elected shall continue to serve as such director for a term of one year, except that upon any termination of the right of all of such holders to vote as a class for Preferred Directors, the term of office of such directors shall terminate. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of a majority of the outstanding shares of Voting Preferred Stock then entitled to vote for the election of directors, present (in person or by proxy) and voting together as a single class (a) at a meeting of the stockholders, or (b) at a meeting of the holders of shares of such Voting Preferred Stock, called for that purpose in accordance with the Bylaws of the Corporation. (iv) So long as a default in any preference dividends on the Series A Preferred Stock shall exist or the holders of any other series of Voting Preferred Stock shall be entitled to elect Preferred Directors, (a) any vacancy in the office of a Preferred Director may be filled (except as provided in the A-3 following clause (b)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (b) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of a majority of the outstanding shares of Voting Preferred Stock then entitled to vote for the election of directors, present (in person or by proxy) and voting together as a single class, at such time as the removal shall be effected. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. (v) For purposes hereof, a "DEFAULT IN PREFERENCE DIVIDENDS" on the Series A Preferred Stock shall be deemed to have occurred whenever the amount of cumulative and unpaid dividends on the Series A Preferred Stock shall be equivalent to six full quarterly dividends or more (whether or not consecutive), and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all cumulative dividends on all shares of the Series A Preferred Stock then outstanding shall have been paid through the last Quarterly Dividend Payment Date or until, but only until, non-cumulative dividends have been paid regularly for at least one year. (D) Except as set forth herein (or as otherwise required by applicable law), holders of Series A Preferred Stock and Series B Preferred Stock shall have no general or special voting rights and their consent shall not be required for taking any corporate action. Section 4. CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock and/or Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on such shares of Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock and Series B Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock and Series B Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled (based upon their respective liquidation values); (iii) redeem or purchase or otherwise acquire for consideration (except as provided in (iv) below) shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock and Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock and Series B Preferred Stock; (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock or Series B Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock and Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. A-4 Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock or Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in this Amended and Restated Certificate of Incorporation, in any Certificate of Amendment creating a series of Preferred Stock or as otherwise required by law. Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Subject to the prior and superior rights of holders of any shares of stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock and Series B Preferred Stock with respect to rights upon liquidation, dissolution or winding up (voluntary or otherwise), no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock and Series B Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock and Series B Preferred Stock shall have received $100.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "SERIES LIQUIDATION PREFERENCE"). Following the payment of the full amount of the Series Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Preferred Stock and Series B Preferred Stock unless, prior thereto, the holders of shares of Common Stock and Nonvoting Common Stock shall have received an amount per share (the "CAPITAL ADJUSTMENT") equal to the quotient obtained by dividing (i) the Series Liquidation Preference by (ii) 100 (subject to the provision for adjustment hereinafter set forth in subparagraph (C) below) (such number in clause (ii), the "ADJUSTMENT NUMBER"). Following the payment of the full amount of the Series Liquidation Preference and the Capital Adjustment in respect of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock, and Common Stock and Nonvoting Common Stock, respectively, holders of Series A Preferred Stock and Series B Preferred Stock, and holders of Common Stock and Nonvoting Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series A Preferred Stock and Series B Preferred Stock, and Common Stock and Nonvoting Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series Liquidation Preference and the liquidation preferences of all other series of stock of the Corporation, if any, which rank on a parity with the Series A Preferred Stock and Series B Preferred Stock, then such remaining assets shall be distributed ratably to the holders of Series A Preferred Stock and Series B Preferred Stock and the holders of such parity stock in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Capital Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock and Nonvoting Common Stock. (C) In the event the Corporation shall at any time after September 1, 1993 (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine or consolidate the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of Common Stock in a reclassification or exchange of the outstanding shares of Common Stock (including any such reclassification or exchange in connection with a merger in which the Corporation is the continuing or surviving corporation), then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. CONVERSION (a) CONVERSION OF SERIES A PREFERRED STOCK. Subject to and upon compliance with the provisions of Section 4 of Paragraph B of this Article FOURTH, any Regulated Stockholder (as defined in A-5 Section 5 of Paragraph B of this Article FOURTH) shall be entitled to convert, at any time and from time to time, any or all of the shares of Series A Preferred Stock held by such stockholder into the same number of shares of Series B Preferred Stock. (b) CONVERSION OF SERIES B PREFERRED STOCK. Subject to and upon compliance with the provisions of Section 4 of Paragraph B of this Article FOURTH, each record holder of Series B Preferred Stock shall be entitled to convert, at any time and from time to time, any or all of the shares of Series B Preferred Stock held by such stockholder into the same number of shares of Series A Preferred Stock; PROVIDED HOWEVER, that no holder of shares of Series B Preferred Stock shall be entitled to convert any such shares to the extent that, as a result of such conversion, such holder and its Affiliates (as defined in Section 5 of Paragraph B of this Article FOURTH), directly or indirectly, would own, control or have the power to vote a greater number of shares of Series A Preferred Stock or other securities of any kind issued by the Corporation than such holder and its Affiliates shall be permitted to own, control or have power to vote under any law, regulation, rule or other requirement of any governmental authority at the time applicable to such holder or its Affiliates. (c) STOCK SPLITS; ADJUSTMENTS. If the Corporation shall in any manner subdivide (by stock split, stock dividend or otherwise) or combine (by reverse stock split or otherwise) the outstanding shares of Series A Preferred Stock or Series B Preferred Stock, then the outstanding shares of Series B Preferred Stock or Series A Preferred Stock, as the case may be, shall be subdivided or combined, as the case may be, to the same extent, share and share alike, and effective provision shall be made for the protection of the conversion rights hereunder. In the case of any reorganization, reclassification or change of shares of Series A Preferred Stock or Series B Preferred Stock (other than a change in par value or from par to no par value as a result of a subdivision or combination), or in case of any consolidation of the Corporation with one or more corporations or a merger of the Corporation with another corporation (other than a consolidation or merger in which the Corporation is the resulting or surviving corporation and which does not result in any reclassification or change of outstanding shares of Series A Preferred Stock or Series B Preferred Stock), each holder of a share of Series A Preferred Stock or Series B Preferred Stock shall have the right at any time thereafter, so long as the conversion right hereunder with respect to such share would exist had such event not occurred, to convert such share into the kind and amount of shares of stock and other securities and properties (including cash) receivable upon such reorganization, reclassification, change, consolidation or merger by a holder of the number of shares of Series A Preferred Stock or Series B Preferred Stock into which such shares of Series A Preferred Stock or Series B Preferred Stock, as the case may be, might have been converted immediately prior to such reorganization, reclassification, change, consolidation or merger. In the event of such a reorganization, reclassification, change, consolidation or merger, effective provision shall be made in the certificate of incorporation of the resulting or surviving corporation or otherwise for the protection of the conversion rights of the shares of Series A Preferred Stock and Series B Preferred Stock that shall be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the shares of Series A Preferred Stock or Series B Preferred Stock into which such Series B Preferred Stock or Series A Preferred Stock, as the case may be, might have been converted immediately prior to such event. (d) RESERVATION OF SHARES. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Preferred Stock or its treasury shares, solely for the purpose of issuance upon the conversion of shares of Series A Preferred Stock and Series B Preferred Stock, such number of shares of such class as are then issuable upon the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock. Shares of Series A Preferred Stock and Series B Preferred Stock that are converted into shares of another class shall not be reissued, except for reissuances in connection with the conversion of shares of Series A Preferred Stock held by Regulated Stockholders into shares of Series B Preferred Stock and the conversion of shares of Series B Preferred Stock into shares of Series A Preferred Stock. A-6 Section 8. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then, in any such case, (i) the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to adjustment as set forth herein) equal to 100 times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged and (ii) the shares of Series B Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to adjustment as set forth herein) equal to 100 times the aggregate amount of stock, securities, cash or other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged (or, if any shares of Nonvoting Common Stock are then outstanding and are being exchanged or changed, 100 times the aggregate amount of stock, securities, cash or other property into which or for which each share of Nonvoting Common Stock is changed or exchanged). Section 9. NO REDEMPTION. The shares of Series A Preferred Stock and Series B Preferred Stock shall not be redeemable. Section 10. RANKING. The Series A Preferred Stock and Series B Preferred Stock shall rank junior to all other series of stock of the Corporation (other than the Common Stock) as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 11. AMENDMENT. The Amended and Restated Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of any series of Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of all series of Preferred Stock so affected, voting together as a separate class. A-7 Exhibit I [Form of Right Certificate] Certificate No. R- Rights -------- NOT EXERCISABLE AFTER SEPTEMBER 1, 2003 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID TO THE EXTENT PROVIDED IN AND UNDER THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]* RIGHT CERTIFICATE This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Amended and Restated Rights Agreement dated as of February 10, 1994 (the "Rights Agreement") between Columbia/HCA Healthcare Corporation, a Delaware corporation (the "Company"), and Mid-America Bank of Louisville & Trust Company (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (New York time) on September 1, 2003 at the principal office of the Rights Agent in Louisville, Kentucky, one one-hundredth of a fully paid, nonassessable share of the Company's [Series A Participating Preferred Stock]** [Series B Participating Preferred Stock]*** (the "Preferred Stock"), at a purchase price of $ per one-hundredth of a share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the ______________________________ * The portion of the legend in brackets shall be inserted only if applicable. ** Include if Rights being issued are Voting Rights (as defined in the Rights Agreement). *** Include if Rights being issued are Nonvoting Rights (as defined in the Rights Agreement). appropriate Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of , , based on the Preferred Stock as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of shares of Preferred Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. The Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the Rights, limitations of Rights, obligations, duties and opportunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are also available upon written request to the Company. This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exercised for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised (other than pursuant to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. If this Right Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii) of the Rights Agreement, the holder shall be entitled to receive this Right Certificate duly marked to indicate that such exercise has occurred as set forth in the Rights Agreement. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.01 per Right. Subject to the provisions of the Rights Agreement, the Company, at its option, may elect to mail payment of the redemption price to the registered holder of the Right at the time of redemption, in which event this Certificate may become void without any further action by the Company. I-2 No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of . ------------------------------- ATTEST: By: - ----------------------------------- ----------------------------------- Name: Name: Title: Title: Countersigned: By: -------------------------------- Name: Title: I-3 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED ------------------------------------------------------------- hereby sells, assigns and transfers unto --------------------------------------- - ------------------------------------------------------------------------------- (Please print name and address of transferee) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: --------------------------- Signature ---------------------------- Signature(s) Guaranteed: - ------------------------ I-4 CERTIFICATE The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Right Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated: ---------------------- ------------------------------ Signature NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. I-5 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Right Certificate pursuant to Section 11(a)(ii) of the Rights Agreement.) To : --------------------------------------- The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the shares of [Common Stock]* [Nonvoting Common Stock]** (or such other securities of the Company) issuable upon the exercise of the Rights and requests that certificates for such shares be issued in the name of: (Please insert social security or other identifying number) - -------------------------------------------------------------------------------- (Please print name and address) The Right Certificate indicating the balance, if any, of such Rights which may still be exercised pursuant to Section 11(a)(ii) of the Rights Agreement shall be returned to the undersigned unless such person requests that the Right Certificate be registered in the name of and delivered to: - -------------------------------------------------------------------------------- (Please insert social security or other identifying number (complete only if Right Certificate is to be registered in a name other than the undersigned)) - -------------------------------------------------------------------------------- (Please print name and address) Dated: --------------------------- Signature Guaranteed: -------------------------------- Signature - --------------------- - ------------------------- * Include if Rights being issued are Voting Rights. ** Include if Rights being issued are Nonvoting Rights. I-6 CERTIFICATE The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Right Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement); (2) this Right Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (3) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated: ----------------------------- --------------------------------- Signature NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. I-7 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Right Certificate other than pursuant to Section 11(a)(ii) of the Rights Agreement.) To : --------------------------------------- The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the shares of Preferred Stock (or such other securities of the Company or any other Person) issuable upon the exercise of the Rights and requests that certificates for such shares be issued in the name of: - -------------------------------------------------------------------------------- (Please insert social security or other identifying number) - -------------------------------------------------------------------------------- (Please print name and address) The Right Certificate indicating the balance, if any, of such Rights which may still be exercised pursuant to Section 11(a)(ii) of the Rights Agreement shall be returned to the undersigned unless such person requests that the Right Certificate be registered in the name of and delivered to: - -------------------------------------------------------------------------------- Please insert social security or other identifying number (complete only if Right Certificate is to be registered in a name other than the undersigned) - -------------------------------------------------------------------------------- (Please print name and address) Dated: ------------------------------ ---------------------------------- Signature Signature Guaranteed: - --------------------- I-8 CERTIFICATE The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Right Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated: ------------------------- ------------------------------- Signature NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. I-9 EX-4.9 4 EXHIBIT 4.9 CREDIT AGREEMENT - -------------------------------------------------------------------------------- $1,000,000,000 CREDIT AGREEMENT AMONG COLUMBIA HEALTHCARE CORPORATION, THE SEVERAL BANKS AND OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO, BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, THE BANK OF NOVA SCOTIA, THE CHASE MANHATTAN BANK N.A., CITIBANK, N.A., DEUTSCHE BANK AG, THE FIRST NATIONAL BANK OF CHICAGO, THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, NATIONSBANK OF NORTH CAROLINA, N.A., PNC BANK, KENTUCKY, INC., TORONTO DOMINION (TEXAS), INC. AND WACHOVIA BANK OF GEORGIA, N.A., AS CO-AGENTS AND CHEMICAL BANK, AS AGENT AND AS CAF LOAN AGENT DATED AS OF FEBRUARY 10, 1994 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1 1.2 Other Definitional Provisions. . . . . . . . . . . . 17 SECTION 2. AMOUNT AND TERMS OF LOANS. . . . . . . . . . . . . 17 2.1 Revolving Credit Loans and Revolving Credit Notes. . 17 2.2 CAF Loans and CAF Loan Notes . . . . . . . . . . . . 18 2.3 Facility Fee . . . . . . . . . . . . . . . . . . . . 23 2.4 Termination, Reduction or Extension of Commitments . . . . . . . . . . . . . . . . . . . . 23 2.5 Optional Prepayments . . . . . . . . . . . . . . . . 26 2.6 Conversion Options; Minimum Amount of Loans. . . . . 26 2.7 Interest Rate and Payment Dates for Revolving Credit Loans. . . . . . . . . . . . . . . . . . . . 27 2.8 Computation of Interest and Fees . . . . . . . . . . 27 2.9 Inability to Determine Interest Rate . . . . . . . . 28 2.10 Pro Rata Borrowings and Payments . . . . . . . . . . 29 2.11 Illegality . . . . . . . . . . . . . . . . . . . . . 31 2.12 Requirements of Law. . . . . . . . . . . . . . . . . 31 2.13 Capital Adequacy . . . . . . . . . . . . . . . . . . 32 2.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 33 2.15 Indemnity. . . . . . . . . . . . . . . . . . . . . . 34 2.16 Application of Proceeds of Loans . . . . . . . . . . 35 2.17 Notice of Certain Circumstances; Assignment of Commitments Under Certain Circumstances . . . . . . 35 SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 36 3.1 Corporate Organization and Existence . . . . . . . . 36 3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . 36 3.3 Financial Information. . . . . . . . . . . . . . . . 36 3.4 Changes in Condition . . . . . . . . . . . . . . . . 37 3.5 Assets . . . . . . . . . . . . . . . . . . . . . . . 38 3.6 Litigation . . . . . . . . . . . . . . . . . . . . . 38 3.7 Tax Returns. . . . . . . . . . . . . . . . . . . . . 39 3.8 Contracts, etc. . . . . . . . . . . . . . . . . . . 39 3.9 No Legal Obstacle to Agreement . . . . . . . . . . . 39 3.10 Defaults . . . . . . . . . . . . . . . . . . . . . . 40 3.11 Burdensome Obligations . . . . . . . . . . . . . . . 40 3.12 Pension Plans. . . . . . . . . . . . . . . . . . . . 40 3.13 Disclosure . . . . . . . . . . . . . . . . . . . . . 41 3.14 Environmental and Public and Employee Health and Safety Matters. . . . . . . . . . . . . . . . . . . 41 3.15 Federal Regulations. . . . . . . . . . . . . . . . . 41 3.16 Investment Company Act; Other Regulations. . . . . . 42 -i- Page ---- SECTION 4. CONDITIONS . . . . . . . . . . . . . . . . . . . . 42 4.1 Loan Documents . . . . . . . . . . . . . . . . . . . 42 4.2 Legal Opinions . . . . . . . . . . . . . . . . . . . 42 4.3 Company Officers' Certificate. . . . . . . . . . . . 42 4.4 Termination of Prior Agreements. . . . . . . . . . . 43 4.5 Legality, etc. . . . . . . . . . . . . . . . . . . . 43 4.6 General. . . . . . . . . . . . . . . . . . . . . . . 43 4.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . 43 4.8 Consummation of The Merger . . . . . . . . . . . . . 43 SECTION 5. GENERAL COVENANTS. . . . . . . . . . . . . . . . . 43 5.1 Taxes, Indebtedness, etc. . . . . . . . . . . . . . 44 5.2 Maintenance of Properties; Compliance with Law . . . 44 5.3 Transactions with Affiliates . . . . . . . . . . . . 45 5.4 Insurance. . . . . . . . . . . . . . . . . . . . . . 45 5.5 Financial Statements . . . . . . . . . . . . . . . . 45 5.6 Ratio of Total Debt to Tangible Net Worth. . . . . . 48 5.7 Interest Coverage Ratio. . . . . . . . . . . . . . . 48 5.8 Distributions. . . . . . . . . . . . . . . . . . . . 48 5.9 Merger or Consolidation. . . . . . . . . . . . . . . 48 5.10 Sales of Assets. . . . . . . . . . . . . . . . . . . 49 5.11 Compliance with ERISA. . . . . . . . . . . . . . . . 49 5.12 Negative Pledge. . . . . . . . . . . . . . . . . . 50 5.13 Sale-and-Lease-back Transactions . . . . . . . . . . 51 SECTION 6. DEFAULTS . . . . . . . . . . . . . . . . . . . . . 51 6.1 Events of Default. . . . . . . . . . . . . . . . . . 51 6.2 Annulment of Defaults. . . . . . . . . . . . . . . . 54 6.3 Waivers. . . . . . . . . . . . . . . . . . . . . . . 54 6.4 Course of Dealing. . . . . . . . . . . . . . . . . . 54 SECTION 7. THE AGENT. . . . . . . . . . . . . . . . . . . . . 54 7.1 Appointment. . . . . . . . . . . . . . . . . . . . . 54 7.2 Delegation of Duties . . . . . . . . . . . . . . . . 55 7.3 Exculpatory Provisions . . . . . . . . . . . . . . . 55 7.4 Reliance by Agent. . . . . . . . . . . . . . . . . . 55 7.5 Notice of Default. . . . . . . . . . . . . . . . . . 56 7.6 Non-Reliance on Agent and Other Banks. . . . . . . . 56 7.7 Indemnification. . . . . . . . . . . . . . . . . . . 57 7.8 Agent and CAF Loan Agent in Its Individual Capacity. . . . . . . . . . . . . . . . . . . . . . 57 7.9 Successor Agent. . . . . . . . . . . . . . . . . . . 57 SECTION 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 58 8.1 Amendments and Waivers . . . . . . . . . . . . . . . 58 8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . 58 8.3 No Waiver; Cumulative Remedies . . . . . . . . . . . 59 8.4 Survival of Representations and Warranties . . . . . 59 8.5 Payment of Expenses and Taxes; Indemnity . . . . . . 60 8.6 Successors and Assigns; Participations; Purchasing Banks. . . . . . . . . . . . . . . . . . 60 8.7 Adjustments; Set-off . . . . . . . . . . . . . . . . 64 -ii- Page ---- 8.8 Counterparts . . . . . . . . . . . . . . . . . . . . 65 8.9 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . 65 8.10 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . 65 8.11 Submission To Jurisdiction; Waivers. . . . . . . . . 65 SCHEDULES SCHEDULE I Commitment Amounts and Percentages; Lending Offices; Addresses for Notice SCHEDULE II Subsidiaries of the Company SCHEDULE III Indebtedness SCHEDULE IV Liens SCHEDULE V Applicable Margins EXHIBITS EXHIBIT A Form of Revolving Credit Note EXHIBIT B Form of Grid CAF Loan Note EXHIBIT C Form of Individual CAF Loan Note EXHIBIT D Form of CAF Loan Request EXHIBIT E Form of CAF Loan Offer EXHIBIT F Form of CAF Loan Confirmation EXHIBIT G Form of Commitment Transfer Supplement -iii- CREDIT AGREEMENT, dated as of February 10, 1994, among COLUMBIA HEALTHCARE CORPORATION, a Delaware corporation and the successor by merger to Columbia Hospital Corporation (the "COMPANY"), the several banks and other financial institutions from time to time parties to this Agreement (the "BANKS"), BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, THE BANK OF NOVA SCOTIA, THE CHASE MANHATTAN BANK, N.A., CITIBANK, N.A., DEUTSCHE BANK AG, THE FIRST NATIONAL BANK OF CHICAGO, THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, NATIONSBANK OF NORTH CAROLINA, N.A., PNC BANK, KENTUCKY, INC., TORONTO DOMINION (TEXAS), INC. AND WACHOVIA BANK OF GEORGIA, N.A., as Co-Agents and CHEMICAL BANK, a New York banking corporation, as agent for the Banks hereunder (in such capacity, the "AGENT") and as CAF Loan agent (in such capacity, the "CAF LOAN AGENT"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, pursuant to a Joint Proxy Statement and Prospectus on Form S-4, dated October 22, 1993 (as amended, the "Proxy"), the Company and HCA-Hospital Corporation of America, a Delaware corporation ("HCA"), have solicited the approval of their respective stockholders to adopt an Agreement and Plan of Merger dated as of October 2, 1993 (the "MERGER AGREEMENT") between the Company and HCA; WHEREAS, pursuant to subsections 1.1 and 4.1 of the Merger Agreement HCA will be merged (the "MERGER") with and into a wholly-owned subsidiary of the Company (with such wholly-owned subsidiary of the Company as the surviving entity), and each stockholder of HCA will receive 1.05 shares of the Company's voting common stock in exchange for each of its shares of HCA's Class A common stock and 1.05 shares of the Company's nonvoting common stock in exchange for each of its shares of HCA's Class B common stock; and WHEREAS, it is a condition precedent to the obligation of the Banks to make their respective Loans (as hereinafter defined) to the Company hereunder that the transactions contemplated in connection with the Merger, including without limitation, the transactions contemplated by the Proxy and subsections 1.1 and 4.1 of the Merger Agreement, are consummated; NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and for other good and valuable consideration, the undersigned hereby agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINED TERMS. As used in this Agreement, the following terms have the following meanings: 2 "ADDITIONAL BANK": as defined in subsection 2.4(d). "AFFILIATE": (a) any director or officer of any corporation or partner or joint venturer or Person holding a similar position in another Person or members of their families, whether or not living under the same roof, or any Person owning beneficially more than 5% of the outstanding common stock or other evidences of beneficial interest of the Person in question, (b) any Person of which any one or more of the Persons described in clause (a) above is an officer, director or beneficial owner of more than 5% of the shares or other beneficial interest and (c) any Person controlled by, controlling or under common control with the Person in question. "AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "ALTERNATE BASE RATE": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City (each change in the Prime Rate to be effective on the date such change is publicly announced); "BASE CD RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "BOARD") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; "C/D RESERVE PERCENTAGE" shall mean, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board (or any successor), for determining the maximum 3 reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion Dollars in respect of new non-personal three-month certificates of deposit in the secondary market in Dollars in New York City and in an amount of $100,000 or more; "C/D ASSESSMENT RATE" shall mean, for any day, the net annual assessment rate (rounded upward to the nearest 1/100th of 1%) determined by Chemical Bank to be payable on such day to the Federal Deposit Insurance Corporation or any successor ("FDIC") for FDIC's insuring time deposits made in Dollars at offices of Chemical Bank in the United States; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ALTERNATE BASE RATE LOANS": Revolving Credit Loans hereunder at such time as they are made and/or being maintained at a rate of interest based upon the Alternate Base Rate. "APPLICABLE LIBOR AUCTION ADVANCE RATE": in respect of any CAF Loan requested pursuant to a LIBOR Auction Advance Request, the London interbank offered rate for deposits in Dollars for the period commencing on the date of such CAF Loan and ending on the maturity date thereof which appears on Telerate Page 3750 as of 11:00 A.M., London time, two Working Days prior to the beginning of such period. "APPLICABLE MARGIN": for each Type of Revolving Credit Loan during a Level I Period, Level II Period, Level III Period, Level IV Period or Level V Period, the rate per annum set forth under the relevant column heading in Schedule V. Increases or decreases in the Applicable Margin 4 shall become effective on the first day of the Level I Period, Level II Period, Level III Period, Level IV Period or Level V Period, as the case may be, to which such Applicable Margin relates. "ATTRIBUTABLE DEBT": means (i) as to any capitalized lease obligations, the Indebtedness carried on the balance sheet in respect thereof in accordance with GAAP and (ii) as to any operating leases, the total net amount of rent required to be paid under such leases during the remaining term thereof. "AUDITOR": any independent certified public accountant of nationally recognized standing and reputation selected by the Company. "AVAILABLE COMMITMENTS": at a particular time, an amount equal to the difference between (a) the amount of the Commitments at such time and (b) the aggregate unpaid principal amount at such time of all Loans. "BANK OBLIGATIONS": as defined in subsection 6.1. "BENEFITTED BANK": as defined in subsection 8.7. "BORROWING DATE": any Business Day specified in a notice pursuant to subsection 2.1(c) or 2.2(b) as a date on which the Company requests the Banks to make Revolving Credit Loans or CAF Loans, as the case may be, hereunder. "BUSINESS DAY": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "CAF LOAN": each CAF Loan made pursuant to subsection 2.2; the aggregate amount advanced by a CAF Loan Bank pursuant to subsection 2.2 on each CAF Loan Date shall constitute one or more CAF Loans, as specified by such CAF Loan Bank pursuant to subsection 2.2(b)(vi). "CAF LOAN ASSIGNEE": as defined in subsection 8.6(c). "CAF LOAN ASSIGNMENT": any assignment by a CAF Loan Bank to a CAF Loan Assignee of a CAF Loan and related Individual CAF Loan Note; any such CAF Loan Assignment to be registered in the Register must set forth, in respect of the CAF Loan Assignee thereunder, the full name of such CAF Loan Assignee, its address for notices, its lending office address (in each case with telephone and facsimile transmission numbers) and payment instructions for all payments to such CAF Loan Assignee, and must contain an agreement by such CAF Loan Assignee to comply with the provisions of subsection 8.6(c) and subsection 8.6(h) to the same extent as any Bank. 5 "CAF LOAN BANKS": Banks from time to time designated as CAF Loan Banks by the Company by written notice to the CAF Loan Agent (which notice the CAF Loan Agent shall transmit to each such CAF Loan Bank). "CAF LOAN CONFIRMATION": each confirmation by the Company of its acceptance of one or more CAF Loan Offers, which CAF Loan Confirmation shall be substantially in the form of Exhibit F and shall be delivered to the CAF Loan Agent in writing or by facsimile transmission. "CAF LOAN DATE": each date on which a CAF Loan is made pursuant to subsection 2.2. "CAF LOAN NOTE": a Grid CAF Loan Note or an Individual CAF Loan Note. "CAF LOAN OFFER": each offer by a CAF Loan Bank to make one or more CAF Loans pursuant to a CAF Loan Request, which CAF Loan Offer shall contain the information specified in Exhibit E and shall be delivered to the CAF Loan Agent by telephone, immediately confirmed by facsimile transmission. "CAF LOAN REQUEST": each request by the Company for CAF Loan Banks to submit bids to make CAF Loans, which shall contain the information in respect of such requested CAF Loans specified in Exhibit D and shall be delivered to the CAF Loan Agent in writing or by facsimile transmission, or by telephone, immediately confirmed by facsimile transmission. "CHANGE IN CONTROL": of any corporation, (a) any Person or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), other than the Company, that shall acquire more than 50% of the Voting Stock of such corporation or (b) any Person or group (as defined in preceding clause (a)), other than the Company, that shall acquire more than 20% of the Voting Stock of such corporation and, at any time following an acquisition described in this clause (b), the Continuing Directors shall not constitute a majority of the board of directors of such corporation. "CHEMICAL BANK": Chemical Bank, a New York banking corporation. "CLOSING DATE": the date on which all of the conditions precedent for the Closing Date set forth in Section 4 shall have been fulfilled, but in no event shall the Closing Date occur later than February 28, 1994. "CODE": the Internal Revenue Code of 1986, as amended from time to time. 6 "COMMITMENT": as to any Bank, its obligation to make Revolving Credit Loans to the Company pursuant to subsection 2.1(a) in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such Bank's name in Schedule I, as such amount may be reduced from time to time as provided herein. "COMMITMENT PERCENTAGE": as to any Bank, the percentage of the aggregate Commitments constituted by such Bank's Commitment. "COMMITMENT PERIOD": the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "COMMITMENT TRANSFER SUPPLEMENT": a Commitment Transfer Supplement, substantially in the form of Exhibit G. "CONFIDENTIAL INFORMATION MEMORANDUM": the Confidential Information Memorandum dated November 1993 relating to this Agreement. "CONSOLIDATED ASSETS": the consolidated assets of the Company and its Subsidiaries, determined in accordance with GAAP. "CONSOLIDATED EARNINGS BEFORE INTEREST AND TAXES": for any period for which the amount thereof is to be determined, Consolidated Net Income for such period plus all amounts deducted in computing such Consolidated Net Income in respect of interest expense on Indebtedness and income taxes, all determined in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE": for any period for which the amount thereof is to be determined, all amounts deducted in computing Consolidated Net Income for such period in respect of interest expense on Indebtedness determined in accordance with GAAP. "CONSOLIDATED NET INCOME": for any period, the consolidated net income, if any, after taxes, of the Company and its Subsidiaries for such period determined in accordance with GAAP; PROVIDED, HOWEVER, that Consolidated Net Income shall not include any gain or loss attributable to extraordinary items, any sale of assets not in the ordinary course of business or any taxes or tax savings as a result thereof. "CONSOLIDATED NET TANGIBLE ASSETS": means the total amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (i) all current liabilities as disclosed on the consolidated balance sheet of the Company (excluding any thereof which are by 7 their terms extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed and excluding any deferred income taxes that are included in current liabilities), and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with GAAP. "CONSOLIDATED TANGIBLE NET WORTH": Consolidated Assets of the Company and its Subsidiaries less the following: (a) the amount, if any, at which any treasury stock appears on the assets side of the balance sheet; (b) an amount equal to goodwill; (c) any writeup in book value of assets resulting from any revaluation made after December 31, 1992 in the case of the Company and its Subsidiaries (excluding Galen and its Subsidiaries) and HCA and its Subsidiaries and August 31, 1993 in the case of Galen and its Subsidiaries; (d) an amount equal to all amounts which appear or should appear as a credit on the balance sheet of the Company in respect of any class or series of preferred stock of the Company; and (e) all liabilities which in accordance with GAAP should be reflected as liabilities on such consolidated balance sheet, but in any event including all Indebtedness. "CONSOLIDATED TOTAL DEBT": the aggregate of all Indebtedness (including the current portion thereof) of the Company and its Subsidiaries on a consolidated basis. "CONTINUING BANK": as defined in subsection 2.4(c). "CONTINUING DIRECTOR": any member of the Board of Directors of the Company who is a member of such Board on the date of this Agreement, and any Person who is a member of such Board and whose nomination as a director was approved by a majority of the Continuing Directors then on such Board. "CONTRACTUAL OBLIGATION": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. 8 "CONTROL GROUP PERSON": any Person which is a member of the controlled group or is under common control with the Company within the meaning of Section 414(b) or 414(c) of the Code or Section 4001(b)(1) of ERISA. "$300,000,000 CREDIT AGREEMENT": the $300,000,000 Credit Agreement, dated as of November 1, 1993, among the Company, the several banks and other financial institutions from time to time parties thereto and Chemical Bank, as agent and as CAF Loan agent. "$500,000,000 CREDIT AGREEMENT": the $500,000,000 Credit Agreement, dated as of September 1, 1993, among the Company, the several banks and other financial institutions from time to time parties thereto, Banque Paribas, The Chase Manhattan Bank N.A., Citibank, N.A., Deutsche Bank AG, The First National Bank of Chicago, The Industrial Bank of Japan, Limited, New York Branch, Morgan Guaranty Trust Company of New York, Nationsbank of North Carolina, N.A., PNC Bank, Kentucky, Inc. and Toronto Dominion (Texas), Inc., as Co-Agents and Chemical Bank, as agent and as CAF Loan agent. "$800,000,000 CREDIT AGREEMENT": the $800,000,000 Credit Agreement, dated as of September 1, 1993, among the Company, the several banks and other financial institutions from time to time parties thereto, Banque Paribas, The Chase Manhattan Bank N.A., Citibank, N.A., Deutsche Bank AG, The First National Bank of Chicago, The Industrial Bank of Japan, Limited, New York Branch, Morgan Guaranty Trust Company of New York, Nationsbank of North Carolina, N.A., PNC Bank, Kentucky, Inc. and Toronto Dominion (Texas), Inc., as Co-Agents and Chemical Bank, as agent and as CAF Loan agent. "$1,642,000,000 CREDIT AGREEMENT": the $1,642,000,000 Amended and Restated Credit Agreement, dated as of September 2, 1993, among HCA, Hospital Corporation of America, the several banks and other financial institutions from time to time parties thereto and Morgan Guaranty Trust Company of New York, as agent. "DEFAULT": any of the events specified in subsection 6.1, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "DISTRIBUTION": (a) the declaration or payment of any dividend on or in respect of any shares of any class of capital stock of the Company other than dividends payable solely in shares of common stock of the Company; (b) the purchase, redemption or other acquisition of any shares of any class of capital stock of the Company directly or indirectly through a Subsidiary or otherwise; and (c) any 9 other distribution on or in respect of any shares of any class of capital stock of the Company. "DOLLARS" and "$": dollars in lawful currency of the United States of America. "DOMESTIC LENDING OFFICE": initially, the office of each Bank designated as such in Schedule I; thereafter, such other office of such Bank, if any, located within the United States which shall be making or maintaining Alternate Base Rate Loans. "EFFECTIVE DATE": as defined in subsection 2.4(b). "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto), dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "EURODOLLAR LENDING OFFICE": initially, the office of each Bank designated as such in Schedule I; thereafter, such other office of such Bank, if any, which shall be making or maintaining Eurodollar Loans. "EURODOLLAR LOANS": Revolving Credit Loans hereunder at such time as they are made and/or are being maintained at a rate of interest based upon the Eurodollar Rate. "EURODOLLAR RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the average (rounded upwards to the nearest whole multiple of one sixteenth of one percent) of the respective rates notified to the Agent by the Reference Banks as the rate at which each of their Eurodollar Lending Offices is offered Dollar deposits two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Eurodollar Lending Office are then being conducted at or about 10:00 A.M., New York City time, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of 10 such Reference Bank to be outstanding during such Interest Period. "EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans having the same Interest Period (whether or not originally made on the same day). "EVENT OF DEFAULT": any of the events specified in subsection 6.1, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act has been satisfied. "FINANCING LEASE": any lease of property, real or personal, if the then present value of the minimum rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee. "FIXED RATE AUCTION ADVANCE REQUEST": any CAF Loan Request requesting the CAF Loan Banks to offer to make CAF Loans at a fixed rate (as opposed to a rate composed of the Applicable LIBOR Auction Advance Rate plus or minus a margin). "GAAP": (a) with respect to determining compliance by the Company with the provisions of subsections 5.6, 5.7 and 5.10, generally accepted accounting principles in the United States of America consistent with those utilized in preparing the audited financial statements referred to in subsection 3.3 and (b) with respect to the financial statements referred to in subsection 3.3 or the furnishing of financial statements pursuant to subsection 5.5 and otherwise, generally accepted accounting principles in the United States of America from time to time in effect. "GALEN": Galen Health Care, Inc., a Delaware Corporation and a successor by spin-off to Humana Inc. "GOVERNMENTAL AUTHORITY": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GRID CAF LOAN NOTE": as defined in subsection 2.2(f). "GUARANTEE OBLIGATION": any arrangement whereby credit is extended to one party on the basis of any promise of another, whether that promise is expressed in terms of an obligation to pay the Indebtedness of another, or to purchase an obligation owed by that other, to purchase assets or to provide funds in the form of lease or other types of payments under circumstances that would enable that other to discharge one or more of its obligations, whether or not such arrangement is listed in the balance sheet of 11 the obligor or referred to in a footnote thereto, but shall not include endorsements of items for collection in the ordinary course of business. "HCA": as defined in the Recitals hereto. "INDEBTEDNESS": of a Person, at a particular date, the sum (without duplication) at such date of (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services or which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations of such Person under Financing Leases, (c) all obligations of such Person in respect of letters of credit, acceptances, or similar obligations issued or created for the account of such Person in excess of $1,000,000, (d) all liabilities secured by any Lien on any property owned by the Company or any Subsidiary even though such Person has not assumed or otherwise become liable for the payment thereof and (e) all Guarantee Obligations relating to any of the foregoing in excess of $1,000,000. "INDIVIDUAL CAF LOAN NOTE": as defined in subsection 2.2(g). "INSOLVENCY" or "INSOLVENT": at any particular time, a Multiemployer Plan which is insolvent within the meaning of Section 4245 of ERISA. "INTEREST PAYMENT DATE": (a) as to any Alternate Base Rate Loan, the last day of each March, June, September and December, commencing on the first of such days to occur after Alternate Base Rate Loans are made or Eurodollar Loans are converted to Alternate Base Rate Loans, (b) as to any Eurodollar Loan in respect of which the Company has selected an Interest Period of one, two or three months, the last day of such Interest Period and (c) as to any Eurodollar Loan in respect of which the Company has selected a longer Interest Period than the periods described in clause (b), the last day of each March, June, September and December falling within such Interest Period and the last day of such Interest Period. "INTEREST PERIOD": with respect to any Eurodollar Loans: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loans and ending one, two, three or six months thereafter (or, with the consent of all the Banks, nine or twelve months thereafter), as selected by the Company in its notice of borrowing as provided in subsection 2.1(c) or its notice of conversion as provided in subsection 2.6(a), as the case may be; and 12 (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loans and ending one, two, three or six months thereafter (or, with the consent of all the Banks, nine or twelve months thereafter), as selected by the Company by irrevocable notice to the Agent not less than three Business Days prior to the last day of the then current Interest Period with respect to such Eurodollar Loans; PROVIDED that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) if the Company shall fail to give notice as provided above, the Company shall be deemed to have selected an Alternate Base Rate Loan to replace the affected Eurodollar Loan; (3) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (4) any Interest Period pertaining to a Eurodollar Loan that would otherwise end after the Termination Date shall end on the Termination Date; and (5) the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "LEVEL I PERIOD": any period during which the higher of the publicly announced ratings by S&P and Moody's of the then current senior unsecured, non-credit enhanced, long- term Indebtedness of the Company that has been publicly issued are A or better or A2 or better, respectively; PROVIDED that (i) any period during which the lower of the publicly announced ratings by S&P or Moody's of the then current senior unsecured, non-credit enhanced, long-term Indebtedness of the Company that has been publicly issued satisfies the Level III Period or Level IV Period requirements shall be deemed to be a Level II Period or 13 Level III Period, respectively, and (ii) any period during which the Level V Period requirements are satisfied shall be deemed to be a Level V Period. "LEVEL II PERIOD": any period during which the higher of the publicly announced ratings by S&P and Moody's of the then current senior unsecured, non-credit enhanced, long- term Indebtedness of the Company that has been publicly issued are A- or A3, respectively; PROVIDED that (i) any period during which the lower of the publicly announced ratings by S&P or Moody's of the then current senior unsecured, non-credit enhanced, long-term Indebtedness of the Company that has been publicly issued satisfies the Level IV Period requirements shall be deemed to be a Level III Period and (ii) any period during which the Level V Period requirements are satisfied shall be deemed to be a Level V Period. "LEVEL III PERIOD": any period during which the higher of the publicly announced ratings by S&P and Moody's of the then current senior unsecured, non-credit enhanced, long- term Indebtedness of the Company that has been publicly issued are BBB+ or Baa1, respectively; PROVIDED that any period during which the Level V Period requirements are satisfied shall be deemed to be a Level V Period. "LEVEL IV PERIOD": any period during which the higher of the publicly announced ratings by S&P and Moody's of the then current senior unsecured, non-credit enhanced, long- term Indebtedness of the Company that has been publicly issued is either BBB or Baa2, respectively, or BBB- or Baa3, respectively; PROVIDED that any period during which the Level V Period requirements are satisfied shall be deemed to be a Level V Period. "LEVEL V PERIOD": any period during which either of the publicly announced ratings by S&P or Moody's of the then current senior unsecured, non-credit enhanced, long-term Indebtedness of the Company that has been publicly issued is below BBB- or unrated or below Baa3 or unrated, as the case may be. "LIBOR AUCTION ADVANCE REQUEST": any CAF Loan Request requesting the CAF Loan Banks to offer to make CAF Loans at an interest rate equal to the Applicable LIBOR Auction Advance Rate plus or minus a margin. "LIEN": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any 14 financing lease having substantially the same economic effect as any of the foregoing). "LOAN": any loan made by any Bank pursuant to this Agreement. "LOAN DOCUMENTS": this Agreement and the Notes. "MERGER": as defined in the Recitals hereto. "MERGER AGREEMENT": as defined in the Recitals hereto. "MOODY'S": Moody's Investors Service, Inc. "MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NOTE": any Revolving Credit Note or CAF Loan Note. "PARTICIPANTS": as defined in subsection 8.6(b). "PAYMENT SHARING NOTICE": a written notice from the Company, or any Bank, informing the Agent that an Event of Default has occurred and is continuing and directing the Agent to allocate payments thereafter received from the Company in accordance with subsection 2.10(c). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PERSON": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PLAN": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Control Group Person is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PRINCIPAL PROPERTY": means each acute care hospital providing general medical and surgical services (including real property but excluding equipment, personal property and hospitals which primarily provide specialty medical services, such as psychiatric and obstetrical and gynecological services) at least 50% of which is owned by the Company and its Subsidiaries on a consolidated basis and located in the United States of America. "PROXY": as defined in the Recitals hereto. "PURCHASING BANKS": as defined in subsection 8.6(d). 15 "REFERENCE BANKS": Chemical Bank, Citibank, N.A., and Morgan Guaranty Trust Company of New York. "REGISTER": as defined in subsection 8.6(e). "REGULATION U": Regulation U of the Board of Governors of the Federal Reserve System. "REORGANIZATION": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "REPORTABLE EVENT": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13,.14,.16,.18,.19 or .20 of PBGC Reg. SECTION 2615. "REQUESTED TERMINATION DATE": as defined in subsection 2.4(b). "REQUIRED BANKS": (i) during the Commitment Period, Banks whose Commitment Percentages aggregate at least 51% and (ii) after the Commitments have expired or been terminated, Banks whose outstanding Loans represent in the aggregate 51% of all outstanding Loans. "REQUIREMENT OF LAW": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "RESPONSIBLE OFFICER": the chief executive officer, the president, any executive or senior vice president or vice president of the Company, the chief financial officer, treasurer or controller of the Company. "REVOLVING CREDIT LOANS": as defined in subsection 2.1(a). "REVOLVING CREDIT NOTES": as defined in subsection 2.1(b). "S&P": Standard & Poor's Corporation. "SALE-AND-LEASEBACK TRANSACTION": means any arrangement entered into by the Company or any Significant Subsidiary with any person (other than the Company or a Significant Subsidiary), or to which any such person is a party, providing for the leasing to the Company or any 16 Significant Subsidiary for a period of more than three years of any Principal Property which has been or is to be held or transferred by the Company or such Significant Subsidiary to such Person or to any other Person (other than the Company or a Significant Subsidiary), to which funds have been or are to be advanced by such Person on the security of the leased property. "SIGNIFICANT SUBSIDIARY": means, at any particular time, any Subsidiary of the Company having total assets of $5,000,000 or more at that time. "SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "SUBSIDIARY": as to any Person, a corporation or partnership of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation or partnership are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "TAXES": as defined in subsection 2.14. "TERMINATING BANK": as defined in subsection 2.4(c). "TERMINATION DATE": the date one day before the fourth anniversary of the Closing Date (or, if such date is not a Business Day, the next succeeding Business Day), or such other Business Day to which the Termination Date may be changed pursuant to subsection 2.4). "TRANSFER EFFECTIVE DATE": as defined in each Commitment Transfer Supplement. "TRANSFEREE": as defined in subsection 8.6(g). "TYPE": as to any Revolving Credit Loan, its nature as an Alternate Base Rate Loan or Eurodollar Loan. "VOTING STOCK": of any corporation, shares of capital stock or other securities of such corporation entitled to vote generally in the election of directors of such corporation. "WORKING DAY": any Business Day on which dealings in foreign currencies and exchange between banks may be carried on in London, England. 17 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF LOANS 2.1 REVOLVING CREDIT LOANS AND REVOLVING CREDIT NOTES. (a) Subject to the terms and conditions hereof, each Bank severally agrees to make loans ("REVOLVING CREDIT LOANS") to the Company from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed the Commitment of such Bank, PROVIDED that the aggregate amount of the Loans outstanding shall not at any time exceed the aggregate amount of the Commitments. During the Commitment Period the Company may use the Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Credit Loans may be (i) Eurodollar Loans, (ii) Alternate Base Rate Loans or (iii) a combination thereof, as determined by the Company and notified to the Agent in accordance with subsection 2.1(c). Eurodollar Loans shall be made and maintained by each Bank at its Eurodollar Lending Office, and Alternate Base Rate Loans shall be made and maintained by each Bank at its Domestic Lending Office. (b) The Revolving Credit Loans made by each Bank shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit A with appropriate insertions as to payee, date and principal amount (a "REVOLVING CREDIT NOTE"), payable to the order of such Bank and evidencing the obligation of the Company to pay a principal amount equal to the amount of the initial Commitment of such Bank or, if a lesser amount, the aggregate unpaid principal amount of all Revolving Credit Loans made by such Bank. Each Bank is hereby authorized to record the 18 date, Type and amount of each Revolving Credit Loan made or converted by such Bank, and the date and amount of each payment or prepayment of principal thereof, and, in the case of Eurodollar Loans, the Interest Period with respect thereto, on the schedule annexed to and constituting a part of its Revolving Credit Note, and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that the failure to make any such recordation shall not affect the obligations of the Company hereunder or under any Revolving Credit Note. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the Termination Date, and (z) bear interest on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in subsection 2.7. (c) The Company may borrow under the Commitments during the Commitment Period on any Business Day; PROVIDED that the Company shall give the Agent irrevocable notice (which notice must be received by the Agent (i) prior to 11:30 A.M., New York City time three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, and (ii) prior to 10:00 A.M., New York City time, on the requested Borrowing Date, in the case of Alternate Base Rate Loans), specifying (A) the amount to be borrowed, (B) the requested Borrowing Date, (C) whether the borrowing is to be of Eurodollar Loans, Alternate Base Rate Loans, or a combination thereof, and (D) if the borrowing is to be entirely or partly of Eurodollar Loans, the length of the Interest Period therefor. Each borrowing pursuant to the Commitments shall be in an aggregate principal amount equal to the lesser of (i) $10,000,000 or a whole multiple of $1,000,000 in excess thereof and (ii) the then Available Commitments. Upon receipt of such notice from the Company, the Agent shall promptly notify each Bank thereof. Each Bank will make the amount of its pro rata share of each borrowing available to the Agent for the account of the Company at the office of the Agent set forth in subsection 8.2 prior to 12:00 P.M., New York City time, on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of all such Revolving Credit Loans will then be made available to the Company by the Agent at such office of the Agent by crediting the account of the Company on the books of such office with the aggregate of the amounts made available to the Agent by the Banks. 2.2 CAF LOANS AND CAF LOAN NOTES. (a) The Company may borrow CAF Loans from time to time on any Business Day (in the case of CAF Loans made pursuant to a Fixed Rate Auction Advance Request) or any Working Day (in the case of CAF Loans made pursuant to a LIBOR Auction Advance Request) during the period from the Closing Date until the date occurring 14 days prior to the Termination Date in the manner set forth in this subsection 2.2 and in amounts such that the aggregate amount of Loans outstanding at any time shall not exceed the aggregate amount of the Commitments at such time. 19 (b) (i) The Company shall request CAF Loans by delivering a CAF Loan Request to the CAF Loan Agent, not later than 12:00 Noon (New York City time) four Working Days prior to the proposed Borrowing Date (in the case of a LIBOR Auction Advance Request), and not later than 10:00 A.M. (New York City time) one Business Day prior to the proposed Borrowing Date (in the case of a Fixed Rate Auction Advance Request). Each CAF Loan Request may solicit bids for CAF Loans in an aggregate principal amount of $10,000,000 or an integral multiple thereof and for not more than three alternative maturity dates for such CAF Loans. The maturity date for each CAF Loan shall be not less than 7 days nor more than 360 days after the Borrowing Date therefor (and in any event not after the Termination Date). The CAF Loan Agent shall promptly notify each CAF Loan Bank by facsimile transmission of the contents of each CAF Loan Request received by it. (ii) In the case of a LIBOR Auction Advance Request, upon receipt of notice from the CAF Loan Agent of the contents of such CAF Loan Request, any CAF Loan Bank that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more CAF Loans at the Applicable LIBOR Auction Advance Rate plus or minus a margin for each such CAF Loan determined by such CAF Loan Bank in its sole discretion. Any such irrevocable offer shall be made by delivering a CAF Loan Offer to the CAF Loan Agent, before 9:30 A.M., New York City time, three Working Days before the proposed Borrowing Date, setting forth the maximum amount of CAF Loans for each maturity date, and the aggregate maximum amount for all maturity dates, which such Bank would be willing to make (which amounts may, subject to subsection 2.2(a), exceed such CAF Loan Bank's Commitment) and the margin above the Applicable LIBOR Auction Advance Rate at which such CAF Loan Bank is willing to make each such CAF Loan; the CAF Loan Agent shall advise the Company before 10:00 A.M., New York City time, three Working Days before the proposed Borrowing Date of the contents of each such CAF Loan Offer received by it. If the CAF Loan Agent in its capacity as a CAF Loan Bank shall, in its sole discretion, elect to make any such offer, it shall advise the Company of the contents of its CAF Loan Offer before 9:00 A.M., New York City time, three Working Days before the proposed Borrowing Date. (iii) In the case of a Fixed Rate Auction Advance Request, upon receipt of notice from the Agent of the contents of such CAF Loan Request, any CAF Loan Bank that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more CAF Loans at a rate or rates of interest for each such CAF Loan determined by such CAF Loan Bank in its sole discretion. Any such irrevocable offer shall be made by delivering a CAF Loan Offer to the CAF Loan Agent, before 9:30 A.M., New York City time, on the proposed Borrowing Date, setting forth the maximum amount of CAF Loans for each maturity date, and the aggregate maximum amount for all maturity dates, which such CAF Loan Bank would be willing to make (which amounts may, subject to subsection 2.2(a), exceed such CAF Loan Bank's Commitment) and 20 the rate or rates of interest at which such CAF Loan Bank is willing to make each such CAF Loan; the CAF Loan Agent shall advise the Company before 10:15 A.M., New York City time, on the proposed Borrowing Date of the contents of each such CAF Loan Offer received by it. If the CAF Loan Agent or any affiliate thereof in its capacity as a CAF Loan Bank shall, in its sole discretion, elect to make any such offer, it shall advise the Company of the contents of its CAF Loan Offer before 9:15 A.M., New York City time, on the proposed Borrowing Date. (iv) The Company shall before 11:00 A.M., New York City time, three Working Days before the proposed Borrowing Date (in the case of CAF Loans requested by a LIBOR Auction Advance Request) and before 10:30 A.M., New York City time, on the proposed Borrowing Date (in the case of CAF Loans requested by a Fixed Rate Auction Advance Request) either, in its absolute discretion: (A) cancel such CAF Loan Request by giving the CAF Loan Agent telephone notice to that effect, or (B) accept one or more of the offers made by any CAF Loan Bank or CAF Loan Banks pursuant to clause (ii) or clause (iii) above, as the case may be, by giving telephone notice to the CAF Loan Agent (immediately confirmed by delivery to the CAF Loan Agent of a CAF Loan Confirmation) of the amount of CAF Loans for each relevant maturity date to be made by each CAF Loan Bank (which amount for each such maturity date shall be equal to or less than the maximum amount for such maturity date specified in the CAF Loan Offer of such CAF Loan Bank, and for all maturity dates included in such CAF Loan Offer shall be equal to or less than the aggregate maximum amount specified in such CAF Loan Offer for all such maturity dates) and reject any remaining offers made by CAF Loan Banks pursuant to clause (ii) or clause (iii) above, as the case may be; PROVIDED, HOWEVER, that (x) the Company may not accept offers for CAF Loans for any maturity date in an aggregate principal amount in excess of the maximum principal amount requested in the related CAF Loan Request, (y) if the Company accepts any of such offers, it must accept offers strictly based upon pricing for such relevant maturity date and no other criteria whatsoever and (z) if two or more CAF Loan Banks submit offers for any maturity date at identical pricing and the Company accepts any of such offers but does not wish to borrow the total amount offered by such CAF Loan Banks with such identical pricing, the Company shall accept offers from all of such CAF Loan Banks in amounts allocated among them PRO RATA according to the amounts offered by such CAF Loan Banks (or as nearly PRO RATA as shall be practicable after giving effect to the requirement that CAF Loans made by a CAF Loan Bank on a Borrowing Date for each relevant maturity date shall be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof PROVIDED that if 21 the number of CAF Loan Banks that submit offers for any maturity date at identical pricing is such that, after the Company accepts such offers PRO RATA in accordance with the foregoing, the CAF Loans to be made by such CAF Loan Banks would be less than $5,000,000 principal amount, the number of such CAF Loan Banks shall be reduced by the CAF Loan Agent by lot until the CAF Loans to be made by such remaining CAF Loan Banks would be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof). (v) If the Company notifies the CAF Loan Agent that a CAF Loan Request is cancelled pursuant to clause (iv)(A) above, the CAF Loan Agent shall give prompt, but in no event more than one hour later, telephone notice thereof to the CAF Loan Banks, and the CAF Loans requested thereby shall not be made. (vi) If the Company accepts pursuant to clause (iv)(B) above one or more of the offers made by any CAF Loan Bank or CAF Loan Banks, the CAF Loan Agent shall promptly, but in no event more than one hour later, notify each CAF Loan Bank which has made such an offer of the aggregate amount of such CAF Loans to be made on such Borrowing Date for each maturity date and of the acceptance or rejection of any offers to make such CAF Loans made by such CAF Loan Bank. Each CAF Loan Bank which is to make a CAF Loan shall, before 12:00 Noon, New York City time, on the Borrowing Date specified in the CAF Loan Request applicable thereto, make available to the Agent at its office set forth in subsection 8.2 the amount of CAF Loans to be made by such CAF Loan Bank, in immediately available funds. The Agent will make such funds available to the Company as soon as practicable on such date at the Agent's aforesaid address. As soon as practicable after each Borrowing Date, the Agent shall notify each Bank of the aggregate amount of CAF Loans advanced on such Borrowing Date and the respective maturity dates thereof. (c) Within the limits and on the conditions set forth in this subsection 2.2, the Company may from time to time borrow under this subsection 2.2, repay pursuant to paragraph (d) below, and reborrow under this subsection 2.2. (d) The Company shall repay to the Agent for the account of each CAF Loan Bank which has made a CAF Loan (or the CAF Loan Assignee in respect thereof, as the case may be) on the maturity date of each CAF Loan (such maturity date being that specified by the Company for repayment of such CAF Loan in the related CAF Loan Request) the then unpaid principal amount of such CAF Loan. The Company shall not have the right to prepay any principal amount of any CAF Loan. (e) The Company shall pay interest on the unpaid principal amount of each CAF Loan from the Borrowing Date to the stated maturity date thereof, at the rate of interest determined pursuant to paragraph (b) above (calculated on the basis of a 22 360-day year for actual days elapsed), payable on the interest payment date or dates specified by the Company for such CAF Loan in the related CAF Loan Request as provided in the CAF Loan Note evidencing such CAF Loan. If all or a portion of the principal amount of any CAF Loan or any interest or other amount payable hereunder in respect thereof shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting any rights of any Bank under this Agreement, bear interest from the date on which such payment was due at a rate per annum which is 2% above the rate which would otherwise be applicable pursuant to the CAF Loan Note evidencing such CAF Loan until the scheduled maturity date with respect thereto as set forth in the CAF Loan Note evidencing such CAF Loan, and for each day thereafter at rate per annum which is 2% above the Alternate Base Rate until paid in full (as well after as before judgment). (f) The CAF Loans made by each CAF Loan Bank shall be evidenced initially by a promissory note of the Company, substantially in the form of Exhibit B with appropriate insertions (a "GRID CAF LOAN NOTE"), payable to the order of such CAF Loan Bank and representing the obligation of the Company to pay the unpaid principal amount of all CAF Loans made by such CAF Loan Bank, with interest on the unpaid principal amount from time to time outstanding of each CAF Loan evidenced thereby as prescribed in subsection 2.2(e). Each CAF Loan Bank is hereby authorized to record the date and amount of each CAF Loan made by such Bank, the maturity date thereof, the date and amount of each payment of principal thereof and the interest rate with respect thereto on the schedule annexed to and constituting part of its Grid CAF Loan Note, and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that the failure to make any such recordation shall not affect the obligations of the Company hereunder or under any Grid CAF Loan Note. Each Grid CAF Loan Note shall be dated the Closing Date and each CAF Loan evidenced thereby shall bear interest for the period from and including the Borrowing Date thereof on the unpaid principal amount thereof from time to time outstanding at the applicable rate per annum determined as provided in, and such interest shall be payable as specified in, subsection 2.2(e). (g) Amounts advanced by a CAF Loan Bank pursuant to this subsection 2.2 on a Borrowing Date which have the same maturity date and interest rate shall be deemed to constitute one CAF Loan so long as such amounts remain evidenced by the Grid CAF Loan Note of such CAF Loan Bank; any such CAF Loan Bank that wishes such amounts to constitute more than one CAF Loan and to have each such CAF Loan evidenced by a separate promissory note payable to such CAF Loan Bank, substantially in the form of Exhibit C with appropriate insertions as to Borrowing Date, principal amount and interest rate (an "INDIVIDUAL CAF LOAN NOTE"), shall notify the CAF Loan Agent and the Company by facsimile transmission of the respective principal amounts of the 23 CAF Loans (which principal amounts shall not be less than $10,000,000 for any of such CAF Loans) to be evidenced by each such Individual CAF Loan Note. Not later than three Business Days after receipt of such notice, the Company shall deliver to such CAF Loan Bank an Individual CAF Loan Note payable to the order of such CAF Loan Bank in the principal amount of each such CAF Loan and otherwise conforming to the requirements of this Agreement. Upon receipt of such Individual CAF Loan Note, such CAF Loan Bank shall endorse on the schedule attached to its Grid CAF Loan Note the transfer of such CAF Loan from Grid CAF Loan Note to such Individual CAF Loan Note. 2.3 FACILITY FEE. (a) The Company agrees to pay to the Agent for the account of each Bank a facility fee in respect of the period from and including the first day of the Commitment Period to the Termination Date, computed at the rate per annum set forth in the table below on the average daily amount of the Commitment of such Bank during each portion of the period for which payment is made that is a separate Level I Period, Level II Period, Level III Period, Level IV Period or Level V Period, payable quarterly on the last day of each March, June, September and December and on any earlier date on which the Commitments shall terminate as provided herein and the Revolving Credit Loans shall have been repaid in full, commencing on the first of such dates to occur after the date hereof: TYPE OF PERIOD FACILITY FEE Level I Period .1250% Level II Period .1500% Level III Period .2000% Level IV Period .2500% Level V Period .3750% (b) The Company agrees to pay to the Agent the other fees in the amounts, and on the dates, agreed to by the Company and the Agent in the fee letter, dated October 20, 1993, between the Agent and the Company. Each Bank acknowledges that the Agent is being paid certain other fees for its own account in connection with the financing contemplated by this Agreement in addition to the fees described in this Agreement. 2.4 TERMINATION, REDUCTION OR EXTENSION OF COMMITMENTS. (a) The Company shall have the right, upon not less than five Business Days' notice to the Agent, to terminate the Commitments or, from time to time, to reduce ratably the amount of the Commitments, PROVIDED that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, the then outstanding principal amount of the Loans would exceed the amount of the Commitments then in effect. Any such reduction shall be in an amount of $10,000,000 or a whole 24 multiple of $1,000,000 in excess thereof, and shall reduce permanently the amount of the Commitments then in effect. (b) The Company may request, in a notice given as herein provided to the Agent and each of the Banks not less than 90 days and not more than 120 days prior to the second anniversary of the Closing Date, that the Termination Date be extended, which notice shall specify that the requested extension is to be effective (the "EFFECTIVE DATE") on the second anniversary of the Closing Date, and that the new Termination Date to be in effect following such extension (the "REQUESTED TERMINATION DATE") is to be the sixth anniversary of the Closing Date. Each Bank shall, not later than 30 days following such notice, notify the Company and the Agent of its election to extend or not to extend the Termination Date with respect to its Commitment. The Company may, not later than 15 days following such notice from the Banks, revoke its request to extend the Termination Date. If the Required Banks elect to extend the Termination Date with respect to their Commitments and the Company has not revoked its request to extend the Termination Date, then, subject to the provisions of this subsection 2.4, the Termination Date shall be extended for two years. Notwithstanding any provision of this Agreement to the contrary, any notice by any Bank of its willingness to extend the Termination Date with respect to its Commitment shall be revocable by such Bank in its sole and absolute discretion at any time prior to the date which is 15 days following such notice from the Banks. Any Bank which shall not notify the Company and the Agent of its election to extend the Termination Date within 30 days following such notice shall be deemed to have elected not to extend the Termination Date with respect to its Commitment. (c) Provided that the Required Banks shall have elected to extend their Commitments as provided in this subsection 2.4, if any Bank shall timely notify the Company and the Agent pursuant to subsection 2.4(b) of its election not to extend its Commitment or its revocation of any extension, or shall be deemed to have elected not to extend its Commitments, (any such Bank being called a "TERMINATING BANK"), then the remaining Banks (the "CONTINUING BANKS") or any of them shall have the right (but not the obligation), upon notice to the Company and the Agent not later than 30 Business Days preceding the Effective Date to increase their Commitments, by an amount up to in the aggregate the Commitments of any Terminating Banks. Each increase in the Commitment of a Continuing Bank shall be evidenced by a written instrument executed by such Continuing Bank, the Company and the Agent, and shall take effect on the Effective Date. Notwithstanding any provision of this Agreement to the contrary, any notice by any Continuing Bank of its willingness to increase its Commitment as provided in this subsection 2.4(c) shall be revocable by such Bank in its sole and absolute discretion at any time prior to the Effective Date. 25 (d) In the event the aggregate Commitments of any Terminating Banks shall exceed the aggregate amount by which the Continuing Banks have agreed to increase their Commitments pursuant to subsection 2.4(c), the Company may, with the approval of the Agent (which will not be unreasonably withheld), designate one or more other banking institutions willing to extend Commitments until the Requested Termination Date in an aggregate amount not greater than such excess. Any such banking institution (an "ADDITIONAL BANK") shall, on or prior to the Effective Date, execute and deliver to the Company and the Agent a Commitment Transfer Supplement, satisfactory to the Company and the Agent, setting forth the amount of such Additional Bank's Commitment and containing its agreement to become, and to perform all the obligations of, a Bank hereunder, and the Commitment of such Additional Bank shall become effective on the Effective Date. Notwithstanding any provision of this Agreement to the contrary, any notice by any Additional Bank of its willingness to become a Bank hereunder shall be revocable by such Additional Bank in its sole and absolute discretion at any time prior to the Effective Date. (e) The Company shall deliver to each Continuing Bank and each Additional Bank, on the Effective Date, in exchange for the Notes held by such Bank, new Notes, maturing on the Requested Termination Date, in the principal amount of such Bank's Commitment after giving effect to the adjustments made pursuant to this subsection 2.4. (f) If the Required Banks shall have elected to extend their Commitments as provided in this subsection 2.4 and the Company has not revoked its request to extend the Termination Date as provided in this subsection 2.4, then (i) the Commitments of the Continuing Banks and any Additional Banks shall continue until the Requested Termination Date specified in the notice from the Company, and as to such Banks the term "Termination Date", as used herein shall mean such Requested Termination Date; (ii) the Commitments of any Terminating Bank shall continue until the Effective Date, and shall then terminate (as to any Terminating Bank, the term "Termination Date", as used herein, shall mean the Effective Date) and any such Terminating Bank shall receive payment in full of the outstanding principal amount, together with accrued interest to such date and any other amounts owed by the Company to such Terminating Bank pursuant to any Loan Document, of the Loans of such Terminating Bank; and (iii) from and after the Effective Date, the term "Banks" shall be deemed to include the Additional Banks and (except with respect to subsections 2.15 and 8.5 to the extent the rights under such subsections arise after the Termination Date in respect of Terminating Banks) to exclude the Terminating Banks. 2.5 OPTIONAL PREPAYMENTS. The Company may on the last day of the relevant Interest Period if the Revolving Credit Loans to be prepaid are in whole or in part Eurodollar Loans, or at any time and from time to time if the Revolving Credit Loans to be 26 prepaid are Alternate Base Rate Loans, prepay the Revolving Credit Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable notice to the Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or Alternate Base Rate Loans or a combination thereof, and if of a combination thereof, the amount of prepayment allocable to each. Upon receipt of such notice the Agent shall promptly notify each Bank thereof. If such notice is given, the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments shall be in an aggregate principal amount of $5,000,000, or a whole multiple thereof, and may only be made if, after giving effect thereto, subsection 2.6(c) shall not have been contravened. 2.6 CONVERSION OPTIONS; MINIMUM AMOUNT OF LOANS. (a) The Company may elect from time to time to convert Eurodollar Loans to Alternate Base Rate Loans by giving the Agent at least two Business Days' prior irrevocable notice of such election (given before 10:00 A.M., New York City time, on the date on which such notice is required), PROVIDED that any such conversion of Eurodollar Loans shall, subject to the fourth following sentence, only be made on the last day of an Interest Period with respect thereto. The Company may elect from time to time to convert Alternate Base Rate Loans to Eurodollar Loans by giving the Agent at least three Business Days' prior irrevocable notice of such election (given before 11:30 A.M., New York City time, on the date on which such notice is required). Upon receipt of such notice, the Agent shall promptly notify each Bank thereof. Promptly following the date on which such conversion is being made each Bank shall take such action as is necessary to transfer its portion of such Revolving Credit Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. All or any part of outstanding Eurodollar Loans and Alternate Base Rate Loans may be converted as provided herein, PROVIDED that, unless the Required Banks otherwise agree, (i) no Revolving Credit Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing, (ii) partial conversions shall be in an aggregate principal amount of $5,000,000 or a whole multiple thereof, and (iii) any such conversion may only be made if, after giving effect thereto, subsection 2.6(c) shall not have been contravened. (b) Any Eurodollar Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Company with the notice provisions contained in subsection 2.6(a); PROVIDED that, unless the Required Banks otherwise agree, no Eurodollar Loan may be continued as such when any Event of Default has occurred and is continuing, but shall be automatically converted to an Alternate Base Rate Loan on the last day of the then current Interest Period with respect thereto. The Agent shall notify the Banks promptly that such 27 automatic conversion contemplated by this subsection 2.6(b) will occur. (c) All borrowings, conversions, payments, prepayments and selection of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising any Eurodollar Tranche shall not be less than $10,000,000. At no time shall there be more than 10 Eurodollar Tranches. 2.7 INTEREST RATE AND PAYMENT DATES FOR REVOLVING CREDIT LOANS. (a) The Eurodollar Loans comprising each Eurodollar Tranche shall bear interest for each day during each Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the Eurodollar Rate plus the Applicable Margin. (b) Alternate Base Rate Loans shall bear interest for each day from and including the date thereof on the unpaid principal amount thereof at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin. (c) If all or a portion of the principal amount of any Revolving Credit Loans shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), each Eurodollar Loan shall, unless the Required Banks otherwise agree, be converted to an Alternate Base Rate Loan at the end of the last Interest Period with respect thereto. Any such overdue principal amount shall bear interest at a rate per annum which is 2% above the rate which would otherwise be applicable pursuant to subsection 2.7(a) or (b), and any overdue interest or other amount payable hereunder shall bear interest at a rate per annum which is 2% above the Alternate Base Rate, in each case from the date of such non-payment until paid in full (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date. 2.8 COMPUTATION OF INTEREST AND FEES. (a) Interest in respect of Alternate Base Rate Loans shall be calculated on the basis of a (i) 365-day (or 366-day, as the case may be) year for the actual days elapsed when such Alternate Base Rate Loans are based on the Prime Rate, and (ii) a 360-day year for the actual days elapsed when based on the Base CD Rate or the Federal Funds Effective Rate. Interest in respect of Eurodollar Loans shall be calculated on the basis of a 360-day year for the actual days elapsed. The Agent shall as soon as practicable notify the Company and the Banks of each determination of a Eurodollar Rate. Any change in the interest rate on a Revolving Credit Loan resulting from a change in the Alternate Base Rate or the Applicable Margin or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on 28 which such change in the Alternate Base Rate is announced, such Applicable Margin changes as provided herein or such change in or the Eurocurrency Reserve Requirements shall become effective, as the case may be. The Agent shall as soon as practicable notify the Company and the Banks of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. The Agent shall, at the request of the Company, deliver to the Company a statement showing the quotations used by the Agent in determining any interest rate pursuant to subsection 2.7(a) or (c). (c) If any Reference Bank's Commitment shall terminate (otherwise than on termination of all the Commitments), or its Revolving Credit Loans shall be assigned for any reason whatsoever, such Reference Bank shall thereupon cease to be a Reference Bank, and if, as a result of the foregoing, there shall only be one Reference Bank remaining, then the Agent (after consultation with the Company and the Banks) shall, by notice to the Company and the Banks, designate another Bank as a Reference Bank so that there shall at all times be at least two Reference Banks. (d) Each Reference Bank shall use its best efforts to furnish quotations of rates to the Agent as contemplated hereby. If any of the Reference Banks shall be unable or otherwise fails to supply such rates to the Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. (e) Facility fees shall be computed on the basis of a 365-day year for the actual days elapsed. 2.9 INABILITY TO DETERMINE INTEREST RATE. In the event that: (i) the Agent shall have determined (which determination shall be conclusive and binding upon the Company) that, by reason of circumstances affecting the interbank eurodollar market generally, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for any requested Interest Period; (ii) only one of the Reference Banks is able to obtain bids for its Dollar deposits for such Interest Period in the manner contemplated by the term "Eurodollar Rate"; or (iii) the Agent shall have received notice prior to the first day of such Interest Period from Banks constituting the Required Banks that the interest rate determined pursuant to subsection 2.7(a) for such Interest Period does 29 not accurately reflect the cost to such Banks (as conclusively certified by such Banks) of making or maintaining their affected Loans during such Interest Period; with respect to (A) proposed Revolving Credit Loans that the Company has requested be made as Eurodollar Loans, (B) Eurodollar Loans that will result from the requested conversion of Alternate Base Rate Loans into Eurodollar Loans or (C) the continuation of Eurodollar Loans beyond the expiration of the then current Interest Period with respect thereto, the Agent shall forthwith give facsimile or telephonic notice of such determination to the Company and the Banks at least one day prior to, as the case may be, the requested Borrowing Date for such Eurodollar Loans, the conversion date of such Loans or the last day of such Interest Period. If such notice is given (x) any requested Eurodollar Loans shall be made as Alternate Base Rate Loans, (y) any Alternate Base Rate Loans that were to have been converted to Eurodollar Loans shall be continued as Alternate Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then current Interest Period with respect thereto, to Alternate Base Rate Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar Loans shall be made, nor shall the Company have the right to convert Alternate Base Rate Loans to Eurodollar Loans. 2.10 PRO RATA BORROWINGS AND PAYMENTS. (a) Each borrowing by the Company of Revolving Credit Loans shall be made ratably from the Banks in accordance with their Commitment Percentages. (b) Whenever any payment received by the Agent under this Agreement or any Note is insufficient to pay in full all amounts then due and payable to the Agent and the Banks under this Agreement and the Notes, and the Agent has not received a Payment Sharing Notice (or if the Agent has received a Payment Sharing Notice but the Event of Default specified in such Payment Sharing Notice has been cured or waived), such payment shall be distributed and applied by the Agent and the Banks in the following order: FIRST, to the payment of fees and expenses due and payable to the Agent under and in connection with this Agreement; SECOND, to the payment of all expenses due and payable under subsection 8.5(a), ratably among the Banks in accordance with the aggregate amount of such payments owed to each such Bank; THIRD, to the payment of fees due and payable under subsection 2.3, ratably among the Banks in accordance with their Commitment Percentages; FOURTH, to the payment of interest then due and payable under the Notes, ratably among the Banks in accordance with the aggregate amount of interest owed to each such Bank; and FIFTH, to the payment of the principal amount of the Notes which is then due and payable, ratably among the Banks in accordance with the aggregate principal amount owed to each such Bank. 30 (c) After the Agent has received a Payment Sharing Notice which remains in effect, all payments received by the Agent under this Agreement or any Note shall be distributed and applied by the Agent and the Banks in the following order: FIRST, to the payment of all amounts described in clauses FIRST through THIRD of the foregoing paragraph (b), in the order set forth therein; and SECOND, to the payment of the interest accrued on and the principal amount of all of the Notes, regardless of whether any such amount is then due and payable, ratably among the Banks in accordance with the aggregate accrued interest plus the aggregate principal amount owed to such Bank. (d) All payments (including prepayments) to be made by the Company on account of principal, interest and fees shall be made without set-off or counterclaim and shall be made to the Agent, for the account of the Banks, at the Agent's office set forth in subsection 8.2, in lawful money of the United States of America and in immediately available funds. The Agent shall distribute such payments to the Banks promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Business Day. (e) Unless the Agent shall have been notified in writing by any Bank prior to a Borrowing Date that such Bank will not make the amount which would constitute its Commitment Percentage of the borrowing of Revolving Credit Loans on such date available to the Agent, the Agent may assume that such Bank has made such amount available to the Agent on such Borrowing Date, and the Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such amount is made available to the Agent on a date after such Borrowing Date, such Bank shall pay to the Agent on demand an amount equal to the product of (i) the daily average Federal Funds Effective Rate during such period as quoted by the Agent, times (ii) the amount of such Bank's Commitment Percentage of such borrowing, times (iii) a fraction the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Bank's Commitment Percentage of such borrowing shall have become immediately available to the Agent and the denominator of which is 360. A certificate of the Agent submitted to any Bank with respect to any amounts owing under this subsection 2.10(e) shall be conclusive, absent manifest error. If such Bank's Commitment Percentage of such borrowing is not in fact made available to the Agent by such Bank within three 31 Business Days of such Borrowing Date, the Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to Alternate Base Rate Loans hereunder, on demand, from the Company. 2.11 ILLEGALITY. Notwithstanding any other provisions herein, if after the date hereof the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Bank to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the Bank shall, within 30 Business Days after it becomes aware of such fact, notify the Company, through the Agent, of such fact, (b) the commitment of such Bank hereunder to make Eurodollar Loans or convert Alternate Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (c) such Bank's Revolving Credit Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Alternate Base Rate Loans on the respective last days of the then current Interest Periods for such Revolving Credit Loans or within such earlier period as required by law. Each Bank shall take such action as may be reasonably available to it without legal or financial disadvantage (including changing its Eurodollar Lending Office) to prevent the adoption of or any change in any such Requirement of Law from becoming applicable to it. 2.12 REQUIREMENTS OF LAW. (a) If after the date hereof the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Bank with any request or directive (whether or not having the force of law) after the date hereof from any central bank or other Governmental Authority: (i) shall subject any Bank to any tax of any kind whatsoever with respect to this Agreement, any Revolving Credit Note or any Eurodollar Loans made by it, or change the basis of taxation of payments to such Bank of principal, facility fee, interest or any other amount payable hereunder in respect of Revolving Credit Loans (except for changes in the rate of tax on the overall net income of such Bank); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Bank which are not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Bank any other condition; and the result of any of the foregoing is to increase the cost to such Bank, by any amount which such Bank deems to be material, of making, renewing or maintaining advances or extensions of credit 32 or to reduce any amount receivable hereunder, in each case, in respect of its Eurodollar Loans, then, in any such case, the Company shall promptly pay such Bank, upon its demand, any additional amounts necessary to compensate such Bank for such additional cost or reduced amount receivable. If a Bank becomes entitled to claim any additional amounts pursuant to this subsection 2.12(a), it shall, within 30 Business Days after it becomes aware of such fact, notify the Company, through the Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by such Bank, through the Agent, to the Company shall be conclusive in the absence of manifest error. Each Bank shall take such action as may be reasonably available to it without legal or financial disadvantage (including changing its Eurodollar Lending Office) to prevent any such Requirement of Law or change from becoming applicable to it. This covenant shall survive the termination of this Agreement and payment of the outstanding Revolving Credit Notes. (b) In the event that after the date hereof a Bank is required to maintain reserves of the type contemplated by the definition of "Eurocurrency Reserve Requirements", such Bank may require the Company to pay, promptly after receiving notice of the amount due, additional interest on the related Eurodollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable Eurodollar Rate divided by (B) one MINUS the Eurocurrency Reserve Requirements over (ii) the applicable Eurodollar Rate. Any Bank wishing to require payment of any such additional interest on account of any of its Eurodollar Loans shall notify the Company no more than 30 Business Days after each date on which interest is payable on such Eurodollar Loan of the amount then due it under this subsection 2.12(b), in which case such additional interest on such Eurodollar Loan shall be payable to such Bank at the place indicated in such notice. Each such notification shall be accompanied by such information as the Company may reasonably request. 2.13 CAPITAL ADEQUACY. If any Bank shall have determined that after the date hereof the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Bank or any corporation controlling such Bank with any request or directive after the date hereof regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on such Bank's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Bank or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy) by an amount which is reasonably deemed by such Bank to be material, then from time to time, promptly after submission by such Bank, through the Agent, to the 33 Company of a written request therefor (such request shall include details reasonably sufficient to establish the basis for such additional amounts payable and shall be submitted to the Company within 30 Business Days after it becomes aware of such fact), the Company shall promptly pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. The agreements in this subsection 2.13 shall survive the termination of this Agreement and payment of the Loans and the Notes and all other amounts payable hereunder. 2.14 TAXES. (a) All payments made by the Company under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority excluding, in the case of the Agent and each Bank, net income and franchise taxes imposed on the Agent or such Bank by the jurisdiction under the laws of which the Agent or such Bank is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Bank's Domestic Lending Office or Eurodollar Lending Office, as the case may be, is located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "TAXES"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Bank hereunder or under the Notes, the amounts so payable to the Agent or such Bank shall be increased to the extent necessary to yield to the Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Taxes are payable by the Company, as promptly as possible thereafter, the Company shall send to the Agent for its own account or for the account of such Bank, as the case may be, a certified copy of an original official receipt received by the Company showing payment thereof. If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Company shall indemnify the Agent and the Banks for any incremental taxes, interest or penalties that may become payable by the Agent or any Bank as a result of any such failure. (b) Each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Company and the Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Bank is entitled to receive payments under this Agreement and the Notes payable to it, without deduction or withholding of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption 34 from United States backup withholding tax. Each Bank which delivers to the Company and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the next preceding sentence further undertakes to deliver to the Company and the Agent two further copies of the said letter and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company, certifying in the case of a Form 1001 or 4224 that such Bank is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such letter or form with respect to it and such Bank advises the Company that it is not capable of receiving payments without any deduction or withholding of United Sates federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (c) The agreements in subsection 2.14 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 2.15 INDEMNITY. The Company agrees to indemnify each Bank and to hold each Bank harmless from any loss or expense (other than any loss of anticipated margin or profit) which such Bank may sustain or incur as a consequence of (a) default by the Company in payment when due of the principal amount of or interest on any Eurodollar Loans of such Bank, (b) default by the Company in making a borrowing or conversion after the Company has given a notice of borrowing in accordance with subsection 2.1(c) or a notice of continuation or conversion pursuant to subsection 2.6, (c) default by the Company in making any prepayment after the Company has given a notice in accordance with subsection 2.5 or (d) the making of a prepayment of a Eurodollar Loan on a day which is not the last day of an Interest Period with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by it to maintain its Eurodollar Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. Any Bank claiming any amount under this subsection 2.15 shall provide calculations, in reasonable detail, of the amount of its loss or expense. This covenant shall survive termination of this Agreement and payment of the outstanding Notes. 35 2.16 APPLICATION OF PROCEEDS OF LOANS. Subject to the provisions of the following sentence, the Company may use the proceeds of the Loans for any lawful corporate purpose. The Company will not, directly or indirectly, apply any part of the proceeds of any such Loan for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U, or to refund any indebtedness incurred for such purpose. 2.17 NOTICE OF CERTAIN CIRCUMSTANCES; ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES. (a) Any Bank claiming any additional amounts payable pursuant to subsections 2.12, 2.13 or 2.14 or exercising its rights under subsection 2.11, shall, in accordance with the respective provisions thereof, provide notice to the Company and the Agent. Such notice to the Company and the Agent shall include details reasonably sufficient to establish the basis for such additional amounts payable or the rights to be exercised by the Bank. (b) Any Bank claiming any additional amounts payable pursuant to subsections 2.12, 2.13 or 2.14 or exercising its rights under subsection 2.11, shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Company or to change the jurisdiction of its applicable lending office if the making of such filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue or avoid the circumstances giving rise to such exercise and would not, in the sole determination of such Bank, be otherwise disadvantageous to such Bank. (c) In the event that the Company shall be required to make any additional payments to any Bank pursuant to subsections 2.12, 2.13 or 2.14 or any Bank shall exercise its rights under subsection 2.11, the Company shall have the right at its own expense, upon notice to such Bank and the Agent, to require such Bank to transfer and to assign without recourse (in accordance with and subject to the terms of subsection 8.6) all its interest, rights and obligations under this Agreement to another financial institution (including any Bank) acceptable to the Agent (which approval shall not be unreasonably withheld) which shall assume such obligations; PROVIDED that (i) no such assignment shall conflict with any Requirement of Law and (ii) such assuming financial institution shall pay to such Bank in immediately available funds on the date of such assignment the outstanding principal amount of such Bank's Notes together with accrued interest thereon and all other amounts accrued for its account or owed to it hereunder, including, but not limited to additional amounts payable under subsections 2.3, 2.11, 2.12, 2.13, 2.14 and 2.15. SECTION 3. REPRESENTATIONS AND WARRANTIES 36 The Company hereby represents and warrants that: 3.1 CORPORATE ORGANIZATION AND EXISTENCE. Each of the Company and each Subsidiary is a corporation duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has all necessary corporate power to carry on the business now conducted by it. The Company has all necessary corporate power and has taken all corporate action required to make all the provisions of this Agreement and the Notes and all other agreements and instruments executed in connection herewith and therewith, the valid and enforceable obligations they purport to be. Each of the Company and each Subsidiary is duly qualified and in good standing as a foreign corporation in all jurisdictions other than that of its incorporation in which the physical properties owned, leased or operated by it are located, and is duly authorized, qualified and licensed under all laws, regulations, ordinances or orders of Governmental Authorities, or otherwise, to carry on its business in the places and in the manner presently conducted. 3.2 SUBSIDIARIES. As of the date hereof, the Company has only the Subsidiaries set forth in Schedule II, all of the outstanding capital stock of each of which is duly authorized, validly issued, fully paid and nonassessable and owned as set forth in said Schedule II. Schedule II indicates all Subsidiaries of the Company which are not wholly-owned Subsidiaries and the percentage ownership of the Company and its Subsidiaries in each such Subsidiary. The capital stock and securities owned by the Company and its Subsidiaries in each of the Company's Subsidiaries are owned free and clear of any mortgage, pledge, lien, encumbrance, charge or restriction on the transfer thereof other than restrictions on transfer imposed by applicable securities laws and restrictions, liens and encumbrances outstanding on the date hereof and listed in said Schedule II. 3.3 FINANCIAL INFORMATION. The Company has furnished to the Agent and each Bank copies of the following: (a) the Annual Report of the Company for the fiscal year ended December 31, 1992, containing the consolidated balance sheet of the Company and its Subsidiaries as at said date and the related consolidated statements of income, common stockholders' equity and changes in financial position for the fiscal year then ended, accompanied by the opinion of Arthur Andersen & Co.; (b) the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1992; (c) quarterly financial statements of the Company, including balance sheets, for the fiscal periods ended March 31, 1993, June 30, 1993 and September 30, 1993; 37 (d) the current report of the Company on Form 8-K, dated September 29, 1993; (e) the Annual Report of Galen for the fiscal year ended August 31, 1993, containing the consolidated balance sheet of Galen and its Subsidiaries as at said date and the related consolidated statements of income, common stockholders' equity and changes in financial position for the fiscal year then ended, accompanied by the opinion of Coopers & Lybrand; (f) the Annual Report of Galen on Form 10-K for the fiscal year ended August 31, 1992; (g) quarterly financial statements of Galen, including balance sheets, for the fiscal periods ended November 30, 1992, February 28, 1993 and May 31, 1993; (h) the Annual Report of HCA on Form 10-K for the fiscal year ended December 31, 1992, containing the consolidated balance sheet of HCA and its Subsidiaries as at said date and the related consolidated statements of income, common stockholders' equity and changes in financial position for the fiscal year then ended, accompanied by the opinion of Ernst & Young; (i) quarterly financial statements of HCA, including balance sheets, for the fiscal periods ended March 31, 1993, June 30, 1993 and September 30, 1993; and (j) the Proxy. Such financial statements (including any notes thereto) have been prepared in accordance with GAAP and fairly present the financial conditions of the corporations covered thereby at the date thereof and the results of their operations for the periods covered thereby, subject to normal year-end adjustments in the case of interim statements. As of the date hereof, neither the Company nor any of its Subsidiaries has any known contingent liabilities of any significant amount which are not referred to in said financial statements or in the notes thereto which could reasonably be expected to have a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries, on a consolidated basis. 3.4 CHANGES IN CONDITION. Since December 31, 1992 there has been no material adverse change in the business or assets or in the condition, financial or otherwise, of the Company and its Subsidiaries, on a consolidated basis, or of HCA and its Subsidiaries, on a consolidated basis. Since August 31, 1993 there has been no material adverse change in the business or assets or in the condition, financial or otherwise, of Galen and its Subsidiaries, on a consolidated basis. 38 3.5 ASSETS. The Company and each Subsidiary have good and marketable title to all material assets carried on their books and reflected in the most recent balance sheet referred to in subsection 3.3 or furnished pursuant to subsection 5.5, except for assets held on Financing Leases or purchased subject to security devices providing for retention of title in the vendor, and except for assets disposed of as permitted by this Agreement. 3.6 LITIGATION. Except as disclosed (i) in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, (ii) in Galen's Annual Report on Form 10-K for its fiscal year ended August 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended November 30, 1992, February 28, 1993 and May 31, 1993 and (iii) in HCA's Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, in each case as filed with the Securities and Exchange Commission and previously distributed to the Banks, there is no litigation, at law or in equity, or any proceeding before any federal, state, provincial or municipal board or other governmental or administrative agency pending or to the knowledge of the Company threatened which, after giving effect to any applicable insurance, may involve any material risk of a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis or which seeks to enjoin the consummation of any of the transactions contemplated by this Agreement or any other Loan Document and involves any material risk that any such injunction will be issued, and no judgment, decree, or order of any federal, state, provincial or municipal court, board or other governmental or administrative agency has been issued against the Company or any Subsidiary which has, or may involve a material risk of a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company does not believe that the final resolution of the matters disclosed in its Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, in Galen's Annual Report on Form 10-K for its fiscal year ended August 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended November 30, 1992, February 28, 1993 and May 31, 1993 or in HCA's Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and HCA's Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, in each case as filed with the Securities and Exchange Commission and previously distributed to the Banks, will have a material adverse effect on the business or assets or condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 39 3.7 TAX RETURNS. The Company and each of its Subsidiaries have filed all tax returns which are required to be filed and have paid, or made adequate provision for the payment of, all taxes which have or may become due pursuant to said returns or to assessments received. All federal tax returns of (i) the Company and its Subsidiaries (other than Smith Laboratories, Inc., Sutter Corporation and Basic American Medical, Inc.) through their fiscal years ended in 1989, (ii) Smith Laboratories, Inc., Sutter Corporation and Basic American Medical, Inc. through their respective fiscal years ended in 1988, 1988 and 1986, respectively, (iii) Galen and its Subsidiaries through their fiscal years ended in 1989 and (iv) HCA and its Subsidiaries through their fiscal years ended in 1990, have been audited by the Internal Revenue Service or are not subject to such audit by virtue of the expiration of the applicable period of limitations, and the results of such audits are adequately reflected in the balance sheets referred to in subsection 3.3. The Company knows of no material additional assessments since said date for which adequate reserves appearing in the said balance sheet have not been established. 3.8 CONTRACTS, ETC. Attached hereto as Schedule III is a statement of outstanding Indebtedness of the Company and its Subsidiaries for borrowed money as of the date set forth therein and a complete and correct list of all agreements, contracts, indentures, instruments, documents and amendments thereto to which the Company or any Subsidiary is a party or by which it is bound pursuant to which any such Indebtedness of the Company and its Subsidiaries in excess of $25,000,000 is outstanding on the date hereof. Said Schedule III also includes a complete and correct list of all such Indebtedness of the Company and its Subsidiaries outstanding on the date indicated in respect of Guarantee Obligations in excess of $1,000,000 and letters of credit in excess of $1,000,000, and there have been no increases in such Indebtedness since said date other than as permitted by this Agreement. 3.9 NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution and delivery of this Agreement or of any Notes, nor the making by the Company of any borrowings hereunder, nor the consummation of any transaction herein or therein referred to or contemplated hereby or thereby nor the fulfillment of the terms hereof or thereof or of any agreement or instrument referred to in this Agreement, has constituted or resulted in or will constitute or result in a breach of the provisions of any contract to which the Company or any of its Subsidiaries is a party or by which it is bound or of the charter or by-laws of the Company, or the violation of any law, judgment, decree or governmental order, rule or regulation applicable to the Company or any of its Subsidiaries, or result in the creation under any agreement or instrument of any security interest, lien, charge or encumbrance upon any of the assets of the Company or any of its Subsidiaries. Other than those which have already been obtained, no approval, authorization or other action by any governmental 40 authority or any other Person is required to be obtained by the Company or any of its Subsidiaries in connection with the execution, delivery and performance of this Agreement or the transactions contemplated hereby, or the making of any borrowing by the Company hereunder. 3.10 DEFAULTS. Neither the Company nor any Subsidiary is in default under any provision of its charter or by-laws or, so as to affect adversely in any material manner the business or assets or the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis, under any provision of any agreement, lease or other instrument to which it is a party or by which it is bound or of any Requirement of Law. 3.11 BURDENSOME OBLIGATIONS. Neither the Company nor any Subsidiary is a party to or bound by any agreement, deed, lease or other instrument, or subject to any charter, by-law or other corporate restriction which, in the opinion of the management thereof, is so unusual or burdensome as to in the foreseeable future have a material adverse effect on the business or assets or condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company does not presently anticipate that future expenditures of the Company and its Subsidiaries needed to meet the provisions of any federal or state statutes, orders, rules or regulations will be so burdensome as to have a material adverse effect on the business or assets or condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 3.12 PENSION PLANS. Each Plan maintained by the Company, any Subsidiary or any Control Group Person or to which any of them makes or will make contributions is in material compliance with the applicable provisions of ERISA and the Code. Neither the Company nor any Subsidiary nor any Control Group Person maintains, contributes to or participates in any Plan that is a "defined benefit plan" as defined in ERISA. Neither the Company, any Subsidiary, nor any Control Group Person has since August 31, 1986 maintained, contributed to or participated in any Multiemployer Plan, with respect to which a complete withdrawal would result in any withdrawal liability. The Company and its Subsidiaries have met all of the funding standards applicable to all Plans that are not Multiemployer Plans, and there exists no event or condition which would permit the institution of proceedings to terminate any Plan that is not a Multiemployer Plan. The current value of the benefits guaranteed under Title IV of ERISA of each Plan that is not a Multiemployer Plan does not exceed the current value of such Plan's assets allocable to such benefits. 3.13 DISCLOSURE. Neither this Agreement nor any agreement, document, certificate or statement furnished to the Banks by the Company in connection herewith or with the planning or the consummation of the transactions contemplated by the Merger, including, without limitation, the information relating 41 to the Company and its Subsidiaries after the Merger included in the Confidential Information Memorandum and Proxy, contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. All pro forma financial statements and other materials describing the structure of the transactions contemplated by the Proxy that have been prepared by the Company and made available to Banks have been prepared in good faith based upon reasonable assumptions. There is no fact known to the Company which has or in the future may have (so far as the Company can now foresee) a material adverse effect on the business or assets or the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis, except to the extent that they may be affected by future general economic conditions. 3.14 ENVIRONMENTAL AND PUBLIC AND EMPLOYEE HEALTH AND SAFETY MATTERS. The Company and each Subsidiary has complied with all applicable Federal, state, and other laws, rules and regulations relating to environmental pollution or to environmental regulation or control or to public or employee health or safety, except to the extent that the failure to so comply would not be reasonably likely to result in a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company's and the Subsidiaries' facilities do not contain, and have not previously contained, any hazardous wastes, hazardous substances, hazardous materials, toxic substances or toxic pollutants regulated under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the Hazardous Materials Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the Clean Water Act or any other applicable law relating to environmental pollution or public or employee health and safety, in violation of any such law, or any rules or regulations promulgated pursuant thereto, except for violations that would not be reasonably likely to result in a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company is aware of no events, conditions or circumstances involving environmental pollution or contamination or public or employee health or safety, in each case applicable to it or its Subsidiaries, that would be reasonably likely to result in a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 3.15 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of the Board of Governors of the Federal Reserve System. If requested by any Bank or the Agent, the Company will 42 furnish to the Agent and each Bank a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. 3.16 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Company is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Company is not subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness. SECTION 4. CONDITIONS The obligations of each Bank to make the Loans contemplated by subsections 2.1 and 2.2 shall be subject to the compliance by the Company with its agreements herein contained and to the satisfaction on or before the Closing Date and each Borrowing Date of such of the following further conditions as are applicable on the Closing Date or such Borrowing Date, as the case may be: 4.1 LOAN DOCUMENTS. The Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Company, with a counterpart for each Bank, and (ii) for the account of each Bank, a Revolving Credit Note and a Grid CAF Loan Note conforming to the requirements hereof and executed by a duly authorized officer of the Company. 4.2 LEGAL OPINIONS. On the Closing Date and on any Borrowing Date as the Agent shall request, each Bank shall have received from any general, associate, or assistant general counsel to the Company, such opinions as the Agent shall have reasonably requested with respect to the transactions contemplated by this Agreement. 4.3 COMPANY OFFICERS' CERTIFICATE. The representations and warranties contained in Section 3 shall be true and correct on the Closing Date and on and as of each Borrowing Date with the same force and effect as though made on and as of such date; no Default shall have occurred (except a Default which shall have been waived in writing or which shall have been cured) and no Default shall exist after giving effect to the Loan to be made; between December 31, 1992 and such Borrowing Date, neither the business nor assets, nor the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis or HCA and its Subsidiaries on a consolidated basis shall have been adversely affected in any material manner as a result of any fire, flood, explosion, accident, drought, strike, lockout, riot, sabotage, confiscation, condemnation, or any purchase of any property by Governmental Authority, activities of armed forces, acts of God or the public enemy, new or amended legislation, regulatory order, judicial decision or any other event or development whether or not related 43 to those enumerated above; and the Agent shall have received a certificate containing a representation to these effects dated such Borrowing Date and signed by a Responsible Officer. 4.4 TERMINATION OF PRIOR AGREEMENTS. On the Closing Date, each of (i) the $300,000,000 Credit Agreement, (ii) the $500,000,000 Credit Agreement, (iii) the $800,000,000 Credit Agreement and (iv) the $1,642,000,000 Credit Agreement shall have been terminated and the Company shall have paid in full all indebtedness outstanding thereunder, including, without limitation, all interest and fees owing with respect to such indebtedness. 4.5 LEGALITY, ETC. The making of the Loan to be made by such Bank on each Borrowing Date shall not subject such Bank to any penalty or special tax, shall not be prohibited by any Requirement of Law applicable to such Bank or the Company, and all necessary consents, approvals and authorizations of any Governmental Authority or any Person to or of any such Loan shall have been obtained and shall be in full force and effect. 4.6 GENERAL. All instruments and legal and corporate proceedings in connection with the Loans contemplated by this Agreement shall be satisfactory in form and substance to the Agent, and the Agent shall have received copies of all documents, including the Merger Agreement executed and delivered by each of the signatories thereto, the Proxy and all amendments and exhibits thereto, and favorable legal opinions and records of corporate proceedings, which the Agent may have reasonably requested in connection with the Loans and other transactions contemplated by this Agreement. 4.7 FEES. The Agent shall have received the fees to be received on the Closing Date referred to in subsection 2.3. 4.8 CONSUMMATION OF THE MERGER. The Agent shall have received evidence, which evidence shall be in form and substance satisfactory to the Agent, that the transactions contemplated by the Merger, including, without limitation, the transactions contemplated by the Proxy and subsections 1.1 and 4.1 of the Merger Agreement, have been consummated. SECTION 5. GENERAL COVENANTS On and after the date hereof, until all of the Notes and all other amounts payable pursuant hereto shall have been paid in full and so long as the Commitments shall remain in effect, the Company covenants that the Company will comply, and will cause each of its Subsidiaries to comply, with such of the provisions of this Section 5 and such other provisions of this Agreement as are applicable to the Person in question. 44 5.1 TAXES, INDEBTEDNESS, ETC. (a) Each of the Company and its Subsidiaries will duly pay and discharge, or cause to be paid and discharged, before the same shall become in arrears, all taxes, assessments, levies and other governmental charges imposed upon such corporation and its properties, sales and activities, or any part thereof, or upon the income or profits therefrom; PROVIDED, HOWEVER, that any such tax, assessment, charge or levy need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Company or the Subsidiary in question shall have set aside on its books appropriate reserves with respect thereto. (b) Each of the Company and its Subsidiaries will promptly pay when due, or in conformance with customary trade terms, all other Indebtedness and liabilities incident to its operations; PROVIDED, HOWEVER, that any such Indebtedness or liability need not be paid if the validity or amount thereof shall currently be contested in good faith and if the Company or the Subsidiary in question shall have set aside on its books appropriate reserves with respect thereto. The Subsidiaries will not create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness outstanding on the date hereof and listed on Schedule III; (ii) Indebtedness that is owing to the Company or any other Subsidiary; and (iii) additional Indebtedness at any time outstanding in an aggregate principal amount not to exceed 10% of Consolidated Assets. 5.2 MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAW. Each of the Company and its Subsidiaries (a) will keep its material properties in good repair, working order and condition and will from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto and will comply at all times with the provisions of all material leases and other material agreements to which it is a party so as to prevent any loss or forfeiture thereof or thereunder unless compliance therewith is being currently contested in good faith by appropriate proceedings and (b) in the case of the Company or any Subsidiary of the Company while such Person remains a Subsidiary, will do all things necessary to preserve, renew and keep in full force and effect and in good standing its corporate existence and franchises necessary to continue such businesses. The Company and its Subsidiaries will comply in all material respects with all valid and applicable Requirements of Law (including any such laws, rules, regulations or governmental orders relating to the protection of environmental or public or employee health or safety) of the United States, of the States thereof and their counties, municipalities and other subdivisions and of any other jurisdiction, applicable to the Company and its Subsidiaries, except where compliance therewith shall be contested in good faith by appropriate proceedings, the Company or the Subsidiary in question shall have set aside on its books appropriate reserves in conformity with GAAP with respect thereto, and the failure to comply therewith could not reasonably 45 be expected to, in the aggregate, have a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 5.3 TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its Subsidiaries will enter into any transactions, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any of their Affiliates (other than the Company and its Subsidiaries) unless such transaction is otherwise permitted under this Agreement, is in the ordinary course of the Company's or such Subsidiary's business and is upon fair and reasonable terms no less favorable to the Company or such Subsidiary, as the case may be, than it would obtain in an arm's-length transaction. 5.4 INSURANCE. The Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained, with financially sound and reputable insurers including any Subsidiary which is engaged in the business of providing insurance protection, insurance (including, without limitation, professional liability insurance against claims for malpractice) with respect to its properties and business and the properties and business of its Subsidiaries against loss or damage of the kinds customarily insured against of such types and such amounts as are customarily carried under similar circumstances by other corporations. Such insurance may be subject to co-insurance, deductibility or similar clauses which, in effect, result in self-insurance of certain losses, and the Company may self-insure against such loss or damage, PROVIDED that adequate insurance reserves are maintained in connection with such self-insurance. 5.5 FINANCIAL STATEMENTS. The Company will and will cause each of its Subsidiaries to maintain a standard modern system of accounting in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with GAAP consistently applied, and will furnish the following to each Bank (in duplicate if so requested): (a) ANNUAL STATEMENTS. As soon as available, and in any event within 120 days after the end of each fiscal year, the consolidated balance sheet as at the end of each fiscal year and consolidated statements of profit and loss and of retained earnings for such fiscal year of the Company and its Subsidiaries, together with comparative consolidated figures for the next preceding fiscal year, accompanied by reports or certificates of an Auditor, to the effect that such balance sheet and statements were prepared in accordance with GAAP consistently applied and fairly present the financial position of the Company and its Subsidiaries as at the end of such fiscal year and the results of their operations and changes in financial position for the year then ended and the statement of such Auditor and of a 46 Responsible Officer of the Company that such Auditor and Responsible Officer have caused the provisions of this Agreement to be reviewed and that nothing has come to their attention to lead them to believe that any Default exists hereunder or, if such is not the case, specifying such Default or possible Default and the nature thereof. In addition, such financial statements shall be accompanied by a certificate of a Responsible Officer of the Company containing computations showing compliance with subsections 5.6, 5.7 and 5.10. (b) QUARTERLY STATEMENTS. As soon as available, and in any event within 60 days after the close of each of the first three fiscal quarters of the Company and its Subsidiaries in each year, consolidated balance sheets as at the end of such fiscal quarter and consolidated profit and loss and retained earnings statements for the portion of the fiscal year then ended, of the Company and its Subsidiaries, together with computations showing compliance with subsections 5.6, 5.7 and 5.10, accompanied by a certificate of a Responsible Officer of the Company that such statements and computations have been properly prepared in accordance with GAAP, consistently applied, and fairly present the financial position of the Company and its Subsidiaries as at the end of such fiscal quarter and the results of their operations and changes in financial position for such quarter and for the portion of the fiscal year then ended, subject to normal audit and year-end adjustments, and to the further effect that he has caused the provisions of this Agreement and all other agreements to which the Company or any of its Subsidiaries is a party and which relate to Indebtedness to be reviewed, and has no knowledge that any Default has occurred under this Agreement or under any such other agreement, or, if said Responsible Officer has such knowledge, specifying such Default and the nature thereof. (c) NOTICE OF MATERIAL LITIGATION; DEFAULTS. The Company will promptly notify each Bank in writing, by delivery of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission or otherwise, as to any litigation or administrative proceeding to which it or any of its Subsidiaries may hereafter be a party which, after giving effect to any applicable insurance, may involve any material risk of any material judgment or liability or which may otherwise result in any material adverse change in the business or assets or in the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. Promptly upon acquiring knowledge thereof, the Company will notify each Bank of the existence of any Default, including, without limitation, any default in the payment of any Indebtedness for money borrowed of the Company or any Subsidiary or under the terms of any agreement relating to such Indebtedness, 47 specifying the nature of such Default and what action the Company has taken or is taking or proposes to take with respect thereto. Promptly upon acquiring knowledge thereof, the Company will notify each Bank of a change in the publicly announced ratings by S&P and Moody's of the then current senior unsecured, non-credit enhanced, long-term Indebtedness of the Company. (d) ERISA REPORTS. The Company will furnish the Agent with copies of any request for waiver of the funding standards or extension of the amortization periods required by Sections 303 and 304 of ERISA or Section 412 of the Code promptly after any such request is submitted by the Company to the Department of Labor or the Internal Revenue Service, as the case may be. Promptly after a Reportable Event occurs, or the Company or any of its Subsidiaries receives notice that the PBGC or any Control Group Person has instituted or intends to institute proceedings to terminate any pension or other Plan, or prior to the Plan administrator's terminating such Plan pursuant to Section 4041 of ERISA, the Company will notify the Agent and will furnish to the Agent a copy of any notice of such Reportable Event which is required to be filed with the PBGC, or any notice delivered by the PBGC evidencing its institution of such proceedings or its intent to institute such proceedings, or any notice to the PBGC that a Plan is to be terminated, as the case may be. The Company will promptly notify each Bank upon learning of the occurrence of any of the following events with respect to any Plan which is a Multiemployer Plan: a partial or complete withdrawal from any Plan which may result in the incurrence by the Company or any of is Subsidiaries of withdrawal liability in excess of $1,000,000 under Subtitle E of Title IV of ERISA, or of the termination, insolvency or reorganization status of any Plan under such Subtitle E which may result in liability to the Company or any of its Subsidiaries in excess of $1,000,000. In the event of such a withdrawal, upon the request of the Agent or any Bank, the Company will promptly provide information with respect to the scope and extent of such liability, to the best of the Company's knowledge. (e) REPORTS TO STOCKHOLDERS, ETC. Promptly after the sending, making available or filing of the same, copies of all reports and financial statements which the Company shall send or make available to its stockholders including, without limitation, the Proxy and all other materials relating thereto, and all registration statements and amendments thereto, and all reports on Form 8-K, 10-Q or 10- K or any similar form hereafter in use which the Company shall file with the Securities and Exchange Commission. (f) OTHER INFORMATION. From time to time upon request of the Agent or any Bank, the Company will furnish information regarding the business affairs and condition, 48 financial or otherwise, of the Company and its Subsidiaries. The Company agrees that any authorized officers and representatives of any Bank shall have the right during reasonable business hours to examine the books and records of the Company and its Subsidiaries, and to make notes and abstracts therefrom, to make an independent examination of its books and records for the purpose of verifying the accuracy of the reports delivered by the Company and its Subsidiaries pursuant to this Agreement or otherwise, and ascertaining compliance with this Agreement. (g) CONFIDENTIALITY OF INFORMATION. Each Bank acknowledges that some of the information furnished to such Bank pursuant to this subsection 5.5 may be received by such Bank prior to the time it shall have been made public, and each Bank agrees that it will keep all information so furnished confidential and shall make no use of such information until it shall have become public, except (i) in connection with matters involving operations under or enforcement of this Agreement or the Notes, (ii) in accordance with each Bank's obligations under law or pursuant to subpoenas or other process to make information available to governmental agencies and examiners or to others, (iii) to each Bank's corporate Affiliates and Transferees and prospective Transferees so long as such Persons agree to be bound by this subsection 5.5(g) or (iv) with the prior consent of the Company. 5.6 RATIO OF TOTAL DEBT TO TANGIBLE NET WORTH. The Company and its Subsidiaries will not at any time have outstanding Consolidated Total Debt in an amount in excess of 200% of Consolidated Tangible Net Worth. 5.7 INTEREST COVERAGE RATIO. On the last day of each fiscal quarter of the Company, the Consolidated Earnings Before Interest and Taxes of the Company and its Subsidiaries for the four consecutive fiscal quarters of the Company then ending will be an amount which equals or exceeds 200% of the Consolidated Interest Expense of the Company and its Subsidiaries for the same four consecutive fiscal quarters. 5.8 DISTRIBUTIONS. The Company will not make any Distribution except that, so long as no Event of Default exists or would exist after giving effect thereto, the Company may make a Distribution. 5.9 MERGER OR CONSOLIDATION. The Company will not become a constituent corporation in any merger or consolidation unless the Company shall be the surviving or resulting corporation and immediately before and after giving effect to such merger or consolidation there shall exist no Default; provided that the Company may merge into another Subsidiary owned by the Company for the purpose of causing the Company to be incorporated in a different jurisdiction in the United States. 49 5.10 SALES OF ASSETS. The Company and its Subsidiaries may from time to time sell or otherwise dispose of all or any part of their respective assets; PROVIDED, HOWEVER, that in any fiscal year, the Company and its Subsidiaries will not (a) sell or dispose of (including, without limitation, any disposition resulting from any merger or consolidation involving a Subsidiary of the Company, and any Sale-and-Leaseback Transaction), outside of the ordinary course of business, assets constituting in the aggregate more than 12% of Consolidated Assets of the Company and its Subsidiaries as at the end of the immediately preceding fiscal year and (b) exchange any asset or group of assets for another asset or group of assets unless (i) such asset or group of assets are exchanged for an asset or group of assets of a substantially similar type or nature, (ii) on a pro forma basis both before and after giving effect to such exchange, no Default or Event of Default shall have occurred and be continuing, (iii) the aggregate fair market value (as determined in good faith by the Board of Directors of the Company) of the asset or group of assets being transferred by the Company or such Subsidiary and the asset or group of assets being acquired by the Company or such Subsidiary are substantially equal and (iv) the aggregate of (x) all assets of the Company and its Subsidiaries sold pursuant to subsection 5.10(a) (including, without limitation, any disposition resulting from any merger or consolidation involving a Subsidiary of the Company, and any Sale-and-Leaseback Transaction) and (y) the aggregate fair market value (as determined in good faith by the Board of Directors of the Company) of all assets of the Company and its Subsidiaries exchanged pursuant to this subsection 5.10(b) does not exceed 20% of Consolidated Assets of the Company and its Subsidiaries as at the end of the immediately preceding fiscal year. 5.11 COMPLIANCE WITH ERISA. Each of the Company and its Subsidiaries will meet, and will cause all Control Group Persons to meet, all minimum funding requirements applicable to any Plan imposed by ERISA or the Code (without giving effect to any waivers of such requirements or extensions of the related amortization periods which may be granted), and will at all times comply, and will cause all Control Group Persons to comply, in all material respects with the provisions of ERISA and the Code which are applicable to the Plans. At no time shall the aggregate actual and contingent liabilities of the Company under Sections 4062, 4063, 4064 and other provisions of ERISA (calculated as if the 30% of collective net worth amount referred to in Section 4062(b)(1)(A)(i)(II) of ERISA exceeded the actual total amount of unfunded guaranteed benefits referred to in Section 4062(B)(1)(A)(i)(I) of ERISA) with respect to all Plans (and all other pension plans to which the Company, any Subsidiary, or any Control Group Person made contributions prior to such time) exceed $7,500,000. Neither the Company nor its Subsidiaries will permit any event or condition to exist which could permit any Plan which is not a Multiemployer Plan to be terminated under circumstances which would cause the lien 50 provided for in Section 4068 of ERISA to attach to the assets of the Company or any of its Subsidiaries. 5.12 NEGATIVE PLEDGE. The Company will not and will ensure that no Subsidiary will create or have outstanding any security on or over any Principal Property in respect of any Indebtedness except for: (a) any security for the purchase price or cost of construction of real property acquired by the Company or any of its Subsidiaries (or additions, substantial repairs, alterations or substantial improvements thereto) or equipment, provided that such Indebtedness and such security are incurred within 18 months of the acquisition or completion of construction (or alteration or repair) and full operation; (b) any security existing on property at the time of acquisition of such property by the Company or a Subsidiary or on the property of a corporation at the time of the acquisition of such corporation by the Company or a Subsidiary (including acquisitions through merger or consolidation); (c) any security created in favor of the Company or a Subsidiary; (d) any security existing at the date of this Agreement set forth on Schedule IV; (e) any security created by operation of law in favor of government agencies of the United States of America or any State thereof; (f) any security created in connection with the borrowing of funds if within 120 days such funds are used to repay Indebtedness in at least the same principal amount as secured by other security of Principal Property with an independent appraised fair market value at least equal to the appraised fair market value of the Principal Property secured by the new security; and (g) any extension, renewal or replacement of any security referred to in the foregoing clauses (a) through (f) provided that the amount thereby secured is not increased; unless any Loans made and/or to be made to and all other sums payable by the Company under this Agreement shall be secured equally and ratably with (or prior to) such Indebtedness so long as such Indebtedness shall be so secured. Notwithstanding the foregoing, the Company and any one or more Subsidiaries may, without securing the Loans made and/or to be made to and all other sums payable by the Company under this Agreement, create, 51 issue or assume Indebtedness which would otherwise be subject to the foregoing restrictions in an aggregate principal amount which, together with all other such Indebtedness of the Company and its Subsidiaries (not including Indebtedness permitted to be secured pursuant to the foregoing clauses (a) through (g) and the aggregate Attributable Debt), including Indebtedness in respect of Sale-and-Lease-back Transactions (other than those permitted by subsection 5.13(b)), does not exceed 10% of Consolidated Net Tangible Assets of the Company and its Subsidiaries. 5.13 SALE-AND-LEASE-BACK TRANSACTIONS. Neither the Company nor any Significant Subsidiary will enter into any Sale- and-Lease-back Transaction with respect to any Principal Property with any Person (other than the Company or a Subsidiary) unless either (a) the Company or such Significant Subsidiary would be entitled, pursuant to the provisions described in subsection 5.12(a) through (g) to incur Indebtedness secured by a security on the property to be leased without equally and ratably securing the Loans made and/or to be made to and all other sums payable by the Company under this Agreement, or (b) the Company during or immediately after the expiration of 120 days after the effective date of such transaction applies to the voluntary retirement of its Indebtedness and/or the acquisition or construction of Principal Property an amount equal to the greater of the net proceeds of the sale of the property leased in such transaction or the fair value in the opinion of the chief financial officer of the Company of the leased property at the time such transaction was entered into. SECTION 6. DEFAULTS 6.1 EVENTS OF DEFAULT. Upon the occurrence of any of the following events: (a) any default shall be made by the Company in any payment in respect of: (i) interest on any of the Notes or any facility fee payable hereunder as the same shall become due and such default shall continue for a period of five days; or (ii) principal of any of the Indebtedness evidenced by the Notes as the same shall become due, whether at maturity, by prepayment, by acceleration or otherwise; or (b) any default shall be made by either the Company or any Subsidiary of the Company in the performance or observance of any of the provisions of subsections 5.6 through 5.10, 5.12 and 5.13; or (c) any default shall be made in the due performance or observance of any other covenant, agreement or provision to be performed or observed by either the Company or any Subsidiary under this Agreement, and such default shall not be rectified or cured to the satisfaction of the Required 52 Banks within a period expiring 30 days after written notice thereof by the Agent to the Company; or (d) any representation or warranty of or with respect to the Company or any Subsidiary of the Company to the Banks in connection with this Agreement shall have been untrue in any material respect on or as of the date made and the facts or circumstances to which such representation or warranty relates shall not have been subsequently corrected to make such representation or warranty no longer incorrect; or (e) any default shall be made in the payment of any item of Indebtedness of the Company or any Subsidiary or under the terms of any agreement relating to such Indebtedness and such default shall continue without having been duly cured, waived or consented to, beyond the period of grace, if any, therein specified; PROVIDED, HOWEVER, that such default shall not constitute an Event of Default unless (i) the outstanding principal amount of such item of Indebtedness exceeds $10,000,000, or (ii) the aggregate outstanding principal amount of such item of Indebtedness and all other items of Indebtedness of the Company and its Subsidiaries as to which such defaults exist and have continued without being duly cured, waived or consented to beyond the respective periods of grace, if any, therein specified exceeds $25,000,000, or (iii) such default shall have continued without being rectified or cured to the satisfaction of the Required Banks for a period of 30 days after written notice thereof by the Agent to the Company; or (f) either the Company or any Subsidiary shall be involved in financial difficulties as evidenced: (i) by its commencement of a voluntary case under Title 11 of the United States Code as from time to time in effect, or by its authorizing, by appropriate proceedings of its board of directors or other governing body, the commencement of such a voluntary case; (ii) by the filing against it of a petition commencing an involuntary case under said Title 11 which shall not have been dismissed within 60 days after the date on which said petition is filed or by its filing an answer or other pleading within said 60- day period admitting or failing to deny the material allegations of such a petition or seeking, consenting or acquiescing in the relief therein provided; (iii) by the entry of an order for relief in any involuntary case commenced under said Title 11; (iv) by its seeking relief as a debtor under any applicable law, other than said Title 11, of any 53 jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or by its consenting to or acquiescing in such relief; (v) by the entry of an order by a court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors, or (iii) assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property; (vi) by its making an assignment for the benefit of, or entering into a composition with, its creditors, or appointing or consenting to the appointment of a receiver or other custodian for all or a substantial part of its property; or (g) a Change in Control of the Company shall occur; then and in each and every such case, (x) the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, proceed to protect and enforce the rights of the Banks by suit in equity, action at law and/or other appropriate proceeding either for specific performance of any covenant or condition contained in this Agreement or any Note or in any instrument delivered to each Bank pursuant to this Agreement, or in aid of the exercise of any power granted in this Agreement or any Note or any such instrument or assignment, and (y) the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, by notice in writing to the Company terminate the obligations of the Banks to make further Revolving Credit Loans hereunder, and thereupon such obligations shall terminate forthwith and (z) (unless there shall have occurred an Event of Default under subsection 6.1(f), in which case the obligations of the Banks to make further Revolving Credit Loans hereunder shall automatically terminate and the unpaid balance of the Notes and accrued interest thereon and all other amounts payable hereunder (the "BANK OBLIGATIONS") shall automatically become due and payable) the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, by notice in writing to the Company declare all or any part of the unpaid balance of the Bank Obligations then outstanding to be forthwith due and payable, and thereupon such unpaid balance or part thereof shall become so due and payable without presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived, the obligations of the Banks to make further Revolving Credit Loans hereunder shall terminate forthwith, and the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, proceed to enforce payment of such balance or part thereof in such manner as the Agent may elect, and each Bank may offset and apply toward the payment of such balance or part thereof, and 54 to the curing of any such Event of Default, any Indebtedness from such Bank to the Company, including any Indebtedness represented by deposits in any general or special account maintained with such Bank. 6.2 ANNULMENT OF DEFAULTS. An Event of Default shall not be deemed to be in existence for any purpose of this Agreement if the Agent, with the consent of or at the direction of the Required Banks, subject to subsection 8.1, shall have waived such event in writing or stated in writing that the same has been cured to its reasonable satisfaction, but no such waiver shall extend to or affect any subsequent Event of Default or impair any rights of the Agent or the Banks upon the occurrence thereof. 6.3 WAIVERS. The Company hereby waives to the extent permitted by applicable law (a) all presentments, demands for performance, notices of nonperformance (except to the extent required by the provisions hereof), protests, notices of protest and notices of dishonor in connection with any of the Indebtedness evidenced by the Notes, (b) any requirement of diligence or promptness on the part of any Bank in the enforcement of its rights under the provisions of this Agreement or any Note, and (c) any and all notices of every kind and description which may be required to be given by any statute or rule of law and any defense of any kind which the Company may now or hereafter have with respect to its liability under this Agreement or any Note. 6.4 COURSE OF DEALING. No course of dealing between the Company and any Bank shall operate as a waiver of any of the Banks' rights under this Agreement or any Note. No delay or omission on the part of any Bank in exercising any right under this Agreement or any Note or with respect to any of the Bank Obligations shall operate as a waiver of such right or any other right hereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver or consent shall be binding upon any Bank unless it is in writing and signed by the Agent or such of the Banks as may be required by the provisions of this Agreement. The making of a Loan hereunder during the existence of a Default shall not constitute a waiver thereof. SECTION 7. THE AGENT 7.1 APPOINTMENT. Each Bank hereby irrevocably designates and appoints Chemical Bank as the Agent and CAF Loan Agent of such Bank under this Agreement, and each such Bank irrevocably authorizes Chemical Bank, as the Agent and CAF Loan Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Agent or CAF Loan Agent, as the case may be, by the terms of this 55 Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Agent nor the CAF Loan Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent or the CAF Loan Agent. 7.2 DELEGATION OF DUTIES. The Agent or the CAF Loan Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither the Agent nor the CAF Loan Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 EXCULPATORY PROVISIONS. Neither the Agent nor the CAF Loan Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent or the CAF Loan Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or for any failure of the Company to perform its obligations hereunder. Neither the Agent nor the CAF Loan Agent shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Company. 7.4 RELIANCE BY AGENT. The Agent and the CAF Loan Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Agent or the CAF Loan Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent and the CAF Loan Agent shall be fully justified in failing or refusing to take any action under this Agreement 56 unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent and the CAF Loan Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 7.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; PROVIDED that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 7.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly acknowledges that neither the Agent nor the CAF Loan Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent or the CAF Loan Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent and the CAF Loan Agent that it has, independently and without reliance upon the Agent or the CAF Loan Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or the CAF Loan Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent or the CAF Loan Agent hereunder, neither the Agent nor the CAF Loan 57 Agent shall have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of the Agent or the CAF Loan Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 INDEMNIFICATION. The Banks agree to indemnify the Agent and the CAF Loan Agent in its capacity as such (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to the respective amounts of their then existing Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent or the CAF Loan Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent or the CAF Loan Agent under or in connection with any of the foregoing; PROVIDED that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's or the CAF Loan Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Notes and all other amounts payable hereunder. 7.8 AGENT AND CAF LOAN AGENT IN ITS INDIVIDUAL Capacity. The Agent and the CAF Loan Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company as though the Agent or the CAF Loan Agent were not the Agent or the CAF Loan Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Agent and the CAF Loan Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include the Agent or the CAF Loan Agent in its individual capacity. 7.9 SUCCESSOR AGENT AND CAF LOAN AGENT. The Agent or the CAF Loan Agent may resign as Agent or CAF Loan Agent, as the case may be, upon 10 days' notice to the Banks. If the Agent or the CAF Loan Agent shall resign as Agent or CAF Loan Agent, as the case may be, under this Agreement, then the Required Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent or CAF Loan Agent, as the case may be, and the term "Agent" or "CAF Loan Agent", as the case may be, shall mean such successor agent effective upon its appointment, and the former Agent's or CAF Loan Agent's rights, powers and 58 duties as Agent or CAF Loan Agent shall be terminated, without any other or further act or deed on the part of such former Agent or CAF Loan Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's or CAF Loan Agent's resignation hereunder as Agent or CAF Loan Agent, the provisions of this subsection 7.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent or CAF Loan Agent under this Agreement. The Co-Agents in their capacities as such shall have no rights, duties or obligations under this Agreement. SECTION 8. MISCELLANEOUS 8.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any Note, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. With the written consent of the Required Banks, the Agent and the Company may, from time to time, enter into written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or the Notes or changing in any manner the rights of the Banks or of the Company hereunder or thereunder or waiving, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of this Agreement or the Notes or any Default or Event of Default and its consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment, supplement or modification shall (a) extend the maturity (whether as stated, by acceleration or otherwise) of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce any fee payable to the Banks hereunder, or reduce the principal amount thereof, or change the amount of any Bank's Commitment or amend, modify or waive any provision of this subsection 8.1 or reduce the percentage specified in the definition of Required Banks, or consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement, in each case without the written consent of all the Banks, or (b) amend, modify or waive any provision of Section 7 without the written consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Company, the Banks, the Agent and all future holders of the Notes. In the case of any waiver, the Company, the Banks and the Agent shall be restored to their former position and rights hereunder and under the outstanding Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 8.2 NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in 59 the mail, postage prepaid, or, in the case of telecopy notice, when sent, confirmation of receipt received, addressed as follows in the case of the Company, the Agent, and the CAF Loan Agent and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Company: Columbia Healthcare Corporation 201 West Main Street Louisville, Kentucky 40202 Attention: Treasurer, with a copy to the General Counsel Telecopy: 502-572-2163 The Agent and CAF Loan Agent: Chemical Bank 270 Park Avenue New York, New York 10017 Attention: Carol J. Burt, Managing Director Telecopy: (212) 270-3279 with a copy to: Chemical Bank Agency Services Corporation 140 East 45th Street New York, New York 10017 Attention: Janet Belden and Wallace Chin Telecopy: (212) 270-0854 PROVIDED that any notice, request or demand to or upon the Agent or the Banks pursuant to Section 2 shall not be effective until received. 8.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes. 8.5 PAYMENT OF EXPENSES AND TAXES; INDEMNITY. 60 (a) The Company agrees (i) to pay or reimburse the Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the Notes and any other documents prepared in connection herewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agent, (ii) to pay or reimburse each Bank and the Agent for all their reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes and any such other documents, including, without limitation, reasonable fees and disbursements of counsel to the Agent and to each of the Banks and (iii) to pay, indemnify, and hold each Bank and the Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes and any such other documents. (b) The Company will indemnify each of the Agent and the Banks and the directors, officers and employees thereof and each Person, if any, who controls each one of the Agent and the Banks (any of the foregoing, an "INDEMNIFIED PERSON") and hold each Indemnified Person harmless from and against any and all claims, damages, liabilities and expenses (including without limitation all fees and disbursements of counsel with whom an Indemnified Person may consult in connection therewith and all expenses of litigation or preparation therefor) which an Indemnified Person may incur or which may be asserted against it in connection with any litigation or investigation involving this Agreement, the use of any proceeds of any Loans under this Agreement by the Company or any Subsidiary, any officer, director or employee thereof or the announcement or consummation of the Merger, other than litigation commenced by the Company against any of the Agent or the Banks which (i) seeks enforcement of any of the Company's right hereunder and (ii) is determined adversely to any of the Agent or the Banks. (c) The agreements in this subsection 8.5 shall survive repayment of the Notes and all other amounts payable hereunder. 8.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Banks, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. 61 (b) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS") participating interests in any Loans owing to such Bank, any Notes held by such Bank, any Commitments of such Bank or any other interests of such Bank hereunder. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under this Agreement to the other parties under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Notes for all purposes under this Agreement, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. The Company agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of offset in respect of its participating interest in amounts owing under this Agreement and any Notes to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Notes, PROVIDED that such right of offset shall be subject to the obligation of such Participant to share with the Banks, and the Banks agree to share with such Participant, as provided in subsection 8.7. The Company also agrees that each Participant shall be entitled to the benefits of subsections 2.12, 2.13 and 2.15 with respect to its participation in the Commitments and the Eurodollar Loans outstanding from time to time; PROVIDED that no Participant shall be entitled to receive any greater amount pursuant to such subsections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. No Participant shall be entitled to consent to any amendment, supplement, modification or waiver of or to this Agreement or any Note, unless the same is subject to clause (a) of the proviso to subsection 8.1. (c) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time assign to one or more banks or other entities ("CAF LOAN ASSIGNEES") any CAF Loan owing to such Bank and any Individual CAF Loan Note held by such Bank evidencing such CAF Loan, pursuant to a CAF Loan Assignment executed by the assignor Bank and the CAF Loan Assignee. Upon such execution, from and after the date of such CAF Loan Assignment, the CAF Loan Assignee shall, to the extent of the assignment provided for in such CAF Loan Assignment, be deemed to have the same rights and benefits of payment and enforcement with respect to such CAF Loan and Individual CAF Loan Note and the same rights of offset pursuant to subsection 6.1 and under applicable law and obligation to share pursuant to subsection 8.7 as it would have had if it were a Bank hereunder; PROVIDED that unless such CAF Loan Assignment 62 shall otherwise specify and a copy of such CAF Loan Assignment shall have been delivered to the Agent for its acceptance and recording in the Register in accordance with subsection 8.6(f), the assignor thereunder shall act as collection agent for the CAF Loan Assignee thereunder, and the Agent shall pay all amounts received from the Company which are allocable to the assigned CAF Loan or Individual CAF Loan Note directly to such assignor without any further liability to such CAF Loan Assignee. A CAF Loan Assignee under a CAF Loan Assignment shall not, by virtue of such CAF Loan Assignment, become a party to this Agreement or have any rights to consent to or refrain from consenting to any amendment, waiver or other modification of any provision of this Agreement or any related document; PROVIDED that if a copy of such CAF Loan Assignment shall have been delivered to the Agent for its acceptance and recording in the Register in accordance with subsection 8.6(f), neither the principal amount of, the interest rate on, nor the maturity date of any CAF Loan or Individual CAF Loan Note assigned to the CAF Loan Assignee thereunder will be modified without the written consent of such CAF Loan Assignee. If a CAF Loan Assignee has caused a CAF Loan Assignment to be recorded in the Register in accordance with subsection 8.6(f), such CAF Loan Assignee may thereafter, in the ordinary course of its business and in accordance with applicable law, assign such Individual CAF Loan Note to any Bank, to any affiliate or subsidiary of such CAF Loan Assignee or to any other financial institution that has total assets in excess of $1,000,000,000 and that in the ordinary course of its business extends credit of the type evidenced by such Individual CAF Loan Note, and the foregoing provisions of this subsection 8.6(c) shall apply, MUTATIS MUTANDIS, to any such assignment by a CAF Loan Assignee. Except in accordance with the preceding sentence, CAF Loans and Individual CAF Loan Notes may not be further assigned by a CAF Loan Assignee, subject to any legal or regulatory requirement that the CAF Loan Assignee's assets must remain under its control. (d) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to any Bank or any affiliate thereof, and, with the consent of the Company and the Agent (which in each case shall not be unreasonably withheld) to one or more additional banks or financial institutions ("PURCHASING BANKS") all or any part of its rights and obligations under this Agreement and the Notes pursuant to a Commitment Transfer Supplement, executed by such Purchasing Bank, such transferor Bank and the Agent (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company); PROVIDED, HOWEVER, that (i) the Commitments purchased by such Purchasing Bank that is not then a Bank shall be equal to or greater than $10,000,000 and (ii) the transferor Bank which has transferred part of its Loans and Commitments to any such Purchasing Bank shall retain a minimum Commitment, after giving effect to such sale, equal to or greater than $10,000,000. Upon (i) such execution of such Commitment Transfer Supplement, (ii) delivery of an executed copy 63 thereof to the Company and (iii) payment by such Purchasing Bank, such Purchasing Bank shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement, to the same extent as if it were an original party hereto with the Commitment Percentage of the Commitments set forth in such Commitment Transfer Supplement. Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such transferor Bank under this Agreement and the Notes. Upon the consummation of any transfer to a Purchasing Bank, pursuant to this subsection 8.6(d), the transferor Bank, the Agent and the Company shall make appropriate arrangements so that, if required, replacement Notes are issued to such transferor Bank and new Notes or, as appropriate, replacement Notes, are issued to such Purchasing Bank, in each case in principal amounts reflecting their Commitment Percentages or, as appropriate, their outstanding Loans as adjusted pursuant to such Commitment Transfer Supplement. (e) The Agent shall maintain at its address referred to in subsection 8.2 a copy of each CAF Loan Assignment and each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of (i) the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time, and (ii) with respect to each CAF Loan Assignment delivered to the Agent, the name and address of the CAF Loan Assignee and the principal amount of each CAF Loan owing to such CAF Loan Assignee. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Bank or CAF Loan Assignee at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of a CAF Loan Assignment executed by an assignor Bank and a CAF Loan Assignee, together with payment to the Agent of a registration and processing fee of $1,000, the Agent shall promptly accept such CAF Loan Assignment, record the information contained therein in the Register and give notice of such acceptance and recordation to the assignor Bank, the CAF Loan Assignee and the Company. Upon its receipt of a Commitment Transfer Supplement executed by a transferor Bank and a Purchasing Bank (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company and the Agent) together with payment to the Agent of a registration and processing fee of $2,500, the Agent shall (i) promptly accept such Commitment Transfer Supplement (ii) on the Transfer Effective Date determined pursuant thereto record the information 64 contained therein in the Register and give notice of such acceptance and recordation to the Banks and the Company. (g) Subject to subsection 5.5(g), the Company authorizes each Bank to disclose to any Participant, CAF Loan Assignee or Purchasing Bank (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such Bank's possession concerning the Company which has been delivered to such Bank by the Company pursuant to this Agreement or which has been delivered to such Bank by the Company in connection with such Bank's credit evaluation of the Company prior to entering into this Agreement. (h) If, pursuant to this subsection 8.6, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank, the Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Company or the transferor Bank with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the case of any Purchasing Bank and any CAF Loan Assignee registered in the Register, the Agent and the Company) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Bank, to provide the transferor Bank (and, in the case of any Purchasing Bank and any CAF Loan Assignee registered in the Register, the Agent and the Company) a new form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. (i) Nothing herein shall prohibit any Bank or any Affiliate thereof from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. 8.7 ADJUSTMENTS; SET-OFF. If any Bank (a "BENEFITTED BANK") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by offset, pursuant to events or proceedings of the nature referred to in subsection 6.1(f), or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Loans, or interest thereon, such Benefitted Bank shall purchase for cash from the other Banks such portion of each such other Bank's Loans, or shall provide 65 such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another Bank's Loan may exercise all rights of a payment (including, without limitation, rights of offset) with respect to such portion as fully as if such Bank were the direct holder of such portion. 8.8 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 8.9 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.10 WAIVERS OF JURY TRIAL. THE COMPANY, THE AGENT, THE CAF LOAN AGENT AND THE BANKS EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 8.11 SUBMISSION TO JURISDICTION; WAIVERS. The Company hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; and (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same. 66 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLUMBIA HEALTHCARE CORPORATION By: ------------------------------------- Name: Title: CHEMICAL BANK, as Agent, as CAF Loan Agent and as a Bank By: ------------------------------------- Name: Title: BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, N.A., as a Co- Agent and as a Bank By: ------------------------------------- Name: Title: 67 CITIBANK, N.A., as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: 68 NATIONSBANK OF NORTH CAROLINA, N.A., as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: PNC BANK, KENTUCKY, INC., as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: TORONTO DOMINION (TEXAS), INC., as a Co- Agent and as a Bank By: ------------------------------------- Name: Title: WACHOVIA BANK OF GEORGIA, N.A., as a Co- Agent and as a Bank By: ------------------------------------- Name: Title: CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: ------------------------------------- Name: Title: 69 FIRST INTERSTATE BANK OF CALIFORNIA By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE FUJI BANK, LIMITED, HOUSTON AGENCY By: ------------------------------------- Name: Title: SHAWMUT BANK-CONNECTICUT, N.A. By: ------------------------------------- Name: Title: NATIONAL CITY BANK By: ------------------------------------- Name: Title: THIRD NATIONAL BANK IN NASHVILLE By: ------------------------------------- Name: Title: 70 THE SANWA BANK, LIMITED, ATLANTA AGENCY By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: J.P. MORGAN DELAWARE By: ------------------------------------- Name: Title: THE SAKURA BANK, LTD. NEW YORK BRANCH By: ------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: ------------------------------------- Name: Title: 71 THE LONG-TERM CREDIT BANK OF JAPAN By: ------------------------------------- Name: Title: MELLON BANK, N.A. By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE MITSUBISHI BANK, LTD. By: ------------------------------------- Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: ROYAL BANK OF CANADA By: ------------------------------------- Name: Title: 72 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By: ------------------------------------- Name: Title: SWISS BANK CORPORATION By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE TOKAI BANK, LIMITED, NEW YORK BRANCH By: ------------------------------------- Name: Title: NBD BANK, N.A. By: ------------------------------------- Name: Title: THE BANK OF TOKYO TRUST COMPANY By: ------------------------------------- Name: Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By: ------------------------------------- Name: Title: 73 AMSOUTH BANK N.A. By: ------------------------------------- Name: Title: ARAB BANK PLC, GRAND CAYMAN BRANCH By: ------------------------------------- Name: Title: BANK ONE, TEXAS, NA By: ------------------------------------- Name: Title: BARNETT BANK OF TAMPA By: ------------------------------------- Name: Title: THE BOATMEN'S NATIONAL BANK OF ST. LOUIS By: ------------------------------------- Name: Title: THE DAIWA BANK, LTD. By: ------------------------------------- Name: Title: FIRST AMERICAN NATIONAL BANK By: ------------------------------------- Name: Title: 74 LIBERTY NATIONAL BANK AND TRUST COMPANY OF LOUISVILLE By: ------------------------------------- Name: Title: THE NORTHERN TRUST COMPANY By: ------------------------------------- Name: Title: UNITED STATES NATIONAL BANK OF OREGON By: ------------------------------------- Name: Title: BANK OF LOUISVILLE & TRUST CO. By: ------------------------------------- Name: Title: SCHEDULE I COMMITMENT AMOUNTS AND PERCENTAGES; LENDING OFFICES; ADDRESSES FOR NOTICE A. COMMITMENT AMOUNTS AND PERCENTAGES.
COMMITMENT COMMITMENT NAME OF BANK AMOUNT PERCENTAGE - ------------ ---------- ---------- CHEMICAL BANK $43,333,333.33 4.33% BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION $40,000,000.00 4.00% THE BANK OF NOVA SCOTIA $40,000,000.00 4.00% THE CHASE MANHATTAN BANK, N.A. $40,000,000.00 4.00% CITIBANK, N.A. $40,000,000.00 4.00% DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES $40,000,000.00 4.00% THE FIRST NATIONAL BANK OF CHICAGO $40,000,000.00 4.00% THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH $40,000,000.00 4.00% MORGAN GUARANTY TRUST COMPANY OF NEW YORK $20,000,000.00 2.00% NATIONSBANK OF NORTH CAROLINA, N.A. $40,000,000.00 4.00% PNC BANK, KENTUCKY, INC. $40,000,000.00 4.00% TORONTO DOMINION (TEXAS), INC. $40,000,000.00 4.00% WACHOVIA BANK OF GEORGIA, N.A. $40,000,000.00 4.00% CREDIT LYONNAIS CAYMAN ISLAND BRANCH $25,000,000.00 2.50% FIRST INTERSTATE BANK OF CALIFORNIA $25,000,000.00 2.50% THE FUJI BANK, LIMITED, HOUSTON AGENCY $25,000,000.00 2.50% SHAWMUT BANK-CONNECTICUT, N.A. $25,000,000.00 2.50% NATIONAL CITY BANK $25,000,000.00 2.50% THIRD NATIONAL BANK IN NASHVILLE $25,000,000.00 2.50% THE SANWA BANK, LIMITED, ATLANTA AGENCY $23,333,333.33 2.33% J.P. MORGAN DELAWARE $20,000,000.00 2.00% THE SAKURA BANK, LTD. NEW YORK BRANCH $20,000,000.00 2.00%
2 ABN AMRO BANK N.V. $16,666,666.67 1.67% FIRST UNION NATIONAL BANK OF NORTH CAROLINA $16,666,666.67 1.67% THE LONG-TERM CREDIT BANK OF JAPAN $16,666,666.67 1.67% MELLON BANK, N.A. $16,666,666.67 1.67% THE MITSUBISHI BANK, LTD. $16,666,666.67 1.67% COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH $16,666,666.67 1.67% ROYAL BANK OF CANADA $16,666,666.67 1.67% THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH $16,666,666.67 1.67% SWISS BANK CORPORATION $16,666,666.67 1.67% THE TOKAI BANK, LIMITED, NEW YORK BRANCH $16,666,666.67 1.67% NBD BANK, N.A. $10,000,000.00 1.00% THE BANK OF TOKYO TRUST COMPANY $10,000,000.00 1.00% THE MITSUBISHI TRUST AND BANKING CORPORATION $10,000,000.00 1.00% AMSOUTH BANK N.A. $ 8,333,333.33 0.83% ARAB BANK PLC, GRAND CAYMAN BRANCH $ 8,333,333.33 0.83% BANK ONE, TEXAS, NA $ 8,333,333.33 0.83% BARNETT BANK OF TAMPA $ 8,333,333.33 0.83% THE BOATMEN'S NATIONAL BANK OF ST. LOUIS $ 8,333,333.33 0.83% THE DAIWA BANK, LTD. $ 8,333,333.33 0.83% FIRST AMERICAN NATIONAL BANK $ 8,333,333.33 0.83% LIBERTY NATIONAL BANK AND TRUST COMPANY OF LOUISVILLE $ 8,333,333.33 0.83% THE NORTHERN TRUST COMPANY $ 8,333,333.33 0.83% UNITED STATES NATIONAL BANK OF OREGON $ 8,333,333.33 0.83% BANK OF LOUISVILLE & TRUST CO. $ 3,333,333.33 0.33% -------------- ------- TOTAL $1,000,000,000 100.00% -------------- ------- -------------- -------
3 B. LENDING OFFICES; ADDRESSES FOR NOTICE. CHEMICAL BANK Domestic Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Eurodollar Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Address for Notices: See subsection 8.2 of the Credit Agreement ABN AMRO BANK N.V. Domestic Lending Office: ABN AMRO Bank N.V. - Pittsburgh Branch One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Eurodollar Lending Office: ABN AMRO Bank N.V. - Pittsburgh Branch One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Address for Notices: ABN AMRO Bank N.V. - Pittsburgh Branch One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Attention: Dennis F. Lennon Telecopy: (412) 566-2266 Confirmation: (412) 566-2256 4 AMSOUTH BANK N.A. Domestic Lending Office: AmSouth Bank N.A. 1900 5th Ave. North Birmingham, AL 35203 Eurodollar Lending Office: AmSouth Bank N.A. 1900 5th Ave. North Birmingham, AL 35203 Address for Notices: AmSouth Bank N.A. 1900 5th Ave. North Birmingham, AL 35203 Attention: William Page Barnes Telecopy: (205) 326-4075 Confirmation: (205) 326-4081 ARAB BANK PLC, GRAND CAYMAN BRANCH Domestic Lending Office: Arab Bank Plc, Grand Cayman Branch 520 Madison Avenue New York, NY 10022 Eurodollar Lending Office: Arab Bank Plc, Grand Cayman Branch 520 Madison Avenue New York, NY 10022 Address for Notices: Arab Bank Plc, Grand Cayman Branch 520 Madison Avenue New York, NY 10022 Attention: Peter Boyadjian Telecopy: (212) 593-4652 Confirmation: (212) 715-9714 5 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION Domestic Lending Office: Bank of America National Trust & Savings Association 555 S. Flower Street #5618 Los Angeles, CA 90071 Eurodollar Lending Office: Bank of America National Trust & Savings Association 1850 Gateway Blvd., 4th Floor Concord, CA 94520 Address for Notices: Bank of America National Trust & Savings Association 555 S. Flower Street #5618 Los Angeles, CA 90071 Attention: Katherine McNallen Telecopy: (213) 228-2958 Confirmation: (213) 228-2756 BANK OF LOUISVILLE & TRUST CO. Domestic Lending Office: Bank of Louisville & Trust Co. Eurodollar Lending Office: Bank of Louisville & Trust Co. Address for Notices: Bank of Louisville & Trust Co. Attention: Telecopy: Confirmation: THE BANK OF NOVA SCOTIA Domestic Lending Office: The Bank of Nova Scotia 55 Park Place Suite 650 Atlanta, GA 30808 Eurodollar Lending Office: The Bank of Nova Scotia 55 Park Place Suite 650 Atlanta, GA 30808 Address for Notices: The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street Suite 2700 Atlanta, GA 30308 Attention: Joe Legista Telecopy: (404) 888-8998 Confirmation: (408) 877-1562 6 THE BANK OF TOKYO TRUST COMPANY Domestic Lending Office: The Bank of Tokyo Trust Company 100 Broadway New York, NY 10005 Eurodollar lending Office: The Bank of Tokyo Trust Company 100 Broadway New York, NY 10005 Address for Notices: The Bank of Tokyo Trust Company 100 Broadway New York, NY 10005 Attention: Telecopy: Confirmation: BANK ONE, TEXAS, NA Domestic Lending Office: Bank One, Texas, NA 500 Throckmorton Fort Worth, TX 76102 Eurodollar Lending Office: Bank One, Texas, NA 500 Throckmorton Fort Worth, TX 76102 Address for Notices: Bank One, Texas, NA 500 Throckmorton, 6th Floor Fort Worth, TX 76102 Attention: J. Michael Wilson Telecopy: (817) 884-5697 Confirmation: (817) 884-4283 BARNETT BANK OF TAMPA Domestic Lending Office: Barnett Bank of Tampa 50 North Laura Street Jacksonville, FL 32202 Eurodollar Lending Office: Barnett Bank of Tampa 50 North Laura Street Jacksonville, FL 32202 Address for Notices: Barnett Bank 101 E. Kennedy Blvd. P. O. Box 30014 Tampa, FL 33630 Attn: W. Thomas Bowry, Jr. 7 Telecopy: (813) 225-8752 Confirmation: (813) 225-8140 THE BOATMEN'S NATIONAL BANK OF ST. LOUIS Domestic Lending Office: The Boatmen's National Bank of St. Louis One Boatmen's Plaza 800 Market Street St. Louis, MO 63166 Eurodollar Lending Office: The Boatmen's National Bank of St. Louis One Boatmen's Plaza 800 Market Street St. Louis, MO 63166 Address for Notices: The Boatmen's National Bank of St. Louis One Boatmen's Plaza 800 Market Street P. O. Box 236 St. Louis, MO 63166 Attention: Telecopy: Confirmation: THE CHASE MANHATTAN BANK, N.A. Domestic Lending Office: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, NY 10081 Eurodollar Lending Office: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, NY 10081 Address for Notices: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza 5th Floor New York, NY 10081 Attention: Elliot Jones Telecopy: (212) 552-1457 Confirmation: (212) 552-5302 CITIBANK, N.A. Domestic Lending Office: Citicorp North America, Inc. 2001 Ross Ave., Suite 1400 Dallas, TX 75201 8 Eurodollar Lending Office: Citicorp North America, Inc. 2001 Ross Ave., Suite 1400 Dallas, TX 75201 Address for Notices: Citicorp North America, Inc. 2001 Ross Ave., Suite 1400 Dallas, TX 75201 Attention: J. Lang Aston Telecopy: (214) 953-3888 Confirmation: (214) 953-3833 CREDIT LYONNAIS CAYMAN ISLAND BRANCH Domestic Lending Office: Credit Lyonnais Cayman Island Branch 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Eurodollar Lending Office: Credit Lyonnais Cayman Island Branch 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Address for Notices: Credit Lyonnais Cayman Island Branch 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Attention: Brian Jackson Telecopy: (312) 641-0527 Confirmation: (312) 220-7309 THE DAIWA BANK, LTD. Domestic Lending Office: The Daiwa Bank, Ltd. 75 Rockefeller Plaza 8th Floor New York, NY 10019 Eurodollar Lending Office: The Daiwa Bank, Ltd. 75 Rockefeller Plaza 8th Floor New York, NY 10019 Address for Notices: The Daiwa Bank, Ltd. 75 Rockefeller Plaza 8th Floor New York, NY 10019 Attention: Telecopy: Confirmation: 9 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES Domestic Lending Office: Deutsche Bank AG, New York Branch 31 West 52nd Street New York, NY 10019 Eurodollar Lending Office: Deutsche Bank, AG, Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Address for Notices: Deutsche Bank AG, New York Branch 31 West 52nd Street New York, NY 10019 Attention: Robert A. Maddux, Director Telecopy: (212) 474-8212 Confirmation: (212) 474-8228 FIRST AMERICAN NATIONAL BANK Domestic lending Office: First American National Bank 327 Union Street Nashville, TN 37237 Eurodollar Lending Office: First American National Bank 327 Union Street Nashville, TN 37237 Address for Notices: First American National Bank First American Center Health Care Division - 2nd FL First Union Street Nashville, TN 37237-0203 Attention: Mark Mattson Telecopy: (615) 748-2812 Confirmation: (615) 748-1479 10 FIRST INTERSTATE BANK OF CALIFORNIA Domestic Lending Office: First Interstate Bank of California 707 Wilshire Blvd. Los Angeles, CA 90017 Eurodollar Lending Office: First Interstate Bank of California 707 Wilshire Blvd. Los Angeles, CA 90017 Address for Notices: First Interstate Bank of California 707 Wilshire Blvd. Los Angeles, CA 90017 Attention: Bruce P. McDonald Telecopy: (213) 614-2569 Confirmation: (213) 614-4879 THE FIRST NATIONAL BANK OF CHICAGO Domestic Lending Office: First National Bank of Chicago One First National Plaza Chicago, IL 60670 Eurodollar Lending Office: First National Bank of Chicago One First National Plaza Chicago, IL 60670 Address for Notices: First National Bank of Chicago One First National Plaza Mail Suite 0091 Chicago, IL 60670 Attn: L. Richard Schiller Telecopy: (312) 732-2016 Confirmation: (312) 732-5932 11 FIRST UNION NATIONAL BANK OF NORTH CAROLINA Domestic Lending Office: First Union National Bank of North Carolina 301 S. College Street Charlotte, NC 28202 Eurodollar Lending Office: First Union National Bank of North Carolina 301 S. College Street Charlotte, NC 28202 Address for Notices: First Union National Bank of North Carolina One FUNB Plaza - 19th FL Charlotte, NC 28288-0735 Attention: John Ronson Telecopy: (704) 374-4092 Confirmation: (704) 383-5212 THE FUJI BANK, LIMITED, HOUSTON AGENCY Domestic Lending Office: The Fuji Bank, Limited, Houston Agency 909 Fannin, Suite 2800 Houston, TX 77010 Eurodollar Lending Office: The Fuji Bank, Limited, Houston Agency 909 Fannin 2 Houston Center, Suite 2800 Houston, TX 77010 Address for Notices: The Fuji Bank, Limited, Houston Agency 909 Fannin, Suite 2800 Houston, TX 77010 Attention: Glenn Mealey Telecopy: (713) 759-0048 Confirmation: (713) 759-1800 12 THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH Domestic Lending Office: The Industrial Bank of Japan Trust Company 245 Park Avenue New York, NY 10167 Eurodollar Lending Office: The Industrial Bank of Japan Trust Company 245 Park Avenue New York, NY 10167 Address for Notices: The Industrial Bank of Japan, Limited New York Branch 245 Park Avenue, 23rd FL New York, NY 10167 Attention: Tomoya Aoki Telecopy: (212) 856-9450 Confirmation: (212) 309-6595 J.P. MORGAN DELAWARE Domestic Lending Office: J.P. Morgan Delaware 500 Stanton-Christiana Road Newark, DE 19713-2007 Eurodollar Lending Office: J.P. Morgan Delaware 500 Stanton-Christiana Road Newark, DE 19713-2007 Address for Notices: J.P. Morgan Delaware 902 Market Street Wilmington, DE 19801-3015 Attention: David J. Morris Telecopy: (302) 651-3788 Confirmation: (302) 654-5336 13 LIBERTY NATIONAL BANK AND TRUST COMPANY OF LOUISVILLE Domestic Lending Office: Liberty National Bank and Trust Company of Louisville 416 West Jefferson Street Louisville, KY 40202 Eurodollar Lending Office: Liberty National Bank and Trust Company of Louisville 416 West Jefferson Street Louisville, KY 40202 Address for Notices: Liberty National Bank and Trust Company of Louisville 416 West Jefferson Street Louisville, KY 40202 Attention: Earl A. Dorsey, Jr. Telecopy: (502) 566-2367 Confirmation: (502) 566-2458 THE LONG-TERM CREDIT BANK OF JAPAN Domestic Lending Office: The Long-Term Credit Bank of Japan 165 Broadway, 49th Floor New York, NY 10006 Eurodollar Lending Office: The Long-Term Credit Bank of Japan 165 Broadway, 49th Floor New York, NY 10006 Address for Notices: The Long-Term Credit Bank of Japan New York Branch 165 Broadway, 49th Floor New York, NY 10006 Attention: Theodore Koerner Telecopy: (212) 608-2371 Confirmation: (212) 335-4566 14 MELLON BANK, N.A. Domestic Lending Office: Mellon Bank, N.A. 2 Mellon Bank Center, Room 2 Pittsburgh, PA 15259 Eurodollar Lending Office: Mellon Bank, N.A. 2 Mellon Bank Center, Room 2 Pittsburgh, PA 15259 Address for Notices: Mellon Bank, N.A. 2 Mellon Bank Center, Room 270 Pittsburgh, PA 15259 Attention: Marsha Wicker Telecopy: (412) 234-9010 Confirmation: (412) 234-3594 THE MITSUBISHI BANK, LTD. Domestic Lending Office: The Mitsubishi Bank, Ltd. 2 World Financial Center 225 Liberty Street, 39th Floor New York, NY 10281 Eurodollar Lending Office: The Mitsubishi Bank, Ltd. 2 World Financial Center 225 Liberty Street, 39th Floor New York, NY 10281 Address for Notices: The Mitsubishi Bank, Ltd. 225 Liberty Street 2 World Financial Center 225 Liberty Street, 39th Floor New York, NY 10281-1059 Attention: Hiroaki Fuchida Telecopy: (212) 667-3562 Confirmation: (212) 667-2884 15 THE MITSUBISHI TRUST AND BANKING CORPORATION Domestic Lending Office: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 25th Floor New York, NY 10022 Eurodollar Lending Office: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 25th Floor New York, NY 10022 Address for Notices: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 25th Floor New York, NY 10022 Attn: Randolph E. J. Medrano Telecopy: (212) 755-2349 Confirmation: (212) 891-8212 MORGAN GUARANTY TRUST COMPANY OF NEW YORK Domestic Lending Office: Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Eurodollar Lending Office: Morgan Guaranty Trust Company of New York Nassau, Bahamas Office c/o J.P. Morgan Services Inc. Euro-Loan Servicing Unit Morgan Christiana Center 500 Stanton Christiana Road Newark, DE 19713 Address for Notices: Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Attention: Laura E. Reim Telecopy: (212) 648-5336 Confirmation: (212) 648-6793 16 NATIONAL CITY BANK Domestic Lending Office: National City Bank 101 South Fifth Street Louisville, KY 40202 Eurodollar Lending Office: National City Bank 101 South Fifth Street Louisville, KY 40202 Address for Notices: National City Bank P. O. Box 36000 Louisville, KY 40233 Attention: Charles Denny Telecopy: (502) 581-4424 Confirmation: (502) 581-4212 NATIONSBANK OF NORTH CAROLINA, N.A. Domestic Lending Office: NationsBank of North Carolina N.A. 1 NationsBank Plaza Charlotte, NC 28255 Eurodollar Lending Office: NationsBank of North Carolina N.A. 1 NationsBank Plaza Charlotte, NC 28255 Address for Notices: NationsBank of North Carolina N.A. Corporate Bank 1 NationsBank Plaza - 5th FL Nashville, TN 37239-1694 Attention: Ashley Crabtree Telecopy: (615) 749-4640 Confirmation: (615) 749-3524 17 NBD BANK, N.A. Domestic Lending Office: NBD Bank, N.A. 611 Woodward Avenue Detroit, MI 48226 Eurodollar Lending Office: NBD Bank, N.A. 611 Woodward Avenue Detroit, MI 48226 Address for Notices: NBD Bank, N.A. 611 Woodward Avenue Detroit, MI 48226 Attention: Steven P. Clemens Telecopy: (313) 225-1671 Confirmation: (313) 225-1314 THE NORTHERN TRUST COMPANY Domestic Lending Office: The Northern Trust Company 50 South La Salle Street Chicago, IL 60657 Eurodollar Lending Office: The Northern Trust Company 50 South La Salle Street Chicago, IL 60657 Address for Notices: The Northern Trust Company 50 South La Salle Street Chicago, IL 60657 Attention: Robert Jones Telecopy: (312) 444-3508 Confirmation: (312) 444-4575 PNC BANK, KENTUCKY, INC. Domestic Lending Office: PNC Bank, Kentucky, Inc. Citizens Plaza Louisville, KY 40296 Eurodollar Lending Office: PNC Bank, Kentucky, Inc. Citizens Plaza Louisville, KY 40296 Address for Notices: PNC Bank, Kentucky, Inc. 500 West Jefferson Street Louisville, KY 40202 Attention: Jefferson Green Telecopy: (502) 581-3355 Confirmation: (502) 581-3248 18 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH Domestic Lending Office: Rabobank Nederland 245 Park Avenue New York, NY 10022 Eurodollar Lending Office: Rabobank Nederland 245 Park Avenue New York, NY 10022 Address for Notices: Rabobank Nederland New York Branch 245 Park Avenue New York, NY 10022 Attention: Paul Beiboer Telecopy: (212) 916-7837 Confirmation: (212) 916-7883 ROYAL BANK OF CANADA Domestic Lending Office: Royal Bank of Canada Pierrepont Plaza 300 Cadman Plaza West Brooklyn, NY 11201 Eurodollar Lending Office: Royal Bank of Canada Pierrepont Plaza 300 Cadman Plaza West Brooklyn, NY 11201 Address for Notices: Royal Bank of Canada New York Operations Center Pierrepont Plaza 300 Cadman Plaza West Brooklyn, NY 11201-2701 Attention: Linda Swanston Telecopy: (718) 522-6292/6293 Confirmation: (212) 858-7176 19 THE SAKURA BANK, LTD. NEW YORK BRANCH Domestic Lending Office: The Sakura Bank, Ltd. New York Branch 277 Park Avenue New York, NY 10172 Eurodollar Lending Office: The Sakura Bank, Ltd. New York Branch 277 Park Avenue New York, NY 10172 Address for Notices: The Sakura Bank, Ltd. New York Branch 277 Park Avenue New York, NY 10172 Attention: Yoshikazu Nagura Telecopy: (212) 888-7651 Confirmation: (212) 756-6804 THE SANWA BANK, LIMITED, ATLANTA AGENCY Domestic Lending Office: The Sanwa Bank, Limited 133 Peachtree Street Suite 4750 Atlanta, GA 30303 Eurodollar Lending Office: The Sanwa Bank, Limited 133 Peachtree Street Suite 4750 Atlanta, GA 30303 Address for Notice: The Sanwa Bank, Limited 133 Peachtree Street Suite 4750 Atlanta, GA 30303 Attention: Kristie Hartrampf Telecopy: (404) 589-1629 Confirmation: (404) 586-6893 20 SHAWMUT BANK - CONNECTICUT, N.A. Domestic Lending Office: Shawmut Bank - Connecticut, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Eurodollar Lending Office: Shawmut Bank - Connecticut, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Address for Notice: Shawmut Bank - Connecticut, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Attention: James Scully Telecopy: (203) 986-5367 Confirmation: (203) 986-7005 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH Domestic Lending Office: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Eurodollar Lending Office: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Address for Notices: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Attention: Jeff Toner Telecopy: (212) 553-0118 Confirmation: (212) 553-1864 21 SWISS BANK CORPORATION Domestic Lending Office: Swiss Bank Corporation 10 East 50th Street New York, NY 10022 Eurodollar Lending Office: Swiss Bank Corporation 10 East 50th Street New York, NY 10022 Address for Notices: Swiss Bank Corporation 101 California Street Suite 1700 San Francisco, CA 94111 Attention: Colin T. Taylor Telecopy: (414) 774-3345 Confirmation: (415) 989-7570 THIRD NATIONAL BANK IN NASHVILLE Domestic Lending Office: Third National Bank In Nashville 201 Fourth Avenue North Nashville, TN 37244 Eurodollar Lending Office: Third National Bank In Nashville 201 Fourth Avenue North Nashville, TN 37244 Address for Notices: Third National Bank In Nashville P.O. Box 305110 Nashville, TN 37230-5110 Attention: Leigh Ann Gregory Telecopy: (615) 748-4089 Confirmation: (615) 748-5461 22 THE TOKAI BANK, LIMITED, NEW YORK BRANCH Domestic Lending Office: The Tokai Bank, Ltd. New York Branch 55 East 52nd Street New York, NY 10055 Eurodollar Lending Office: The Tokai Bank, Ltd. New York Branch 55 East 52nd Street New York, NY 10055 Address for Notices: The Tokai Bank, Ltd. New York Branch 55 East 52nd Street New York, NY 10055 Attention: Stuart Schulman Telecopy: (212) 754-2170 Confirmation: (212) 339-1117 TORONTO DOMINION (TEXAS), INC. Domestic Lending Office: The Toronto-Dominion Bank, Houston Agency 909 Fannin Street, Suite 1700 Houston, TX 77010 Eurodollar Lending Office: The Toronto-Dominion Bank, Houston Agency 909 Fannin Street, Suite 1700 Houston, TX 77010 Address for Notices: The Toronto-Dominion Bank, USA Division 31 West 52nd Street New York, NY 10019-6101 Attention: Beth Olmstead Telecopy: (212) 262-1929 Confirmation: (212) 468-0754 23 UNITED STATES NATIONAL BANK OF OREGON Domestic Lending Office: United States National Bank of Oregon 309 SW 6th Avenue, BB12 Portland, OR 97204 Eurodollar Lending Office: United States National Bank of Oregon 309 SW 6th Avenue, BB12 Portland, OR 97204 Address for Notices: United States National Bank of Oregon 309 SW 6th Avenue, BB12 Portland, OR 97204 Attention: Chris Kerlin Telecopy: (503) 275-5428 Confirmation: (503) 275-4940 WACHOVIA BANK OF GEORGIA, N.A. Domestic Lending Office: Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, GA 30303 Eurodollar Lending Office: Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, GA 30303 Address for Notices: Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. 28th Floor Atlanta, GA 30303 Attention: Solomon Elisha Telecopy: (404) 332-6898 Confirmation: (404) 332-1092 SCHEDULE V APPLICABLE MARGINS
- -------------------------------------------------------------------------------- REVOLVING CREDIT LOANS - -------------------------------------------------------------------------------- ALTERNATE BASE RATE LOANS EURODOLLAR LOANS - -------------------------------------------------------------------------------- Level I Period .0000% .2500% - -------------------------------------------------------------------------------- Level II Period .0000% .2250% - -------------------------------------------------------------------------------- Level III Period .0000% .2500% - -------------------------------------------------------------------------------- Level IV Period .0000% .3750% - -------------------------------------------------------------------------------- Level V Period .0000% .5000% - --------------------------------------------------------------------------------
EXHIBIT A [FORM OF REVOLVING CREDIT NOTE] $_____________ New York, New York February __, 1994 FOR VALUE RECEIVED, the undersigned, COLUMBIA HEALTHCARE CORPORATION, a Delaware corporation (the "Company"), hereby unconditionally promises to pay to the order of _______________________________ (the "Bank") at the office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) _______________ DOLLARS ($__________), or, if less, (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Bank to the Company pursuant to subsection 2.1 of the Credit Agreement hereinafter referred to (the "Credit Agreement"). The principal amount of each Revolving Credit Loan evidenced hereby shall be payable on the Termination Date. The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the applicable interest rate per annum determined as provided in, and payable as specified in, subsection 2.7 of the Credit Agreement. The holder of this Note is authorized to record the date, Type and amount of each Revolving Credit Loan made by the Bank pursuant to subsection 2.1 of the Credit Agreement, the date and amount of each repayment of principal hereof, the date of each interest rate conversion pursuant to subsection 2.6 of the Credit Agreement and the principal amount subject thereto, and in the case of Eurodollar Loans, the interest rate and maturity date with respect thereto on the schedules annexed hereto and made a part hereof or on any other record customarily maintained by such Bank with respect to this Note and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed; PROVIDED, HOWEVER, that the failure to make any such endorsement shall not affect the obligations of the Company in respect of such Revolving Credit Loan. This Note is one of the Revolving Credit Notes referred to in the $_____________ Credit Agreement dated as of February __, 1994, among the Company, the Bank, the other banks and financial institutions from time to time parties thereto and Chemical Bank, as Agent and CAF Loan Agent, and is entitled to the benefits thereof. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. 2 All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. COLUMBIA HEALTHCARE CORPORATION By______________________ Title: Schedule 1 to Note ------------- ALTERNATE BASE RATE LOANS LOANS AND PAYMENTS OF PRINCIPAL
Amount Amount Converted Amount Converted Amount to Alter- of to Euro- Unpaid of nate Base Principal dollar Principal Notation Date Loans Rate Loans Repaid Loans Balance Made By ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________
2 ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________ ____ ______ __________ _________ _________ _________ _________
Schedule 2 to Note ------------- EURODOLLAR LOANS LOANS AND PAYMENTS OF PRINCIPAL
Amount Amount Converted Amount Converted Amount to Euro- of to Alter- Unpaid of dollar Principal nate Base Principal Notation Date Loans Loans Repaid Rate Loans Balance Made By ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________
2 ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________ ____ ______ _________ _________ _________ _________ _________
EXHIBIT B [FORM OF GRID CAF LOAN NOTE] PROMISSORY NOTE $_____________ New York, New York February __, 1994 FOR VALUE RECEIVED, the undersigned, COLUMBIA HEALTHCARE CORPORATION, a Delaware corporation (the "COMPANY"), hereby unconditionally promises to pay to the order of ______________________________ (the "BANK") at the office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) ____________________ DOLLARS ($_________), or, if less, (b) the aggregate unpaid principal amount of all CAF Loans that are (i) made by the Bank to the Company pursuant to subsection 2.2 of the Credit Agreement hereinafter referred to (the "CREDIT AGREEMENT") and (ii) not evidenced by an Individual CAF Loan Note executed and delivered by the Company pursuant to subsection 2.2(g) of the Credit Agreement. The principal amount of each CAF Loan evidenced hereby shall be payable on the maturity date therefor set forth on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof (the "GRID"). The Company further agrees to pay interest in like money at such office on the unpaid principal amount of each CAF Loan evidenced hereby, at the rate per annum set forth in respect of such CAF Loan on the Grid, calculated on the basis of a year of 360 days and actual days elapsed from the date of such CAF Loan until the due date thereof (whether at the stated maturity, by acceleration or otherwise) and thereafter at the rates determined in accordance with subsection 2.2(e) of the Credit Agreement. Interest on each CAF Loan evidenced hereby shall be payable on the date or dates set forth in respect of such CAF Loan on the Grid. CAF Loans evidenced by this Note may not be prepaid. The holder of this Note is authorized to endorse on the Grid the date, amount, interest rate, interest payment dates and maturity date in respect of each CAF Loan made pursuant to subsection 2.2 of the Credit Agreement, each payment of principal with respect thereto and any transfer of such CAF Loan from this Note to an Individual CAF Loan Note delivered to the Bank pursuant to subsection 2.2(g) of the Credit Agreement, which endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed; PROVIDED, HOWEVER, that the failure to make any such endorsement shall not affect the obligations of the Company in respect of such CAF Loan. This Note is one of the Grid CAF Loan Notes referred to in the $___________ Credit Agreement dated as of February __, 1994, among the Company, the Bank, the other 2 banks and financial institutions from time to time parties thereto and Chemical Bank, as Agent and CAF Loan Agent, and is entitled to the benefits thereof. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. COLUMBIA HEALTHCARE CORPORATION By______________________ Title: SCHEDULE OF CAF LOANS
Date of Transfer Date Amount Interest to Indi- of of Interest Payment Maturity Payment vidual Author- Loan Loan Rate Dates Date Date Note ization - ---- ------ -------- -------- -------- ------- -------- ------- ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______
EXHIBIT C [FORM OF INDIVIDUAL CAF LOAN NOTE] NON-NEGOTIABLE CAF LOAN NOTE $_____________ New York, New York ____________, 19__ FOR VALUE RECEIVED, the undersigned, COLUMBIA HEALTHCARE CORPORATION, a Delaware corporation (the "COMPANY"), hereby promises to pay on ___________, 19__ to the order of _______________________ (the "BANK") at the office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal sum of ______________ DOLLARS ($__________). The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time from the date hereof at the rate of ___% per annum (calculated on the basis of a year of 360 days and actual days elapsed) until the due date hereof (whether at the stated maturity, by acceleration, or otherwise) and thereafter at the rates determined in accordance with subsection 2.2(e) of the $____________ Credit Agreement, dated as of February __, 1994 (the "CREDIT AGREEMENT"), among the Company, the Bank, the other banks and financial institutions from time to time parties thereto and Chemical Bank, as Agent and CAF Loan Agent. Interest shall be payable on ____________________. This Note may not be prepaid. This Note is one of the Individual CAF Loan Notes referred to in, is subject to and is entitled to the benefits of, the Credit Agreement, which Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. 2 Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by and construed in accordance with the laws of the State of New York. COLUMBIA HEALTHCARE CORPORATION By:______________________ Title: EXHIBIT D [FORM OF CAF LOAN REQUEST] ________________, 19__ Chemical Bank, as CAF Loan Agent 270 Park Avenue New York, New York 10017 Dear Sirs: Reference is made to the $___________ Credit Agreement, dated as of February __, 1994, among the undersigned, the Banks named therein and Chemical Bank, as Agent and CAF Loan Agent (the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein as therein defined. This is a [LIBOR Auction Advance Rate] [Fixed Rate Auction Advance] Request pursuant to subsection 2.2 of the Credit Agreement requesting quotes for the following CAF Loans: Aggregate Principal Amount $_______ $_______ $_______ CAF Loan Date _______ _______ _______ [Interest Period]* _______ _______ _______ Maturity Date** _______ _______ _______ Interest Payment Dates _______ _______ _______
Very truly yours, COLUMBIA HEALTHCARE CORPORATION By:_______________________ Title: [Note: Pursuant to the Credit Agreement, a CAF Loan Request may be transmitted in writing, or by facsimile transmission, or by telephone, immediately confirmed by facsimile transmission. In any case, a CAF Loan Request shall contain the information specified in the second paragraph of this form.] - ----------------------------- */ Insert only in a LIBOR Auction Advance Request. **/ In a LIBOR Auction Advance Request, insert last day of Interest Period. EXHIBIT E [FORM OF CAF LOAN OFFER] ________________, 19__ Chemical Bank, as CAF Loan Agent 270 Park Avenue New York, New York 10017 Dear Sirs: Reference is made to the $__________ Credit Agreement, dated as of February __, 1994, among Columbia Healthcare Corporation, the Banks named therein and Chemical Bank, as Agent and CAF Loan Agent (as the same may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein as therein defined. In accordance with subsection 2.2 of the Credit Agreement, the undersigned Bank offers to make CAF Loans thereunder in the following amounts with the following maturity dates: CAF Loan Date: _____________, 19__ Aggregate Maximum Amount: $_____________ MATURITY DATE 1 ___: MATURITY DATE 2 ___: MATURITY DATE 3 ___: Maximum Amount $___ Maximum Amount $___ Maximum Amount $___ Rate * Amount $___ Rate * Amount $___ Rate * Amount $___ Rate * Amount $___ Rate * Amount $___ Rate * Amount $___ Very truly yours, By: ------------------------- Name: Title: Telephone No.: Fax No.: - ------------------------- */ In the case of LIBOR Auction Advance Rate CAF Loans, insert margin bid. In the case of Fixed Rate Auction Advance CAF Loans, insert fixed rate bid. EXHIBIT F [FORM OF CAF LOAN CONFIRMATION] _________________, 19__ Chemical Bank, as CAF Loan Agent 270 Park Avenue New York, New York 10017 Dear Sirs: Reference is made to the $_________ Credit Agreement, dated as of February __, 1994, among the undersigned, the Banks named therein and Chemical Bank, as Agent and CAF Loan Agent (as the same may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein as therein defined. In accordance with subsection 2.2 of the Credit Agreement, the undersigned accepts and confirms the offers by the CAF Loan Bank(s) to make CAF Loans to the undersigned on ____________, 19__ [CAF Loan Date] under said subsection 2.2 in the (respective) amount(s) set forth on the attached list of CAF Loans offered. Very truly yours, COLUMBIA HEALTHCARE CORPORATION By____________________________ Title: [Company to attach CAF Loan offer list prepared by CAF Loan Agent with accepted amount entered by the Company to right of each CAF Loan Offer]. EXHIBIT G [FORM OF COMMITMENT TRANSFER SUPPLEMENT] COMMITMENT TRANSFER SUPPLEMENT COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Transferor Bank set forth in Item 2 of Schedule I hereto (the "TRANSFEROR BANK"), each Purchasing Bank set forth in Item 3 of Schedule I hereto (each, a "PURCHASING BANK"), and CHEMICAL BANK, as agent for the Banks under the Credit Agreement described below (in such capacity, the "AGENT"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, this Commitment Transfer Supplement is being executed and delivered in accordance with subsection 8.6(d) of the $_______________ Credit Agreement, dated as of February __, 1994, among Columbia Healthcare Corporation, a Delaware corporation and the successor by merger to Columbia Hospital Corporation (the "COMPANY"), the Transferor Bank and the other Banks party thereto and the Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined); WHEREAS, each Purchasing Bank (if it is not already a Bank party to the Credit Agreement) wishes to become a Bank party to the Credit Agreement; and WHEREAS, the Transferor Bank is selling and assigning to each Purchasing Bank, rights, obligations and commitments under the Credit Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Upon receipt by the Agent of five counterparts of this Commitment Transfer Supplement, to each of which is attached a fully completed Schedule I and Schedule II, and each of which has been executed by the Transferor Bank, each Purchasing Bank (and any other person required by the Credit Agreement to execute this Commitment Transfer Supplement), the Agent will transmit to the Company, the Transferor Bank and each Purchasing Bank a Transfer Effective Notice, substantially in the form of Schedule III to this Commitment Transfer Supplement (a "TRANSFER EFFECTIVE NOTICE"). Such Transfer Effective Notice shall set forth, INTER ALIA, the date on which the transfer effected by this Commitment Transfer Supplement shall become effective (the "TRANSFER EFFECTIVE DATE"), which date shall be the fifth Business Day following the date of such Transfer Effective Notice. From and 2 after the Transfer Effective Date each Purchasing Bank shall be a Bank party to the Credit Agreement for all purposes thereof. 2. At or before 12:00 Noon, local time of the Transferor Bank, on the Transfer Effective Date, each Purchasing Bank shall pay to the Transferor Bank, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Bank and such Purchasing Bank (the "PURCHASE PRICE"), of the portion being purchased by such Purchasing Bank (such Purchasing Bank's "PURCHASED PERCENTAGE") of the outstanding Loans and other amounts owing to the Transferor Bank under the Credit Agreement and the Notes. Effective upon receipt by the Transferor Bank of the Purchase Price from a Purchasing Bank, the Transferor Bank hereby irrevocably sells, assigns and transfers to such Purchasing Bank, without recourse, representation or warranty, and each Purchasing Bank hereby irrevocably purchases, takes and assumes from the Transferor Bank, such Purchasing Bank's Purchased Percentage of the Commitments and the presently outstanding Loans and other amounts owing to the Transferor Bank under the Credit Agreement and the Notes together with all instruments, documents and collateral security pertaining thereto. 3. The Transferor Bank has made arrangements with each Purchasing Bank with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Bank to such Purchasing Bank of any fees heretofore received by the Transferor Bank pursuant to the Credit Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates for payment, by such Purchasing Bank to the Transferor Bank of fees or interest received by such Purchasing Bank pursuant to the Credit Agreement from and after the Transfer Effective Date. 4. (a) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Bank pursuant to the Credit Agreement and the Notes shall, instead, be payable to or for the account of the Transferor Bank and the Purchasing Banks, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. (b) All interest, fees and other amounts that would otherwise accrue for the account of the Transferor Bank from and after the Transfer Effective Date pursuant to the Credit Agreement and the Notes shall, instead, accrue for the account of, and be payable to, the Transferor Bank and the Purchasing Banks, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by any Purchasing Bank, the Transferor Bank and each Purchasing Bank will make appropriate arrangements for payment by the Transferor Bank to such Purchasing Bank of such amount upon receipt thereof from the Company. 5. On or prior to the Transfer Effective Date, the Transferor Bank will deliver to the Agent its Note[s]. On or prior to the Transfer Effective Date, the Company will deliver to the Agent Notes for each Purchasing Bank and the Transferor Bank, in each case in principal amounts reflecting, in accordance with the Credit Agreement, their 3 Commitments (as adjusted pursuant to this Commitment Transfer Supplement). As provided in subsection 8.6(d) of the Credit Agreement, each such new Note shall be dated the Closing Date. Promptly after the Transfer Effective Date, the Agent will send to each of the Transferor Bank and the Purchasing Banks its new Notes and will send to the Company the superseded Note of the Transferor Bank, marked "Cancelled" or if such Note cannot be located by such Transferee Bank, a lost note indemnification agreement in form and substance reasonably acceptable to the Company. 6. Concurrently with the execution and delivery hereof, the Transferor Bank will provide to each Purchasing Bank (if it is not already a Bank party to the Credit Agreement) conformed copies of all documents delivered to such Transferor Bank on the Closing Date in satisfaction of the conditions precedent set forth in the Credit Agreement. 7. Each of the parties to this Commitment Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Transfer Supplement. 8. By executing and delivering this Commitment Transfer Supplement, the Transferor Bank and each Purchasing Bank confirm to and agree with each other and the Agent and the Banks as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Notes or any other instrument or document furnished pursuant thereto; (ii) the Transferor Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Agreement, the Notes or any other instrument or document furnished pursuant hereto; (iii) each Purchasing Bank confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in subsection 3.3, the financial statements delivered pursuant to subsection 5.5, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Transfer Supplement; (iv) each Purchasing Bank will, independently and without reliance upon the Agent, the Transferor Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (v) each Purchasing Bank appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Credit Agreement; and (vi) each Purchasing Bank agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. 4 9. Each party hereto represents and warrants to and agrees with the Agent that it is aware of and will comply with the provision of subsection 8.6(h) of the Credit Agreement. 10. Schedule II hereto sets forth the revised Commitments and Commitment Percentages of the Transferor Bank and each Purchasing Bank as well as administrative information with respect to each Purchasing Bank. 11. This Commitment Transfer Supplement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT COMPLETION OF INFORMATION AND SIGNATURES FOR COMMITMENT TRANSFER SUPPLEMENT Re: $_________ Credit Agreement, dated as of February __, 1994, with Columbia Healthcare Corporation - -------------------------------------------------------------------------------- Item 1 (Date of Commitment Transfer [Insert date of Commitment Transfer Supplement): Supplement] - -------------------------------------------------------------------------------- Item 2 (Transferor Bank): [Insert name of Transferor Bank] - -------------------------------------------------------------------------------- Item 3 (Purchasing Bank[s]): [Insert name[s] of Purchasing Bank[s]] - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- Item 4 (Signatures of Parties to Commitment Transfer Supplement) _____________________, as Transferor Bank By______________________ Title: ___________________, as a Purchasing Bank By______________________ Title: ___________________, as a Purchasing Bank By______________________ Title: - -------------------------------------------------------------------------------- CONSENTED TO AND ACKNOWLEDGED: COLUMBIA HEALTHCARE CORPORATION By___________________________ Title: CHEMICAL BANK, as Agent By___________________________ Title: 3 [Consents Required only when Purchasing Bank is not already a Bank or affiliate thereof] ACCEPTED FOR RECORDATION IN REGISTER: CHEMICAL BANK, as Agent By___________________________ Title: SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS [Name of Transferor Bank] REVISED COMMITMENT AMOUNTS: $________ REVISED COMMITMENT PERCENTAGE: ________ [Name of Purchasing Bank] NEW COMMITMENT AMOUNTS: $________ NEW COMMITMENT PERCENTAGE: ________ ADDRESS FOR NOTICES: [Address] Attention: _____________ Telephone: _____________ Telecopier: ____________ EURODOLLAR LENDING OFFICE: _________________________ _________________________ _________________________ DOMESTIC LENDING OFFICE: _________________________ _________________________ _________________________ SCHEDULE III TO COMMITMENT TRANSFER SUPPLEMENT [Form of Transfer Effective Notice] To: Columbia Healthcare Corporation, [Insert Name of Transferor Bank and each Purchasing Bank] The undersigned, as Agent [delegate of the Agent performing administrative functions of the Agent] under the $__________ Credit Agreement, dated as of February __, 1994, among Columbia Healthcare Corporation, the Banks parties thereto and Chemical Bank, as Agent and as CAF Loan Agent, acknowledges receipt of five executed counterparts of a completed Commitment Transfer Supplement, as described in Schedule I hereto. [Note: attach copy of Schedule I from Commitment Transfer Supplement.] Terms defined in such Commitment Transfer Supplement are used herein as therein defined. 1. Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be ____________ [Insert fifth business day following date of Transfer Effective Notice]. 2. Pursuant to such Commitment Transfer Supplement, the Transferor Bank is required to deliver to the Agent on or before the Transfer Effective Date its Note[s] or lost note indemnity. 3. Pursuant to such Commitment Transfer Supplement, the Company is required to deliver to the Agent on or before the Transfer Effective Date the following Notes, each dated ____________ [Insert Closing Date]. [Describe each new Note for Transferor Bank and Purchasing Bank as to principal amount, payee and type of Note (e.g. Revolving Credit Note, Grid CAF Loan Note, Individual CAF Loan Note etc.] 2 4. Pursuant to such Commitment Transfer Supplement each Purchasing Bank is required to pay its Purchase Price to the Transferor Bank at or before 12:00 Noon on the Transfer Effective Date in immediately available funds. Very truly yours, CHEMICAL BANK By________________________ Title: EX-4.10 5 EXHIBIT 4.10 CREDIT AGREEMENT $2,000,000,000 CREDIT AGREEMENT AMONG COLUMBIA HEALTHCARE CORPORATION, THE SEVERAL BANKS AND OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO, BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, THE BANK OF NOVA SCOTIA, THE CHASE MANHATTAN BANK N.A., CITIBANK, N.A., DEUTSCHE BANK AG, THE FIRST NATIONAL BANK OF CHICAGO, THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, NATIONSBANK OF NORTH CAROLINA, N.A., PNC BANK, KENTUCKY, INC., TORONTO DOMINION (TEXAS), INC. AND WACHOVIA BANK OF GEORGIA, N.A., AS CO-AGENTS AND CHEMICAL BANK, AS AGENT AND AS CAF LOAN AGENT DATED AS OF FEBRUARY 10, 1994 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1 1.2 Other Definitional Provisions. . . . . . . . . . . . 15 SECTION 2. AMOUNT AND TERMS OF LOANS. . . . . . . . . . . . . 16 2.1 Revolving Credit Loans and Revolving Credit Notes. . 16 2.2 CAF Loans and CAF Loan Notes . . . . . . . . . . . . 17 2.3 Facility Fee . . . . . . . . . . . . . . . . . . . . 22 2.4 Termination, Reduction or Extension of Commitments. . . . . . . . . . . . . . . . . . . . 22 2.5 Optional Prepayments . . . . . . . . . . . . . . . . 24 2.6 Conversion Options; Minimum Amount of Loans. . . . . 24 2.7 Interest Rate and Payment Dates for Revolving Credit Loans . . . . . . . . . . . . . . . . . . . 25 2.8 Computation of Interest and Fees . . . . . . . . . . 26 2.9 Inability to Determine Interest Rate . . . . . . . . 27 2.10 Pro Rata Borrowings and Payments . . . . . . . . . . 28 2.11 Illegality . . . . . . . . . . . . . . . . . . . . . 29 2.12 Requirements of Law. . . . . . . . . . . . . . . . . 30 2.13 Capital Adequacy . . . . . . . . . . . . . . . . . . 31 2.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 31 2.15 Indemnity. . . . . . . . . . . . . . . . . . . . . . 33 2.16 Application of Proceeds of Loans . . . . . . . . . . 33 2.17 Notice of Certain Circumstances; Assignment of Commitments Under Certain Circumstances. . . . . . 33 SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 34 3.1 Corporate Organization and Existence . . . . . . . . 34 3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . 35 3.3 Financial Information. . . . . . . . . . . . . . . . 35 3.4 Changes in Condition . . . . . . . . . . . . . . . . 36 3.5 Assets . . . . . . . . . . . . . . . . . . . . . . . 36 3.6 Litigation . . . . . . . . . . . . . . . . . . . . . 36 3.7 Tax Returns. . . . . . . . . . . . . . . . . . . . . 37 3.8 Contracts, etc. . . . . . . . . . . . . . . . . . . 38 3.9 No Legal Obstacle to Agreement . . . . . . . . . . . 38 3.10 Defaults . . . . . . . . . . . . . . . . . . . . . . 38 3.11 Burdensome Obligations . . . . . . . . . . . . . . . 38 3.12 Pension Plans. . . . . . . . . . . . . . . . . . . . 39 3.13 Disclosure . . . . . . . . . . . . . . . . . . . . . 39 3.14 Environmental and Public and Employee Health and Safety Matters . . . . . . . . . . . . . . . . . . 39 3.15 Federal Regulations. . . . . . . . . . . . . . . . . 40 3.16 Investment Company Act; Other Regulations. . . . . . 40 -i- Page SECTION 4. CONDITIONS . . . . . . . . . . . . . . . . . . . . 40 4.1 Loan Documents . . . . . . . . . . . . . . . . . . . 41 4.2 Legal Opinions . . . . . . . . . . . . . . . . . . . 41 4.3 Company Officers' Certificate. . . . . . . . . . . . 41 4.4 Termination of Prior Agreements. . . . . . . . . . . 41 4.5 Legality, etc. . . . . . . . . . . . . . . . . . . . 41 4.6 General. . . . . . . . . . . . . . . . . . . . . . . 42 4.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . 42 4.8 Consummation of The Merger . . . . . . . . . . . . . 42 SECTION 5. GENERAL COVENANTS. . . . . . . . . . . . . . . . . 42 5.1 Taxes, Indebtedness, etc. . . . . . . . . . . . . . 42 5.2 Maintenance of Properties; Compliance with Law . . . 43 5.3 Transactions with Affiliates . . . . . . . . . . . . 43 5.4 Insurance. . . . . . . . . . . . . . . . . . . . . . 43 5.5 Financial Statements . . . . . . . . . . . . . . . . 44 5.6 Ratio of Total Debt to Tangible Net Worth. . . . . . 47 5.7 Interest Coverage Ratio. . . . . . . . . . . . . . . 47 5.8 Distributions. . . . . . . . . . . . . . . . . . . . 47 5.9 Merger or Consolidation. . . . . . . . . . . . . . . 47 5.10 Sales of Assets. . . . . . . . . . . . . . . . . . . 47 5.11 Compliance with ERISA. . . . . . . . . . . . . . . . 48 5.12 Negative Pledge . . . . . . . . . . . . . . . . . 48 5.13 Sale-and-Lease-back Transactions . . . . . . . . . . 49 SECTION 6. DEFAULTS . . . . . . . . . . . . . . . . . . . . . 50 6.1 Events of Default. . . . . . . . . . . . . . . . . . 50 6.2 Annulment of Defaults. . . . . . . . . . . . . . . . 52 6.3 Waivers. . . . . . . . . . . . . . . . . . . . . . . 52 6.4 Course of Dealing. . . . . . . . . . . . . . . . . . 53 SECTION 7. THE AGENT. . . . . . . . . . . . . . . . . . . . . 53 7.1 Appointment. . . . . . . . . . . . . . . . . . . . . 53 7.2 Delegation of Duties . . . . . . . . . . . . . . . . 53 7.3 Exculpatory Provisions . . . . . . . . . . . . . . . 53 7.4 Reliance by Agent. . . . . . . . . . . . . . . . . . 54 7.5 Notice of Default. . . . . . . . . . . . . . . . . . 54 7.6 Non-Reliance on Agent and Other Banks. . . . . . . . 55 7.7 Indemnification. . . . . . . . . . . . . . . . . . . 55 7.8 Agent and CAF Loan Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . 56 7.9 Successor Agent. . . . . . . . . . . . . . . . . . . 56 SECTION 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 56 8.1 Amendments and Waivers . . . . . . . . . . . . . . . 56 8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . 57 8.3 No Waiver; Cumulative Remedies . . . . . . . . . . . 58 8.4 Survival of Representations and Warranties . . . . . 58 8.5 Payment of Expenses and Taxes; Indemnity . . . . . . 58 8.6 Successors and Assigns; Participations; Purchasing Banks . . . . . . . . . . . . . . . . . 59 -ii- Page 8.7 Adjustments; Set-off . . . . . . . . . . . . . . . . 63 8.8 Counterparts . . . . . . . . . . . . . . . . . . . . 64 8.9 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . 64 8.10 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . 64 8.11 Submission To Jurisdiction; Waivers. . . . . . . . . 64 SCHEDULES SCHEDULE I Commitment Amounts and Percentages; Lending Offices; Addresses for Notice SCHEDULE II Subsidiaries of the Company SCHEDULE III Indebtedness SCHEDULE IV Liens EXHIBITS EXHIBIT A Form of Revolving Credit Note EXHIBIT B Form of Grid CAF Loan Note EXHIBIT C Form of Individual CAF Loan Note EXHIBIT D Form of CAF Loan Request EXHIBIT E Form of CAF Loan Offer EXHIBIT F Form of CAF Loan Confirmation EXHIBIT G Form of Commitment Transfer Supplement -iii- CREDIT AGREEMENT, dated as of February 10, 1994, among COLUMBIA HEALTHCARE CORPORATION, a Delaware corporation and the successor by merger to Columbia Hospital Corporation (the "COMPANY"), the several banks and other financial institutions from time to time parties to this Agreement (the "BANKS"), BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, THE BANK OF NOVA SCOTIA, THE CHASE MANHATTAN BANK, N.A., CITIBANK, N.A., DEUTSCHE BANK AG, THE FIRST NATIONAL BANK OF CHICAGO, THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, NATIONSBANK OF NORTH CAROLINA, N.A., PNC BANK, KENTUCKY, INC., TORONTO DOMINION (TEXAS), INC. AND WACHOVIA BANK OF GEORGIA, N.A., as Co-Agents and CHEMICAL BANK, a New York banking corporation, as agent for the Banks hereunder (in such capacity, the "AGENT") and as CAF Loan agent (in such capacity, the "CAF LOAN AGENT"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, pursuant to a Joint Proxy Statement and Prospectus on Form S-4, dated October 22, 1993 (as amended, the "PROXY"), the Company and HCA-Hospital Corporation of America, a Delaware corporation ("HCA"), have solicited the approval of their respective stockholders to adopt an Agreement and Plan of Merger dated as of October 2, 1993 (the "MERGER AGREEMENT") between the Company and HCA; WHEREAS, pursuant to subsections 1.1 and 4.1 of the Merger Agreement HCA will be merged (the "MERGER") with and into a wholly-owned subsidiary of the Company (with such wholly-owned subsidiary of the Company as the surviving entity), and each stockholder of HCA will receive 1.05 shares of the Company's voting common stock in exchange for each of its shares of HCA's Class A common stock and 1.05 shares of the Company's nonvoting common stock in exchange for each of its shares of HCA's Class B common stock; and WHEREAS, it is a condition precedent to the obligation of the Banks to make their respective Loans (as hereinafter defined) to the Company hereunder that the transactions contemplated in connection with the Merger, including without limitation, the transactions contemplated by the Proxy and subsections 1.1 and 4.1 of the Merger Agreement, are consummated; NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and for other good and valuable consideration, the undersigned hereby agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINED TERMS. As used in this Agreement, the following terms have the following meanings: 2 "ADDITIONAL BANK": as defined in subsection 2.4(d). "AFFILIATE": (a) any director or officer of any corporation or partner or joint venturer or Person holding a similar position in another Person or members of their families, whether or not living under the same roof, or any Person owning beneficially more than 5% of the outstanding common stock or other evidences of beneficial interest of the Person in question, (b) any Person of which any one or more of the Persons described in clause (a) above is an officer, director or beneficial owner of more than 5% of the shares or other beneficial interest and (c) any Person controlled by, controlling or under common control with the Person in question. "AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "ALTERNATE BASE RATE": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City (each change in the Prime Rate to be effective on the date such change is publicly announced); "BASE CD RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "BOARD") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; "C/D RESERVE PERCENTAGE" shall mean, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board (or any successor), for determining the maximum 3 reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion Dollars in respect of new non-personal three-month certificates of deposit in the secondary market in Dollars in New York City and in an amount of $100,000 or more; "C/D ASSESSMENT RATE" shall mean, for any day, the net annual assessment rate (rounded upward to the nearest 1/100th of 1%) determined by Chemical Bank to be payable on such day to the Federal Deposit Insurance Corporation or any successor ("FDIC") for FDIC's insuring time deposits made in Dollars at offices of Chemical Bank in the United States; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ALTERNATE BASE RATE LOANS": Revolving Credit Loans hereunder at such time as they are made and/or being maintained at a rate of interest based upon the Alternate Base Rate. "APPLICABLE LIBOR AUCTION ADVANCE RATE": in respect of any CAF Loan requested pursuant to a LIBOR Auction Advance Request, the London interbank offered rate for deposits in Dollars for the period commencing on the date of such CAF Loan and ending on the maturity date thereof which appears on Telerate Page 3750 as of 11:00 A.M., London time, two Working Days prior to the beginning of such period. "APPLICABLE MARGIN": (i) with respect to Alternate Base Rate Loans, 0% per annum and (ii) with respect to Eurodollar Loans, 0.275% per annum. 4 "ATTRIBUTABLE DEBT": means (i) as to any capitalized lease obligations, the Indebtedness carried on the balance sheet in respect thereof in accordance with GAAP and (ii) as to any operating leases, the total net amount of rent required to be paid under such leases during the remaining term thereof. "AUDITOR": any independent certified public accountant of nationally recognized standing and reputation selected by the Company. "AVAILABLE COMMITMENTS": at a particular time, an amount equal to the difference between (a) the amount of the Commitments at such time and (b) the aggregate unpaid principal amount at such time of all Loans. "BANK OBLIGATIONS": as defined in subsection 6.1. "BENEFITTED BANK": as defined in subsection 8.7. "BORROWING DATE": any Business Day specified in a notice pursuant to subsection 2.1(c) or 2.2(b) as a date on which the Company requests the Banks to make Revolving Credit Loans or CAF Loans, as the case may be, hereunder. "BUSINESS DAY": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "CAF LOAN": each CAF Loan made pursuant to subsection 2.2; the aggregate amount advanced by a CAF Loan Bank pursuant to subsection 2.2 on each CAF Loan Date shall constitute one or more CAF Loans, as specified by such CAF Loan Bank pursuant to subsection 2.2(b)(vi). "CAF LOAN ASSIGNEE": as defined in subsection 8.6(c). "CAF LOAN ASSIGNMENT": any assignment by a CAF Loan Bank to a CAF Loan Assignee of a CAF Loan and related Individual CAF Loan Note; any such CAF Loan Assignment to be registered in the Register must set forth, in respect of the CAF Loan Assignee thereunder, the full name of such CAF Loan Assignee, its address for notices, its lending office address (in each case with telephone and facsimile transmission numbers) and payment instructions for all payments to such CAF Loan Assignee, and must contain an agreement by such CAF Loan Assignee to comply with the provisions of subsection 8.6(c) and subsection 8.6(h) to the same extent as any Bank. "CAF LOAN BANKS": Banks from time to time designated as CAF Loan Banks by the Company by written notice to the CAF Loan Agent (which notice the CAF Loan Agent shall transmit to each such CAF Loan Bank). 5 "CAF LOAN CONFIRMATION": each confirmation by the Company of its acceptance of one or more CAF Loan Offers, which CAF Loan Confirmation shall be substantially in the form of Exhibit F and shall be delivered to the CAF Loan Agent in writing or by facsimile transmission. "CAF LOAN DATE": each date on which a CAF Loan is made pursuant to subsection 2.2. "CAF LOAN NOTE": a Grid CAF Loan Note or an Individual CAF Loan Note. "CAF LOAN OFFER": each offer by a CAF Loan Bank to make one or more CAF Loans pursuant to a CAF Loan Request, which CAF Loan Offer shall contain the information specified in Exhibit E and shall be delivered to the CAF Loan Agent by telephone, immediately confirmed by facsimile transmission. "CAF LOAN REQUEST": each request by the Company for CAF Loan Banks to submit bids to make CAF Loans, which shall contain the information in respect of such requested CAF Loans specified in Exhibit D and shall be delivered to the CAF Loan Agent in writing or by facsimile transmission, or by telephone, immediately confirmed by facsimile transmission. "CHANGE IN CONTROL": of any corporation, (a) any Person or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), other than the Company, that shall acquire more than 50% of the Voting Stock of such corporation or (b) any Person or group (as defined in preceding clause (a)), other than the Company, that shall acquire more than 20% of the Voting Stock of such corporation and, at any time following an acquisition described in this clause (b), the Continuing Directors shall not constitute a majority of the board of directors of such corporation. "CHEMICAL BANK": Chemical Bank, a New York banking corporation. "CLOSING DATE": the date on which all of the conditions precedent for the Closing Date set forth in Section 4 shall have been fulfilled, but in no event shall the Closing Date occur later than February 28, 1994. "CODE": the Internal Revenue Code of 1986, as amended from time to time. "COMMITMENT": as to any Bank, its obligation to make Revolving Credit Loans to the Company pursuant to subsection 2.1(a) in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such Bank's name 6 in Schedule I, as such amount may be reduced from time to time as provided herein. "COMMITMENT PERCENTAGE": as to any Bank, the percentage of the aggregate Commitments constituted by such Bank's Commitment. "COMMITMENT PERIOD": the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "COMMITMENT TRANSFER SUPPLEMENT": a Commitment Transfer Supplement, substantially in the form of Exhibit G. "CONFIDENTIAL INFORMATION MEMORANDUM": the Confidential Information Memorandum dated November 1993 relating to this Agreement. "CONSOLIDATED ASSETS": the consolidated assets of the Company and its Subsidiaries, determined in accordance with GAAP. "CONSOLIDATED EARNINGS BEFORE INTEREST AND TAXES": for any period for which the amount thereof is to be determined, Consolidated Net Income for such period plus all amounts deducted in computing such Consolidated Net Income in respect of interest expense on Indebtedness and income taxes, all determined in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE": for any period for which the amount thereof is to be determined, all amounts deducted in computing Consolidated Net Income for such period in respect of interest expense on Indebtedness determined in accordance with GAAP. "CONSOLIDATED NET INCOME": for any period, the consolidated net income, if any, after taxes, of the Company and its Subsidiaries for such period determined in accordance with GAAP; PROVIDED, HOWEVER, that Consolidated Net Income shall not include any gain or loss attributable to extraordinary items, any sale of assets not in the ordinary course of business or any taxes or tax savings as a result thereof. "CONSOLIDATED NET TANGIBLE ASSETS": means the total amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (i) all current liabilities as disclosed on the consolidated balance sheet of the Company (excluding any thereof which are by their terms extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed and excluding any deferred income taxes that are included in 7 current liabilities), and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with GAAP. "CONSOLIDATED TANGIBLE NET WORTH": Consolidated Assets of the Company and its Subsidiaries less the following: (a) the amount, if any, at which any treasury stock appears on the assets side of the balance sheet; (b) an amount equal to goodwill; (c) any writeup in book value of assets resulting from any revaluation made after December 31, 1992 in the case of the Company and its Subsidiaries (excluding Galen and its Subsidiaries) and HCA and its Subsidiaries and August 31, 1993 in the case of Galen and its Subsidiaries; (d) an amount equal to all amounts which appear or should appear as a credit on the balance sheet of the Company in respect of any class or series of preferred stock of the Company; and (e) all liabilities which in accordance with GAAP should be reflected as liabilities on such consolidated balance sheet, but in any event including all Indebtedness. "CONSOLIDATED TOTAL DEBT": the aggregate of all Indebtedness (including the current portion thereof) of the Company and its Subsidiaries on a consolidated basis. "CONTINUING BANK": as defined in subsection 2.4(c). "CONTINUING DIRECTOR": any member of the Board of Directors of the Company who is a member of such Board on the date of this Agreement, and any Person who is a member of such Board and whose nomination as a director was approved by a majority of the Continuing Directors then on such Board. "CONTRACTUAL OBLIGATION": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "CONTROL GROUP PERSON": any Person which is a member of the controlled group or is under common control with the Company within the meaning of Section 414(b) or 414(c) of the Code or Section 4001(b)(1) of ERISA. 8 "$300,000,000 CREDIT AGREEMENT": the $300,000,000 Credit Agreement, dated as of November 1, 1993, among the Company, the several banks and other financial institutions from time to time parties thereto and Chemical Bank, as agent and as CAF Loan agent. "$500,000,000 CREDIT AGREEMENT": the $500,000,000 Credit Agreement, dated as of September 1, 1993, among the Company, the several banks and other financial institutions from time to time parties thereto, Banque Paribas, The Chase Manhattan Bank N.A., Citibank, N.A., Deutsche Bank AG, The First National Bank of Chicago, The Industrial Bank of Japan, Limited, New York Branch, Morgan Guaranty Trust Company of New York, Nationsbank of North Carolina, N.A., PNC Bank, Kentucky, Inc. and Toronto Dominion (Texas), Inc., as Co-Agents and Chemical Bank, as agent and as CAF Loan agent. "$800,000,000 CREDIT AGREEMENT": the $800,000,000 Credit Agreement, dated as of September 1, 1993, among the Company, the several banks and other financial institutions from time to time parties thereto, Banque Paribas, The Chase Manhattan Bank N.A., Citibank, N.A., Deutsche Bank AG, The First National Bank of Chicago, The Industrial Bank of Japan, Limited, New York Branch, Morgan Guaranty Trust Company of New York, Nationsbank of North Carolina, N.A., PNC Bank, Kentucky, Inc. and Toronto Dominion (Texas), Inc., as Co-Agents and Chemical Bank, as agent and as CAF Loan agent. "$1,642,000,000 CREDIT AGREEMENT": the $1,642,000,000 Amended and Restated Credit Agreement, dated as of September 2, 1993, among HCA, Hospital Corporation of America, the several banks and other financial institutions from time to time parties thereto and Morgan Guaranty Trust Company of New York, as agent. "DEFAULT": any of the events specified in subsection 6.1, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "DISTRIBUTION": (a) the declaration or payment of any dividend on or in respect of any shares of any class of capital stock of the Company other than dividends payable solely in shares of common stock of the Company; (b) the purchase, redemption or other acquisition of any shares of any class of capital stock of the Company directly or indirectly through a Subsidiary or otherwise; and (c) any other distribution on or in respect of any shares of any class of capital stock of the Company. "DOLLARS" and "$": dollars in lawful currency of the United States of America. 9 "DOMESTIC LENDING OFFICE": initially, the office of each Bank designated as such in Schedule I; thereafter, such other office of such Bank, if any, located within the United States which shall be making or maintaining Alternate Base Rate Loans. "EFFECTIVE DATE": as defined in subsection 2.4(b). "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto), dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "EURODOLLAR LENDING OFFICE": initially, the office of each Bank designated as such in Schedule I; thereafter, such other office of such Bank, if any, which shall be making or maintaining Eurodollar Loans. "EURODOLLAR LOANS": Revolving Credit Loans hereunder at such time as they are made and/or are being maintained at a rate of interest based upon the Eurodollar Rate. "EURODOLLAR RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the average (rounded upwards to the nearest whole multiple of one sixteenth of one percent) of the respective rates notified to the Agent by the Reference Banks as the rate at which each of their Eurodollar Lending Offices is offered Dollar deposits two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Eurodollar Lending Office are then being conducted at or about 10:00 A.M., New York City time, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of such Reference Bank to be outstanding during such Interest Period. "EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans having the same Interest Period (whether or not originally made on the same day). 10 "EVENT OF DEFAULT": any of the events specified in subsection 6.1, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act has been satisfied. "FINANCING LEASE": any lease of property, real or personal, if the then present value of the minimum rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee. "FIXED RATE AUCTION ADVANCE REQUEST": any CAF Loan Request requesting the CAF Loan Banks to offer to make CAF Loans at a fixed rate (as opposed to a rate composed of the Applicable LIBOR Auction Advance Rate plus or minus a margin). "GAAP": (a) with respect to determining compliance by the Company with the provisions of subsections 5.6, 5.7 and 5.10, generally accepted accounting principles in the United States of America consistent with those utilized in preparing the audited financial statements referred to in subsection 3.3 and (b) with respect to the financial statements referred to in subsection 3.3 or the furnishing of financial statements pursuant to subsection 5.5 and otherwise, generally accepted accounting principles in the United States of America from time to time in effect. "GALEN": Galen Health Care, Inc., a Delaware Corporation and a successor by spin-off to Humana Inc. "GOVERNMENTAL AUTHORITY": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GRID CAF LOAN NOTE": as defined in subsection 2.2(f). "GUARANTEE OBLIGATION": any arrangement whereby credit is extended to one party on the basis of any promise of another, whether that promise is expressed in terms of an obligation to pay the Indebtedness of another, or to purchase an obligation owed by that other, to purchase assets or to provide funds in the form of lease or other types of payments under circumstances that would enable that other to discharge one or more of its obligations, whether or not such arrangement is listed in the balance sheet of the obligor or referred to in a footnote thereto, but shall not include endorsements of items for collection in the ordinary course of business. "HCA": as defined in the Recitals hereto. 11 "INDEBTEDNESS": of a Person, at a particular date, the sum (without duplication) at such date of (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services or which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations of such Person under Financing Leases, (c) all obligations of such Person in respect of letters of credit, acceptances, or similar obligations issued or created for the account of such Person in excess of $1,000,000, (d) all liabilities secured by any Lien on any property owned by the Company or any Subsidiary even though such Person has not assumed or otherwise become liable for the payment thereof and (e) all Guarantee Obligations relating to any of the foregoing in excess of $1,000,000. "INDIVIDUAL CAF LOAN NOTE": as defined in subsection 2.2(g). "INSOLVENCY" or "INSOLVENT": at any particular time, a Multiemployer Plan which is insolvent within the meaning of Section 4245 of ERISA. "INTEREST PAYMENT DATE": (a) as to any Alternate Base Rate Loan, the last day of each March, June, September and December, commencing on the first of such days to occur after Alternate Base Rate Loans are made or Eurodollar Loans are converted to Alternate Base Rate Loans, (b) as to any Eurodollar Loan in respect of which the Company has selected an Interest Period of one, two or three months, the last day of such Interest Period and (c) as to any Eurodollar Loan in respect of which the Company has selected a longer Interest Period than the periods described in clause (b), the last day of each March, June, September and December falling within such Interest Period and the last day of such Interest Period. "INTEREST PERIOD": with respect to any Eurodollar Loans: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loans and ending one, two, three or six months thereafter (or, with the consent of all the Banks, nine months thereafter), as selected by the Company in its notice of borrowing as provided in subsection 2.1(c) or its notice of conversion as provided in subsection 2.6(a), as the case may be; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loans and ending one, two, three or six months thereafter (or, with the consent of all the Banks, nine months thereafter), as selected by the Company by irrevocable notice to the 12 Agent not less than three Business Days prior to the last day of the then current Interest Period with respect to such Eurodollar Loans; PROVIDED that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) if the Company shall fail to give notice as provided above, the Company shall be deemed to have selected an Alternate Base Rate Loan to replace the affected Eurodollar Loan; (3) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (4) any Interest Period pertaining to a Eurodollar Loan that would otherwise end after the Termination Date shall end on the Termination Date; and (5) the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "LIBOR AUCTION ADVANCE REQUEST": any CAF Loan Request requesting the CAF Loan Banks to offer to make CAF Loans at an interest rate equal to the Applicable LIBOR Auction Advance Rate plus or minus a margin. "LIEN": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing). "LOAN": any loan made by any Bank pursuant to this Agreement. 13 "LOAN DOCUMENTS": this Agreement and the Notes. "MERGER": as defined in the Recitals hereto. "MERGER AGREEMENT": as defined in the Recitals hereto. "MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NOTE": any Revolving Credit Note or CAF Loan Note. "PARTICIPANTS": as defined in subsection 8.6(b). "PAYMENT SHARING NOTICE": a written notice from the Company, or any Bank, informing the Agent that an Event of Default has occurred and is continuing and directing the Agent to allocate payments thereafter received from the Company in accordance with subsection 2.10(c). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PERSON": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PLAN": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Control Group Person is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA. "PRINCIPAL PROPERTY": means each acute care hospital providing general medical and surgical services (including real property but excluding equipment, personal property and hospitals which primarily provide specialty medical services, such as psychiatric and obstetrical and gynecological services) at least 50% of which is owned by the Company and its Subsidiaries on a consolidated basis and located in the United States of America. "PROXY": as defined in the Recitals hereto. "PURCHASING BANKS": as defined in subsection 8.6(d). "REFERENCE BANKS": Chemical Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York. "REGISTER": as defined in subsection 8.6(e). "REGULATION U": Regulation U of the Board of Governors of the Federal Reserve System. 14 "REORGANIZATION": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "REPORTABLE EVENT": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13,.14,.16,.18,.19 or .20 of PBGC Reg. Section 2615. "REQUESTED TERMINATION DATE": as defined in subsection 2.4(b). "REQUIRED BANKS": (i) during the Commitment Period, Banks whose Commitment Percentages aggregate at least 51% and (ii) after the Commitments have expired or been terminated, Banks whose outstanding Loans represent in the aggregate 51% of all outstanding Loans. "REQUIREMENT OF LAW": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "RESPONSIBLE OFFICER": the chief executive officer, the president, any executive or senior vice president or vice president of the Company, the chief financial officer, treasurer or controller of the Company. "REVOLVING CREDIT LOANS": as defined in subsection 2.1(a). "REVOLVING CREDIT NOTES": as defined in subsection 2.1(b). "SALE-AND-LEASEBACK TRANSACTION": means any arrangement entered into by the Company or any Significant Subsidiary with any person (other than the Company or a Significant Subsidiary), or to which any such person is a party, providing for the leasing to the Company or any Significant Subsidiary for a period of more than three years of any Principal Property which has been or is to be held or transferred by the Company or such Significant Subsidiary to such Person or to any other Person (other than the Company or a Significant Subsidiary), to which funds have been or are to be advanced by such Person on the security of the leased property. 15 "SIGNIFICANT SUBSIDIARY": means, at any particular time, any Subsidiary of the Company having total assets of $5,000,000 or more at that time. "SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "SUBSIDIARY": as to any Person, a corporation or partnership of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation or partnership are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a Subsidiary or to Subsidiaries in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "TAXES": as defined in subsection 2.14. "TERMINATING BANK": as defined in subsection 2.4(c). "TERMINATION DATE": the date which is 364 days after the Closing Date (or, if such date is not a Business Day, the immediately preceding Business Day), or such other Business Day to which the Termination Date may be changed pursuant to subsection 2.4). "TRANSFER EFFECTIVE DATE": as defined in each Commitment Transfer Supplement. "TRANSFEREE": as defined in subsection 8.6(g). "TYPE": as to any Revolving Credit Loan, its nature as an Alternate Base Rate Loan or Eurodollar Loan. "VOTING STOCK": of any corporation, shares of capital stock or other securities of such corporation entitled to vote generally in the election of directors of such corporation. "WORKING DAY": any Business Day on which dealings in foreign currencies and exchange between banks may be carried on in London, England. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant 16 hereto or thereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF LOANS 2.1 REVOLVING CREDIT LOANS AND REVOLVING CREDIT NOTES. (a) Subject to the terms and conditions hereof, each Bank severally agrees to make loans ( "REVOLVING CREDIT LOANS") to the Company from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed the Commitment of such Bank, PROVIDED that the aggregate amount of the Loans outstanding shall not at any time exceed the aggregate amount of the Commitments. During the Commitment Period the Company may use the Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Credit Loans may be (i) Eurodollar Loans, (ii) Alternate Base Rate Loans or (iii) a combination thereof, as determined by the Company and notified to the Agent in accordance with subsection 2.1(c). Eurodollar Loans shall be made and maintained by each Bank at its Eurodollar Lending Office, and Alternate Base Rate Loans shall be made and maintained by each Bank at its Domestic Lending Office. (b) The Revolving Credit Loans made by each Bank shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit A with appropriate insertions as to payee, date and principal amount (a "REVOLVING CREDIT NOTE"), payable to the order of such Bank and evidencing the obligation of the Company to pay a principal amount equal to the amount of the initial Commitment of such Bank or, if a lesser amount, the aggregate unpaid principal amount of all Revolving Credit Loans made by such Bank. Each Bank is hereby authorized to record the date, Type and amount of each Revolving Credit Loan made or converted by such Bank, and the date and amount of each payment or prepayment of principal thereof, and, in the case of Eurodollar Loans, the Interest Period with respect thereto, on the schedule annexed to and constituting a part of its Revolving Credit Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; 17 PROVIDED, HOWEVER, that the failure to make any such recordation shall not affect the obligations of the Company hereunder or under any Revolving Credit Note. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the Termination Date, and (z) bear interest on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in subsection 2.7. (c) The Company may borrow under the Commitments during the Commitment Period on any Business Day; PROVIDED that the Company shall give the Agent irrevocable notice (which notice must "be received by the Agent (i) prior to 1":30 A.M., New York City time three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, and (ii) prior to 10:00 A.M., New York City time, on the requested Borrowing Date, in the case of Alternate Base Rate Loans), specifying (A) the amount to be borrowed, (B) the requested Borrowing Date, (C) whether the borrowing is to be of Eurodollar Loans, Alternate Base Rate Loans, or a combination thereof, and (D) if the borrowing is to be entirely or partly of Eurodollar Loans, the length of the Interest Period therefor. Each borrowing pursuant to the Commitments shall be in an aggregate principal amount equal to the lesser of (i) $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (ii) the then Available Commitments. Upon receipt of such notice from the Company, the Agent shall promptly notify each Bank thereof. Each Bank will make the amount of its pro rata share of each borrowing available to the Agent for the account of the Company at the office of the Agent set forth in subsection 8.2 prior to 12:00 P.M., New York City time, on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of all such Revolving Credit Loans will then be made available to the Company by the Agent at such office of the Agent by crediting the account of the Company on the books of such office with the aggregate of the amounts made available to the Agent by the Banks. 2.2 CAF LOANS AND CAF LOAN NOTES. (a) The Company may borrow CAF Loans from time to time on any Business Day (in the case of CAF Loans made pursuant to a Fixed Rate Auction Advance Request) or any Working Day (in the case of CAF Loans made pursuant to a LIBOR Auction Advance Request) during the period from the Closing Date until the date occurring 14 days prior to the Termination Date in the manner set forth in this subsection 2.2 and in amounts such that the aggregate amount of Loans outstanding at any time shall not exceed the aggregate amount of the Commitments at such time. (b) (i) The Company shall request CAF Loans by delivering a CAF Loan Request to the CAF Loan Agent, not later than 12:00 Noon (New York City time) four Working Days prior to the proposed Borrowing Date (in the case of a LIBOR Auction Advance Request), and not later than 10:00 A.M. (New York City time) one Business Day prior to the proposed Borrowing Date (in 18 the case of a Fixed Rate Auction Advance Request). Each CAF Loan Request may solicit bids for CAF Loans in an aggregate principal amount of $5,000,000 or an integral multiple thereof and for not more than three alternative maturity dates for such CAF Loans. The maturity date for each CAF Loan shall be not less than 7 days nor more than 360 days after the Borrowing Date therefor (and in any event not after the Termination Date). The CAF Loan Agent shall promptly notify each CAF Loan Bank by facsimile transmission of the contents of each CAF Loan Request received by it. (ii) In the case of a LIBOR Auction Advance Request, upon receipt of notice from the CAF Loan Agent of the contents of such CAF Loan Request, any CAF Loan Bank that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more CAF Loans at the Applicable LIBOR Auction Advance Rate plus or minus a margin for each such CAF Loan determined by such CAF Loan Bank in its sole discretion. Any such irrevocable offer shall be made by delivering a CAF Loan Offer to the CAF Loan Agent, before 9:30 A.M., New York City time, three Working Days before the proposed Borrowing Date, setting forth the maximum amount of CAF Loans for each maturity date, and the aggregate maximum amount for all maturity dates, which such Bank would be willing to make (which amounts may, subject to subsection 2.2(a), exceed such CAF Loan Bank's Commitment) and the margin above the Applicable LIBOR Auction Advance Rate at which such CAF Loan Bank is willing to make each such CAF Loan; the CAF Loan Agent shall advise the Company before 10:00 A.M., New York City time, three Working Days before the proposed Borrowing Date of the contents of each such CAF Loan Offer received by it. If the CAF Loan Agent in its capacity as a CAF Loan Bank shall, in its sole discretion, elect to make any such offer, it shall advise the Company of the contents of its CAF Loan Offer before 9:00 A.M., New York City time, three Working Days before the proposed Borrowing Date. (iii) In the case of a Fixed Rate Auction Advance Request, upon receipt of notice from the Agent of the contents of such CAF Loan Request, any CAF Loan Bank that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more CAF Loans at a rate or rates of interest for each such CAF Loan determined by such CAF Loan Bank in its sole discretion. Any such irrevocable offer shall be made by delivering a CAF Loan Offer to the CAF Loan Agent, before 9:30 A.M., New York City time, on the proposed Borrowing Date, setting forth the maximum amount of CAF Loans for each maturity date, and the aggregate maximum amount for all maturity dates, which such CAF Loan Bank would be willing to make (which amounts may, subject to subsection 2.2(a), exceed such CAF Loan Bank's Commitment) and the rate or rates of interest at which such CAF Loan Bank is willing to make each such CAF Loan; the CAF Loan Agent shall advise the Company before 10:15 A.M., New York City time, on the proposed Borrowing Date of the contents of each such CAF Loan Offer received by it. If the CAF Loan Agent or any affiliate thereof in its capacity as a CAF Loan Bank shall, in its sole 19 discretion, elect to make any such offer, it shall advise the Company of the contents of its CAF Loan Offer before 9:15 A.M., New York City time, on the proposed Borrowing Date. (iv) The Company shall before 11:00 A.M., New York City time, three Working Days before the proposed Borrowing Date (in the case of CAF Loans requested by a LIBOR Auction Advance Request) and before 10:30 A.M., New York City time, on the proposed Borrowing Date (in the case of CAF Loans requested by a Fixed Rate Auction Advance Request) either, in its absolute discretion: (A) cancel such CAF Loan Request by giving the CAF Loan Agent telephone notice to that effect, or (B) accept one or more of the offers made by any CAF Loan Bank or CAF Loan Banks pursuant to clause (ii) or clause (iii) above, as the case may be, by giving telephone notice to the CAF Loan Agent (immediately confirmed by delivery to the CAF Loan Agent of a CAF Loan Confirmation) of the amount of CAF Loans for each relevant maturity date to be made by each CAF Loan Bank (which amount for each such maturity date shall be equal to or less than the maximum amount for such maturity date specified in the CAF Loan Offer of such CAF Loan Bank, and for all maturity dates included in such CAF Loan Offer shall be equal to or less than the aggregate maximum amount specified in such CAF Loan Offer for all such maturity dates) and reject any remaining offers made by CAF Loan Banks pursuant to clause (ii) or clause (iii) above, as the case may be; PROVIDED, HOWEVER, that (x) the Company may not accept offers for CAF Loans for any maturity date in an aggregate principal amount in excess of the maximum principal amount requested in the related CAF Loan Request, (y) if the Company accepts any of such offers, it must accept offers strictly based upon pricing for such relevant maturity date and no other criteria whatsoever and (z) if two or more CAF Loan Banks submit offers for any maturity date at identical pricing and the Company accepts any of such offers but does not wish to borrow the total amount offered by such CAF Loan Banks with such identical pricing, the Company shall accept offers from all of such CAF Loan Banks in amounts allocated among them PRO RATA according to the amounts offered by such CAF Loan Banks (or as nearly pro rata as shall be practicable after giving effect to the requirement that CAF Loans made by a CAF Loan Bank on a Borrowing Date for each relevant maturity date shall be in a principal amount of $2,500,000 or an integral multiple of $1,000,000 in excess thereof PROVIDED that if the number of CAF Loan Banks that submit offers for any maturity date at identical pricing is such that, after the Company accepts such offers PRO RATA in accordance with the foregoing, the CAF Loans to be made by such CAF Loan Banks would be less than $2,500,000 principal amount, the number of such CAF Loan Banks shall be reduced by the CAF Loan 20 Agent by lot until the CAF Loans to be made by such remaining CAF Loan Banks would be in a principal amount of $2,500,000 or an integral multiple of $1,000,000 in excess thereof). (v) If the Company notifies the CAF Loan Agent that a CAF Loan Request is cancelled pursuant to clause (iv)(A) above, the CAF Loan Agent shall give prompt, but in no event more than one hour later, telephone notice thereof to the CAF Loan Banks, and the CAF Loans requested thereby shall not be made. (vi) If the Company accepts pursuant to clause (iv)(B) above one or more of the offers made by any CAF Loan Bank or CAF Loan Banks, the CAF Loan Agent shall promptly, but in no event more than one hour later, notify each CAF Loan Bank which has made such an offer of the aggregate amount of such CAF Loans to be made on such Borrowing Date for each maturity date and of the acceptance or rejection of any offers to make such CAF Loans made by such CAF Loan Bank. Each CAF Loan Bank which is to make a CAF Loan shall, before 12:00 Noon, New York City time, on the Borrowing Date specified in the CAF Loan Request applicable thereto, make available to the Agent at its office set forth in subsection 8.2 the amount of CAF Loans to be made by such CAF Loan Bank, in immediately available funds. The Agent will make such funds available to the Company as soon as practicable on such date at the Agent's aforesaid address. As soon as practicable after each Borrowing Date, the Agent shall notify each Bank of the aggregate amount of CAF Loans advanced on such Borrowing Date and the respective maturity dates thereof. (c) Within the limits and on the conditions set forth in this subsection 2.2, the Company may from time to time borrow under this subsection 2.2, repay pursuant to paragraph (d) below, and reborrow under this subsection 2.2. (d) The Company shall repay to the Agent for the account of each CAF Loan Bank which has made a CAF Loan (or the CAF Loan Assignee in respect thereof, as the case may be) on the maturity date of each CAF Loan (such maturity date being that specified by the Company for repayment of such CAF Loan in the related CAF Loan Request) the then unpaid principal amount of such CAF Loan. The Company shall not have the right to prepay any principal amount of any CAF Loan. (e) The Company shall pay interest on the unpaid principal amount of each CAF Loan from the Borrowing Date to the stated maturity date thereof, at the rate of interest determined pursuant to paragraph (b) above (calculated on the basis of a 360-day year for actual days elapsed), payable on the interest payment date or dates specified by the Company for such CAF Loan in the related CAF Loan Request as provided in the CAF Loan Note evidencing such CAF Loan. If all or a portion of the principal amount of any CAF Loan or any interest or other amount payable hereunder in respect thereof shall not be paid when due (whether 21 at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting any rights of any Bank under this Agreement, bear interest from the date on which such payment was due at a rate per annum which is 2% above the rate which would otherwise be applicable pursuant to the CAF Loan Note evidencing such CAF Loan until the scheduled maturity date with respect thereto as set forth in the CAF Loan Note evidencing such CAF Loan, and for each day thereafter at rate per annum which is 2% above the Alternate Base Rate until paid in full (as well after as before judgment). (f) The CAF Loans made by each CAF Loan Bank shall be evidenced initially by a promissory note of the Company, substantially in the form of Exhibit B with appropriate insertions (a "GRID CAF LOAN NOTE"), payable to the order of such CAF Loan Bank and representing the obligation of the Company to pay the unpaid principal amount of all CAF Loans made by such CAF Loan Bank, with interest on the unpaid principal amount from time to time outstanding of each CAF Loan evidenced thereby as prescribed in subsection 2.2(e). Each CAF Loan Bank is hereby authorized to record the date and amount of each CAF Loan made by such Bank, the maturity date thereof, the date and amount of each payment of principal thereof and the interest rate with respect thereto on the schedule annexed to and constituting part of its Grid CAF Loan Note, and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that the failure to make any such recordation shall not affect the obligations of the Company hereunder or under any Grid CAF Loan Note. Each Grid CAF Loan Note shall be dated the Closing Date and each CAF Loan evidenced thereby shall bear interest for the period from and including the Borrowing Date thereof on the unpaid principal amount thereof from time to time outstanding at the applicable rate per annum determined as provided in, and such interest shall be payable as specified in, subsection 2.2(e). (g) Amounts advanced by a CAF Loan Bank pursuant to this subsection 2.2 on a Borrowing Date which have the same maturity date and interest rate shall be deemed to constitute one CAF Loan so long as such amounts remain evidenced by the Grid CAF Loan Note of such CAF Loan Bank; any such CAF Loan Bank that wishes such amounts to constitute more than one CAF Loan and to have each such CAF Loan evidenced by a separate promissory note payable to such CAF Loan Bank, substantially in the form of Exhibit C with appropriate insertions as to Borrowing Date, principal amount and interest rate (an "INDIVIDUAL CAF LOAN NOTE"), shall notify the CAF Loan Agent and the Company by facsimile transmission of the respective principal amounts of the CAF Loans (which principal amounts shall not be less than $5,000,000 for any of such CAF Loans) to be evidenced by each such Individual CAF Loan Note. Not later than three Business Days after receipt of such notice, the Company shall deliver to such CAF Loan Bank an Individual CAF Loan Note payable to the order of such CAF Loan Bank in the principal amount of each such 22 CAF Loan and otherwise conforming to the requirements of this Agreement. Upon receipt of such Individual CAF Loan Note, such CAF Loan Bank shall endorse on the schedule attached to its Grid CAF Loan Note the transfer of such CAF Loan from Grid CAF Loan Note to such Individual CAF Loan Note. 2.3 FACILITY FEE. (a) The Company agrees to pay to the Agent for the account of each Bank a facility fee in respect of the period from and including the first day of the Commitment Period to the Termination Date, computed at the rate of 0.10% per annum on the average daily amount of the Commitment of such Bank during the period for which payment is made, payable quarterly on the last day of each March, June, September and December and on any earlier date on which the Commitments shall terminate as provided herein and the Revolving Credit Loans shall have been repaid in full, commencing on the first of such dates to occur after the date hereof. (b) The Company agrees to pay to the Agent such other fees as may be mutually agreed upon by the Company and the Agent. Each Bank acknowledges that the Agent may be paid certain other fees for its own account in connection with the financing contemplated by this Agreement in addition to the fees described in this Agreement. 2.4 TERMINATION, REDUCTION OR EXTENSION OF COMMITMENTS. (a) The Company shall have the right, upon not less than five Business Days' notice to the Agent, to terminate the Commitments or, from time to time, to reduce ratably the amount of the Commitments, PROVIDED that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, the then outstanding principal amount of the Loans would exceed the amount of the Commitments then in effect. Any such reduction shall be in an amount of $10,000,000 or a whole multiple of $1,000,000 in excess thereof, and shall reduce permanently the amount of the Commitments then in effect. (b) The Company may request, in a notice given as herein provided to the Agent and each of the Banks not less than 60 days and not more than 90 days prior to the Termination Date, that the Termination Date be extended, which notice shall specify that the requested extension is to be effective (the "EFFECTIVE DATE") on the Termination Date, and that the new Termination Date to be in effect following such extension (the "REQUESTED TERMINATION DATE") is to be the date 364 days after the Termination Date. Each Bank shall, not less than 30 days and not more than 60 days prior to the Effective Date, notify the Company and the Agent of its election to extend or not to extend the Termination Date with respect to its Commitment. The Company may, not later than 30 days prior to the Effective Date, revoke its request to extend the Termination Date. Notwithstanding any provision of this Agreement to the contrary, any notice by any Bank of its willingness to extend the Termination Date with 23 respect to its Commitment shall be revocable by such Bank in its sole and absolute discretion at any time prior to the date which is 30 days prior to the Effective Date. If on the date 30 days prior to the Effective Date the Required Banks elect to extend the Termination Date with respect to their Commitments and the Company has not revoked its request to extend the Termination Date, then, subject to the provisions of this subsection 2.4, the Termination Date shall be extended for 364 days. Any Bank which shall not notify the Company and the Agent of its election to extend the Termination Date on or prior to the date 30 days prior to the Effective Date shall be deemed to have elected not to extend the Termination Date with respect to its Commitment. (c) Provided that the Required Banks shall have elected to extend their Commitments as provided in this subsection 2.4, if any Bank shall timely notify the Company and the Agent pursuant to subsection 2.4(b) of its election not to extend its Commitment or its revocation of any extension, or shall be deemed to have elected not to extend its Commitments, (any such Bank being called a "TERMINATING BANK"), then the remaining Banks (the "CONTINUING BANKS") or any of them shall have the right (but not the obligation), upon notice to the Company and the Agent not later than 15 Business Days preceding the Effective Date to increase their Commitments, by an amount up to in the aggregate the Commitments of any Terminating Banks. Each increase in the Commitment of a Continuing Bank shall be evidenced by a written instrument executed by such Continuing Bank, the Company and the Agent, and shall take effect on the Effective Date. Notwithstanding any provision of this Agreement to the contrary, any notice by any Continuing Bank of its willingness to increase its Commitment as provided in this subsection 2.4(c) shall be revocable by such Bank in its sole and absolute discretion at any time prior to the Effective Date. (d) In the event the aggregate Commitments of any Terminating Banks shall exceed the aggregate amount by which the Continuing Banks have agreed to increase their Commitments pursuant to subsection 2.4(c), the Company may, with the approval of the Agent (which will not be unreasonably withheld), designate one or more other banking institutions willing to extend Commitments until the Requested Termination Date in an aggregate amount not greater than such excess. Any such banking institution (an "ADDITIONAL BANK") shall, on or prior to the Effective Date, execute and deliver to the Company and the Agent a Commitment Transfer Supplement, satisfactory to the Company and the Agent, setting forth the amount of such Additional Bank's Commitment and containing its agreement to become, and to perform all the obligations of, a Bank hereunder, and the Commitment of such Additional Bank shall become effective on the Effective Date. Notwithstanding any provision of this Agreement to the contrary, any notice by any Additional Bank of its willingness to become a Bank hereunder shall be revocable by such Additional Bank in its sole and absolute discretion at any time prior to the Effective Date. 24 (e) The Company shall deliver to each Continuing Bank and each Additional Bank, on the Effective Date, in exchange for the Notes held by such Bank, new Notes, maturing on the Requested Termination Date, in the principal amount of such Bank's Commitment after giving effect to the adjustments made pursuant to this subsection 2.4. (f) If the Required Banks shall have elected to extend their Commitments as provided in this subsection 2.4 and the Company has not revoked its request to extend the Termination Date as provided in this subsection 2.4, then (i) the Commitments of the Continuing Banks and any Additional Banks shall continue until the Requested Termination Date specified in the notice from the Company, and as to such Banks the term "Termination Date", as used herein shall mean such Requested Termination Date; (ii) the Commitments of any Terminating Bank shall continue until the Effective Date, and shall then terminate (as to any Terminating Bank, the term "Termination Date", as used herein, shall mean the Effective Date) and any such Terminating Bank shall receive payment in full of the outstanding principal amount, together with accrued interest to such date and any other amounts owed by the Company to such Terminating Bank pursuant to any Loan Document, of the Loans of such Terminating Bank; and (iii) from and after the Effective Date, the term "Banks" shall be deemed to include the Additional Banks and (except with respect to subsections 2.15 and 8.5 to the extent the rights under such subsections arise after the Termination Date in respect of Terminating Banks) to exclude the Terminating Banks. 2.5 OPTIONAL PREPAYMENTS. The Company may on the last day of the relevant Interest Period if the Revolving Credit Loans to be prepaid are in whole or in part Eurodollar Loans, or at any time and from time to time if the Revolving Credit Loans to be prepaid are Alternate Base Rate Loans, prepay the Revolving Credit Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable notice to the Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or Alternate Base Rate Loans or a combination thereof, and if of a combination thereof, the amount of prepayment allocable to each. Upon receipt of such notice the Agent shall promptly notify each Bank thereof. If such notice is given, the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments shall be in an aggregate principal amount of $5,000,000, or a whole multiple thereof, and may only be made if, after giving effect thereto, subsection 2.6(c) shall not have been contravened. 2.6 CONVERSION OPTIONS; MINIMUM AMOUNT OF LOANS. (a) The Company may elect from time to time to convert Eurodollar Loans to Alternate Base Rate Loans by giving the Agent at least two Business Days' prior irrevocable notice of such election (given before 10:00 A.M., New York City time, on the date on 25 which such notice is required), PROVIDED that any such conversion of Eurodollar Loans shall, subject to the fourth following sentence, only be made on the last day of an Interest Period with respect thereto. The Company may elect from time to time to convert Alternate Base Rate Loans to Eurodollar Loans by giving the Agent at least three Business Days' prior irrevocable notice of such election (given before 11:30 A.M., New York City time, on the date on which such notice is required). Upon receipt of such notice, the Agent shall promptly notify each Bank thereof. Promptly following the date on which such conversion is being made each Bank shall take such action as is necessary to transfer its portion of such Revolving Credit Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. All or any part of outstanding Eurodollar Loans and Alternate Base Rate Loans may be converted as provided herein, PROVIDED that, unless the Required Banks otherwise agree, (i) no Revolving Credit Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing, (ii) partial conversions shall be in an aggregate principal amount of $5,000,000 or a whole multiple thereof, and (iii) any such conversion may only be made if, after giving effect thereto, subsection 2.6(c) shall not have been contravened. (b) Any Eurodollar Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Company with the notice provisions contained in subsection 2.6(a); PROVIDED that, unless the Required Banks otherwise agree, no Eurodollar Loan may be continued as such when any Event of Default has occurred and is continuing, but shall be automatically converted to an Alternate Base Rate Loan on the last day of the then current Interest Period with respect thereto. The Agent shall notify the Banks promptly that such automatic conversion contemplated by this subsection 2.6(b) will occur. (c) All borrowings, conversions, payments, prepayments and selection of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising any Eurodollar Tranche shall not be less than $5,000,000. At no time shall there be more than 8 Eurodollar Tranches. 2.7 INTEREST RATE AND PAYMENT DATES FOR REVOLVING CREDIT LOANS. (a) The Eurodollar Loans comprising each Eurodollar Tranche shall bear interest for each day during each Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the Eurodollar Rate plus the Applicable Margin. (b) Alternate Base Rate Loans shall bear interest for each day from and including the date thereof on the unpaid principal amount thereof at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin. 26 (c) If all or a portion of the principal amount of any Revolving Credit Loans shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), each Eurodollar Loan shall, unless the Required Banks otherwise agree, be converted to an Alternate Base Rate Loan at the end of the last Interest Period with respect thereto. Any such overdue principal amount shall bear interest at a rate per annum which is 2% above the rate which would otherwise be applicable pursuant to subsection 2.7(a) or (b), and any overdue interest or other amount payable hereunder shall bear interest at a rate per annum which is 2% above the Alternate Base Rate, in each case from the date of such non-payment until paid in full (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date. 2.8 COMPUTATION OF INTEREST AND FEES. (a) Interest in respect of Alternate Base Rate Loans shall be calculated on the basis of a (i) 365-day (or 366-day, as the case may be) year for the actual days elapsed when such Alternate Base Rate Loans are based on the Prime Rate, and (ii) a 360-day year for the actual days elapsed when based on the Base CD Rate or the Federal Funds Effective Rate. Interest in respect of Eurodollar Loans shall be calculated on the basis of a 360-day year for the actual days elapsed. The Agent shall as soon as practicable notify the Company and the Banks of each determination of a Eurodollar Rate. Any change in the interest rate on a Revolving Credit Loan resulting from a change in the Alternate Base Rate or the Applicable Margin or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate is announced, such Applicable Margin changes as provided herein or such change in or the Eurocurrency Reserve Requirements shall become effective, as the case may be. The Agent shall as soon as practicable notify the Company and the Banks of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. The Agent shall, at the request of the Company, deliver to the Company a statement showing the quotations used by the Agent in determining any interest rate pursuant to subsection 2.7(a) or (c). (c) If any Reference Bank's Commitment shall terminate (otherwise than on termination of all the Commitments), or its Revolving Credit Loans shall be assigned for any reason whatsoever, such Reference Bank shall thereupon cease to be a Reference Bank, and if, as a result of the foregoing, there shall only be one Reference Bank remaining, then the Agent (after consultation with the Company and the Banks) shall, by notice to the Company and the Banks, designate another Bank as a Reference 27 Bank so that there shall at all times be at least two Reference Banks. (d) Each Reference Bank shall use its best efforts to furnish quotations of rates to the Agent as contemplated hereby. If any of the Reference Banks shall be unable or otherwise fails to supply such rates to the Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Banks or Reference Bank. (e) Facility fees shall be computed on the basis of a 365-day year for the actual days elapsed. 2.9 INABILITY TO DETERMINE INTEREST RATE. In the event that: (i) the Agent shall have determined (which determination shall be conclusive and binding upon the Company) that, by reason of circumstances affecting the interbank eurodollar market generally, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for any requested Interest Period; (ii) only one of the Reference Banks is able to obtain bids for its Dollar deposits for such Interest Period in the manner contemplated by the term "Eurodollar Rate"; or (iii) the Agent shall have received notice prior to the first day of such Interest Period from Banks constituting the Required Banks that the interest rate determined pursuant to subsection 2.7(a) for such Interest Period does not accurately reflect the cost to such Banks (as conclusively certified by such Banks) of making or maintaining their affected Loans during such Interest Period; with respect to (A) proposed Revolving Credit Loans that the Company has requested be made as Eurodollar Loans, (B) Eurodollar Loans that will result from the requested conversion of Alternate Base Rate Loans into Eurodollar Loans or (C) the continuation of Eurodollar Loans beyond the expiration of the then current Interest Period with respect thereto, the Agent shall forthwith give facsimile or telephonic notice of such determination to the Company and the Banks at least one day prior to, as the case may be, the requested Borrowing Date for such Eurodollar Loans, the conversion date of such Loans or the last day of such Interest Period. If such notice is given (x) any requested Eurodollar Loans shall be made as Alternate Base Rate Loans, (y) any Alternate Base Rate Loans that were to have been converted to Eurodollar Loans shall be continued as Alternate Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then current Interest Period with respect thereto, to Alternate Base Rate Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar Loans shall be 28 made, nor shall the Company have the right to convert Alternate Base Rate Loans to Eurodollar Loans. 2.10 PRO RATA BORROWINGS AND PAYMENTS. (a) Each borrowing by the Company of Revolving Credit Loans shall be made ratably from the Banks in accordance with their Commitment Percentages. (b) Whenever any payment received by the Agent under this Agreement or any Note is insufficient to pay in full all amounts then due and payable to the Agent and the Banks under this Agreement and the Notes, and the Agent has not received a Payment Sharing Notice (or if the Agent has received a Payment Sharing Notice but the Event of Default specified in such Payment Sharing Notice has been cured or waived), such payment shall be distributed and applied by the Agent and the Banks in the following order: FIRST, to the payment of fees and expenses due and payable to the Agent under and in connection with this Agreement; SECOND, to the payment of all expenses due and payable under subsection 8.5(a), ratably among the Banks in accordance with the aggregate amount of such payments owed to each such Bank; THIRD, to the payment of fees due and payable under subsection 2.3, ratably among the Banks in accordance with their Commitment Percentages; FOURTH, to the payment of interest then due and payable under the Notes, ratably among the Banks in accordance with the aggregate amount of interest owed to each such Bank; and FIFTH, to the payment of the principal amount of the Notes which is then due and payable, ratably among the Banks in accordance with the aggregate principal amount owed to each such Bank. (c) After the Agent has received a Payment Sharing Notice which remains in effect, all payments received by the Agent under this Agreement or any Note shall be distributed and applied by the Agent and the Banks in the following order: FIRST, to the payment of all amounts described in clauses FIRST through THIRD of the foregoing paragraph (b), in the order set forth therein; and SECOND, to the payment of the interest accrued on and the principal amount of all of the Notes, regardless of whether any such amount is then due and payable, ratably among the Banks in accordance with the aggregate accrued interest plus the aggregate principal amount owed to such Bank. (d) All payments (including prepayments) to be made by the Company on account of principal, interest and fees shall be made without set-off or counterclaim and shall be made to the Agent, for the account of the Banks, at the Agent's office set forth in subsection 8.2, in lawful money of the United States of America and in immediately available funds. The Agent shall distribute such payments to the Banks promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments 29 of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Business Day. (e) Unless the Agent shall have been notified in writing by any Bank prior to a Borrowing Date that such Bank will not make the amount which would constitute its Commitment Percentage of the borrowing of Revolving Credit Loans on such date available to the Agent, the Agent may assume that such Bank has made such amount available to the Agent on such Borrowing Date, and the Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such amount is made available to the Agent on a date after such Borrowing Date, such Bank shall pay to the Agent on demand an amount equal to the product of (i) the daily average Federal Funds Effective Rate during such period as quoted by the Agent, times (ii) the amount of such Bank's Commitment Percentage of such borrowing, times (iii) a fraction the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Bank's Commitment Percentage of such borrowing shall have become immediately available to the Agent and the denominator of which is 360. A certificate of the Agent submitted to any Bank with respect to any amounts owing under this subsection 2.10(e) shall be conclusive, absent manifest error. If such Bank's Commitment Percentage of such borrowing is not in fact made available to the Agent by such Bank within three Business Days of such Borrowing Date, the Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to Alternate Base Rate Loans hereunder, on demand, from the Company. 2.11 ILLEGALITY. Notwithstanding any other provisions herein, if after the date hereof the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Bank to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the Bank shall, within 30 Business Days after it becomes aware of such fact, notify the Company, through the Agent, of such fact, (b) the commitment of such Bank hereunder to make Eurodollar Loans or convert Alternate Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (c) such Bank's Revolving Credit Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Alternate Base Rate Loans on the respective last days of the then current Interest Periods for such Revolving Credit Loans or within such earlier period as required by law. Each Bank shall take such action as may be reasonably available to it without legal or financial disadvantage (including changing its Eurodollar Lending Office) to prevent the adoption of or any 30 change in any such Requirement of Law from becoming applicable to it. 2.12 REQUIREMENTS OF LAW. (a) If after the date hereof the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Bank with any request or directive (whether or not having the force of law) after the date hereof from any central bank or other Governmental Authority: (i) shall subject any Bank to any tax of any kind whatsoever with respect to this Agreement, any Revolving Credit Note or any Eurodollar Loans made by it, or change the basis of taxation of payments to such Bank of principal, facility fee, interest or any other amount payable hereunder in respect of Revolving Credit Loans (except for changes in the rate of tax on the overall net income of such Bank); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Bank which are not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Bank any other condition; and the result of any of the foregoing is to increase the cost to such Bank, by any amount which such Bank deems to be material, of making, renewing or maintaining advances or extensions of credit or to reduce any amount receivable hereunder, in each case, in respect of its Eurodollar Loans, then, in any such case, the Company shall promptly pay such Bank, upon its demand, any additional amounts necessary to compensate such Bank for such additional cost or reduced amount receivable. If a Bank becomes entitled to claim any additional amounts pursuant to this subsection 2.12(a), it shall, within 30 Business Days after it becomes aware of such fact, notify the Company, through the Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by such Bank, through the Agent, to the Company shall be conclusive in the absence of manifest error. Each Bank shall take such action as may be reasonably available to it without legal or financial disadvantage (including changing its Eurodollar Lending Office) to prevent any such Requirement of Law or change from becoming applicable to it. This covenant shall survive the termination of this Agreement and payment of the outstanding Revolving Credit Notes. (b) In the event that after the date hereof a Bank is required to maintain reserves of the type contemplated by the definition of "Eurocurrency Reserve Requirements", such Bank may 31 require the Company to pay, promptly after receiving notice of the amount due, additional interest on the related Eurodollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable Eurodollar Rate divided by (B) one MINUS the Eurocurrency Reserve Requirements over (ii) the applicable Eurodollar Rate. Any Bank wishing to require payment of any such additional interest on account of any of its Eurodollar Loans shall notify the Company no more than 30 Business Days after each date on which interest is payable on such Eurodollar Loan of the amount then due it under this subsection 2.12(b), in which case such additional interest on such Eurodollar Loan shall be payable to such Bank at the place indicated in such notice. Each such notification shall be accompanied by such information as the Company may reasonably request. 2.13 CAPITAL ADEQUACY. If any Bank shall have determined that after the date hereof the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Bank or any corporation controlling such Bank with any request or directive after the date hereof regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on such Bank's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Bank or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy) by an amount which is reasonably deemed by such Bank to be material, then from time to time, promptly after submission by such Bank, through the Agent, to the Company of a written request therefor (such request shall include details reasonably sufficient to establish the basis for such additional amounts payable and shall be submitted to the Company within 30 Business Days after it becomes aware of such fact), the Company shall promptly pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. The agreements in this subsection 2.13 shall survive the termination of this Agreement and payment of the Loans and the Notes and all other amounts payable hereunder. 2.14 TAXES. (a) All payments made by the Company under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority excluding, in the case of the Agent and each Bank, net income and franchise taxes imposed on the Agent or such Bank by the jurisdiction under the laws of which the Agent or such Bank is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Bank's Domestic Lending Office or Eurodollar Lending Office, 32 as the case may be, is located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "TAXES"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Bank hereunder or under the Notes, the amounts so payable to the Agent or such Bank shall be increased to the extent necessary to yield to the Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Taxes are payable by the Company, as promptly as possible thereafter, the Company shall send to the Agent for its own account or for the account of such Bank, as the case may be, a certified copy of an original official receipt received by the Company showing payment thereof. If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Company shall indemnify the Agent and the Banks for any incremental taxes, interest or penalties that may become payable by the Agent or any Bank as a result of any such failure. (b) Each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Company and the Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Bank is entitled to receive payments under this Agreement and the Notes payable to it, without deduction or withholding of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Bank which delivers to the Company and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the next preceding sentence further undertakes to deliver to the Company and the Agent two further copies of the said letter and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company, certifying in the case of a Form 1001 or 4224 that such Bank is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such letter or form with respect to it and such Bank advises the Company that it is not capable of receiving payments without any deduction or withholding of United 33 States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (c) The agreements in subsection 2.14 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 2.15 INDEMNITY. The Company agrees to indemnify each Bank and to hold each Bank harmless from any loss or expense (other than any loss of anticipated margin or profit) which such Bank may sustain or incur as a consequence of (a) default by the Company in payment when due of the principal amount of or interest on any Eurodollar Loans of such Bank, (b) default by the Company in making a borrowing or conversion after the Company has given a notice of borrowing in accordance with subsection 2.1(c) or a notice of continuation or conversion pursuant to subsection 2.6, (c) default by the Company in making any prepayment after the Company has given a notice in accordance with subsection 2.5 or (d) the making of a prepayment of a Eurodollar Loan on a day which is not the last day of an Interest Period with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by it to maintain its Eurodollar Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. Any Bank claiming any amount under this subsection 2.15 shall provide calculations, in reasonable detail, of the amount of its loss or expense. This covenant shall survive termination of this Agreement and payment of the outstanding Notes. 2.16 APPLICATION OF PROCEEDS OF LOANS. Subject to the provisions of the following sentence, the Company may use the proceeds of the Loans for any lawful corporate purpose. The Company will not, directly or indirectly, apply any part of the proceeds of any such Loan for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U, or to refund any indebtedness incurred for such purpose. 2.17 NOTICE OF CERTAIN CIRCUMSTANCES; ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES. (a) Any Bank claiming any additional amounts payable pursuant to subsections 2.12, 2.13 or 2.14 or exercising its rights under subsection 2.11, shall, in accordance with the respective provisions thereof, provide notice to the Company and the Agent. Such notice to the Company and the Agent shall include details reasonably sufficient to establish the basis for such additional amounts payable or the rights to be exercised by the Bank. (b) Any Bank claiming any additional amounts payable pursuant to subsections 2.12, 2.13 or 2.14 or exercising its rights under subsection 2.11, shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any 34 certificate or document requested by the Company or to change the jurisdiction of its applicable lending office if the making of such filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue or avoid the circumstances giving rise to such exercise and would not, in the sole determination of such Bank, be otherwise disadvantageous to such Bank. (c) In the event that the Company shall be required to make any additional payments to any Bank pursuant to subsections 2.12, 2.13 or 2.14 or any Bank shall exercise its rights under subsection 2.11, the Company shall have the right at its own expense, upon notice to such Bank and the Agent, to require such Bank to transfer and to assign without recourse (in accordance with and subject to the terms of subsection 8.6) all its interest, rights and obligations under this Agreement to another financial institution (including any Bank) acceptable to the Agent (which approval shall not be unreasonably withheld) which shall assume such obligations; PROVIDED that (i) no such assignment shall conflict with any Requirement of Law and (ii) such assuming financial institution shall pay to such Bank in immediately available funds on the date of such assignment the outstanding principal amount of such Bank's Notes together with accrued interest thereon and all other amounts accrued for its account or owed to it hereunder, including, but not limited to additional amounts payable under subsections 2.3, 2.11, 2.12, 2.13, 2.14 and 2.15. SECTION 3. REPRESENTATIONS AND WARRANTIES The Company hereby represents and warrants that: 3.1 CORPORATE ORGANIZATION AND EXISTENCE. Each of the Company and each Subsidiary is a corporation duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has all necessary corporate power to carry on the business now conducted by it. The Company has all necessary corporate power and has taken all corporate action required to make all the provisions of this Agreement and the Notes and all other agreements and instruments executed in connection herewith and therewith, the valid and enforceable obligations they purport to be. Each of the Company and each Subsidiary is duly qualified and in good standing as a foreign corporation in all jurisdictions other than that of its incorporation in which the physical properties owned, leased or operated by it are located, and is duly authorized, qualified and licensed under all laws, regulations, ordinances or orders of Governmental Authorities, or otherwise, to carry on its business in the places and in the manner presently conducted. 3.2 SUBSIDIARIES. As of the date hereof, the Company has only the Subsidiaries set forth in Schedule II, all of the outstanding capital stock of each of which is duly authorized, 35 validly issued, fully paid and nonassessable and owned as set forth in said Schedule II. Schedule II indicates all Subsidiaries of the Company which are not wholly-owned Subsidiaries and the percentage ownership of the Company and its Subsidiaries in each such Subsidiary. The capital stock and securities owned by the Company and its Subsidiaries in each of the Company's Subsidiaries are owned free and clear of any mortgage, pledge, lien, encumbrance, charge or restriction on the transfer thereof other than restrictions on transfer imposed by applicable securities laws and restrictions, liens and encumbrances outstanding on the date hereof and listed in said Schedule II. 3.3 FINANCIAL INFORMATION. The Company has furnished to the Agent and each Bank copies of the following: (a) the Annual Report of the Company for the fiscal year ended December 31, 1992, containing the consolidated balance sheet of the Company and its Subsidiaries as at said date and the related consolidated statements of income, common stockholders' equity and changes in financial position for the fiscal year then ended, accompanied by the opinion of Arthur Andersen & Co.; (b) the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1992; (c) quarterly financial statements of the Company, including balance sheets, for the fiscal periods ended March 31, 1993, June 30, 1993 and September 30, 1993; (d) the current report of the Company on Form 8-K, dated September 29, 1993; (e) the Annual Report of Galen for the fiscal year ended August 31, 1993, containing the consolidated balance sheet of Galen and its Subsidiaries as at said date and the related consolidated statements of income, common stockholders' equity and changes in financial position for the fiscal year then ended, accompanied by the opinion of Coopers & Lybrand; (f) the Annual Report of Galen on Form 10-K for the fiscal year ended August 31, 1992; (g) quarterly financial statements of Galen, including balance sheets, for the fiscal periods ended November 30, 1992, February 28, 1993 and May 31, 1993; (h) the Annual Report of HCA on Form 10-K for the fiscal year ended December 31, 1992, containing the consolidated balance sheet of HCA and its Subsidiaries as at said date and the related consolidated statements of income, common stockholders' equity and changes in financial 36 position for the fiscal year then ended, accompanied by the opinion of Ernst & Young; (i) quarterly financial statements of HCA, including balance sheets, for the fiscal periods ended March 31, 1993, June 30, 1993 and September 30, 1993; and (j) the Proxy. Such financial statements (including any notes thereto) have been prepared in accordance with GAAP and fairly present the financial conditions of the corporations covered thereby at the date thereof and the results of their operations for the periods covered thereby, subject to normal year-end adjustments in the case of interim statements. As of the date hereof, neither the Company nor any of its Subsidiaries has any known contingent liabilities of any significant amount which are not referred to in said financial statements or in the notes thereto which could reasonably be expected to have a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries, on a consolidated basis. 3.4 CHANGES IN CONDITION. Since December 31, 1992 there has been no material adverse change in the business or assets or in the condition, financial or otherwise, of the Company and its Subsidiaries, on a consolidated basis, or of HCA and its Subsidiaries, on a consolidated basis. Since August 31, 1993 there has been no material adverse change in the business or assets or in the condition, financial or otherwise, of Galen and its Subsidiaries, on a consolidated basis. 3.5 ASSETS. The Company and each Subsidiary have good and marketable title to all material assets carried on their books and reflected in the most recent balance sheet referred to in subsection 3.3 or furnished pursuant to subsection 5.5, except for assets held on Financing Leases or purchased subject to security devices providing for retention of title in the vendor, and except for assets disposed of as permitted by this Agreement. 3.6 LITIGATION. Except as disclosed (i) in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, (ii) in Galen's Annual Report on Form 10-K for its fiscal year ended August 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended November 30, 1992, February 28, 1993 and May 31, 1993 and (iii) in HCA's Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, in each case as filed with the Securities and Exchange Commission and previously distributed to the Banks, there is no litigation, at law or in equity, or any proceeding before any federal, state, provincial or municipal board or other governmental or 37 administrative agency pending or to the knowledge of the Company threatened which, after giving effect to any applicable insurance, may involve any material risk of a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis or which seeks to enjoin the consummation of any of the transactions contemplated by this Agreement or any other Loan Document and involves any material risk that any such injunction will be issued, and no judgment, decree, or order of any federal, state, provincial or municipal court, board or other governmental or administrative agency has been issued against the Company or any Subsidiary which has, or may involve a material risk of a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company does not believe that the final resolution of the matters disclosed in its Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, in Galen's Annual Report on Form 10-K for its fiscal year ended August 31, 1992 and its Quarterly Reports on Form 10-Q for its fiscal quarters ended November 30, 1992, February 28, 1993 and May 31, 1993 or in HCA's Annual Report on Form 10-K for its fiscal year ended December 31, 1992 and HCA's Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31, 1993, June 30, 1993 and September 30, 1993, in each case as filed with the Securities and Exchange Commission and previously distributed to the Banks, will have a material adverse effect on the business or assets or condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 3.7 TAX RETURNS. The Company and each of its Subsidiaries have filed all tax returns which are required to be filed and have paid, or made adequate provision for the payment of, all taxes which have or may become due pursuant to said returns or to assessments received. All federal tax returns of (i) the Company and its Subsidiaries (other than Smith Laboratories, Inc., Sutter Corporation and Basic American Medical, Inc.) through their fiscal years ended in 1989, (ii) Smith Laboratories, Inc., Sutter Corporation and Basic American Medical, Inc. through their respective fiscal years ended in 1988, 1988 and 1986, respectively, (iii) Galen and its Subsidiaries through their fiscal years ended in 1989 and (iv) HCA and its Subsidiaries through their fiscal years ended in 1990, have been audited by the Internal Revenue Service or are not subject to such audit by virtue of the expiration of the applicable period of limitations, and the results of such audits are adequately reflected in the balance sheets referred to in subsection 3.3. The Company knows of no material additional assessments since said date for which adequate reserves appearing in the said balance sheet have not been established. 3.8 CONTRACTS, ETC. Attached hereto as Schedule III is a statement of outstanding Indebtedness of the Company and its 38 Subsidiaries for borrowed money as of the date set forth therein and a complete and correct list of all agreements, contracts, indentures, instruments, documents and amendments thereto to which the Company or any Subsidiary is a party or by which it is bound pursuant to which any such Indebtedness of the Company and its Subsidiaries in excess of $25,000,000 is outstanding on the date hereof. Said Schedule III also includes a complete and correct list of all such Indebtedness of the Company and its Subsidiaries outstanding on the date indicated in respect of Guarantee Obligations in excess of $1,000,000 and letters of credit in excess of $1,000,000, and there have been no increases in such Indebtedness since said date other than as permitted by this Agreement. 3.9 NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution and delivery of this Agreement or of any Notes, nor the making by the Company of any borrowings hereunder, nor the consummation of any transaction herein or therein referred to or contemplated hereby or thereby nor the fulfillment of the terms hereof or thereof or of any agreement or instrument referred to in this Agreement, has constituted or resulted in or will constitute or result in a breach of the provisions of any contract to which the Company or any of its Subsidiaries is a party or by which it is bound or of the charter or by-laws of the Company, or the violation of any law, judgment, decree or governmental order, rule or regulation applicable to the Company or any of its Subsidiaries, or result in the creation under any agreement or instrument of any security interest, lien, charge or encumbrance upon any of the assets of the Company or any of its Subsidiaries. Other than those which have already been obtained, no approval, authorization or other action by any governmental authority or any other Person is required to be obtained by the Company or any of its Subsidiaries in connection with the execution, delivery and performance of this Agreement or the transactions contemplated hereby, or the making of any borrowing by the Company hereunder. 3.10 DEFAULTS. Neither the Company nor any Subsidiary is in default under any provision of its charter or by-laws or, so as to affect adversely in any material manner the business or assets or the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis, under any provision of any agreement, lease or other instrument to which it is a party or by which it is bound or of any Requirement of Law. 3.11 BURDENSOME OBLIGATIONS. Neither the Company nor any Subsidiary is a party to or bound by any agreement, deed, lease or other instrument, or subject to any charter, by-law or other corporate restriction which, in the opinion of the management thereof, is so unusual or burdensome as to in the foreseeable future have a material adverse effect on the business or assets or condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company does not presently anticipate that future expenditures of the Company 39 and its Subsidiaries needed to meet the provisions of any federal or state statutes, orders, rules or regulations will be so burdensome as to have a material adverse effect on the business or assets or condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 3.12 PENSION PLANS. Each Plan maintained by the Company, any Subsidiary or any Control Group Person or to which any of them makes or will make contributions is in material compliance with the applicable provisions of ERISA and the Code. Neither the Company nor any Subsidiary nor any Control Group Person maintains, contributes to or participates in any Plan that is a "defined benefit plan" as defined in ERISA. Neither the Company, any Subsidiary, nor any Control Group Person has since August 31, 1986 maintained, contributed to or participated in any Multiemployer Plan, with respect to which a complete withdrawal would result in any withdrawal liability. The Company and its Subsidiaries have met all of the funding standards applicable to all Plans that are not Multiemployer Plans, and there exists no event or condition which would permit the institution of proceedings to terminate any Plan that is not a Multiemployer Plan. The current value of the benefits guaranteed under Title IV of ERISA of each Plan that is not a Multiemployer Plan does not exceed the current value of such Plan's assets allocable to such benefits. 3.13 DISCLOSURE. Neither this Agreement nor any agreement, document, certificate or statement furnished to the Banks by the Company in connection herewith or with the planning or the consummation of the transactions contemplated by the Merger, including, without limitation, the information relating to the Company and its Subsidiaries after the Merger included in the Confidential Information Memorandum and Proxy, contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. All pro forma financial statements and other materials describing the structure of the transactions contemplated by the Proxy that have been prepared by the Company and made available to Banks have been prepared in good faith based upon reasonable assumptions. There is no fact known to the Company which has or in the future may have (so far as the Company can now foresee) a material adverse effect on the business or assets or the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis, except to the extent that they may be affected by future general economic conditions. 3.14 ENVIRONMENTAL AND PUBLIC AND EMPLOYEE HEALTH AND SAFETY MATTERS. The Company and each Subsidiary has complied with all applicable Federal, state, and other laws, rules and regulations relating to environmental pollution or to environmental regulation or control or to public or employee health or safety, except to the extent that the failure to so comply would not be reasonably likely to result in a material 40 adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company's and the Subsidiaries' facilities do not contain, and have not previously contained, any hazardous wastes, hazardous substances, hazardous materials, toxic substances or toxic pollutants regulated under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the Hazardous Materials Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the Clean Water Act or any other applicable law relating to environmental pollution or public or employee health and safety, in violation of any such law, or any rules or regulations promulgated pursuant thereto, except for violations that would not be reasonably likely to result in a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. The Company is aware of no events, conditions or circumstances involving environmental pollution or contamination or public or employee health or safety, in each case applicable to it or its Subsidiaries, that would be reasonably likely to result in a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 3.15 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of the Board of Governors of the Federal Reserve System. If requested by any Bank or the Agent, the Company will furnish to the Agent and each Bank a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. 3.16 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Company is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Company is not subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness. SECTION 4. CONDITIONS The obligations of each Bank to make the Loans contemplated by subsections 2.1 and 2.2 shall be subject to the compliance by the Company with its agreements herein contained and to the satisfaction on or before the Closing Date and each Borrowing Date of such of the following further conditions as are applicable on the Closing Date or such Borrowing Date, as the case may be: 41 4.1 LOAN DOCUMENTS. The Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Company, with a counterpart for each Bank and (ii) for the account of each Bank, a Revolving Credit Note and a Grid CAF Loan Note conforming to the requirements hereof and executed by a duly authorized officer of the Company. 4.2 LEGAL OPINIONS. On the Closing Date and on any Borrowing Date as the Agent shall request, each Bank shall have received from any general, associate, or assistant general counsel to the Company, such opinions as the Agent shall have reasonably requested with respect to the transactions contemplated by this Agreement. 4.3 COMPANY OFFICERS' CERTIFICATE. The representations and warranties contained in Section 3 shall be true and correct on the Closing Date and on and as of each Borrowing Date with the same force and effect as though made on and as of such date; no Default shall have occurred (except a Default which shall have been waived in writing or which shall have been cured) and no Default shall exist after giving effect to the Loan to be made; between (i) December 31, 1992 in the case of the Company and its Subsidiaries and HCA and its Subsidiaries and August 31, 1993 in the case of Galen and its Subsidiaries and (ii) such Borrowing Date, neither the business nor assets, nor the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis or HCA and its Subsidiaries on a consolidated basis shall have been adversely affected in any material manner as a result of any fire, flood, explosion, accident, drought, strike, lockout, riot, sabotage, confiscation, condemnation, or any purchase of any property by Governmental Authority, activities of armed forces, acts of God or the public enemy, new or amended legislation, regulatory order, judicial decision or any other event or development whether or not related to those enumerated above; and the Agent shall have received a certificate containing a representation to these effects dated such Borrowing Date and signed by a Responsible Officer. 4.4 TERMINATION OF PRIOR AGREEMENTS. On the Closing Date, each of (i) the $300,000,000 Credit Agreement, (ii) the $500,000,000 Credit Agreement, (iii) the $800,000,000 Credit Agreement and (iv) the $1,642,000,000 Credit Agreement shall have been terminated and the Company shall have paid in full all indebtedness outstanding thereunder, including, without limitation, all interest and fees owing with respect to such indebtedness. 4.5 LEGALITY, ETC. The making of the Loan to be made by such Bank on each Borrowing Date shall not subject such Bank to any penalty or special tax, shall not be prohibited by any Requirement of Law applicable to such Bank or the Company, and all necessary consents, approvals and authorizations of any Governmental Authority or any Person to or of any such Loan shall have been obtained and shall be in full force and effect. 42 4.6 GENERAL. All instruments and legal and corporate proceedings in connection with the Loans contemplated by this Agreement shall be satisfactory in form and substance to the Agent, and the Agent shall have received copies of all documents, including the Merger Agreement executed and delivered by each of the signatories thereto, the Proxy and all amendments and exhibits thereto, and favorable legal opinions and records of corporate proceedings, which the Agent may have reasonably requested in connection with the Loans and other transactions contemplated by this Agreement. 4.7 FEES. The Agent shall have received the fees to be received on the Closing Date referred to in subsection 2.3. 4.8 CONSUMMATION OF THE MERGER. The Agent shall have received evidence, which evidence shall be in form and substance satisfactory to the Agent, that the transactions contemplated by the Merger, including, without limitation, the transactions contemplated by the Proxy and subsections 1.1 and 4.1 of the Merger Agreement, have been consummated. SECTION 5. GENERAL COVENANTS On and after the date hereof, until all of the Notes and all other amounts payable pursuant hereto shall have been paid in full and so long as the Commitments shall remain in effect, the Company covenants that the Company will comply, and will cause each of its Subsidiaries to comply, with such of the provisions of this Section 5 and such other provisions of this Agreement as are applicable to the Person in question. 5.1 TAXES, INDEBTEDNESS, ETC. (a) Each of the Company and its Subsidiaries will duly pay and discharge, or cause to be paid and discharged, before the same shall become in arrears, all taxes, assessments, levies and other governmental charges imposed upon such corporation and its properties, sales and activities, or any part thereof, or upon the income or profits therefrom; PROVIDED, HOWEVER, that any such tax, assessment, charge or levy need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Company or the Subsidiary in question shall have set aside on its books appropriate reserves with respect thereto. (b) Each of the Company and its Subsidiaries will promptly pay when due, or in conformance with customary trade terms, all other Indebtedness and liabilities incident to its operations; PROVIDED, HOWEVER, that any such Indebtedness or liability need not be paid if the validity or amount thereof shall currently be contested in good faith and if the Company or the Subsidiary in question shall have set aside on its books appropriate reserves with respect thereto. The Subsidiaries will not create, incur, assume or suffer to exist any Indebtedness, 43 except: (i) Indebtedness outstanding on the date hereof and listed on Schedule III; (ii) Indebtedness that is owing to the Company or any other Subsidiary; and (iii) additional Indebtedness at any time outstanding in an aggregate principal amount not to exceed 10% of Consolidated Assets. 5.2 MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAW. Each of the Company and its Subsidiaries (a) will keep its material properties in good repair, working order and condition and will from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto and will comply at all times with the provisions of all material leases and other material agreements to which it is a party so as to prevent any loss or forfeiture thereof or thereunder unless compliance therewith is being currently contested in good faith by appropriate proceedings and (b) in the case of the Company or any Subsidiary of the Company while such Person remains a Subsidiary, will do all things necessary to preserve, renew and keep in full force and effect and in good standing its corporate existence and franchises necessary to continue such businesses. The Company and its Subsidiaries will comply in all material respects with all valid and applicable Requirements of Law (including any such laws, rules, regulations or governmental orders relating to the protection of environmental or public or employee health or safety) of the United States, of the States thereof and their counties, municipalities and other subdivisions and of any other jurisdiction, applicable to the Company and its Subsidiaries, except where compliance therewith shall be contested in good faith by appropriate proceedings, the Company or the Subsidiary in question shall have set aside on its books appropriate reserves in conformity with GAAP with respect thereto, and the failure to comply therewith could not reasonably be expected to, in the aggregate, have a material adverse effect on the business or assets or on the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. 5.3 TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its Subsidiaries will enter into any transactions, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any of their Affiliates (other than the Company and its Subsidiaries) unless such transaction is otherwise permitted under this Agreement, is in the ordinary course of the Company's or such Subsidiary's business and is upon fair and reasonable terms no less favorable to the Company or such Subsidiary, as the case may be, than it would obtain in an arm's-length transaction. 5.4 INSURANCE. The Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained, with financially sound and reputable insurers including any Subsidiary which is engaged in the business of providing insurance protection, insurance (including, without limitation, professional liability insurance against claims for malpractice) 44 with respect to its properties and business and the properties and business of its Subsidiaries against loss or damage of the kinds customarily insured against of such types and such amounts as are customarily carried under similar circumstances by other corporations. Such insurance may be subject to co-insurance, deductibility or similar clauses which, in effect, result in self-insurance of certain losses, and the Company may self-insure against such loss or damage, PROVIDED that adequate insurance reserves are maintained in connection with such self-insurance. 5.5 FINANCIAL STATEMENTS. The Company will and will cause each of its Subsidiaries to maintain a standard modern system of accounting in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with GAAP consistently applied, and will furnish the following to each Bank (in duplicate if so requested): (a) ANNUAL STATEMENTS. As soon as available, and in any event within 120 days after the end of each fiscal year, the consolidated balance sheet as at the end of each fiscal year and consolidated statements of profit and loss and of retained earnings for such fiscal year of the Company and its Subsidiaries, together with comparative consolidated figures for the next preceding fiscal year, accompanied by reports or certificates of an Auditor, to the effect that such balance sheet and statements were prepared in accordance with GAAP consistently applied and fairly present the financial position of the Company and its Subsidiaries as at the end of such fiscal year and the results of their operations and changes in financial position for the year then ended and the statement of such Auditor and of a Responsible Officer of the Company that such Auditor and Responsible Officer have caused the provisions of this Agreement to be reviewed and that nothing has come to their attention to lead them to believe that any Default exists hereunder or, if such is not the case, specifying such Default or possible Default and the nature thereof. In addition, such financial statements shall be accompanied by a certificate of a Responsible Officer of the Company containing computations showing compliance with subsections 5.6, 5.7 and 5.10. (b) QUARTERLY STATEMENTS. As soon as available, and in any event within 60 days after the close of each of the first three fiscal quarters of the Company and its Subsidiaries in each year, consolidated balance sheets as at the end of such fiscal quarter and consolidated profit and loss and retained earnings statements for the portion of the fiscal year then ended, of the Company and its Subsidiaries, together with computations showing compliance with subsections 5.6, 5.7 and 5.10, accompanied by a certificate of a Responsible Officer of the Company that such statements and computations have been properly prepared in accordance 45 with GAAP, consistently applied, and fairly present the financial position of the Company and its Subsidiaries as at the end of such fiscal quarter and the results of their operations and changes in financial position for such quarter and for the portion of the fiscal year then ended, subject to normal audit and year-end adjustments, and to the further effect that he has caused the provisions of this Agreement and all other agreements to which the Company or any of its Subsidiaries is a party and which relate to Indebtedness to be reviewed, and has no knowledge that any Default has occurred under this Agreement or under any such other agreement, or, if said Responsible Officer has such knowledge, specifying such Default and the nature thereof. (c) NOTICE OF MATERIAL LITIGATION; DEFAULTS. The Company will promptly notify each Bank in writing, by delivery of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission or otherwise, as to any litigation or administrative proceeding to which it or any of its Subsidiaries may hereafter be a party which, after giving effect to any applicable insurance, may involve any material risk of any material judgment or liability or which may otherwise result in any material adverse change in the business or assets or in the condition, financial or otherwise, of the Company and its Subsidiaries on a consolidated basis. Promptly upon acquiring knowledge thereof, the Company will notify each Bank of the existence of any Default, including, without limitation, any default in the payment of any Indebtedness for money borrowed of the Company or any Subsidiary or under the terms of any agreement relating to such Indebtedness, specifying the nature of such Default and what action the Company has taken or is taking or proposes to take with respect thereto. Promptly upon acquiring knowledge thereof, the Company will notify each Bank of a change in the publicly announced ratings by Standard & Poor's Corporation and Moody's Investors Service, Inc. of the then current senior unsecured, non-credit enhanced, long-term Indebtedness of the Company. (d) ERISA REPORTS. The Company will furnish the Agent with copies of any request for waiver of the funding standards or extension of the amortization periods required by Sections 303 and 304 of ERISA or Section 412 of the Code promptly after any such request is submitted by the Company to the Department of Labor or the Internal Revenue Service, as the case may be. Promptly after a Reportable Event occurs, or the Company or any of its Subsidiaries receives notice that the PBGC or any Control Group Person has instituted or intends to institute proceedings to terminate any pension or other Plan, or prior to the Plan administrator's terminating such Plan pursuant to Section 4041 of ERISA, the Company will notify the Agent and will 46 furnish to the Agent a copy of any notice of such Reportable Event which is required to be filed with the PBGC, or any notice delivered by the PBGC evidencing its institution of such proceedings or its intent to institute such proceedings, or any notice to the PBGC that a Plan is to be terminated, as the case may be. The Company will promptly notify each Bank upon learning of the occurrence of any of the following events with respect to any Plan which is a Multiemployer Plan: a partial or complete withdrawal from any Plan which may result in the incurrence by the Company or any of is Subsidiaries of withdrawal liability in excess of $1,000,000 under Subtitle E of Title IV of ERISA, or of the termination, insolvency or reorganization status of any Plan under such Subtitle E which may result in liability to the Company or any of its Subsidiaries in excess of $1,000,000. In the event of such a withdrawal, upon the request of the Agent or any Bank, the Company will promptly provide information with respect to the scope and extent of such liability, to the best of the Company's knowledge. (e) REPORTS TO STOCKHOLDERS, ETC. Promptly after the sending, making available or filing of the same, copies of all reports and financial statements which the Company shall send or make available to its stockholders including, without limitation, the Proxy and all other materials relating thereto, and all registration statements and amendments thereto, and all reports on Form 8-K, 10-Q or 10- K or any similar form hereafter in use which the Company shall file with the Securities and Exchange Commission. (f) OTHER INFORMATION. From time to time upon request of the Agent or any Bank, the Company will furnish information regarding the business affairs and condition, financial or otherwise, of the Company and its Subsidiaries. The Company agrees that any authorized officers and representatives of any Bank shall have the right during reasonable business hours to examine the books and records of the Company and its Subsidiaries, and to make notes and abstracts therefrom, to make an independent examination of its books and records for the purpose of verifying the accuracy of the reports delivered by the Company and its Subsidiaries pursuant to this Agreement or otherwise, and ascertaining compliance with this Agreement. (g) CONFIDENTIALITY OF INFORMATION. Each Bank acknowledges that some of the information furnished to such Bank pursuant to this subsection 5.5 may be received by such Bank prior to the time it shall have been made public, and each Bank agrees that it will keep all information so furnished confidential and shall make no use of such information until it shall have become public, except (i) in connection with matters involving operations under or enforcement of this Agreement or the Notes, (ii) in accordance with each Bank's obligations under law or 47 pursuant to subpoenas or other process to make information available to governmental agencies and examiners or to others, (iii) to each Bank's corporate Affiliates and Transferees and prospective Transferees so long as such Persons agree to be bound by this subsection 5.5(g) or (iv) with the prior consent of the Company. 5.6 RATIO OF TOTAL DEBT TO TANGIBLE NET WORTH. The Company and its Subsidiaries will not at any time have outstanding Consolidated Total Debt in an amount in excess of 200% of Consolidated Tangible Net Worth. 5.7 INTEREST COVERAGE RATIO. On the last day of each fiscal quarter of the Company, the Consolidated Earnings Before Interest and Taxes of the Company and its Subsidiaries for the four consecutive fiscal quarters of the Company then ending will be an amount which equals or exceeds 200% of the Consolidated Interest Expense of the Company and its Subsidiaries for the same four consecutive fiscal quarters. 5.8 DISTRIBUTIONS. The Company will not make any Distribution except that, so long as no Event of Default exists or would exist after giving effect thereto, the Company may make a Distribution. 5.9 MERGER OR CONSOLIDATION. The Company will not become a constituent corporation in any merger or consolidation unless the Company shall be the surviving or resulting corporation and immediately before and after giving effect to such merger or consolidation there shall exist no Default; provided that the Company may merge into another Subsidiary owned by the Company for the purpose of causing the Company to be incorporated in a different jurisdiction in the United States. 5.10 SALES OF ASSETS. The Company and its Subsidiaries may from time to time sell or otherwise dispose of all or any part of their respective assets; PROVIDED, HOWEVER, that in any fiscal year, the Company and its Subsidiaries will not (a) sell or dispose of (including, without limitation, any disposition resulting from any merger or consolidation involving a Subsidiary of the Company, and any Sale-and-Leaseback Transaction), outside of the ordinary course of business, assets constituting in the aggregate more than 12% of Consolidated Assets of the Company and its Subsidiaries as at the end of the immediately preceding fiscal year and (b) exchange any asset or group of assets for another asset or group of assets unless (i) such asset or group of assets are exchanged for an asset or group of assets of a substantially similar type or nature, (ii) on a pro forma basis both before and after giving effect to such exchange, no Default or Event of Default shall have occurred and be continuing, (iii) the aggregate fair market value (as determined in good faith by the Board of Directors of the Company) of the asset or group of assets being transferred by the Company or such Subsidiary and the asset or group of assets being 48 acquired by the Company or such Subsidiary are substantially equal and (iv) the aggregate of (x) all assets of the Company and its Subsidiaries sold pursuant to subsection 5.10(a) (including, without limitation, any disposition resulting from any merger or consolidation involving a Subsidiary of the Company, and any Sale-and-Leaseback Transaction) and (y) the aggregate fair market value (as determined in good faith by the Board of Directors of the Company) of all assets of the Company and its Subsidiaries exchanged pursuant to this subsection 5.10(b) does not exceed 20% of Consolidated Assets of the Company and its Subsidiaries as at the end of the immediately preceding fiscal year. 5.11 COMPLIANCE WITH ERISA. Each of the Company and its Subsidiaries will meet, and will cause all Control Group Persons to meet, all minimum funding requirements applicable to any Plan imposed by ERISA or the Code (without giving effect to any waivers of such requirements or extensions of the related amortization periods which may be granted), and will at all times comply, and will cause all Control Group Persons to comply, in all material respects with the provisions of ERISA and the Code which are applicable to the Plans. At no time shall the aggregate actual and contingent liabilities of the Company under Sections 4062, 4063, 4064 and other provisions of ERISA (calculated as if the 30% of collective net worth amount referred to in Section 4062(b)(1)(A)(i)(II) of ERISA exceeded the actual total amount of unfunded guaranteed benefits referred to in Section 4062(B)(1)(A)(i)(I) of ERISA) with respect to all Plans (and all other pension plans to which the Company, any Subsidiary, or any Control Group Person made contributions prior to such time) exceed $7,500,000. Neither the Company nor its Subsidiaries will permit any event or condition to exist which could permit any Plan which is not a Multiemployer Plan to be terminated under circumstances which would cause the lien provided for in Section 4068 of ERISA to attach to the assets of the Company or any of its Subsidiaries. 5.12 NEGATIVE PLEDGE. The Company will not and will ensure that no Subsidiary will create or have outstanding any security on or over any Principal Property in respect of any Indebtedness except for: (a) any security for the purchase price or cost of construction of real property acquired by the Company or any of its Subsidiaries (or additions, substantial repairs, alterations or substantial improvements thereto) or equipment, provided that such Indebtedness and such security are incurred within 18 months of the acquisition or completion of construction (or alteration or repair) and full operation; (b) any security existing on property at the time of acquisition of such property by the Company or a Subsidiary or on the property of a corporation at the time of the acquisition of such corporation by the Company or a 49 Subsidiary (including acquisitions through merger or consolidation); (c) any security created in favor of the Company or a Subsidiary; (d) any security existing at the date of this Agreement set forth on Schedule IV; (e) any security created by operation of law in favor of government agencies of the United States of America or any State thereof; (f) any security created in connection with the borrowing of funds if within 120 days such funds are used to repay Indebtedness in at least the same principal amount as secured by other security of Principal Property with an independent appraised fair market value at least equal to the appraised fair market value of the Principal Property secured by the new security; and (g) any extension, renewal or replacement of any security referred to in the foregoing clauses (a) through (f) provided that the amount thereby secured is not increased; unless any Loans made and/or to be made to and all other sums payable by the Company under this Agreement shall be secured equally and ratably with (or prior to) such Indebtedness so long as such Indebtedness shall be so secured. Notwithstanding the foregoing, the Company and any one or more Subsidiaries may, without securing the Loans made and/or to be made to and all other sums payable by the Company under this Agreement, create, issue or assume Indebtedness which would otherwise be subject to the foregoing restrictions in an aggregate principal amount which, together with all other such Indebtedness of the Company and its Subsidiaries (not including Indebtedness permitted to be secured pursuant to the foregoing clauses (a) through (g) and the aggregate Attributable Debt), including Indebtedness in respect of Sale-and-Lease-back Transactions (other than those permitted by subsection 5.13(b)), does not exceed 10% of Consolidated Net Tangible Assets of the Company and its Subsidiaries. 5.13 SALE-AND-LEASE-BACK TRANSACTIONS. Neither the Company nor any Significant Subsidiary will enter into any Sale- and-Lease-back Transaction with respect to any Principal Property with any Person (other than the Company or a Subsidiary) unless either (a) the Company or such Significant Subsidiary would be entitled, pursuant to the provisions described in subsection 5.12(a) through (g) to incur Indebtedness secured by a security on the property to be leased without equally and ratably securing the Loans made and/or to be made to and all other sums payable by the Company under this Agreement, or (b) the Company during or immediately after the expiration of 120 days after the effective 50 date of such transaction applies to the voluntary retirement of its Indebtedness and/or the acquisition or construction of Principal Property an amount equal to the greater of the net proceeds of the sale of the property leased in such transaction or the fair value in the opinion of the chief financial officer of the Company of the leased property at the time such transaction was entered into. SECTION 6. DEFAULTS 6.1 EVENTS OF DEFAULT. Upon the occurrence of any of the following events: (a) any default shall be made by the Company in any payment in respect of: (i) interest on any of the Notes or any facility fee payable hereunder as the same shall become due and such default shall continue for a period of five days; or (ii) principal of any of the Indebtedness evidenced by the Notes as the same shall become due, whether at maturity, by prepayment, by acceleration or otherwise; or (b) any default shall be made by either the Company or any Subsidiary of the Company in the performance or observance of any of the provisions of subsections 5.6 through 5.10, 5.12 and 5.13; or (c) any default shall be made in the due performance or observance of any other covenant, agreement or provision to be performed or observed by either the Company or any Subsidiary under this Agreement, and such default shall not be rectified or cured to the satisfaction of the Required Banks within a period expiring 30 days after written notice thereof by the Agent to the Company; or (d) any representation or warranty of or with respect to the Company or any Subsidiary of the Company to the Banks in connection with this Agreement shall have been untrue in any material respect on or as of the date made and the facts or circumstances to which such representation or warranty relates shall not have been subsequently corrected to make such representation or warranty no longer incorrect; or (e) any default shall be made in the payment of any item of Indebtedness of the Company or any Subsidiary or under the terms of any agreement relating to such Indebtedness and such default shall continue without having been duly cured, waived or consented to, beyond the period of grace, if any, therein specified; PROVIDED, HOWEVER, that such default shall not constitute an Event of Default unless (i) the outstanding principal amount of such item of Indebtedness exceeds $10,000,000, or (ii) the aggregate outstanding principal amount of such item of Indebtedness and all other items of Indebtedness of the Company and its 51 Subsidiaries as to which such defaults exist and have continued without being duly cured, waived or consented to beyond the respective periods of grace, if any, therein specified exceeds $25,000,000, or (iii) such default shall have continued without being rectified or cured to the satisfaction of the Required Banks for a period of 30 days after written notice thereof by the Agent to the Company; or (f) either the Company or any Subsidiary shall be involved in financial difficulties as evidenced: (i) by its commencement of a voluntary case under Title 11 of the United States Code as from time to time in effect, or by its authorizing, by appropriate proceedings of its board of directors or other governing body, the commencement of such a voluntary case; (ii) by the filing against it of a petition commencing an involuntary case under said Title 11 which shall not have been dismissed within 60 days after the date on which said petition is filed or by its filing an answer or other pleading within said 60- day period admitting or failing to deny the material allegations of such a petition or seeking, consenting or acquiescing in the relief therein provided; (iii) by the entry of an order for relief in any involuntary case commenced under said Title 11; (iv) by its seeking relief as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or by its consenting to or acquiescing in such relief; (v) by the entry of an order by a court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors, or (iii) assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property; (vi) by its making an assignment for the benefit of, or entering into a composition with, its creditors, or appointing or consenting to the appointment of a receiver or other custodian for all or a substantial part of its property; or (g) a Change in Control of the Company shall occur; 52 then and in each and every such case, (x) the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, proceed to protect and enforce the rights of the Banks by suit in equity, action at law and/or other appropriate proceeding either for specific performance of any covenant or condition contained in this Agreement or any Note or in any instrument delivered to each Bank pursuant to this Agreement, or in aid of the exercise of any power granted in this Agreement or any Note or any such instrument or assignment, and (y) the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, by notice in writing to the Company terminate the obligations of the Banks to make further Revolving Credit Loans hereunder, and thereupon such obligations shall terminate forthwith and (z) (unless there shall have occurred an Event of Default under subsection 6.1(f), in which case the obligations of the Banks to make further Revolving Credit Loans hereunder shall automatically terminate and the unpaid balance of the Notes and accrued interest thereon and all other amounts payable hereunder (the "BANK OBLIGATIONS") shall automatically become due and payable) the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, by notice in writing to the Company declare all or any part of the unpaid balance of the Bank Obligations then outstanding to be forthwith due and payable, and thereupon such unpaid balance or part thereof shall become so due and payable without presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived, the obligations of the Banks to make further Revolving Credit Loans hereunder shall terminate forthwith, and the Agent may, with the consent of the Required Banks, or shall, at the direction of the Required Banks, proceed to enforce payment of such balance or part thereof in such manner as the Agent may elect, and each Bank may offset and apply toward the payment of such balance or part thereof, and to the curing of any such Event of Default, any Indebtedness from such Bank to the Company, including any Indebtedness represented by deposits in any general or special account maintained with such Bank. 6.2 ANNULMENT OF DEFAULTS. An Event of Default shall not be deemed to be in existence for any purpose of this Agreement if the Agent, with the consent of or at the direction of the Required Banks, subject to subsection 8.1, shall have waived such event in writing or stated in writing that the same has been cured to its reasonable satisfaction, but no such waiver shall extend to or affect any subsequent Event of Default or impair any rights of the Agent or the Banks upon the occurrence thereof. 6.3 WAIVERS. The Company hereby waives to the extent permitted by applicable law (a) all presentments, demands for performance, notices of nonperformance (except to the extent required by the provisions hereof), protests, notices of protest and notices of dishonor in connection with any of the Indebtedness evidenced by the Notes, (b) any requirement of 53 diligence or promptness on the part of any Bank in the enforcement of its rights under the provisions of this Agreement or any Note, and (c) any and all notices of every kind and description which may be required to be given by any statute or rule of law and any defense of any kind which the Company may now or hereafter have with respect to its liability under this Agreement or any Note. 6.4 COURSE OF DEALING. No course of dealing between the Company and any Bank shall operate as a waiver of any of the Banks' rights under this Agreement or any Note. No delay or omission on the part of any Bank in exercising any right under this Agreement or any Note or with respect to any of the Bank Obligations shall operate as a waiver of such right or any other right hereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver or consent shall be binding upon any Bank unless it is in writing and signed by the Agent or such of the Banks as may be required by the provisions of this Agreement. The making of a Loan hereunder during the existence of a Default shall not constitute a waiver thereof. SECTION 7. THE AGENT 7.1 APPOINTMENT. Each Bank hereby irrevocably designates and appoints Chemical Bank as the Agent and CAF Loan Agent of such Bank under this Agreement, and each such Bank irrevocably authorizes Chemical Bank, as the Agent and CAF Loan Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Agent or CAF Loan Agent, as the case may be, by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Agent nor the CAF Loan Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent or the CAF Loan Agent. 7.2 DELEGATION OF DUTIES. The Agent or the CAF Loan Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither the Agent nor the CAF Loan Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 EXCULPATORY PROVISIONS. Neither the Agent nor the CAF Loan Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for 54 any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent or the CAF Loan Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or for any failure of the Company to perform its obligations hereunder. Neither the Agent nor the CAF Loan Agent shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Company. 7.4 RELIANCE BY AGENT. The Agent and the CAF Loan Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Agent or the CAF Loan Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent and the CAF Loan Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent and the CAF Loan Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 7.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be 55 reasonably directed by the Required Banks; PROVIDED that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 7.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly acknowledges that neither the Agent nor the CAF Loan Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent or the CAF Loan Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent and the CAF Loan Agent that it has, independently and without reliance upon the Agent or the CAF Loan Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or the CAF Loan Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent or the CAF Loan Agent hereunder, neither the Agent nor the CAF Loan Agent shall have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of the Agent or the CAF Loan Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 INDEMNIFICATION. The Banks agree to indemnify the Agent and the CAF Loan Agent in its capacity as such (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to the respective amounts of their then existing Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent or the CAF Loan Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action 56 taken or omitted by the Agent or the CAF Loan Agent under or in connection with any of the foregoing; PROVIDED that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's or the CAF Loan Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Notes and all other amounts payable hereunder. 7.8 AGENT AND CAF LOAN AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and the CAF Loan Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company as though the Agent or the CAF Loan Agent were not the Agent or the CAF Loan Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Agent and the CAF Loan Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include the Agent or the CAF Loan Agent in its individual capacity. 7.9 SUCCESSOR AGENT AND CAF LOAN AGENT. The Agent or the CAF Loan Agent may resign as Agent or CAF Loan Agent, as the case may be, upon 10 days' notice to the Banks. If the Agent or the CAF Loan Agent shall resign as Agent or CAF Loan Agent, as the case may be, under this Agreement, then the Required Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent or CAF Loan Agent, as the case may be, and the term "Agent" or "CAF Loan Agent", as the case may be, shall mean such successor agent effective upon its appointment, and the former Agent's or CAF Loan Agent's rights, powers and duties as Agent or CAF Loan Agent shall be terminated, without any other or further act or deed on the part of such former Agent or CAF Loan Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's or CAF Loan Agent's resignation hereunder as Agent or CAF Loan Agent, the provisions of this subsection 7.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent or CAF Loan Agent under this Agreement. The Co-Agents in their capacities as such shall have no rights, duties or obligations under this Agreement. SECTION 8. MISCELLANEOUS 8.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any Note, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. With the written consent of the Required Banks, the Agent and the Company may, from time to time, enter into written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or the 57 Notes or changing in any manner the rights of the Banks or of the Company hereunder or thereunder or waiving, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of this Agreement or the Notes or any Default or Event of Default and its consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment, supplement or modification shall (a) extend the maturity (whether as stated, by acceleration or otherwise) of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce any fee payable to the Banks hereunder, or reduce the principal amount thereof, or change the amount of any Bank's Commitment or amend, modify or waive any provision of this subsection 8.1 or reduce the percentage specified in the definition of Required Banks, or consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement, in each case without the written consent of all the Banks, or (b) amend, modify or waive any provision of Section 7 without the written consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Company, the Banks, the Agent and all future holders of the Notes. In the case of any waiver, the Company, the Banks and the Agent shall be restored to their former position and rights hereunder and under the outstanding Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 8.2 NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when sent, confirmation of receipt received, addressed as follows in the case of the Company, the Agent, and the CAF Loan Agent and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: 58 The Company: Columbia Healthcare Corporation 201 West Main Street Louisville, Kentucky 40202 Attention: Treasurer, with a copy to the General Counsel Telecopy: 502-572-2163 The Agent and CAF Loan Agent: Chemical Bank 270 Park Avenue New York, New York 10017 Attention: Carol J. Burt, Managing Director Telecopy: (212) 270-3279 with a copy to: Chemical Bank Agency Services Corporation 140 East 45th Street New York, New York 10017 Attention: Janet Belden and Wallace Chin Telecopy: (212) 270-0854 PROVIDED that any notice, request or demand to or upon the Agent or the Banks pursuant to Section 2 shall not be effective until received. 8.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes. 8.5 PAYMENT OF EXPENSES AND TAXES; INDEMNITY. (a) The Company agrees (i) to pay or reimburse the Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the Notes and any other documents prepared in connection herewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agent, (ii) to pay or reimburse each Bank and the Agent for all their reasonable costs 59 and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes and any such other documents, including, without limitation, reasonable fees and disbursements of counsel to the Agent and to each of the Banks and (iii) to pay, indemnify, and hold each Bank and the Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes and any such other documents. (b) The Company will indemnify each of the Agent and the Banks and the directors, officers and employees thereof and each Person, if any, who controls each one of the Agent and the Banks (any of the foregoing, an "INDEMNIFIED PERSON") and hold each Indemnified Person harmless from and against any and all claims, damages, liabilities and expenses (including without limitation all fees and disbursements of counsel with whom an Indemnified Person may consult in connection therewith and all expenses of litigation or preparation therefor) which an Indemnified Person may incur or which may be asserted against it in connection with any litigation or investigation involving this Agreement or the use of any proceeds of any Loans under this Agreement by the Company or any Subsidiary, any officer, director or employee thereof or the announcement or consummation of the Merger, other than litigation commenced by the Company against any of the Agent or the Banks which (i) seeks enforcement of any of the Company's right hereunder and (ii) is determined adversely to any of the Agent or the Banks. (c) The agreements in this subsection 8.5 shall survive repayment of the Notes and all other amounts payable hereunder. 8.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Banks, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. (b) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loans owing to such Bank, any Notes held by such Bank, any Commitments of such Bank or any other interests of such Bank hereunder. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under this Agreement to the other parties under this Agreement shall remain unchanged, such 60 Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Notes for all purposes under this Agreement, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. The Company agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of offset in respect of its participating interest in amounts owing under this Agreement and any Notes to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Notes, PROVIDED that such right of offset shall be subject to the obligation of such Participant to share with the Banks, and the Banks agree to share with such Participant, as provided in subsection 8.7. The Company also agrees that each Participant shall be entitled to the benefits of subsections 2.12, 2.13 and 2.15 with respect to its participation in the Commitments and the Eurodollar Loans outstanding from time to time; PROVIDED that no Participant shall be entitled to receive any greater amount pursuant to such subsections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. No Participant shall be entitled to consent to any amendment, supplement, modification or waiver of or to this Agreement or any Note, unless the same is subject to clause (a) of the proviso to subsection 8.1. (c) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time assign to one or more banks or other entities ("CAF LOAN ASSIGNEES") any CAF Loan owing to such Bank and any Individual CAF Loan Note held by such Bank evidencing such CAF Loan, pursuant to a CAF Loan Assignment executed by the assignor Bank and the CAF Loan Assignee. Upon such execution, from and after the date of such CAF Loan Assignment, the CAF Loan Assignee shall, to the extent of the assignment provided for in such CAF Loan Assignment, be deemed to have the same rights and benefits of payment and enforcement with respect to such CAF Loan and Individual CAF Loan Note and the same rights of offset pursuant to subsection 6.1 and under applicable law and obligation to share pursuant to subsection 8.7 as it would have had if it were a Bank hereunder; PROVIDED that unless such CAF Loan Assignment shall otherwise specify and a copy of such CAF Loan Assignment shall have been delivered to the Agent for its acceptance and recording in the Register in accordance with subsection 8.6(f), the assignor thereunder shall act as collection agent for the CAF Loan Assignee thereunder, and the Agent shall pay all amounts received from the Company which are allocable to the assigned CAF Loan or Individual CAF Loan Note directly to such assignor without any further liability to such CAF Loan Assignee. A CAF Loan Assignee under a CAF Loan Assignment shall not, by virtue of 61 such CAF Loan Assignment, become a party to this Agreement or have any rights to consent to or refrain from consenting to any amendment, waiver or other modification of any provision of this Agreement or any related document; PROVIDED that if a copy of such CAF Loan Assignment shall have been delivered to the Agent for its acceptance and recording in the Register in accordance with subsection 8.6(f), neither the principal amount of, the interest rate on, nor the maturity date of any CAF Loan or Individual CAF Loan Note assigned to the CAF Loan Assignee thereunder will be modified without the written consent of such CAF Loan Assignee. If a CAF Loan Assignee has caused a CAF Loan Assignment to be recorded in the Register in accordance with subsection 8.6(f), such CAF Loan Assignee may thereafter, in the ordinary course of its business and in accordance with applicable law, assign such Individual CAF Loan Note to any Bank, to any affiliate or subsidiary of such CAF Loan Assignee or to any other financial institution that has total assets in excess of $1,000,000,000 and that in the ordinary course of its business extends credit of the type evidenced by such Individual CAF Loan Note, and the foregoing provisions of this subsection 8.6(c) shall apply, MUTATIS MUTANDIS, to any such assignment by a CAF Loan Assignee. Except in accordance with the preceding sentence, CAF Loans and Individual CAF Loan Notes may not be further assigned by a CAF Loan Assignee, subject to any legal or regulatory requirement that the CAF Loan Assignee's assets must remain under its control. (d) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to any Bank or any affiliate thereof, and, with the consent of the Company and the Agent (which in each case shall not be unreasonably withheld) to one or more additional banks or financial institutions ("PURCHASING BANKS") all or any part of its rights and obligations under this Agreement and the Notes pursuant to a Commitment Transfer Supplement, executed by such Purchasing Bank, such transferor Bank and the Agent (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company); PROVIDED, HOWEVER, that (i) the Commitments purchased by such Purchasing Bank that is not then a Bank shall be equal to or greater than $10,000,000 and (ii) the transferor Bank which has transferred part of its Loans and Commitments to any such Purchasing Bank shall retain a minimum Commitment, after giving effect to such sale, equal to or greater than $10,000,000. Upon (i) such execution of such Commitment Transfer Supplement, (ii) delivery of an executed copy thereof to the Company and (iii) payment by such Purchasing Bank, such Purchasing Bank shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement, to the same extent as if it were an original party hereto with the Commitment Percentage of the Commitments set forth in such Commitment Transfer Supplement. Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting 62 adjustment of Commitment Percentages arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such transferor Bank under this Agreement and the Notes. Upon the consummation of any transfer to a Purchasing Bank, pursuant to this subsection 8.6(d), the transferor Bank, the Agent and the Company shall make appropriate arrangements so that, if required, replacement Notes are issued to such transferor Bank and new Notes or, as appropriate, replacement Notes, are issued to such Purchasing Bank, in each case in principal amounts reflecting their Commitment Percentages or, as appropriate, their outstanding Loans as adjusted pursuant to such Commitment Transfer Supplement. (e) The Agent shall maintain at its address referred to in subsection 8.2 a copy of each CAF Loan Assignment and each Commitment Transfer Supplement delivered to it and a register (the "REGISTER") for the recordation of (i) the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time, and (ii) with respect to each CAF Loan Assignment delivered to the Agent, the name and address of the CAF Loan Assignee and the principal amount of each CAF Loan owing to such CAF Loan Assignee. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Bank or CAF Loan Assignee at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of a CAF Loan Assignment executed by an assignor Bank and a CAF Loan Assignee, together with payment to the Agent of a registration and processing fee of $1,000, the Agent shall promptly accept such CAF Loan Assignment, record the information contained therein in the Register and give notice of such acceptance and recordation to the assignor Bank, the CAF Loan Assignee and the Company. Upon its receipt of a Commitment Transfer Supplement executed by a transferor Bank and a Purchasing Bank (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company and the Agent) together with payment to the Agent of a registration and processing fee of $2,500, the Agent shall (i) promptly accept such Commitment Transfer Supplement (ii) on the Transfer Effective Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Banks and the Company. (g) Subject to subsection 5.5(g), the Company authorizes each Bank to disclose to any Participant, CAF Loan Assignee or Purchasing Bank (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such Bank's possession concerning the Company which has been delivered to such Bank by the Company pursuant to this Agreement or which 63 has been delivered to such Bank by the Company in connection with such Bank's credit evaluation of the Company prior to entering into this Agreement. (h) If, pursuant to this subsection 8.6, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank, the Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Company or the transferor Bank with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the case of any Purchasing Bank and any CAF Loan Assignee registered in the Register, the Agent and the Company) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Bank, to provide the transferor Bank (and, in the case of any Purchasing Bank and any CAF Loan Assignee registered in the Register, the Agent and the Company) a new form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. (i) Nothing herein shall prohibit any Bank or any Affiliate thereof from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. 8.7 ADJUSTMENTS; SET-OFF. If any Bank (a "BENEFITTED BANK") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by offset, pursuant to events or proceedings of the nature referred to in subsection 6.1(f), or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Loans, or interest thereon, such Benefitted Bank shall purchase for cash from the other Banks such portion of each such other Bank's Loans, or shall provide such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another 64 Bank's Loan may exercise all rights of a payment (including, without limitation, rights of offset) with respect to such portion as fully as if such Bank were the direct holder of such portion. 8.8 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 8.9 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.10 WAIVERS OF JURY TRIAL. THE COMPANY, THE AGENT, THE CAF LOAN AGENT AND THE BANKS EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 8.11 SUBMISSION TO JURISDICTION; WAIVERS. The Company hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; and (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same. 65 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLUMBIA HEALTHCARE CORPORATION By: ------------------------------------- Name: Title: CHEMICAL BANK, as Agent, as CAF Loan Agent and as a Bank By: ------------------------------------- Name: Title: BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, N.A., as a Co- Agent and as a Bank By: ------------------------------------- Name: Title: 66 CITIBANK, N.A., as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: 67 NATIONSBANK OF NORTH CAROLINA, N.A., as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: PNC BANK, KENTUCKY, INC., as a Co-Agent and as a Bank By: ------------------------------------- Name: Title: TORONTO DOMINION (TEXAS), INC., as a Co- Agent and as a Bank By: ------------------------------------- Name: Title: WACHOVIA BANK OF GEORGIA, N.A., as a Co- Agent and as a Bank By: ------------------------------------- Name: Title: CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: ------------------------------------- Name: Title: 68 FIRST INTERSTATE BANK OF CALIFORNIA By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE FUJI BANK, LIMITED, HOUSTON AGENCY By: ------------------------------------- Name: Title: SHAWMUT BANK-CONNECTICUT, N.A. By: ------------------------------------- Name: Title: NATIONAL CITY BANK By: ------------------------------------- Name: Title: THIRD NATIONAL BANK IN NASHVILLE By: ------------------------------------- Name: Title: 69 THE SANWA BANK, LIMITED, ATLANTA AGENCY By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: J.P. MORGAN DELAWARE By: ------------------------------------- Name: Title: THE SAKURA BANK, LTD. NEW YORK BRANCH By: ------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: ------------------------------------- Name: Title: 70 THE LONG-TERM CREDIT BANK OF JAPAN By: ------------------------------------- Name: Title: MELLON BANK, N.A. By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE MITSUBISHI BANK, LTD. By: ------------------------------------- Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: ROYAL BANK OF CANADA By: ------------------------------------- Name: Title: 71 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By: ------------------------------------- Name: Title: SWISS BANK CORPORATION By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: THE TOKAI BANK, LIMITED, NEW YORK BRANCH By: ------------------------------------- Name: Title: NBD BANK, N.A. By: ------------------------------------- Name: Title: THE BANK OF TOKYO TRUST COMPANY By: ------------------------------------- Name: Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By: ------------------------------------- Name: Title: 72 AMSOUTH BANK N.A. By: ------------------------------------- Name: Title: ARAB BANK PLC, GRAND CAYMAN BRANCH By: ------------------------------------- Name: Title: BANK ONE, TEXAS, NA By: ------------------------------------- Name: Title: BARNETT BANK OF TAMPA By: ------------------------------------- Name: Title: THE BOATMEN'S NATIONAL BANK OF ST. LOUIS By: ------------------------------------- Name: Title: THE DAIWA BANK, LTD. By: ------------------------------------- Name: Title: FIRST AMERICAN NATIONAL BANK By: ------------------------------------- Name: Title: 73 LIBERTY NATIONAL BANK AND TRUST COMPANY OF LOUISVILLE By: ------------------------------------- Name: Title: THE NORTHERN TRUST COMPANY By: ------------------------------------- Name: Title: UNITED STATES NATIONAL BANK OF OREGON By: ------------------------------------- Name: Title: BANK OF LOUISVILLE & TRUST CO. By: ------------------------------------- Name: Title: SCHEDULE I COMMITMENT AMOUNTS AND PERCENTAGES; LENDING OFFICES; ADDRESSES FOR NOTICE A. COMMITMENT AMOUNTS AND PERCENTAGES.
COMMITMENT COMMITMENT NAME OF BANK AMOUNT PERCENTAGE - ------------ ---------- ---------- CHEMICAL BANK $86,666,666.67 4.33% BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION $80,000,000.00 4.00% THE BANK OF NOVA SCOTIA $80,000,000.00 4.00% THE CHASE MANHATTAN BANK, N.A. $80,000,000.00 4.00% CITIBANK, N.A. $80,000,000.00 4.00% DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES $80,000,000.00 4.00% THE FIRST NATIONAL BANK OF CHICAGO $80,000,000.00 4.00% THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH $80,000,000.00 4.00% MORGAN GUARANTY TRUST COMPANY OF NEW YORK $40,000,000.00 2.00% NATIONSBANK OF NORTH CAROLINA, N.A.$80,000,000.00 4.00% PNC BANK, KENTUCKY, INC. $80,000,000.00 4.00% TORONTO DOMINION (TEXAS), INC. $80,000,000.00 4.00% WACHOVIA BANK OF GEORGIA, N.A. $80,000,000.00 4.00% CREDIT LYONNAIS CAYMAN ISLAND BRANCH $50,000,000.00 2.50% FIRST INTERSTATE BANK OF CALIFORNIA $50,000,000.00 2.50% THE FUJI BANK, LIMITED, HOUSTON AGENCY $50,000,000.00 2.50% SHAWMUT BANK-CONNECTICUT, N.A. $50,000,000.00 2.50% NATIONAL CITY BANK $50,000,000.00 2.50% THIRD NATIONAL BANK IN NASHVILLE $50,000,000.00 2.50% THE SANWA BANK, LIMITED, ATLANTA AGENCY $46,666,666.67 2.33% J.P. MORGAN DELAWARE $40,000,000.00 2.00% THE SAKURA BANK, LTD. NEW YORK BRANCH $40,000,000.00 2.00%
2 ABN AMRO BANK N.V. $33,333,333.33 1.67% FIRST UNION NATIONAL BANK OF NORTH CAROLINA $33,333,333.33 1.67% THE LONG-TERM CREDIT BANK OF JAPAN $33,333,333.33 1.67% MELLON BANK, N.A. $33,333,333.33 1.67% THE MITSUBISHI BANK, LTD. $33,333,333.33 1.67% COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH $33,333,333.33 1.67% ROYAL BANK OF CANADA $33,333,333.33 1.67% THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH $33,333,333.33 1.67% SWISS BANK CORPORATION $33,333,333.33 1.67% THE TOKAI BANK, LIMITED, NEW YORK BRANCH $33,333,333.33 1.67% NBD BANK, N.A. $20,000,000.00 1.00% THE BANK OF TOKYO TRUST COMPANY $20,000,000.00 1.00% THE MITSUBISHI TRUST AND BANKING CORPORATION $20,000,000.00 1.00% AMSOUTH BANK N.A. $16,666,666.67 0.83% ARAB BANK PLC, GRAND CAYMAN BRANCH $16,666,666.67 0.83% BANK ONE, TEXAS, NA $16,666,666.67 0.83% BARNETT BANK OF TAMPA $16,666,666.67 0.83% THE BOATMEN'S NATIONAL BANK OF ST. LOUIS $16,666,666.67 0.83% THE DAIWA BANK, LTD. $16,666,666.67 0.83% FIRST AMERICAN NATIONAL BANK $16,666,666.67 0.83% LIBERTY NATIONAL BANK AND TRUST COMPANY OF LOUISVILLE $16,666,666.67 0.83% THE NORTHERN TRUST COMPANY $16,666,666.67 0.83% UNITED STATES NATIONAL BANK OF OREGON $16,666,666.67 0.83% BANK OF LOUISVILLE & TRUST CO. $ 6,666,666.67 0.33% TOTAL $2,000,000,000 100.00%
3 B. LENDING OFFICES; ADDRESSES FOR NOTICE. CHEMICAL BANK Domestic Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Eurodollar Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Address for Notices: See subsection 8.2 of the Credit Agreement ABN AMRO BANK N.V. Domestic Lending Office: ABN AMRO Bank N.V. - Pittsburgh Branch One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Eurodollar Lending Office: ABN AMRO Bank N.V. - Pittsburgh Branch One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Address for Notices: ABN AMRO Bank N.V. - Pittsburgh Branch One PPG Place, Suite 2950 Pittsburgh, PA 15222-5400 Attention: Dennis F. Lennon Telecopy: (412) 566-2266 Confirmation: (412) 566-2256 4 AMSOUTH BANK N.A. Domestic Lending Office: AmSouth Bank N.A. 1900 5th Ave. North Birmingham, AL 35203 Eurodollar Lending Office: AmSouth Bank N.A. 1900 5th Ave. North Birmingham, AL 35203 Address for Notices: AmSouth Bank N.A. 1900 5th Ave. North Birmingham, AL 35203 Attention: William Page Barnes Telecopy: (205) 326-4075 Confirmation: (205) 326-4081 ARAB BANK PLC, GRAND CAYMAN BRANCH Domestic Lending Office: Arab Bank Plc, Grand Cayman Branch 520 Madison Avenue New York, NY 10022 Eurodollar Lending Office: Arab Bank Plc, Grand Cayman Branch 520 Madison Avenue New York, NY 10022 Address for Notices: Arab Bank Plc, Grand Cayman Branch 520 Madison Avenue New York, NY 10022 Attention: Peter Boyadjian Telecopy: (212) 593-4652 Confirmation: (212) 715-9714 5 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION Domestic Lending Office: Bank of America National Trust & Savings Association 555 S. Flower Street #5618 Los Angeles, CA 90071 Eurodollar Lending Office: Bank of America National Trust & Savings Association 1850 Gateway Blvd., 4th Floor Concord, CA 94520 Address for Notices: Bank of America National Trust & Savings Association 555 S. Flower Street #5618 Los Angeles, CA 90071 Attention: Katherine McNallen Telecopy: (213) 228-2958 Confirmation: (213) 228-2756 BANK OF LOUISVILLE & TRUST CO. Domestic Lending Office: Bank of Louisville & Trust Co. Eurodollar Lending Office: Bank of Louisville & Trust Co. Address for Notices: Bank of Louisville & Trust Co. Attention: Telecopy: Confirmation: THE BANK OF NOVA SCOTIA Domestic Lending Office: The Bank of Nova Scotia 55 Park Place Suite 650 Atlanta, GA 30808 Eurodollar Lending Office: The Bank of Nova Scotia 55 Park Place Suite 650 Atlanta, GA 30808 Address for Notices: The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street Suite 2700 Atlanta, GA 30308 Attention: Joe Legista Telecopy: (404) 888-8998 Confirmation: (408) 877-1562 6 THE BANK OF TOKYO TRUST COMPANY Domestic Lending Office: The Bank of Tokyo Trust Company 100 Broadway New York, NY 10005 Eurodollar lending Office: The Bank of Tokyo Trust Company 100 Broadway New York, NY 10005 Address for Notices: The Bank of Tokyo Trust Company 100 Broadway New York, NY 10005 Attention: Telecopy: Confirmation: BANK ONE, TEXAS, NA Domestic Lending Office: Bank One, Texas, NA 500 Throckmorton Fort Worth, TX 76102 Eurodollar Lending Office: Bank One, Texas, NA 500 Throckmorton Fort Worth, TX 76102 Address for Notices: Bank One, Texas, NA 500 Throckmorton, 6th Floor Fort Worth, TX 76102 Attention: J. Michael Wilson Telecopy: (817) 884-5697 Confirmation: (817) 884-4283 BARNETT BANK OF TAMPA Domestic Lending Office: Barnett Bank of Tampa 50 North Laura Street Jacksonville, FL 32202 Eurodollar Lending Office: Barnett Bank of Tampa 50 North Laura Street Jacksonville, FL 32202 Address for Notices: Barnett Bank 101 E. Kennedy Blvd. P. O. Box 30014 Tampa, FL 33630 Attn: W. Thomas Bowry, Jr. 7 Telecopy: (813) 225-8752 Confirmation: (813) 225-8140 THE BOATMEN'S NATIONAL BANK OF ST. LOUIS Domestic Lending Office: The Boatmen's National Bank of St. Louis One Boatmen's Plaza 800 Market Street St. Louis, MO 63166 Eurodollar Lending Office: The Boatmen's National Bank of St. Louis One Boatmen's Plaza 800 Market Street St. Louis, MO 63166 Address for Notices: The Boatmen's National Bank of St. Louis One Boatmen's Plaza 800 Market Street P. O. Box 236 St. Louis, MO 63166 Attention: Telecopy: Confirmation: THE CHASE MANHATTAN BANK, N.A. Domestic Lending Office: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, NY 10081 Eurodollar Lending Office: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, NY 10081 Address for Notices: The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza 5th Floor New York, NY 10081 Attention: Elliot Jones Telecopy: (212) 552-1457 Confirmation: (212) 552-5302 CITIBANK, N.A. Domestic Lending Office: Citicorp North America, Inc. 2001 Ross Ave., Suite 1400 Dallas, TX 75201 8 Eurodollar Lending Office: Citicorp North America, Inc. 2001 Ross Ave., Suite 1400 Dallas, TX 75201 Address for Notices: Citicorp North America, Inc. 2001 Ross Ave., Suite 1400 Dallas, TX 75201 Attention: J. Lang Aston Telecopy: (214) 953-3888 Confirmation: (214) 953-3833 CREDIT LYONNAIS CAYMAN ISLAND BRANCH Domestic Lending Office: Credit Lyonnais Cayman Island Branch 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Eurodollar Lending Office: Credit Lyonnais Cayman Island Branch 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Address for Notices: Credit Lyonnais Cayman Island Branch 227 W. Monroe Street Suite 3800 Chicago, IL 60606 Attention: Brian Jackson Telecopy: (312) 641-0527 Confirmation: (312) 220-7309 THE DAIWA BANK, LTD. Domestic Lending Office: The Daiwa Bank, Ltd. 75 Rockefeller Plaza 8th Floor New York, NY 10019 Eurodollar Lending Office: The Daiwa Bank, Ltd. 75 Rockefeller Plaza 8th Floor New York, NY 10019 Address for Notices: The Daiwa Bank, Ltd. 75 Rockefeller Plaza 8th Floor New York, NY 10019 Attention: Telecopy: Confirmation: 9 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES Domestic Lending Office: Deutsche Bank AG, New York Branch 31 West 52nd Street New York, NY 10019 Eurodollar Lending Office: Deutsche Bank, AG, Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Address for Notices: Deutsche Bank AG, New York Branch 31 West 52nd Street New York, NY 10019 Attention: Robert A. Maddux, Director Telecopy: (212) 474-8212 Confirmation: (212) 474-8228 FIRST AMERICAN NATIONAL BANK Domestic lending Office: First American National Bank 327 Union Street Nashville, TN 37237 Eurodollar Lending Office: First American National Bank 327 Union Street Nashville, TN 37237 Address for Notices: First American National Bank First American Center Health Care Division - 2nd FL First Union Street Nashville, TN 37237-0203 Attention: Mark Mattson Telecopy: (615) 748-2812 Confirmation: (615) 748-1479 10 FIRST INTERSTATE BANK OF CALIFORNIA Domestic Lending Office: First Interstate Bank of California 707 Wilshire Blvd. Los Angeles, CA 90017 Eurodollar Lending Office: First Interstate Bank of California 707 Wilshire Blvd. Los Angeles, CA 90017 Address for Notices: First Interstate Bank of California 707 Wilshire Blvd. Los Angeles, CA 90017 Attention: Bruce P. McDonald Telecopy: (213) 614-2569 Confirmation: (213) 614-4879 THE FIRST NATIONAL BANK OF CHICAGO Domestic Lending Office: First National Bank of Chicago One First National Plaza Chicago, IL 60670 Eurodollar Lending Office: First National Bank of Chicago One First National Plaza Chicago, IL 60670 Address for Notices: First National Bank of Chicago One First National Plaza Mail Suite 0091 Chicago, IL 60670 Attn: L. Richard Schiller Telecopy: (312) 732-2016 Confirmation: (312) 732-5932 11 FIRST UNION NATIONAL BANK OF NORTH CAROLINA Domestic Lending Office: First Union National Bank of North Carolina 301 S. College Street Charlotte, NC 28202 Eurodollar Lending Office: First Union National Bank of North Carolina 301 S. College Street Charlotte, NC 28202 Address for Notices: First Union National Bank of North Carolina One FUNB Plaza - 19th FL Charlotte, NC 28288-0735 Attention: John Ronson Telecopy: (704) 374-4092 Confirmation: (704) 383-5212 THE FUJI BANK, LIMITED, HOUSTON AGENCY Domestic Lending Office: The Fuji Bank, Limited, Houston Agency 909 Fannin, Suite 2800 Houston, TX 77010 Eurodollar Lending Office: The Fuji Bank, Limited, Houston Agency 909 Fannin 2 Houston Center, Suite 2800 Houston, TX 77010 Address for Notices: The Fuji Bank, Limited, Houston Agency 909 Fannin, Suite 2800 Houston, TX 77010 Attention: Glenn Mealey Telecopy: (713) 759-0048 Confirmation: (713) 759-1800 12 THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH Domestic Lending Office: The Industrial Bank of Japan Trust Company 245 Park Avenue New York, NY 10167 Eurodollar Lending Office: The Industrial Bank of Japan Trust Company 245 Park Avenue New York, NY 10167 Address for Notices: The Industrial Bank of Japan, Limited New York Branch 245 Park Avenue, 23rd FL New York, NY 10167 Attention: Tomoya Aoki Telecopy: (212) 856-9450 Confirmation: (212) 309-6595 J.P. MORGAN DELAWARE Domestic Lending Office: J.P. Morgan Delaware 500 Stanton-Christiana Road Newark, DE 19713-2007 Eurodollar Lending Office: J.P. Morgan Delaware 500 Stanton-Christiana Road Newark, DE 19713-2007 Address for Notices: J.P. Morgan Delaware 902 Market Street Wilmington, DE 19801-3015 Attention: David J. Morris Telecopy: (302) 651-3788 Confirmation: (302) 654-5336 13 LIBERTY NATIONAL BANK AND TRUST COMPANY OF LOUISVILLE Domestic Lending Office: Liberty National Bank and Trust Company of Louisville 416 West Jefferson Street Louisville, KY 40202 Eurodollar Lending Office: Liberty National Bank and Trust Company of Louisville 416 West Jefferson Street Louisville, KY 40202 Address for Notices: Liberty National Bank and Trust Company of Louisville 416 West Jefferson Street Louisville, KY 40202 Attention: Earl A. Dorsey, Jr. Telecopy: (502) 566-2367 Confirmation: (502) 566-2458 THE LONG-TERM CREDIT BANK OF JAPAN Domestic Lending Office: The Long-Term Credit Bank of Japan 165 Broadway, 49th Floor New York, NY 10006 Eurodollar Lending Office: The Long-Term Credit Bank of Japan 165 Broadway, 49th Floor New York, NY 10006 Address for Notices: The Long-Term Credit Bank of Japan New York Branch 165 Broadway, 49th Floor New York, NY 10006 Attention: Theodore Koerner Telecopy: (212) 608-2371 Confirmation: (212) 335-4566 14 MELLON BANK, N.A. Domestic Lending Office: Mellon Bank, N.A. 2 Mellon Bank Center, Room 2 Pittsburgh, PA 15259 Eurodollar Lending Office: Mellon Bank, N.A. 2 Mellon Bank Center, Room 2 Pittsburgh, PA 15259 Address for Notices: Mellon Bank, N.A. 2 Mellon Bank Center, Room 270 Pittsburgh, PA 15259 Attention: Marsha Wicker Telecopy: (412) 234-9010 Confirmation: (412) 234-3594 THE MITSUBISHI BANK, LTD. Domestic Lending Office: The Mitsubishi Bank, Ltd. 2 World Financial Center 225 Liberty Street, 39th Floor New York, NY 10281 Eurodollar Lending Office: The Mitsubishi Bank, Ltd. 2 World Financial Center 225 Liberty Street, 39th Floor New York, NY 10281 Address for Notices: The Mitsubishi Bank, Ltd. 225 Liberty Street 2 World Financial Center 225 Liberty Street, 39th Floor New York, NY 10281-1059 Attention: Hiroaki Fuchida Telecopy: (212) 667-3562 Confirmation: (212) 667-2884 15 THE MITSUBISHI TRUST AND BANKING CORPORATION Domestic Lending Office: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 25th Floor New York, NY 10022 Eurodollar Lending Office: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 25th Floor New York, NY 10022 Address for Notices: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 25th Floor New York, NY 10022 Attn: Randolph E. J. Medrano Telecopy: (212) 755-2349 Confirmation: (212) 891-8212 MORGAN GUARANTY TRUST COMPANY OF NEW YORK Domestic Lending Office: Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Eurodollar Lending Office: Morgan Guaranty Trust Company of New York Nassau, Bahamas Office c/o J.P. Morgan Services Inc. Euro-Loan Servicing Unit Morgan Christiana Center 500 Stanton Christiana Road Newark, DE 19713 Address for Notices: Morgan Guaranty Trust Company of New York 60 Wall Street New York, NY 10260-0060 Attention: Laura E. Reim Telecopy: (212) 648-5336 Confirmation: (212) 648-6793 16 NATIONAL CITY BANK Domestic Lending Office: National City Bank 101 South Fifth Street Louisville, KY 40202 Eurodollar Lending Office: National City Bank 101 South Fifth Street Louisville, KY 40202 Address for Notices: National City Bank P. O. Box 36000 Louisville, KY 40233 Attention: Charles Denny Telecopy: (502) 581-4424 Confirmation: (502) 581-4212 NATIONSBANK OF NORTH CAROLINA, N.A. Domestic Lending Office: NationsBank of North Carolina N.A. 1 NationsBank Plaza Charlotte, NC 28255 Eurodollar Lending Office: NationsBank of North Carolina N.A. 1 NationsBank Plaza Charlotte, NC 28255 Address for Notices: NationsBank of North Carolina N.A. Corporate Bank 1 NationsBank Plaza - 5th FL Nashville, TN 37239-1694 Attention: Ashley Crabtree Telecopy: (615) 749-4640 Confirmation: (615) 749-3524 17 NBD BANK, N.A. Domestic Lending Office: NBD Bank, N.A. 611 Woodward Avenue Detroit, MI 48226 Eurodollar Lending Office: NBD Bank, N.A. 611 Woodward Avenue Detroit, MI 48226 Address for Notices: NBD Bank, N.A. 611 Woodward Avenue Detroit, MI 48226 Attention: Steven P. Clemens Telecopy: (313) 225-1671 Confirmation: (313) 225-1314 THE NORTHERN TRUST COMPANY Domestic Lending Office: The Northern Trust Company 50 South La Salle Street Chicago, IL 60657 Eurodollar Lending Office: The Northern Trust Company 50 South La Salle Street Chicago, IL 60657 Address for Notices: The Northern Trust Company 50 South La Salle Street Chicago, IL 60657 Attention: Robert Jones Telecopy: (312) 444-3508 Confirmation: (312) 444-4575 PNC BANK, KENTUCKY, INC. Domestic Lending Office: PNC Bank, Kentucky, Inc. Citizens Plaza Louisville, KY 40296 Eurodollar Lending Office: PNC Bank, Kentucky, Inc. Citizens Plaza Louisville, KY 40296 Address for Notices: PNC Bank, Kentucky, Inc. 500 West Jefferson Street Louisville, KY 40202 Attention: Jefferson Green Telecopy: (502) 581-3355 Confirmation: (502) 581-3248 18 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH Domestic Lending Office: Rabobank Nederland 245 Park Avenue New York, NY 10022 Eurodollar Lending Office: Rabobank Nederland 245 Park Avenue New York, NY 10022 Address for Notices: Rabobank Nederland New York Branch 245 Park Avenue New York, NY 10022 Attention: Paul Beiboer Telecopy: (212) 916-7837 Confirmation: (212) 916-7883 ROYAL BANK OF CANADA Domestic Lending Office: Royal Bank of Canada Pierrepont Plaza 300 Cadman Plaza West Brooklyn, NY 11201 Eurodollar Lending Office: Royal Bank of Canada Pierrepont Plaza 300 Cadman Plaza West Brooklyn, NY 11201 Address for Notices: Royal Bank of Canada New York Operations Center Pierrepont Plaza 300 Cadman Plaza West Brooklyn, NY 11201-2701 Attention: Linda Swanston Telecopy: (718) 522-6292/6293 Confirmation: (212) 858-7176 19 THE SAKURA BANK, LTD. NEW YORK BRANCH Domestic Lending Office: The Sakura Bank, Ltd. New York Branch 277 Park Avenue New York, NY 10172 Eurodollar Lending Office: The Sakura Bank, Ltd. New York Branch 277 Park Avenue New York, NY 10172 Address for Notices: The Sakura Bank, Ltd. New York Branch 277 Park Avenue New York, NY 10172 Attention: Yoshikazu Nagura Telecopy: (212) 888-7651 Confirmation: (212) 756-6804 THE SANWA BANK, LIMITED, ATLANTA AGENCY Domestic Lending Office: The Sanwa Bank, Limited 133 Peachtree Street Suite 4750 Atlanta, GA 30303 Eurodollar Lending Office: The Sanwa Bank, Limited 133 Peachtree Street Suite 4750 Atlanta, GA 30303 Address for Notice: The Sanwa Bank, Limited 133 Peachtree Street Suite 4750 Atlanta, GA 30303 Attention: Kristie Hartrampf Telecopy: (404) 589-1629 Confirmation: (404) 586-6893 20 SHAWMUT BANK - CONNECTICUT, N.A. Domestic Lending Office: Shawmut Bank - Connecticut, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Eurodollar Lending Office: Shawmut Bank - Connecticut, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Address for Notice: Shawmut Bank - Connecticut, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Attention: James Scully Telecopy: (203) 986-5367 Confirmation: (203) 986-7005 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH Domestic Lending Office: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Eurodollar Lending Office: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Address for Notices: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Attention: Jeff Toner Telecopy: (212) 553-0118 Confirmation: (212) 553-1864 21 SWISS BANK CORPORATION Domestic Lending Office: Swiss Bank Corporation 10 East 50th Street New York, NY 10022 Eurodollar Lending Office: Swiss Bank Corporation 10 East 50th Street New York, NY 10022 Address for Notices: Swiss Bank Corporation 101 California Street Suite 1700 San Francisco, CA 94111 Attention: Colin T. Taylor Telecopy: (414) 774-3345 Confirmation: (415) 989-7570 THIRD NATIONAL BANK IN NASHVILLE Domestic Lending Office: Third National Bank In Nashville 201 Fourth Avenue North Nashville, TN 37244 Eurodollar Lending Office: Third National Bank In Nashville 201 Fourth Avenue North Nashville, TN 37244 Address for Notices: Third National Bank In Nashville P.O. Box 305110 Nashville, TN 37230-5110 Attention: Leigh Ann Gregory Telecopy: (615) 748-4089 Confirmation: (615) 748-5461 22 THE TOKAI BANK, LIMITED, NEW YORK BRANCH Domestic Lending Office: The Tokai Bank, Ltd. New York Branch 55 East 52nd Street New York, NY 10055 Eurodollar Lending Office: The Tokai Bank, Ltd. New York Branch 55 East 52nd Street New York, NY 10055 Address for Notices: The Tokai Bank, Ltd. New York Branch 55 East 52nd Street New York, NY 10055 Attention: Stuart Schulman Telecopy: (212) 754-2170 Confirmation: (212) 339-1117 TORONTO DOMINION (TEXAS), INC. Domestic Lending Office: The Toronto-Dominion Bank, Houston Agency 909 Fannin Street, Suite 1700 Houston, TX 77010 Eurodollar Lending Office: The Toronto-Dominion Bank, Houston Agency 909 Fannin Street, Suite 1700 Houston, TX 77010 Address for Notices: The Toronto-Dominion Bank, USA Division 31 West 52nd Street New York, NY 10019-6101 Attention: Beth Olmstead Telecopy: (212) 262-1929 Confirmation: (212) 468-0754 23 UNITED STATES NATIONAL BANK OF OREGON Domestic Lending Office: United States National Bank of Oregon 309 SW 6th Avenue, BB12 Portland, OR 97204 Eurodollar Lending Office: United States National Bank of Oregon 309 SW 6th Avenue, BB12 Portland, OR 97204 Address for Notices: United States National Bank of Oregon 309 SW 6th Avenue, BB12 Portland, OR 97204 Attention: Chris Kerlin Telecopy: (503) 275-5428 Confirmation: (503) 275-4940 WACHOVIA BANK OF GEORGIA, N.A. Domestic Lending Office: Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, GA 30303 Eurodollar Lending Office: Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, GA 30303 Address for Notices: Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. 28th Floor Atlanta, GA 30303 Attention: Solomon Elisha Telecopy: (404) 332-6898 Confirmation: (404) 332-1092 EX-4.11 6 EXHIBIT 4.11 ___________________________________________________________________________ ___________________________________________________________________________ COLUMBIA HEALTHCARE CORPORATION TO THE FIRST NATIONAL BANK OF CHICAGO, TRUSTEE ______________________ ______________________ INDENTURE DATED AS OF DECEMBER 15, 1993 ______________________ ______________________ DEBT SECURITIES ___________________________________________________________________________ ___________________________________________________________________________ TABLE OF CONTENTS
Page ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . 1 SECTION 101. DEFINITIONS. . . . . . . . . . . . . . . . 1 SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. . . 12 SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. . 13 SECTION 104. NOTICES, ETC., TO TRUSTEE AND COMPANY. . . 13 SECTION 105. NOTICE TO HOLDERS; WAIVER. . . . . . . . . 14 SECTION 106. CONFLICT WITH TRUST INDENTURE ACT. . . . . 14 SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. . . . . . . . . . . . . . . 15 SECTION 108. SUCCESSORS AND ASSIGNS. . . . . . . . . . 15 SECTION 109. SEPARABILITY CLAUSE. . . . . . . . . . . . 15 SECTION 110. BENEFITS OF INDENTURE. . . . . . . . . . . 15 SECTION 111. GOVERNING LAW. . . . . . . . . . . . . . . 15 SECTION 112. LEGAL HOLIDAYS . . . . . . . . . . . . . . 15 SECTION 113. NO SECURITY INTEREST CREATED. . . . . . . 16 SECTION 114. LIABILITY SOLELY CORPORATE. . . . . . . . 16 SECTION 115. COUNTERPARTS. . . . . . . . . . . . . . . 16 ARTICLE TWO DEBT SECURITY FORMS . . . . . . . . . 16 SECTION 201. FORMS GENERALLY. . . . . . . . . . . . . . 16 SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION . . . . . . . . . . . . 17 ARTICLE THREE THE DEBT SECURITIES . . . . . . . . . 18 SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES. . . 18 SECTION 302. DENOMINATIONS. . . . . . . . . . . . . . . 21 SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING . . . . . . . . . . . . . . . . 21 SECTION 304. TEMPORARY DEBT SECURITIES; GLOBAL NOTES. . 23 SECTION 305. REGISTRATION, TRANSFER AND EXCHANGE. . . . 25 SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN DEBT SECURITIES. . . . . . . . . . . . 26 SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. . . . . . . . . . . . . . . 26 SECTION 308. CANCELLATION . . . . . . . . . . . . . . . 28 SECTION 309. COMPUTATION OF INTEREST. . . . . . . . . . 28 SECTION 310. CURRENCY OF PAYMENTS IN RESPECT OF DEBT SECURITIES . . . . . . . . . . . . . . 28 SECTION 311. JUDGMENTS. . . . . . . . . . . . . . . . . 32
i ARTICLE FOUR SATISFACTION AND DISCHARGE . . . . . . . 32 SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. . 32 SECTION 402. APPLICATION OF TRUST MONEY. . . . . . . . 34 ARTICLE FIVE REMEDIES . . . . . . . . . . . . 34 SECTION 501. EVENTS OF DEFAULT. . . . . . . . . . . . . 34 SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. . . . . . . . . . . . . . . 35 SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. . . . . . . . 36 SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . 37 SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF DEBT SECURITIES. . . . . 38 SECTION 506. APPLICATION OF MONEY COLLECTED . . . . . . 38 SECTION 507. LIMITATION ON SUITS. . . . . . . . . . . . 39 SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. . . . 39 SECTION 509. RESTORATION OF RIGHTS AND REMEDIES . . . . 40 SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. . . . . . 40 SECTION 511. DELAY OR OMISSION NOT WAIVER. . . . . . . 40 SECTION 512. CONTROL BY HOLDERS. . . . . . . . . . . . 40 SECTION 513. WAIVER OF PAST DEFAULTS. . . . . . . . . . 41 SECTION 514. UNDERTAKING FOR COSTS. . . . . . . . . . . 41 SECTION 515. WAIVER OF STAY OR EXTENSION LAWS. . . . . 42 ARTICLE SIX THE TRUSTEE . . . . . . . . . . . 42 SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES. . . . 42 SECTION 602. NOTICE OF DEFAULT. . . . . . . . . . . . . 43 SECTION 603. CERTAIN RIGHTS OF TRUSTEE. . . . . . . . . 44 SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBT SECURITIES . . . . . . . . . . 45 SECTION 605. MAY HOLD DEBT SECURITIES. . . . . . . . . 45 SECTION 606. MONEY HELD IN TRUST. . . . . . . . . . . . 45 SECTION 607. COMPENSATION, INDEMNIFICATION AND REIMBURSEMENT. . . . . . . . . . . . . 45 SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. . . . . . . . . . . . . . . 46 SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. . 48 SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS . . . . . . . . 49 SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT. . . . 50 SECTION 612. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY . . . . . . . . . . . 51
ii ARTICLE SEVEN CONCERNING THE HOLDERS . . . . . . . . 52 SECTION 701. ACTS OF HOLDERS. . . . . . . . . . . . . . 52 SECTION 702. PROOF OF OWNERSHIP; PROOF OF EXECUTION OF INSTRUMENTS BY HOLDERS. . . . . . . . 52 SECTION 703. PERSONS DEEMED OWNERS. . . . . . . . . . . 53 SECTION 704. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. . . . . . . . . . . . . . . . . 53 ARTICLE EIGHT HOLDERS' MEETINGS . . . . . . . . . . 53 SECTION 801. PURPOSES OF MEETINGS. . . . . . . . . . . 53 SECTION 802. CALL OF MEETINGS BY TRUSTEE. . . . . . . . 54 SECTION 803. CALL OF MEETINGS BY COMPANY OR HOLDERS. . 54 SECTION 804. QUALIFICATIONS FOR VOTING. . . . . . . . . 54 SECTION 805. REGULATIONS. . . . . . . . . . . . . . . . 55 SECTION 806. VOTING . . . . . . . . . . . . . . . . . . 55 SECTION 807. NO DELAY OF RIGHTS BY MEETING. . . . . . . 56 ARTICLE NINE CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . 56 SECTION 901. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. . . . . . . . . . . . . 56 SECTION 902. SUCCESSOR CORPORATION SUBSTITUTED. . . . . 57 ARTICLE TEN SUPPLEMENTAL INDENTURES . . . . . . . . 57 SECTION 1001. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . 57 SECTION 1002. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS . . . . . . . . . . . . . . . 58 SECTION 1003. EXECUTION OF SUPPLEMENTAL INDENTURES. . . 59 SECTION 1004. EFFECT OF SUPPLEMENTAL INDENTURES. . . . 60 SECTION 1005. CONFORMITY WITH TRUST INDENTURE ACT. . . 60 SECTION 1006. REFERENCE IN DEBT SECURITIES TO SUPPLEMENTAL INDENTURES. . . . . . . 60 SECTION 1007. NOTICE OF SUPPLEMENTAL INDENTURE. . . . . 60 ARTICLE ELEVEN COVENANTS . . . . . . . . . . . . 60 SECTION 1101. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. . . . . . . . . . . . . . . 60 SECTION 1102. MAINTENANCE OF OFFICE OR AGENCY. . . . . 61 SECTION 1103. MONEY FOR DEBT SECURITIES; PAYMENTS TO BE HELD IN TRUST. . . . . . . . . . . 61 SECTION 1104. CORPORATE EXISTENCE. . . . . . . . . . . 62 SECTION 1105. LIMITATION ON MORTGAGES. . . . . . . . . 62
iii SECTION 1106. LIMITATION ON SALE AND LEASE-BACK. . . . 64 SECTION 1107. LIMITATION ON INCURRENCE OF INDEBTEDNESS OR ISSUANCE OF PREFERRED STOCK BY RESTRICTED SUBSIDIARIES . . . . . . . 65 SECTION 1108. EXEMPTED TRANSACTIONS. . . . . . . . . . 66 SECTION 1109. OFFICERS' CERTIFICATE AS TO DEFAULT. . . 66 ARTICLE TWELVE REDEMPTION OF DEBT SECURITIES. . . . . . . 67 SECTION 1201. APPLICABILITY OF ARTICLE. . . . . . . . . 67 SECTION 1202. ELECTION TO REDEEM; NOTICE TO TRUSTEE. . 67 SECTION 1203. SELECTION BY TRUSTEE OF DEBT SECURITIES TO BE REDEEMED. . . . . . . . . . . . 67 SECTION 1204. NOTICE OF REDEMPTION. . . . . . . . . . . 68 SECTION 1205. DEPOSIT OF REDEMPTION PRICE. . . . . . . 68 SECTION 1206. DEBT SECURITIES PAYABLE ON REDEMPTION DATE. . . . . . . . . . . . . . . . . 69 SECTION 1207. DEBT SECURITIES REDEEMED IN PART. . . . . 69 ARTICLE THIRTEEN SINKING FUNDS . . . . . . . . . . . 70 SECTION 1301. APPLICABILITY OF ARTICLE. . . . . . . . . 70 SECTION 1302. SATISFACTION OF MANDATORY SINKING FUND PAYMENTS WITH DEBT SECURITIES . . . . 70 SECTION 1303. REDEMPTION OF DEBT SECURITIES FOR SINKING FUND. . . . . . . . . . . . . 70 ARTICLE FOURTEEN DEFEASANCE . . . . . . . . . . . 72 SECTION 1401. APPLICABILITY OF ARTICLE. . . . . . . . . 72 SECTION 1402. DEFEASANCE UPON DEPOSIT OF MONEYS OR U.S. GOVERNMENT OBLIGATIONS . . . . . 72 SECTION 1403. DEPOSIT MONEYS AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST . . . 74 SECTION 1404. REPAYMENT TO COMPANY. . . . . . . . . . . 74
iv INDENTURE dated as of December 15, 1993, between COLUMBIA HEALTHCARE CORPORATION, a Delaware corporation (hereinafter called the "Company"), having its principal executive office at 201 West Main Street, Louisville, Kentucky 40202 and The First National Bank of Chicago (hereinafter called the "Trustee"), having its Corporate Trust Office at One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126. RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its debentures, notes, bonds or other evidences of indebtedness (herein generally called the "Debt Securities"), to be issued in one or more series, as in this Indenture provided. All things necessary have been done to make this Indenture a valid agreement of the Company, in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of Debt Securities or of Debt Securities of any series, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation; and (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in ARTICLE THREE or ARTICLE SIX, are defined in those respective Articles. "Act" when used with respect to any Holder has the meaning specified in SECTION 701. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Affiliated Corporation" means any corporation that is controlled by the Company but which is not a Subsidiary of the Company pursuant to the definition of the term "Subsidiary." "Attributable Debt" means as of the date of determination, (i) as to any capitalized lease obligations, the indebtedness carried on the balance sheet in accordance with generally accepted accounting principles and (ii) as to any operating leases, the total net amount of rent required to be paid under such leases during the remaining term thereof, discounted at the rate of 1% per annum over the weighted average yield to Stated Maturity of the Outstanding Debt Securities compounded semi-annually. The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. The net amount of rent required to be paid shall also exclude contingent rent payments that are based on factors, such as revenue growth, that are not part of required minimum rent payments. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Attributable Debt" does not include any obligation to make payments arising from the transfer of tax benefits under the United States Economic Recovery Tax Act of 1981 to the extent such obligation is conditioned upon receipt of payments from another Person. "Authenticating Agent" has the meaning specified in SECTION 611. "Board of Directors" means either the board of directors of the Company, or any committee of that board duly authorized to act in respect hereof. 2 "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Debt Securities means any day that is not a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies in that Place of Payment or other location are authorized or obligated by law to close, except as otherwise specified pursuant to SECTION 301. "Code" means the Internal Revenue Code of 1986, as amended and as in effect on the date hereof. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" and "Company Order" mean, respectively, a written request or order signed in the name of the Company by the Chairman, a Vice Chairman, the President, the Chief Financial Officer or a Vice President and by the Treasurer, an Assistant Treasurer, the Controller, the Director of Finance, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Component Currency" has the meaning specified in SECTION 310(H). "Consolidated Net Tangible Assets" means the total amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities as disclosed on the consolidated balance sheet of the Company (excluding any thereof which are by their terms extendible or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed and further excluding any deferred income taxes that are included in current liabilities) and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with generally accepted accounting principles. "Consolidated Stockholders' Equity" means the total stockholders' equity of the Company and its Consolidated Subsidiaries, which under generally accepted accounting principles would appear on a consolidated balance sheet of the Company and its Subsidiaries, excluding the separate component of stockholders' equity attributable to foreign currency 3 translation adjustments pursuant to "Statement of Financial Accounting Standards No. 52 -- Foreign Currency Translation" or any successor provision or principle of generally accepted accounting principles. "Consolidated Subsidiaries" means those Subsidiaries that are consolidated with the Company for financial reporting purposes. "Conversion Date" has the meaning specified in SECTION 310(D). "Conversion Event" means the cessation of (i) a Foreign Currency to be used both by the government of the country which issued such Currency and for the settlement of transactions by public institutions of or within the international banking community, (ii) the ECU to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European communities, or (iii) any Currency unit other than the ECU to be used for the purposes for which it was established. "Corporate Trust Office" means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this instrument is located at The First National Bank of Chicago, One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust Services Division. "Corporation" includes corporations, associations, companies and business trusts. "Currency" means Dollars or Foreign Currency. "Currency Determination Agent" means the New York Clearing House bank, if any, from time to time selected by the Company for purposes of SECTION 310; provided that such agent shall accept such appointment in writing and the terms of such appointment shall be acceptable to the Company and shall, in the opinion of the Company at the time of such appointment, require such agent to make the determinations required by this Indenture by a method consistent with the method provided in this Indenture for the making of such decision or determination. "Debt" means (i) indebtedness for borrowed money by the Company or a Restricted Subsidiary, (ii) indebtedness of the Company or a Restricted Subsidiary (including capitalized lease obligations) for the deferred payment of the purchase price of property or assets purchased, and (iii) guarantees or other contingent obligations of the Company or a Restricted Subsidiary of or for borrowed money of another person or indebtedness of another person for the deferred payment of the purchase price of property or assets purchased (other than indebtedness owed by a Restricted Subsidiary to the Company, by a Restricted Subsidiary to a Subsidiary or by the Company to a Subsidiary). 4 "Debt Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Debt Securities (including any Global Notes) authenticated and delivered under this Indenture. "Defaulted Interest" has the meaning specified in SECTION 307. "Depositary" means a clearing agency registered under the Securities Exchange Act of 1934, as amended, or any successor thereto, which shall in either case be designated by the Company pursuant to SECTION 301 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder, and if at any time there is more than one such Person, "Depositary" as used with respect to the Debt Securities of any series shall mean the Depositary with respect to the Debt Securities of that series. "Discharged" has the meaning specified in SECTION 1402. "Discount Security" means any Debt Security that is issued with "original issue discount" within the meaning of Section 1273(a) of the Code and the regulations thereunder. "Dollar" or "$" means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. "Dollar Equivalent of the Currency Unit" has the meaning specified in SECTION 310(G). "Dollar Equivalent of the Foreign Currency" has the meaning specified in SECTION 310(F). "ECU" means the European Currency Unit as defined and revised from time to time by the Council of the European Communities. "Election Date" has the meaning specified in SECTION 310(H). "Event of Default" has the meaning specified in SECTION 501. "Exchange Rate Officer's Certificate" means a telex or a certificate setting forth (i) the applicable Market Exchange Rate and (ii) the Dollar, Foreign Currency or Currency unit amounts of principal, premium, if any, and any interest respectively (on an aggregate basis and on the basis of a Debt Security having the lowest denomination principal amount pursuant to SECTION 302 in the relevant Currency or Currency unit), payable on the basis of such Market Exchange Rate sent (in the case of a telex) or signed (in the case of a certificate) by the Chief Financial Officer, a Vice President, the Treasurer or any Assistant Treasurer of the Company. 5 "Fixed Rate Security" means a Debt Security that provides for the payment of interest at a fixed rate. "Floating Rate Security" means a Debt Security that provides for the payment of interest at a variable rate determined periodically by reference to an interest rate index or any other index specified pursuant to SECTION 301. "Foreign Currency" means a currency issued by the government of any country other than the United States or a composite currency or currency unit the value of which is determined by reference to the values of the currencies of any group of countries. "Funded Debt" means any indebtedness for money borrowed, created, issued, incurred, assumed or guaranteed that would, in accordance with generally accepted accounting principles, be classified as long-term debt, but in any event including all indebtedness for money borrowed, whether secured or unsecured, maturing more than one year, or extendible at the option of the obligor to a date more than one year, after the date of determination thereof (excluding any amount thereof included in current liabilities). "Global Note" means a Debt Security evidencing all or part of a series of Debt Securities that is executed by the Company and authenticated and delivered to the Depositary or pursuant to the Depositary's instructions, all in accordance with this Indenture and pursuant to a Company order, which shall be registered in the name of the Depositary or its nominee and that shall represent the amount of uncertificated securities as specified therein. "Holder" means a person in whose name a Debt Security of any series is registered in the Security Register. "Indenture" means this instrument as originally executed, or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and, unless the context otherwise requires, shall include the terms of a particular series of Debt Securities as established pursuant to SECTION 301. "Independent" when used with respect to any specified Person means such a Person who (i) is in fact independent with respect to the Company, (ii) does not have any direct financial interest or any material indirect financial interest in the Company or in any other obligor upon the Debt Securities or in any Affiliate of the Company or of such other obligor, and (iii) is not connected with the Company or such other obligor or any Affiliate of the Company or of such other obligor, as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. The term "Interest", when used with respect to a Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date" with respect to any Debt Security means the Stated Maturity of an installment of interest on such Debt Security. 6 "Joint Venture Subsidiary" means a Subsidiary of the Company as of the date of the Indenture of which the Company, directly or indirectly, owns less than 100% of the voting securities entitling the holders thereof to elect a majority of the directors (or, in the case of a partnership, of which the Company, directly or indirectly, owns less than 100% of the general partnership interests therein). "Market Exchange Rate" means (i) for any conversion involving a Currency unit on the one hand and Dollars or any Foreign Currency on the other, the exchange rate between the relevant Currency unit and Dollars or such Foreign Currency calculated by the method specified pursuant to SECTION 301 for the securities of the relevant series, (ii) for any conversion of Dollars into any Foreign Currency, the noon (New York City time) buying rate for such Foreign Currency for cable transfers quoted in New York City as certified for customs purposes by the Federal Reserve Bank of New York, and (iii) for any conversion of one Foreign currency into Dollars or another Foreign Currency, the spot rate at noon local time in the relevant market at which, in accordance with normal banking procedures, the Dollars or Foreign Currency into which conversion is being made could be purchased with the Foreign Currency from which conversion is being made from major banks located in New York City, London or any other principal market for Dollars or such purchased Foreign Currency. In the event of the unavailability of any of the exchange rates provided for in the foregoing clauses (i), (ii) and (iii) the Currency Determination Agent shall use, in its sole discretion and without liability on its part, such quotation of the Federal Reserve Bank of New York as of the most recent available date, or quotations from one or more major banks in New York City, London or any other principal market for such Currency or Currency unit in question, or such other quotations as the Currency Determination Agent shall deem appropriate. Unless otherwise specified by the Currency Determination Agent if there is more than one market for dealing in any currency or Currency unit by reason of foreign exchange regulations or otherwise, the market to be used in respect of such Currency or Currency unit shall be that upon which a nonresident issuer of securities designated in such Currency or Currency unit would purchase such Currency or Currency unit in order to make payments in respect of such securities. "Maturity" when used with respect to any Debt Security means the date on which the principal of such Debt Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, repayment at the option of the Holder thereof or otherwise. "Mortgages" means mortgages, liens, pledges or other encumbrances. "Officers' Certificate" means a certificate signed by the Chairman, a Vice Chairman, the President, the Chief Financial Officer or a Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel to the Company (including an employee of the Company) and who shall be reasonably satisfactory to the Trustee, which is delivered to the Trustee. 7 "Outstanding" when used with respect to Debt Securities, means, as of the date of determination, all Debt Securities theretofore authenticated and delivered under this Indenture, except: (i) Debt Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Debt Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Debt Securities and any coupons thereto appertaining; PROVIDED, HOWEVER, that if such Debt Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Debt Securities which have been surrendered pursuant to SECTION 306 or in exchange for or in lieu of which other Debt Securities have been authenticated and delivered pursuant to this Indenture, other than any such Debt Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Debt Securities are held by a BONA FIDE purchaser in whose hands such Debt Securities are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of Debt Securities outstanding have performed any Act hereunder, Debt Securities owned by the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such Act, only Debt Securities that the Trustee knows to be so owned shall be so disregarded. Debt Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to act with respect to such Debt Securities and that the pledgee is not the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor. In determining whether the Holders of the requisite principal amount of Outstanding Debt Securities have performed any Act hereunder, the principal amount of a Discount Security that shall be deemed to be Outstanding for such purpose shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to SECTION 502 and the principal amount of a Debt Security denominated in a Foreign Currency that shall be deemed to be Outstanding for such purpose shall be the amount calculated pursuant to SECTION 310(j). "Overdue Rate," when used with respect to any series of the Debt Securities, means the rate designated as such in or pursuant to the Board Resolution or the supplemental indenture, as the case may be, relating to such series as contemplated by SECTION 301. 8 "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Debt Securities on behalf of the Company. "Permitted Subsidiary Refinancing Debt" means Debt of any Subsidiary, the proceeds of which are used to renew, extend, refinance or refund outstanding Debt of such Subsidiary, PROVIDED that such Debt is scheduled to mature no earlier than the Debt being renewed, extended, refinanced or refunded; PROVIDED, FURTHER, that such Debt shall be Permitted Subsidiary Refinancing Debt only to the extent that the aggregate principal amount of such Debt (or, if such Debt is issued at a price less than the principal amount thereof, the aggregate amount of gross proceeds therefrom) does not exceed the aggregate principal amount then outstanding under the Debt being renewed, extended, refinanced or refunded (or if the Debt being renewed, extended, refinanced or refunded, was issued at a price less than the principal amount thereof, then not in excess of the amount of liability in respect thereof determined in accordance with generally accepted accounting principles.) "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" when used with respect to the Debt Securities of any series means the place or places where the principal of (and premium, if any) and interest on the Debt Securities of that series are payable as specified pursuant to SECTION 301. "Predecessor Security" of any particular Debt Security means every previous Debt Security evidencing all or a portion of the same debt as that evidenced by such particular Debt Security; and, for the purposes of this definition, any Debt Security authenticated and delivered under SECTION 306 in lieu of a mutilated, lost, destroyed or stolen Debt Security or a Debt Security to which a mutilated, lost, destroyed or stolen Coupon appertains shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Debt Security or the Debt Security to which the mutilated, lost, destroyed or stolen Coupon appertains, as the case may be. "Preferred Stock" of any Person means any capital stock of such Person which by its terms or by the terms of any security into which it is convertible or exchangeable is preferred as to the payment of dividends or upon liquidation to any class of the common stock of such Person or which matures or is mandatorily redeemable at the option of the holder thereof, in whole or in part, on or prior to the maturity date of any Outstanding Debt Securities. "Principal Property" means 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 Company and/or one or more of its Subsidiaries and located in the United States of America. 9 "Redemption Date" means the date fixed for redemption of any Debt Security pursuant to this Indenture which, in the case of a Floating Rate Security, unless otherwise specified pursuant to SECTION 301, shall be an Interest Payment Date only. "Redemption Price" means, in the case of a Discount Security, the amount of the principal thereof that would be due and payable as of the Redemption Date upon a declaration of acceleration of the maturity thereof pursuant to SECTION 502, and in the case of any other Debt Security, the principal amount thereof, plus, in each case, premium, if any, and accrued and unpaid interest, if any, to the Redemption Date. "Regular Record Date" for the interest payable on the Debt Securities of any series on any Interest Payment Date means the date specified for the purpose pursuant to SECTION 301 for such Interest Payment Date. "Responsible Officer" when used with respect to the Trustee means any Vice President, the Secretary, any Assistant Secretary, any Trust Officer or Assistant Trust Officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means (a) any Subsidiary other than an Unrestricted Subsidiary and (b) any Subsidiary which was an Unrestricted Subsidiary but which, subsequent to the date hereof, is designated by the Company (by Board Resolution) to be a Restricted Subsidiary; PROVIDED, HOWEVER, that the Company may not designate any such Subsidiary to be a Restricted Subsidiary if the Company would thereby breach any covenant or agreement contained in the Indenture (on the assumption that any transaction to which such Subsidiary was a party at the time of such designation and which would have given rise to Debt or Preferred Stock or constituted a Sale and Leaseback Transaction at the time it was entered into had such Subsidiary then been a Restricted Subsidiary was entered into at the time of such designation). "Security Register" and "Security Registrar" have the respective meanings specified in SECTION 305(A). "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to SECTION 307. "Specified Amount" has the meaning specified in SECTION 310(H). "Stated Maturity" when used with respect to any Debt Security or any installment of principal thereof or premium thereon or interest thereon means the date specified in such Debt Security as the date on which the principal of such Debt Security or such installment of principal, premium or interest is due and payable. 10 "Subsidiary" means (i) any corporation of which at least a majority of the outstanding stock 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 other 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, directly or indirectly, owned or controlled by the Company or by one or more Subsidiaries thereof, or by the Company and one or more Subsidiaries or (ii) any partnership or joint venture of which at least a majority of the equity ownership, whether in the form of membership, general, special or limited partnership interests or otherwise, is directly or indirectly owned or controlled by the Company or by one or more Subsidiaries thereof, or by the Company and one or more Subsidiaries; PROVIDED, HOWEVER, that said term shall not include any corporation or partnership controlled by the Company (herein referred to as an "Affiliated Entity") which: (a) does not transact any substantial portion of its business or regularly maintain any substantial portion of its operating assets within the continental limits of the United States of America; (b) is principally engaged in the business of financing (including, without limitation, the purchase, holding, sale or discounting of or lending upon any notes, contracts, leases or other forms of obligations) the sale or lease of merchandise, equipment or services (1) by the Company, or (2) by a Subsidiary (whether such sales or leases have been made before or after the date when such corporation or partnership became a Subsidiary), or (3) by another Affiliated Entity, or (4) by any corporation or partnership prior to the time when substantially all its assets have heretofore been or shall hereafter have been acquired by the Company; (c) is principally engaged in the business of owning, leasing, dealing in or developing real property; (d) is principally engaged in the holding of stock in, and/or the financing of operations of, an Affiliated Entity; or (e) is principally engaged in the business of (i) offering health benefit products or (ii) insuring against professional and general liability risks of the Company. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in SECTION 1005. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee," as used with respect to the Debt Securities of any series, shall mean the Trustee with respect to Debt Securities of such series. 11 "U.S. Government Obligations" has the meaning specified in SECTION 1402. "Unrestricted Subsidiary" means (a) any Subsidiary acquired or organized after the date hereof, PROVIDED, HOWEVER, that such Subsidiary is not a successor, directly or indirectly, to, and does not directly or indirectly own any equity interest in, any Restricted Subsidiary; (b) any Subsidiary the principal business of which consists of obtaining financing in capital markets outside the United States of America or financing the acquisition or disposition of machinery, equipment, inventory, accounts receivable and other real, personal and intangible property by Persons including the Company or a Subsidiary; (c) any Subsidiary the principal business of which is owning, leasing, dealing in or developing real property for residential or office building purposes or land, buildings or related real property owned by the Company or any Subsidiary as of the date of the Indenture; (d) any Joint Venture Subsidiary; or (e) stock or other securities of an Unrestricted Subsidiary of the character described in clauses (a) through (d) of this definition, unless and until, in each of the cases specified in this paragraph, any such Subsidiary shall have been designated to be a Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted Subsidiary." "Valuation Date" has the meaning specified in SECTION 310(C). "Vice President" includes with respect to the Company and the Trustee, any Vice President of the Company or the Trustee, as the case may be, whether or not designated by a number or word or words added before or after the title "Vice President." "Wholly Owned Subsidiary" means a Subsidiary of which all of the stock (other than directors' qualifying shares) is at the time, directly or indirectly, owned by the Company, and/or by one or more Wholly Owned Subsidiaries of the Company. SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; 12 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. NOTICES, ETC., TO TRUSTEE AND COMPANY. Any Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Services Division; or 13 (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid or airmail postage prepaid if sent from outside the United States, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument, to the attention of its Treasurer, or at any other address previously furnished in writing to the Trustee by the Company. Any such Act or other document shall be in the English language, except that any published notice may be in an official language of the country of publication. SECTION 105. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given to Holders (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to such Holders as their names and addresses appear in the Security Register, within the time prescribed; provided, however, that any notice to Holders of Floating Rate Securities regarding the determination of a periodic rate of interest, if such notice is required pursuant to SECTION 301, shall be sufficiently given if given in the manner specified pursuant to SECTION 301. In the event of suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice by mail, such notification shall be given by telex, telecopy or other facsimile transmission. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance on such waiver. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder, shall affect the sufficiency of such notice with respect to other Holders, and any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given. SECTION 106. CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture by operation of Sections 310 to 317, inclusive, of the Trust Indenture Act (an "incorporated provision"), such incorporated provision shall control. 14 SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the parties hereto shall bind their respective successors and assigns and inure to the benefit of their permitted successors and assigns, whether so expressed or not. SECTION 109. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Debt Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Debt Securities, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent and their successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. GOVERNING LAW. This Indenture and the Debt Securities shall be deemed to be contracts made and to be performed entirely in the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State without regard to the conflicts of law rules of said State. SECTION 112. LEGAL HOLIDAYS. Unless otherwise specified pursuant to SECTION 301 or in any Debt Security, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Debt Security of any series shall not be a Business Day at any Place of Payment for the Debt Securities of that series, then (notwithstanding any other provision of this Indenture or of the Debt Securities) payment of principal (and premium, if any) or interest need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity, and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day if such payment is made or duly provided for on such Business Day. 15 SECTION 113. NO SECURITY INTEREST CREATED. Nothing in this Indenture or in the Debt Securities, express or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect in any jurisdiction where property of the Company or its Subsidiaries is or may be located. SECTION 114. LIABILITY SOLELY CORPORATE. No recourse shall be had for the payment of the principal of (or premium, if any) or the interest on any Debt Securities, or any part thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement of this Indenture, against any incorporator, or against any stockholder, officer or director, as such, past, present or future, of the Company (or any incorporator, stockholder, officer or director of any predecessor or successor corporation), either directly or through the Company (or any such predecessor or successor corporation), whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Indenture and all the Debt Securities are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any such incorporator, stockholder, officer or director, past, present or future, of the Company (or any incorporator, stockholder, officer or director of any such predecessor or successor corporation), either directly or indirectly through the Company or any such predecessor or successor corporation, because of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants, promises or agreements contained in this Indenture or in any of the Debt Securities or to be implied herefrom or therefrom; and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of securities; PROVIDED, HOWEVER, that nothing herein or in the Debt Securities contained shall be taken to prevent recourse to and the enforcement of the liability, if any, of any stockholder or subscriber to capital stock upon or in respect of the shares of capital stock not fully paid. SECTION 115. COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. ARTICLE TWO DEBT SECURITY FORMS SECTION 201. FORMS GENERALLY. The Debt Securities of each series shall be substantially in one of the forms (including global form) established in or pursuant to a Board Resolution or one or more 16 indentures supplemental hereto, and shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange on which any series of the Debt Securities may be listed, or to conform to usage, all as determined by the officers executing such Debt Securities as conclusively evidenced by their execution of such Debt Securities. If the form of a series of Debt Securities (or any Global Note) is established in or pursuant to a Board Resolution, a copy of such Board Resolution shall be delivered to the Trustee, together with an Officers' Certificate setting forth the form of such series, at or prior to the delivery of the Company Order contemplated by SECTION 303 for the authentication and delivery of such Debt Securities (or any such Global Note). The definitive Debt Securities of each series shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debt Securities, as conclusively evidenced by their execution of such Debt Securities. SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The form of the Trustee's certificate of authentication to be borne by the Debt Securities shall be substantially as follows: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the series of Debt Securities issued under the within mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By _________________________________ Authorized Signatory 17 ARTICLE THREE THE DEBT SECURITIES SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate principal amount of Debt Securities that may be authenticated and delivered under this Indenture is unlimited. The Debt Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and (subject to SECTION 303) set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Debt Securities of any series: (1) the title of the Debt Securities of the series (which shall distinguish the Debt Securities of such series from all other series of Debt Securities); (2) the limit, if any, upon the aggregate principal amount of the Debt Securities of the series that may be authenticated and delivered under this Indenture (except for Debt Securities authenticated and delivered upon transfer of, or in exchange for, or in lieu of, other Debt Securities of such series pursuant to SECTIONS 304, 305, 306, 1006 or 1207); (3) the date or dates on which or periods during which the Debt Securities of the series may be issued, and the date or dates (or the method of determination thereof) on which the principal of (and premium, if any, on) the Debt Securities of such series are or may be payable (which, if so provided in such Board Resolution or supplemental indenture may be determined by the Company from time to time and set forth in the Debt Securities of the series issued from time to time); (4) the rate or rates (or the method of determination thereof) at which the Debt Securities of the series shall bear interest, if any, and the dates from which such interest shall accrue (which, in either case or both, if so provided in such Board Resolution or supplemental indenture may be determined by the Company from time to time and set forth in the Debt Securities of the series issued from time to time), the Interest Payment Dates on which such interest shall be payable (or the method of determination thereof), and the Regular Record Dates for the interest payable on such Interest Payment Dates and, in the case of Floating Rate Securities, the notice, if any, to Holders regarding the determination of interest and the manner of giving such notice, and the extent to which, or the manner in which, any interest payable on any Global Note on an Interest Payment Date will be paid if other than in the manner provided in SECTION 307; (5) the place or places, if any, in addition to or instead of the Corporate Trust Office of the Trustee, where the principal of (and premium, if any) and interest on Debt Securities of the series shall be payable; 18 (6) the obligation, if any, of the Company to redeem or purchase Debt Securities of the series pursuant to any sinking fund or analogous provisions or at the option of the Holder and the period or periods within which or the dates on which, the prices at which and the terms and conditions upon which Debt Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (7) the period or periods within which or the date or dates on which, the price or prices at which and the terms and conditions upon which Debt Securities of the series may be redeemed, if any, in whole or in part, at the option of the Company or otherwise; (8) if the coin or Currency in which the Debt Securities shall be issuable is in Dollars, the denominations of such Debt Securities if other than denominations of $1,000 and any integral multiple thereof (except as provided in SECTION 304); (9) whether the Debt Securities of the series are to be issued as Discount Securities and the amount of discount with which such Debt Securities may be issued and, if other than the principal amount thereof, the portion of the principal amount of Debt Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to SECTION 502; (10) provisions, if any, for the defeasance of Debt Securities of the series; (11) If other than Dollars, the Foreign Currency or Currencies in which Debt Securities of the series shall be denominated, or in which payment of the principal of (and/or premium, if any) and/or interest on the Debt Securities of the series may be made, and the particular provisions applicable thereto and, if applicable, the amount of Debt Securities of the series which entitles the Holder of a Debt Security of the series or proxy to one vote for purposes of SECTION 805; (12) if the principal of (and premium, if any) or interest on Debt Securities of the series are to be payable, at the election of the Company or a Holder thereof, in a Currency other than that in which the Debt Securities are denominated or payable without such election, in addition or in lieu of the provisions of SECTION 310, the period or periods within which and the terms and conditions upon which such election may be made and the time and the manner of determining the exchange rate or rates between the Currency or Currencies in which the Debt Securities are denominated or payable without such election and the Currency or Currencies in which the Debt Securities are to be paid if such election is made; (13) the date as of which any global Debt Security representing any Outstanding Debt Securities of the series shall be dated if other than the date of original issuance of the first Debt Security of the series to be issued; 19 (14) if the amount of payments of principal of (and premium, if any) or interest on the Debt Securities of the series may be determined with reference to an index including, but not limited to, an index based on a Currency or Currencies other than that in which the Debt Securities are denominated or payable, or any other type of index, the manner in which such amounts shall be determined; (15) if the Debt Securities of the series are denominated or payable in a Foreign Currency, any other terms concerning the payment of principal of (and premium, if any) or any interest on such Debt Securities (including the Currency or Currencies of payment thereof); (16) the designation of the original Currency Determination Agent; (17) the applicable Overdue Rate, if any; (18) if the Debt Securities of the series do not bear interest, the applicable dates for purposes of SECTION 312(a) of the Trust Indenture Act; (19) any addition to, or modification or deletion of, any Events of Default or covenants provided for with respect to Debt Securities of the series; (20) whether the Debt Securities of the series shall be issued in whole or in part in the form of one or more Global Notes and, in such case, the Depositary for such Global Note or Notes; and (21) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Debt Securities of any one series shall be substantially identical except as to denomination, rate of interest, Stated Maturity and the date from which interest, if any, shall accrue, which, as set forth above, may be determined by the Company from time to time as to Debt Securities of a series if so provided in or established pursuant to the authority granted in a Board Resolution or in any such indenture supplemental hereto, and except as may otherwise be provided in or pursuant to such Board Resolution and (subject to SECTION 303) set forth in such Officers' Certificate, or in any such indenture supplemental hereto. All Debt Securities of any one series need not be issued at the same time, and unless otherwise provided, a series may be reopened for issuance of additional Debt Securities of such series. If any of the terms of a series of Debt Securities is established in or pursuant to a Board Resolution, a copy of such Board Resolution shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. SECTION 302. DENOMINATIONS. 20 In the absence of any specification pursuant to SECTION 301 with respect to Debt Securities of any series, the Debt Securities of such series shall be issuable only in registered form and in denominations of $1,000 and any integral multiple thereof and shall be payable only in Dollars. SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Debt Securities of any series shall be executed on behalf of the Company by its Chairman, a Vice Chairman, its President, its Chief Financial Officer, one of its Vice Presidents or its Treasurer, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers may be manual or facsimile. Debt Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Debt Securities or did not hold such offices at the date of such Debt Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debt Securities of any series, executed by the Company, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Debt Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Debt Securities. If all the Debt Securities of any one series are not to be issued at one time and if a Board Resolution or supplemental indenture relating to such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Debt Securities such as interest rate, Stated Maturity, date of issuance and date from which interest, if any, shall accrue. The Trustee shall be entitled to receive, and (subject to any incorporated provisions) shall be fully protected in relying upon, prior to the authentication and delivery of the Debt Securities of a particular series, (i) the supplemental indenture or the Board Resolution by or pursuant to which the form and terms of such Debt Securities have been approved and (ii) an Opinion of Counsel stating that: (1) all instruments furnished by the Company to the Trustee in connection with the authentication and delivery of such Debt Securities conform to the requirements of this Indenture and constitute sufficient authority hereunder for the Trustee to authenticate and deliver such Debt Securities; (2) the forms and terms of such Debt Securities have been established in conformity with the provisions of this Indenture; (3) in the event that the forms or terms of such Debt Securities have been established in a supplemental indenture, the execution and delivery of such supplemental indenture has been duly authorized by all necessary corporate action of the Company, 21 such supplemental indenture has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Trustee, is a valid and binding obligation enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); (4) the execution and delivery of such Debt Securities have been duly authorized by all necessary corporate action of the Company and such Debt Securities have been duly executed by the Company, and, assuming due authentication by the Trustee and delivery by the Company, are valid and binding obligations enforceable against the Company in accordance with their terms, entitled to the benefit of the Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and subject to such other exceptions as counsel shall request and as to which the Trustee shall not reasonably object; and (5) the amount of Debt Securities Outstanding of such series, together with the amount of such Debt Securities, does not exceed any limit established under the terms of this Indenture on the amount of Debt Securities of such series that may be authenticated and delivered. The Trustee shall not be required to authenticate such Debt Securities if the issuance of such Debt Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Debt Securities and this Indenture in a manner which is not reasonably acceptable to the Trustee. Each Debt Security shall be dated the date of its authentication. No Debt Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Debt Security a certificate of authentication substantially in one of the forms provided for herein duly executed by the Trustee or by an Authenticating Agent, and such certificate upon any Debt Security shall be conclusive evidence, and the only evidence, that such Debt Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Debt Security shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Debt Security to the Trustee for cancellation as provided in SECTION 308 together with a written statement (which need not comply with SECTION 102) stating that such Debt Security has never been issued and sold by the Company, for all purposes of this Indenture such Debt Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. TEMPORARY DEBT SECURITIES; GLOBAL NOTES. 22 (a) Pending the preparation of definitive Debt Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Debt Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination for Debt Securities of such series, substantially of the tenor of the definitive Debt Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Debt Securities may determine, as conclusively evidenced by their execution of such Debt Securities. Every such temporary Debt Security shall be executed by the Company and shall be authenticated and delivered by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debt Securities in lieu of which they are issued. If temporary Debt Securities of any series are issued, the Company will cause definitive Debt Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Debt Securities of such series, the temporary Debt Securities of such series shall be exchangeable for definitive Debt Securities of such series, of a like Stated Maturity and with like terms and provisions, upon surrender of the temporary Debt Securities of such series at the office or agency of the Company in a Place of Payment for such series, without charge to the Holder, except as provided in SECTION 305 in connection with a transfer. Upon surrender for cancellation of any one or more temporary Debt Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Debt Securities of the same series of authorized denominations and of a like Stated Maturity and like terms and provisions. Until so exchanged, the temporary Debt Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Debt Securities of such series. (b) If the Company shall establish pursuant to SECTION 301 that the Debt Securities of a series are to be issued in whole or in part in the form of one or more Global Notes, then the Company shall execute and the Trustee shall, in accordance with SECTION 303 and the Company Order with respect to such series, authenticate and deliver one or more Global Notes in temporary or permanent form that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of the outstanding Debt Securities of such series to be represented by one or more Global Notes, (ii) shall be registered in the name of the Depositary for such Global Note or Notes or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instruction, and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for Debt Securities in definitive form, this Debt Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary." Notwithstanding any other provision of this Section or SECTION 305, unless and until it is exchanged in whole or in part for Debt Securities in definitive form, a Global Note representing all or a portion of the Debt Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of 23 such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary. If at any time the Depositary for the Debt Securities of a series notifies the Company that it is unwilling or unable to continue as Depositary for the Debt Securities of such series or if at any time the Depositary for Debt Securities of a series shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Company shall appoint a successor Depositary with respect to the Debt Securities of such series. If a successor Depositary for the Debt Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Debt Securities of such series, will authenticate and deliver, Debt Securities of such series in definitive form in an aggregate principal amount equal to the principal amount of the Global Note or Notes representing such series in exchange for such Global Note or Notes. The Company may at any time and in its sole discretion determine that the Debt Securities of any series issued in the form of one or more Global Notes shall no longer be represented by such Global Note or Notes. In such event, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Debt Securities of such series, will authenticate and deliver, Debt Securities of such series in definitive form and in an aggregate principal amount equal to the principal amount of the Global Note or Notes representing such series in exchange for such Global Note or Notes. If specified by the Company pursuant to SECTION 301 with respect to Debt Securities of a series, the Depositary for such series of Debt Securities may surrender a Global Note for such series of Debt Securities in exchange in whole or in part for Debt Securities of such series in definitive form on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute and the Trustee shall authenticate and deliver, without charge: (i) to each Person specified by the Depositary a new Debt Security or Securities of the same series of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Note; and (ii) to the Depositary a new Global Note in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Note and the aggregate principal amount of Debt Securities delivered to Holders thereof. Upon the exchange of a Global Note for Debt Securities in definitive form, such Global Note shall be canceled by the Trustee. Debt Securities issued in exchange for a Global Note pursuant to this SECTION 304 shall be registered in such names and in such authorized denominations as the Depositary for such Global Note, pursuant to instructions from its direct 24 or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debt Securities to the persons in whose names such Debt Securities are so registered. SECTION 305. REGISTRATION, TRANSFER AND EXCHANGE. (a) The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the registers maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of the Debt Securities and of transfers and exchanges of the Debt Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering the Debt Securities and registering transfers and exchanges of the Debt Securities as herein provided; PROVIDED, HOWEVER, that the Company may appoint co-Security Registrars. Upon surrender for registration of transfer of any Debt Security of any series at the office or agency of the Company maintained for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee, one or more new Debt Securities of the same series of like aggregate principal amount of such denominations as are authorized for Debt Securities of such series and of a like Stated Maturity and with like terms and conditions. At the option of the Holder, Debt Securities of any series (except Global Notes) may be exchanged for other Debt Securities of the same series of like aggregate principal amount and of a like Stated Maturity and with like terms and conditions, upon surrender of the Debt Securities to be exchanged at such office or agency. Whenever any Debt Securities are surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Debt Securities that the Holder making the exchange is entitled to receive. (b) All Debt Securities issued upon any transfer or exchange of Debt Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Debt Securities surrendered for such transfer or exchange. Every Debt Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge will be made for any transfer or exchange of Debt Securities except as provided in SECTION 306. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration, transfer or exchange of Debt Securities, other than those expressly provided in this Indenture to be made at the Company's own expense or without expense or without charge to the Holders. 25 The Company shall not be required (i) to register, transfer or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before the day of the transmission of a notice of redemption of Debt Securities of such series selected for redemption under SECTION 1204 and ending at the close of business on the day of such transmission, or (ii) to register, transfer or exchange any Debt Security so selected for redemption in whole or in part, except the unredeemed portion of any Debt Security being redeemed in part. SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN DEBT SECURITIES. If (i) any mutilated Debt Security is surrendered to the Trustee at its Corporate Trust Office, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Debt Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any Paying Agent harmless, and neither the Company nor the Trustee receives notice that such Debt Security has been acquired by a BONA FIDE purchaser, then the Company shall execute and upon Company Request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Debt Security, a new Debt Security of the same series of like Stated Maturity and with like terms and conditions and like principal amount, bearing a number not contemporaneously Outstanding. In case any such mutilated, destroyed, lost or stolen Debt Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debt Security, pay the amount due on such Debt Security in accordance with its terms. Upon the issuance of any new Debt Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in respect thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Debt Security of any series issued pursuant to this Section shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debt Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debt Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debt Securities or Coupons. SECTION 307. Payment of Interest; Interest Rights Preserved. (a) Interest on any Debt Security that is payable and is punctually paid or duly provided for on any Interest Payment Date shall be paid to the Person in whose name such Debt Security (or one or more Predecessor Securities) is registered at the close of business on the 26 Regular Record Date for such interest notwithstanding the cancellation of such Debt Security upon any transfer or exchange subsequent to the Regular Record Date. Payment of interest on Debt Securities shall be made at the offices of the Paying Agent or Paying Agents specified pursuant to SECTION 301 or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or, if provided pursuant to SECTION 301, by wire transfer to an account designated by the Holder. (b) Any interest on any Debt Security that is payable but is not punctually paid or duly provided for on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of his having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names such Debt Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Debt Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money in the Currency or Currency unit in which the Debt Securities of such series are payable (except as otherwise specified pursuant to SECTIONS 301 or 310) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which date shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to the Holders of such Debt Securities at their addresses as they appear in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debt Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on Debt Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Debt Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the 27 Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. (c) Subject to the foregoing provisions of this Section, each Debt Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Debt Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debt Security. SECTION 308. CANCELLATION. Unless otherwise specified pursuant to SECTION 301 for Debt Securities of any series, all Debt Securities surrendered for payment, redemption, transfer, exchange or credit against any sinking fund, if surrendered to any Person other than the Trustee, shall be delivered to the Trustee. All Debt Securities so delivered shall be promptly canceled by the Trustee. The Company may at any time deliver to the Trustee for cancellation any Debt Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Debt Securities previously authenticated hereunder which the Company has not issued, and all Debt Securities or Coupons so delivered shall be promptly canceled by the Trustee. No Debt Securities shall be authenticated in lieu of or in exchange for any Debt Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Debt Securities held by the Trustee shall be destroyed by the Trustee, and the Trustee shall deliver a certificate to such effect to the Company. The acquisition of any Debt Securities by the Company shall not operate as a redemption or satisfaction of the indebtedness represented thereby unless and until such Debt Securities are surrendered to the Trustee for cancellation. SECTION 309. COMPUTATION OF INTEREST. Except as otherwise specified pursuant to SECTION 301 for Debt Securities of any series, interest on the Debt Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 310. CURRENCY OF PAYMENTS IN RESPECT OF DEBT SECURITIES. (a) With respect to Debt Securities of any series not permitting the election provided for in paragraph (b) below or the Holders of which have not made the election provided for in paragraph (b) below, except as provided in paragraph (d) below, payment of the principal of (and premium, if any) and any interest on any Debt Security of such series will be made in the Currency in which such Debt Security is payable. (b) It may be provided pursuant to SECTION 301 with respect to the Debt Securities of any series that Holders shall have the option, subject to paragraphs (d) and (e) below, to receive payments of principal of (and premium, if any) and any interest on such Debt Securities in any of the Currencies that may be designated for such election by delivering to the 28 Trustee and the Currency Determination Agent a written election, to be in form and substance satisfactory to the Trustee, not later than the close of business on the Election Date immediately preceding the applicable payment date. If a Holder so elects to receive such payments in any such Currency, such election will remain in effect for such Holder or any transferee of such Holder until changed by such Holder or such transferee by written notice to the Trustee and the Currency Determination Agent (but any such change must be made not later than the close of business on the Election Date immediately preceding the next payment date to be effective for the payment to be made on such payment date and no such change or election may be made with respect to payments to be made on any Debt Security of such series with respect to which an Event of Default has occurred or notice of redemption has been given by the Company pursuant to ARTICLE TWELVE). Any Holder of any such Debt Security who shall not have delivered any such election to the Trustee and the Currency Determination Agent by the close of business on the applicable Election Date will be paid the amount due on the applicable payment date in the relevant Currency as provided in paragraph (a) of this SECTION 310. (c) If the election referred to in paragraph (b) above has been provided for pursuant to SECTION 301, then not later than the fourth Business Day after the Election Date for each payment date, the Trustee or the Currency Determination Agent will deliver to the Company a written notice specifying, in the Currency in which each series of the Debt Securities are payable, the respective aggregate amounts of principal of (and premium, if any) and any interest on the Debt Securities to be paid on such payment date, specifying the amounts so payable in respect of the Debt Securities as to which the Holders of Debt Securities denominated in any Currency shall have elected to be paid in another Currency as provided in paragraph (b) above. If the election referred to in paragraph (b) above has been provided for pursuant to SECTION 301 and if at least one Holder has made such election, then, on the second Business Day preceding each payment date, the Company will deliver to the Trustee and the Currency Determination Agent an Exchange Rate Officer's Certificate in respect of the Currency payments to be made on such payment date. The Currency amount receivable by Holders of Debt Securities who have elected payment in a Currency as provided in paragraph (b) above shall be determined by the Company on the basis of the applicable Market Exchange Rate in effect on the third Business Day (the "Valuation Date") immediately preceding each payment date. (d) If a Conversion Event occurs with respect to a Foreign Currency, the ECU or any other Currency unit in which any of the Debt Securities are denominated or payable other than pursuant to an election provided for pursuant to paragraph (b) above, then with respect to each date for the payment of principal of (and premium, if any) and any interest on the applicable Foreign Currency, the ECU or such other Currency unit occurring after the last date on which such Foreign Currency, the ECU or such other Currency unit was used (the "Conversion Date"), the Dollar shall be the Currency of payment for use on each such payment date. The Dollar amount to be paid by the Company to the Trustee and by the Trustee or any Paying Agent to the Holders of such Debt Securities with respect to such payment date shall be the Dollar Equivalent of the Foreign Currency or, in the case of a Currency unit, the Dollar Equivalent of the Currency Unit, in each case as determined by the Currency Determination Agent in the manner provided in paragraph (f) or (g) below. 29 (e) If the Holder of a Debt Security denominated in any Currency shall have elected to be paid in another Currency as provided in paragraph (b) above, and a Conversion Event occurs with respect to such elected Currency, such Holder shall receive payment in the Currency in which payment would have been made in the absence of such election. If a Conversion Event occurs with respect to the Currency in which payment would have been made in the absence of such election, such Holder shall receive payment in Dollars as provided in paragraph (d) of this SECTION 310. (f) The "Dollar Equivalent of the Foreign Currency" shall be determined by the Currency Determination Agent and shall be obtained for each subsequent payment date by converting the specified Foreign Currency into Dollars at the Market Exchange Rate on the Conversion Date. (g) The "Dollar Equivalent of the Currency Unit" shall be determined by the Currency Determination Agent and subject to the provisions of paragraph (h) below, shall be the sum of each amount obtained by converting the Specified Amount of each Component Currency into Dollars at the Market Exchange Rate for such Component Currency on the Valuation Date with respect to each payment. (h) For purposes of this SECTION 310 the following terms shall have the following meanings: A "Component Currency" shall mean any Currency which, on the Conversion Date, was a Component Currency of the relevant Currency unit, including, but not limited to, the ECU. A "Specified Amount" of a Component Currency shall mean the number of units of such Component Currency or fractions thereof which were represented in the relevant currency unit, including, but not limited to, the ECU, on the Conversion Date. If after the Conversion Date the official unit of any Component Currency is altered by way of combination or subdivision, the Specified Amount of such Component Currency shall be divided or multiplied in the same proportion. If after the Conversion Date two or more Component Currencies are consolidated into a single Currency, the respective Specified Amounts of such Component Currencies shall be replaced by an amount in such single Currency equal to the sum of the respective Specified Amounts of such consolidated Component Currencies expressed in such single Currency, and such amount shall thereafter be a Specified Amount and such single Currency shall thereafter be a Component Currency. If after the Conversion Date any Component Currency shall be divided into two or more Currencies, the Specified Amount of such Component Currency shall be replaced by amounts of such two or more Currencies with appropriate Dollar equivalents at the Market Exchange Rate on the date of such replacement equal to the dollar equivalent of the Specified Amount of such former Component Currency at the Market Exchange Rate on such date, and such amounts shall thereafter be Specified Amounts and such Currencies shall thereafter be Component Currencies. If after the Conversion Date of the relevant Currency unit, including but not limited to, the ECU, a Conversion Event (other than any event referred to above in this definition of "Specified Amount") occurs with respect 30 to any Component Currency of such Currency unit, the Specified Amount of such Component Currency shall, for purposes of calculating the Dollar Equivalent of the Currency Unit, be converted into Dollars at the Market Exchange Rate in effect on the Conversion Date of such Component Currency. "Election Date" shall mean the record date with respect to any payment date, and with respect to the Maturity shall mean the record date (if within 16 or fewer days prior to the Maturity) immediately preceding the Maturity, and with respect to any series of Debt Securities whose record date immediately preceding the Maturity is more than 16 days prior to the Maturity or any series of Debt Securities for which no record dates are provided with respect to interest payments, shall mean the date that is 16 days prior to the Maturity. (i) All decisions and determinations of the Currency Determination Agent regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the Currency Unit and the Market Exchange Rate shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Company and all Holders of the Debt Securities denominated or payable in the relevant Currency. In the event of a Conversion Event with respect to a Foreign Currency, the Company, after learning thereof, will immediately give written notice thereof to the Trustee and the Currency Determination Agent (and the Trustee will promptly thereafter give notice in the manner provided in SECTION 105 to the Holders) specifying the Conversion Date. In the event of a Conversion Event with respect to the ECU or any other Currency in which Securities are denominated or payable, the Company, after learning thereof, will immediately give notice thereof to the Trustee (and the Trustee will promptly thereafter give written notice in the manner provided in SECTION 105 to the Holders) specifying the Conversion Date and the Specified Amount of each Component Currency on the Conversion Date. In the event of any subsequent change in any Component Currency as set forth in the definition of Specified Amount above, the Company, after learning thereof, will similarly give written notice to the Trustee. The Trustee shall be fully justified and protected in relying and acting upon information received by it from the Company and the Currency Determination Agent and shall not otherwise have any duty or obligation to determine such information independently. (j) For purposes of any provision of the Indenture where the Holders of Outstanding Debt Securities may perform an Act that requires that a specified percentage of the Outstanding Debt Securities of all series perform such Act and for purposes of any decision or determination by the Trustee of amounts due and unpaid for the principal of (and premium, if any) and interest on the Debt Securities of all series in respect of which moneys are to be disbursed ratably, the principal of (and premium, if any) and interest on the Outstanding Debt Securities denominated in a Foreign Currency will be the amount in Dollars based upon the Market Exchange Rate for Debt Securities of such series, as of the date for determining whether the Holders entitled to perform such Act have performed it, or as of the date of such decision or determination by the Trustee, as the case may be. SECTION 311. JUDGMENTS. 31 If for the purpose of obtaining a judgment in any court with respect to any obligation of the Company hereunder or under any Debt Security, it shall become necessary to convert into any other Currency any amount in the Currency due hereunder or under such Debt Security, then such conversion shall be made at the Market Exchange Rate as in effect on the date the Company shall make payment to any Person in satisfaction of such judgment. If pursuant to any such judgment, conversion shall be made on a date other than the date payment is made and there shall occur a change between such Market Exchange Rate and the Market Exchange Rate as in effect on the date of payment, the Company agrees to pay such additional amounts (if any) as may be necessary to ensure that the amount paid is equal to the amount in such other Currency which, when converted at the Market Exchange Rate as in effect on the date of payment or distribution, is the amount then due hereunder or under such Debt Security. Any amount due from the Company under this SECTION 311 shall be due as a separate debt and is not to be affected by or merged into any judgment being obtained for any other sums due hereunder or in respect of any Debt Security. In no event, however, shall the Company be required to pay more in the Currency or Currency unit due hereunder or under such Debt Security at the Market Exchange Rate as in effect when payment is made than the amount of Currency stated to be due hereunder or under such Debt Security so that in any event the Company's obligations hereunder or under such Debt Security will be effectively maintained as obligations in such Currency, and the Company shall be entitled to withhold (or be reimbursed for, as the case may be) any excess of the amount actually realized upon any such conversion over the amount due and payable on the date of payment or distribution. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture, with respect to the Debt Securities of any series (if all series issued under this Indenture are not to be affected), shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of such Debt Securities herein expressly provided for and rights to receive payments of principal (and premium, if any) and interest on such Debt Securities) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Debt Securities of such series theretofore authenticated and delivered (other than (i) Debt Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in SECTION 306 and (ii) Debt Securities of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or 32 discharged from such trust, as provided in SECTION 1103) have been delivered to the Trustee for cancellation; or (B) all Debt Securities of such series not theretofore delivered to the Trustee for cancellation, (i) have become due and payable; or (ii) will become due and payable at their Stated Maturity within one year; or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) of this subclause (B), has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the Currency in which such Debt Securities are denominated (except as otherwise provided pursuant to SECTIONS 301 or 310), sufficient to pay and discharge the entire indebtedness on such Debt Securities for principal (and premium, if any) and interest to the date of such deposit (in the case of Debt Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; PROVIDED, HOWEVER, in the event a petition for relief under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, is filed with respect to the Company within 91 days after the deposit and the Trustee is required to return the deposited money to the Company, the obligations of the Company under this Indenture with respect to such Debt Securities shall not be deemed terminated or discharged; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under SECTION 607, the obligations of the Trustee to any Authenticating Agent under SECTION 611 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under SECTION 402 and the last paragraph of SECTION 1103 shall survive. If, after the deposit referred to in this SECTION 401 has been made, (x) the Holder of a Debt Security is entitled to, and does, elect pursuant to SECTION 310(b), to receive payment in a Currency other than that in which the deposit pursuant to this SECTION 401 was made, or (y) if a Conversion Event occurs with respect to the Currency in which the deposit was made or elected to be received by the Holder pursuant to SECTION 33 310(b), then the indebtedness represented by such Debt Security shall be fully discharged to the extent that the deposit made with respect to such Debt Security shall be converted into the Currency in which such payment is made. SECTION 402. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of SECTION 1103, all money deposited with the Trustee pursuant to SECTION 401 shall be held in trust and applied by it, in accordance with the provisions of the Debt Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. ARTICLE FIVE REMEDIES SECTION 501. EVENTS OF DEFAULT. "Event of Default" wherever used herein with respect to Debt Securities of any series means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law, pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Debt Security of such series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (and premium, if any, on) any Debt Security of such series at its Maturity; or (3) default in the deposit of any sinking fund payment or analogous obligation, when and as due by the terms of a Debt Security of such series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which expressly has been included in this Indenture solely for the benefit of Debt Securities of a series other than such series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Debt Securities of such series, a written notice 34 specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (6) the commencement by the Company of a voluntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by it to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of its creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (7) any other Event of Default provided with respect to Debt Securities of that series pursuant to SECTION 301. SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default with respect to Debt Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of Outstanding Debt Securities of such series may declare the principal amount (or, if any Debt Securities of such series are Discount Securities, such portion of the principal amount of such Discount Securities as may be specified in the terms of such Discount Securities) of all the Debt Securities of such series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. Upon payment of such amount in the Currency in which such Debt Securities are denominated (except as otherwise provided pursuant to SECTIONS 301 or 310), all obligations of the Company in respect of the payment of principal of the Debt Securities of such series shall terminate. 35 At any time after such a declaration of acceleration with respect to Debt Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Debt Securities of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum in the Currency in which such Debt Securities are denominated (except as otherwise provided pursuant to SECTIONS 301 or 310) sufficient to pay (A) all overdue installments of interest on all Debt Securities of such series; (B) the principal of (and premium, if any, on) any Debt Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Debt Securities; (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest on each Debt Security at the Overdue Rate; and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; PROVIDED, HOWEVER, that all sums payable under this clause (D) shall be paid in Dollars; and (2) all Events of Default with respect to Debt Securities of such series, other than the nonpayment of the principal of Debt Securities of such series which have become due solely by such declaration of acceleration, have been cured or waived as provided in SECTION 513. No such rescission and waiver shall affect any subsequent default or impair any right consequent thereon. SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if: (1) default is made in the payment of any installment of interest on any Debt Security when such interest becomes due and payable and such default continues for a period of 30 days; 36 (2) default is made in the payment of principal of (or premium, if any, on) any Debt Security at the Maturity thereof; or (3) default is made in the making or satisfaction of any sinking fund payment or analogous obligation when the same becomes due pursuant to the terms of the Debt Securities of any series; the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Debt Securities the amount then due and payable on such Debt Securities for the principal (and premium, if any) and interest, if any, and, to the extent that payment of such interest shall be legally enforceable, interest upon the overdue principal (and premium, if any) and upon overdue installments of interest, at the Overdue Rate; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amount forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Debt Securities, and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Debt Securities wherever situated. If an Event of Default with respect to Debt Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Debt Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceedings, or any voluntary or involuntary case under the federal bankruptcy laws, as now or hereafter constituted, relative to the Company or any other obligor upon the Debt Securities, if any, of a particular series or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of such Debt Securities shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise: (i) to file and prove a claim for the whole amount of principal (or, if the Debt Securities of such series are Discount Securities, such portion of the principal amount as may be due and payable with respect to such series pursuant to a declaration in 37 accordance with SECTION 502) (and premium, if any) and interest owing and unpaid in respect of the Debt Securities of such series and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders of such Debt Securities and Coupons allowed in such judicial proceeding; and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, custodian, liquidator, sequestrator or other similar official in any such proceeding is hereby authorized by each such Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to such Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under SECTION 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debt Securities of such series or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF DEBT SECURITIES. All rights of action and claims under this Indenture or the Debt Securities of any series may be prosecuted and enforced by the Trustee without the possession of any of such Debt Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name, as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Debt Securities in respect of which such judgment has been recovered. SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (and premium, if any) or interest, upon presentation of the Debt Securities of any series in respect of which money has been collected and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under SECTION 607; 38 SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Debt Securities of such series, in respect of which or for the benefit of which such money has been collected ratably, without preference or priority of any kind, according to the amounts due and payable on such Debt Securities for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. LIMITATION ON SUITS. No Holder of any Debt Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to such series; (2) the Holders of not less than 25% in principal amount of the Outstanding Debt Securities of such series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Debt Securities of such series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other such Holders or of the Holders of Outstanding Debt Securities of any other series, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. For the protection and enforcement of the provisions of this SECTION 507, each and every Holder of Debt Securities of any series and the Trustee for such series shall be entitled to such relief as can be given at law or in equity. SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Debt Security shall have the right, which is absolute and unconditional, to receive payment of the 39 principal of (and premium, if any) and (subject to SECTION 307) interest on such Debt Security on the respective Stated Maturity or Maturities expressed in such Debt Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment and interest thereon, and such right shall not be impaired without the consent of such Holder. SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise expressly provided elsewhere in this Indenture, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Indenture or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. CONTROL BY HOLDERS. The Holders of a majority in principal amount of the Outstanding Debt Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Debt Securities of such series, PROVIDED, that (1) such direction shall not be in conflict with any rule of law or with this Indenture; 40 (2) subject to any incorporated provisions, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceeding so directed would be unjustly prejudicial to the Holders of Debt Securities of such series not joining in any such direction; and (3) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series may on behalf of the Holders of all the Debt Securities of any such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Debt Security of such series, or in the payment of any sinking fund installment or analogous obligation with respect to the Debt Securities of such series, or (2) in respect of a covenant or provision hereof which pursuant to ARTICLE TEN cannot be modified or amended without the consent of the Holder of each outstanding Debt Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Debt Securities of such series under this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Debt Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit other than the Trustee of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder or group of Holders holding in the aggregate more than 10% in principal amount of the Outstanding Debt Securities of any series, or to any suit instituted by any Holder of a Debt Security for the enforcement of the payment of the principal of (or premium, if any) or interest on such Debt Security on or after the respective Stated Maturity or Maturities expressed in such Debt Security (or, in the case of redemption, on or after the Redemption Date). 41 SECTION 515. WAIVER OF STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default with respect to the Debt Securities of any series, (1) the Trustee undertakes to perform such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether they conform to the requirements of this Indenture. (b) In case an Event of Default with respect to Debt Securities of any series has occurred and is continuing, the Trustee shall, with respect to the Debt Securities of such series, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, PROVIDED that (1) this subsection shall not be construed to limit the effect of subsection (a) of this Section; 42 (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it with respect to Debt Securities of any series in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Debt Securities of such series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) the Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. NOTICE OF DEFAULTS. Within 90 days after the occurrence of any default hereunder with respect to Debt Securities of any series the Trustee shall give notice to all Holders of Debt Securities of such series of such default hereunder known to the Trustee, unless such default shall have been cured or waived; PROVIDED, HOWEVER, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Debt Security of such series or in the payment of any sinking fund installment with respect to Debt Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Debt Securities of such series; and PROVIDED, FURTHER, that in the case of any default of the character specified in SECTION 501(4) with respect to Debt Securities of such series no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Debt Securities of such series. Notice given pursuant to this SECTION 602 shall be transmitted by mail: (1) to all Holders, as the names and addresses of the Holders appear in the Security Register; and 43 (2) to each Holder of a Debt Security of any series whose name and address appear in the information preserved at the time by the Trustee in accordance with the Trust Indenture Act. SECTION 603. CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Debt Securities of any series pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee 44 shall not be responsible for any misconduct or negligence on the part of any agent (including any agent appointed pursuant to SECTION 310(I)) or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be required to take notice or be deemed to have notice of any default hereunder (except failure by the Company to pay principal of or interest on any series of Securities so long as the Trustee is also acting as Paying Agent for such series of Securities) unless the Trustee shall be specifically notified in writing of such default by the Company by the Holders of at least a 10% in aggregate principal amount of all Securities then outstanding, and all such notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the principal Corporate Trust Office of the Trustee, and in the absence of such notice the Trustee may conclusively assume there is no default except as aforesaid; and (i) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty. SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBT SECURITIES. The recitals contained herein and in the Debt Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debt Securities or Coupons, if any, of any series. The Trustee shall not be accountable for the use or application by the Company of any Debt Securities or the proceeds thereof. SECTION 605. MAY HOLD DEBT SECURITIES. The Trustee, any Paying Agent, the Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Debt Securities, and, subject to any incorporated provisions, may otherwise deal with the Company with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent. SECTION 606. MONEY HELD IN TRUST. Money in any Currency held by the Trustee or any Paying Agent in trust hereunder need not be segregated from other funds except to the extent required by law. Neither the Trustee nor any Paying Agent shall be under any liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 607. COMPENSATION, INDEMNIFICATION AND REIMBURSEMENT. The Company agrees: 45 (1) to pay to the Trustee from time to time reasonable compensation in Dollars for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee in Dollars upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify in Dollars the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part arising out of or in connection with the acceptance or administration of this trust or performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Debt Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of amounts due on the Debt Securities. The obligations of the Company under this SECTION 607 to compensate and indemnify the Trustee for expenses, disbursements and advances shall constitute additional indebtedness under this Indenture and shall survive the satisfaction and discharge of this Indenture. SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under SECTION 609. (b) The Trustee may resign at any time with respect to the Debt Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Debt Securities of such series. (c) The Trustee may be removed at any time with respect to the Debt Securities of any series and a successor Trustee appointed by Act of the Holders of a majority in principal amount of the Outstanding Debt Securities of such series, delivered to the Trustee and to the Company. 46 (d) If at any time: (1) the Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act with respect to the Debt Securities of any series after written request therefor by the Company or by any Holder who has been a BONA FIDE Holder of a Debt Security of such series for at least six months; or (2) the Trustee shall cease to be eligible under Section 310(a) of the Trust Indenture Act with respect to the Debt Securities of any series and shall fail to resign after written request therefor by the Company or by any such Holder; or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Debt Securities, or (ii) subject to SECTION 514, any Holder who has been a BONA FIDE Holder of a Debt Security of any series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee for the Debt Securities of such series; (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Debt Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Debt Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Debt Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Debt Securities of any particular series) and shall comply with the applicable requirements of SECTION 609. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Debt Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Debt Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Debt Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Debt Securities of any series shall have been so appointed by the Company or the Holders of such series and accepted appointment in the manner hereinafter provided, any Holder who has been a BONA FIDE Holder of a Debt Security of such series for at least six months may, subject to SECTION 514, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Debt Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Debt Securities of any series and each appointment of a successor 47 Trustee with respect to the Debt Securities of any series in the manner and to the extent provided in SECTION 105 to the Holders of Debt Securities of such series. Each notice shall include the name of the successor Trustee with respect to the Debt Securities of such series and the address of its Corporate Trust Office. (g) If the Trustee has or shall acquire any conflicting interest within the meaning of the Trust Indenture Act with respect to the Debt Securities of any series, it shall either eliminate such conflicting interest or resign with respect to the Debt Securities of that series in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture, and the Company shall take prompt action to have a successor Trustee with respect to the Debt Securities of that series appointed in the manner provided herein. (h) There shall at all times be a Trustee hereunder with respect to the Debt Securities of each series, which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority and having its Corporate Trust Office in Chicago, Illinois or New York, New York. If such corporation publishes reports of condition at least annually, pursuant to law or the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In the case of an appointment hereunder of a successor Trustee with respect to all Debt Securities, each such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in SECTION 607. (b) In case of the appointment hereunder of a successor Trustee with respect to the Debt Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Debt Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debt Securities of that or those series to which 48 the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Debt Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debt Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in any such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any other trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of any such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debt Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Debt Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Debt Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debt Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Debt Securities. In case any Debt Securities shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Debt Securities, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee. 49 SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT. As long as any Debt Securities of a series remain Outstanding, upon a Company Request, there shall be an authenticating agent (the "Authenticating Agent") appointed, for such period as the Company shall elect, by the Trustee for such series of Debt Securities to act as its agent on its behalf and subject to its direction in connection with the authentication and delivery of each series of Debt Securities for which it is serving as Trustee. Debt Securities of each such series authenticated by such Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by such Trustee. Wherever reference is made in this Indenture to the authentication and delivery of Debt Securities of any series by the Trustee for such series or to the Trustee's Certificate of Authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee for such series by an Authenticating Agent for such series and a Certificate of Authentication executed on behalf of such Trustee by such Authenticating Agent except that only the Trustee may authenticate Debt Securities upon original issuance and pursuant to SECTION 306 hereof. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $25,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which any Authenticating Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent with respect to all series of Debt Securities for which it served as Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee for such series or such Authenticating Agent. Any Authenticating Agent may at any time, and if it shall cease to be eligible, shall resign by giving written notice of resignation to the applicable Trustee and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this SECTION 611 with respect to one or more of all series of Debt Securities, the Trustee for such series shall upon Company Request appoint a successor Authenticating Agent, and the Company shall provide notice of such appointment to all Holders of Debt Securities of such series in the manner and to the extent provided in SECTION 105. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named 50 as Authenticating Agent herein. The Trustee for the Debt Securities of such series agrees to pay to the Authenticating Agent for such series from time to time reasonable compensation for its services, and the Trustee shall be entitled to be reimbursed for such payment, subject to the provisions of SECTION 607. The Authenticating Agent for the Debt Securities of any series shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee for such series. If an appointment with respect to one or more series is made pursuant to this Section, the Debt Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the series of Debt Securities issued under the within mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By ________________________________ As Authenticating Agent By ________________________________ Authorized Signatory SECTION 612. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and when the Trustee becomes a creditor of the Company (or any other obligor upon the Debt Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). A Trustee that has resigned or been removed is subject to such provisions of the Trust Indenture Act to the extent provided therein. 51 ARTICLE SEVEN CONCERNING THE HOLDERS SECTION 701. ACTS OF HOLDERS. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Outstanding Debt Securities of any series may take any Act, the fact that the Holders of such specified percentage have joined therein may be evidenced (a) by the instrument or instruments executed by Holders in person or by agent or proxy appointed in writing, or (b) by the record of Holders voting in favor thereof at any meeting of such Holders duly called and held in accordance with the provisions of ARTICLE EIGHT, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Holders. SECTION 702. PROOF OF OWNERSHIP; PROOF OF EXECUTION OF INSTRUMENTS BY HOLDERS. The ownership of Debt Securities of any series shall be proved by the Security Register for such series or by a certificate of the Security Registrar for such series. Subject to the provisions of SECTION 603 and 805, proof of the execution of a writing appointing an agent or proxy and of the execution of any instrument by a Holder or his agent or proxy shall be sufficient and conclusive in favor of the Trustee and the Company if made in the following manner: The fact and date of the execution by any such person of any instrument may be proved by the certificate of any notary public or other officer authorized to take acknowledgement of deeds, that the person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, as the case may be, or by any other person acting in a representative capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The record of any Holders' meeting shall be proved in the manner provided in SECTION 806. 52 The Trustee may in any instance require further proof with respect to any of the matters referred to in this Section so long as the request is a reasonable one. SECTION 703. PERSONS DEEMED OWNERS. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Debt Security is registered as the owner of such Debt Security for the purpose of receiving payment of the principal of (and premium, if any) and (subject to SECTION 307) interest, if any, on such Debt Security and for all other purposes whatsoever, whether or not such Debt Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. All payments made to any Holder, or upon his order, shall be valid, and, to the extent of the sum or sums paid, effectual to satisfy and discharge the liability for moneys payable upon such Debt Security. SECTION 704. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in SECTION 701, of the taking of any Act by the Holders of the percentage in aggregate principal amount of the Outstanding Debt Securities specified in this Indenture in connection with such Act, any Holder of a Debt Security the number, letter or other distinguishing symbol of which is shown by the evidence to be included in the Debt Securities the Holders of which have consented to such Act may, by filing written notice with the Trustee at the Corporate Trust Office and upon proof of ownership as provided in SECTION 702, revoke such Act so far as it concerns such Debt Security. Except as aforesaid, any such Act taken by the Holder of any Debt Security shall be conclusive and binding upon such Holder and upon all future Holders of such Debt Security and of any Debt Securities issued on transfer or in lieu thereof or in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Debt Security or such other Debt Securities. ARTICLE EIGHT HOLDERS' MEETINGS SECTION 801. PURPOSES OF MEETINGS. A meeting of Holders of any or all series may be called at any time and from time to time pursuant to the provisions of this ARTICLE EIGHT for any of the following purposes: (1) to give any notice to the Company or to the Trustee for such series, or to give any directions to the Trustee for such series, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to any of the provisions of ARTICLE FIVE; 53 (2) to remove the Trustee for such series and appoint a successor Trustee pursuant to the provisions of ARTICLE SIX; (3) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of SECTION 1002; or (4) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Outstanding Debt Securities of any one or more or all series, as the case may be, under any other provision of this Indenture or under applicable law. SECTION 802. CALL OF MEETINGS BY TRUSTEE. The Trustee for any series may at any time call a meeting of Holders of such series to take any action specified in SECTION 801, to be held at such time or times and at such place or places as the Trustee for such series shall determine. Notice of every meeting of the Holders of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given to Holders of such series in the manner and to the extent provided in SECTION 105. Such notice shall be given not less than 20 days nor more than 90 days prior to the date fixed for the meeting. SECTION 803. CALL OF MEETINGS BY COMPANY OR HOLDERS. In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in aggregate principal amount of the Outstanding Debt Securities of a series or of all series, as the case may be, shall have requested the Trustee for such series to call a meeting of Holders of any or all such series by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have given the notice of such meeting within 20 days after the receipt of such request, then the Company or such Holders may determine the time or times and the place or places for such meetings and may call such meetings to take any action authorized in SECTION 801, by giving notice thereof as provided in SECTION 802. SECTION 804. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Holders a Person shall be (a) a Holder of a Debt Security of the series with respect to which such meeting is being held or (b) a Person appointed by an instrument in writing as agent or proxy by such Holder. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee for the series with respect to which such meeting is being held and its counsel and any representatives of the Company and its counsel. 54 SECTION 805. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee for any series may make such reasonable regulations as it may deem advisable for any meeting of Holders of such series, in regard to proof of the holding of Debt Securities of such series and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of such series as provided in SECTION 803, in which case the Company or the Holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by a majority vote of the meeting. Subject to the provisos in the definition of "Outstanding," at any meeting each Holder of a Debt Security of the series with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000 principal amount (or such other amount as shall be specified as contemplated by SECTION 301) of Debt Securities of such series held or represented by him; PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting in respect of any Debt Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Outstanding Debt Securities of such series held by him or instruments in writing duly designating him as the person to vote on behalf of Holders of Debt Securities of such series. Any meeting of Holders with respect to which a meeting was duly called pursuant to the provisions of SECTION 802 or 803 may be adjourned from time to time by a majority of such Holders present and the meeting may be held as so adjourned without further notice. SECTION 806. VOTING. The vote upon any resolution submitted to any meeting of Holders with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such Holders or of their representatives by proxy and the serial number or numbers of the Debt Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was transmitted as provided in SECTION 802. The record shall show the serial numbers of the Debt Securities voting in favor of or against any resolution. The record shall be signed and verified by the 55 affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 807. NO DELAY OF RIGHTS BY MEETING. Nothing contained in this ARTICLE EIGHT shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to any Holder under any of the provisions of this Indenture or of the Debt Securities of any series. ARTICLE NINE CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 901. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless: (1) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety (the "successor corporation") shall be a corporation organized and existing under the laws of the United States of America or any state or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Debt Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both would become an Event of Default, shall have happened and be continuing; and (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance that would not be permitted by this Indenture, the Company or such successor corporation or Person, as the case may be, shall take such steps as shall be necessary effectively to secure all Debt Securities equally and ratably with (or prior to) all indebtedness secured thereby; and 56 (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 902. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation with or merger into any other corporation, or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with SECTION 901, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Debt Securities. ARTICLE TEN SUPPLEMENTAL INDENTURES SECTION 1001. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company and the assumption by such successor of the covenants of the Company herein and in the Debt Securities contained; or (2) to add to the covenants of the Company, for the benefit of the Holders of all or any series of Debt Securities appertaining thereto (and if such covenants are to be for the benefit of less than all series, stating that such covenants are expressly being included solely for the benefit of such series), or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default (and if such Events of Default are to be applicable to less than all series, stating that such Events of Default are expressly being included solely to be applicable to such series); or (4) to change or eliminate any of the provisions of this Indenture, PROVIDED that any such change or elimination shall become effective only when there is no Outstanding Debt Security of any series created prior to the execution of such 57 supplemental indenture that is entitled to the benefit of such provision and as to which such supplemental indenture would apply; or (5) to secure the Debt Securities; or (6) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Debt Securities pursuant to ARTICLE FOUR OR ARTICLE FOURTEEN, PROVIDED that any such action shall not adversely affect the interests of the Holders of Debt Securities of such series or any other series of Debt Securities in any material respect; or (7) to establish the form or terms of Debt Securities of any series as permitted by SECTIONS 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to one or more series of Debt Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of SECTION 609; or (9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with any provision of this Indenture, PROVIDED such other provisions shall not adversely affect the interests of the Holders of Outstanding Debt Securities of any series created prior to the execution of such supplemental indenture in any material respect; or (10) to change any place or places where (1) the principal of and premium, if any, and interest, if any, on all or any series of Debt Securities shall be payable, (2) all or any series of Debt Securities may be surrendered for registration or transfer, (3) all or any series of Debt Securities may be surrendered for exchange, and (4) notices and demands to or upon the Company in respect of all or any series of Debt Securities and this Indenture may be served. SECTION 1002. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Debt Securities of each series affected by such supplemental indenture voting separately, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture of such Debt Securities; PROVIDED, HOWEVER, that no 58 such supplemental indenture shall, without the consent of the Holder of each outstanding Debt Security of each such series affected thereby, (1) change the Stated Maturity of the principal of, or installment of interest, if any, on, any Debt Security, or reduce the principal amount thereof or the interest thereon or any premium payable upon redemption thereof, or change the Currency or Currencies in which the principal of (and premium, if any) or interest on such Debt Security is denominated or payable, or reduce the amount of the principal of a Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to SECTION 502, or adversely affect the right of repayment or repurchase, if any, at the option of the Holder, or reduce the amount of, or postpone the date fixed for, any payment under any sinking fund or analogous provisions for any Debt Security, or impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or (2) reduce the percentage in principal amount of the Outstanding Debt Securities of any series, the consent of whose Holders is required for any supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; or (3) modify any of the provisions of this Section, SECTION 513 or SECTION 1109, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Debt Security affected thereby; PROVIDED, HOWEVER, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and SECTION 1109, or the deletion of this proviso, in accordance with the requirements of SECTIONS 609 and 1001(7). It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture with respect to one or more particular series of Debt Securities or which modifies the rights of the Holders of Debt Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Debt Securities of any other series. SECTION 1003. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this 59 Indenture, the Trustee shall be entitled to receive, and (subject to any incorporated provisions) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise in a material way. SECTION 1004. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Debt Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 1005. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 1006. REFERENCE IN DEBT SECURITIES TO SUPPLEMENTAL INDENTURES. Debt Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debt Securities of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Debt Securities of such series. SECTION 1007. NOTICE OF SUPPLEMENTAL INDENTURE. Promptly after the execution by the Company and the appropriate Trustee of any supplemental indenture pursuant to SECTION 1002, the Company shall transmit, in the manner and to the extent provided in SECTION 105, to all Holders of any series of the Debt Securities affected thereby, a notice setting forth in general terms the substance of such supplemental indenture. ARTICLE ELEVEN COVENANTS SECTION 1101. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company covenants and agrees for the benefit of each series of Debt Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Debt Securities in accordance with the terms of the Debt Securities and this Indenture. 60 SECTION 1102. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in each Place of Payment for each series of Debt Securities an office or agency where Debt Securities of that series may be presented or surrendered for payment, where Debt Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Debt Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all presentations, surrenders, notices and demands. SECTION 1103. MONEY FOR DEBT SECURITIES; PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent with respect to any series of Debt Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Debt Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents with respect to any series of Debt Securities, it will, by or on each due date of the principal (and premium, if any) or interest on any Debt Securities of such series, deposit with any such Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto, and (unless any such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent with respect to any series of Debt Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Debt Securities of such series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Debt Securities of such series) in the making of any payment of principal (and premium, if any) or interest on the Debt Securities of such series; and 61 (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Debt Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has became due and payable shall be paid to the Company upon Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Debt Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be transmitted in the manner and to the extent provided by SECTION 105, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1104. CORPORATE EXISTENCE. Subject to ARTICLE NINE, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. SECTION 1105. LIMITATIONS ON MORTGAGES. Nothing in this Indenture or in the Debt Securities shall in any way restrict or prevent the Company or any Subsidiary from incurring any indebtedness; PROVIDED that the Company covenants and agrees that neither it nor any Subsidiary will issue, assume or guarantee any indebtedness or obligation secured by Mortgages upon any Principal Property, without effectively providing that the Debt Securities then Outstanding and thereafter created (together with, if the Company so determines, any other indebtedness or obligation then existing and any other indebtedness or obligation thereafter created ranking equally with the Debt Securities) shall be secured equally and ratably with (or prior to) such indebtedness or obligation as long as such 62 indebtedness or obligation shall be so secured, except that the foregoing provisions shall not apply to: (a)(i) Mortgages to secure all or any part of the purchase price or the cost of construction of property acquired or constructed by the Company or a Subsidiary, PROVIDED such indebtedness and related Mortgage are incurred within 18 months after acquisition, or completion of construction and full operation, whichever is later; (ii) Mortgages on property owned by the Company or a Subsidiary to secure indebtedness incurred to construct additions, substantial repairs or alterations or substantial improvements to such properties, PROVIDED the amount of such indebtedness does not exceed the expense incurred to construct such additions, substantial repairs or alterations or substantial improvements and PROVIDED FURTHER that such indebtedness and related Mortgage are incurred within 18 months after the completion of such construction, repairs, alterations or improvements; (b) Mortgages existing on property at the time of acquisition of such property by the Company or a Subsidiary or on the property of a Corporation at the time of the acquisition of such Corporation by the Company or a Subsidiary (including acquisitions through merger or consolidation); (c) Mortgages to secure indebtedness on which the interest payments to bondholders are exempt from federal income tax under Section 103 of the Code; (d) In the case of a Consolidated Subsidiary, Mortgages in favor of the Company or another Consolidated Subsidiary; (e) Mortgages existing on the date of this Indenture; (f) Mortgages in favor of a government or governmental entity that: (i) secure indebtedness which is guaranteed by the government or governmental entity, or (ii) secure indebtedness incurred to finance all or some of the purchase price or cost of construction of goods, products or facilities produced under contract or subcontract for the government or governmental entity, or (iii) secure indebtedness incurred to finance all or some of the purchase price or cost of construction of the property subject to the Mortgage; (g) Mortgages incurred in connection with the borrowing of funds if within 120 days after entering into such Mortgage, such funds are used to repay indebtedness 63 in the same principal amount secured by other Mortgages on Principal Property with a fair market value at least equal to the fair market value of the Principal Property that secures the new Mortgages, in each case based on an appraisal by an Independent professional appraiser; (h) Mortgages arising in connection with the transfer of tax benefits in accordance with Section 168(f)(8) of the Code (or any similar provision of law from time to time in effect); PROVIDED, that such Mortgages (i) are incurred within 90 days (or any longer period, not in excess of one year, as any such provision of law may from time to time permit) after the acquisition of the property or equipment subject to said Mortgage, (ii) do not extend to any other property or equipment and (iii) are solely for the purpose of said transfer of tax benefits or otherwise permitted by this SECTION 1105; and (i) Any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Mortgage referred to in the foregoing clauses (a) to (h) inclusive or of any indebtedness secured thereby; PROVIDED that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement Mortgage shall be limited to all or part of substantially the same property that secured the Mortgage extended, renewed or replaced (plus improvements on such property). SECTION 1106. LIMITATIONS ON SALE AND LEASE-BACK. The Company covenants and agrees that neither it nor any Subsidiary will enter into any arrangement with any Person (other than the Company or a Subsidiary), or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary for a period of more than three years of any Principal Property that has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person (other than the Company or a Subsidiary), to which the funds have been or are to be advanced by such Person on the security of the leased property (in this Article Eleven called "Sale and Lease-Back Transactions") unless either: (i) the Company or such Subsidiary would be entitled, pursuant to SECTION 1105, to incur indebtedness secured by a Mortgage on the property to be leased, without equally and ratable securing the Debt Securities, or (ii) the Company (and in any such case the Company covenants and agrees that it will do so) during or immediately after the expiration of 120 days after the effective date of such Sale and Lease-Back Transaction (whether made by the Company or a Subsidiary) applies to the voluntary retirement of Funded Debt and/or the acquisition or construction of Principal Property an amount equal to the value of such Sale and Lease-Back Transaction, less the principal amount of Debt Securities delivered, within 120 days after the effective date of such arrangement, to the Trustee for retirement and cancellation and the principal amount of other Funded Debt voluntarily retired by the 64 Company within such 120-day period, excluding retirements of Debt Securities and other Funded Debt as a result of conversions or pursuant to mandatory sinking fund or prepayment provisions or by payment at maturity. For purposes of this SECTION 1106, the term "value" shall mean, with respect to a Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (1) the net proceeds of the sale or transfer of the property leased pursuant to such Sale and Lease-Back Transaction or (2) the fair value in the opinion of the Chief Financial Officer of the Company of such property at the time of entering into such Sale and Lease-Back Transaction, in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease. SECTION 1107. LIMITATIONS ON INCURRENCE OF DEBT OR ISSUANCE OF PREFERRED STOCK BY RESTRICTED SUBSIDIARIES The Company shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume or otherwise become liable with respect to, extend the maturity of or become responsible for the payment of, as applicable, any Debt or Preferred Stock other than: (i) Debt outstanding on the date of this Indenture; (ii) Debt of a Restricted Subsidiary that represents the assumption by such Restricted Subsidiary of Debt of another Restricted Subsidiary; (iii) Debt or Preferred Stock of any corporation or partnership existing at the time such corporation or partnership becomes a Subsidiary; (iv) Debt of a Restricted Subsidiary arising from agreements providing for indemnification, adjustment of purchase price or similar obligations or from guarantees, letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Subsidiaries incurred or assumed in connection with the disposition of any business, property or Subsidiary, other than guarantees or similar credit support by any Restricted Subsidiary of indebtedness incurred by any Person acquiring all or any portion of such business, property or Subsidiary for the purpose of financing such acquisition, PROVIDED that the maximum aggregate liability in respect of all such Debt in the nature of such guarantees will at no time exceed the gross proceeds (including cash and the fair market value of property other than cash) actually received from the disposition of such business, property or Subsidiary; (v) Debt of a Restricted Subsidiary in respect of performance, surety and other similar bonds, bankers acceptances and letters of credit provided by such Restricted Subsidiary in the ordinary course of business; 65 (vi) Debt secured by a Mortgage incurred to finance the purchase price or cost of construction of property (or additions, substantial repairs, alterations or substantial improvements thereto), provided that (A) such Mortgage and the Debt secured thereby are incurred within 18 months of the later of such acquisition or completion of construction (or such addition, repair, alteration or improvement) and full operation thereof and (B) such Mortgage does not relate to any property other than the property so purchased or constructed (or added, repaired, altered or improved); (vii) Permitted Subsidiary Refinancing Debt; (viii) Debt (including without limitation, Debt arising from a guarantee) of a Restricted Subsidiary to the Company or another Subsidiary, but only for so long as held or owned by the Company or another Subsidiary; or (ix) any obligation pursuant to a Sale and Lease-Back Transaction permitted under SECTION 1106. SECTION 1108. EXEMPTED TRANSACTIONS. Notwithstanding the provisions of SECTIONS 1105, 1106 and 1107, the Company and any Subsidiary may issue, assume or guarantee indebtedness secured by Mortgages and enter into Sale and Lease-Back Transactions that would otherwise be subject to the restrictions in SECTIONS 1105 and 1106, respectively, and any Restricted Subsidiary may issue, assume or otherwise become liable for any Debt or Preferred Stock that would otherwise be subject to the restrictions in SECTION 1107, PROVIDED (a) the aggregate outstanding principal amount of all other indebtedness of the Company and its Subsidiaries that is subject to the restrictions in SECTION 1105 (not including indebtedness permitted to be secured under clauses (a) to (i), inclusive of SECTION 1105), plus (b) the aggregate Attributable Debt in respect of the Sale and Lease-Back Transactions in existence at such time (not including Sale and Lease-Back Transactions permitted by SECTION 1106(i) or (ii)), plus (c) the aggregate principal amount of all Debt or Preferred Stock of any Restricted Subsidiary subject to the restrictions in SECTION 1107, (not including Debt or Preferred Stock permitted under clauses (i) to (ix), inclusive, of SECTION 1107) does not exceed 15% of the Consolidated Net Tangible Assets of the Company and its Consolidated Subsidiaries. SECTION 1109. OFFICERS' CERTIFICATE AS TO DEFAULT. The Company will deliver to the Trustee, on or before a date not more than four months after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observation of any of the terms, provisions and conditions of this Indenture, and, if the Company shall be in default, specifying all such defaults and the nature thereof of which they may have knowledge. 66 ARTICLE TWELVE REDEMPTION OF DEBT SECURITIES SECTION 1201. APPLICABILITY OF ARTICLE. Debt Securities of any series that are redeemable before their Maturity shall be redeemable in accordance with their terms and (except as otherwise specified pursuant to SECTION 301 for Debt Securities of any series) in accordance with this Article. SECTION 1202. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem (or, in the case of Discount Securities, to permit the Holders to elect to surrender for redemption) any Debt Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all of the Debt Securities of any series pursuant to SECTION 1204, the Company shall, at least 60 days prior the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Debt Securities of such series to be redeemed. In the case of any redemption of Debt Securities prior to the expiration of any restriction on such redemption provided in the terms of such Debt Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restrictions. SECTION 1203. SELECTION BY TRUSTEE OF DEBT SECURITIES TO BE REDEEMED. If less than all the Debt Securities of any series are to be redeemed at the election of the Company, the particular Debt Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Debt Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Debt Securities of such series or any integral multiple thereof) of the principal amount of Debt Securities of such series in a denomination larger than the minimum authorized denomination for Debt Securities of such series pursuant to SECTION 302 in the Currency in which the Debt Securities of such series are denominated. The portions of the principal amount of Debt Securities so selected for partial redemption shall be equal to the minimum authorized denominations for Debt Securities of such series pursuant to SECTION 302 in the Currency in which the Debt Securities of such series are denominated or any integral multiple thereof, except as otherwise set forth in the applicable form of Debt Securities. In any case where more than one Debt Security of such series is registered in the same name, the Trustee in its discretion may treat the aggregate principal amount so registered as if it were represented by one Debt Security of such series. The Trustee shall promptly notify the Company in writing of the Debt Securities selected for redemption and, in the case of any Debt Securities selected for partial redemption, the principal amount thereof to be redeemed. 67 For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Debt Securities shall relate, in the case of any Debt Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Debt Security that has been or is to be redeemed. SECTION 1204. NOTICE OF REDEMPTION. Notice of redemption shall be given by the Company, or at the Company's request, by the Trustee in the name and at the expense of the Company, not less than 30 days and not more than 60 days prior to the Redemption Date to the Holders of Debt Securities of any series to be redeemed in whole or in part pursuant to this ARTICLE TWELVE, in the manner provided in SECTION 105. Any notice so given shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. Failure to give such notice, or any defect in such notice to the Holder of any Debt Security of a series designated for redemption, in whole or in part, shall not affect the sufficiency of any notice of redemption with respect to the Holder of any other Debt Security of such series. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) that Debt Securities of such series are being redeemed by the Company pursuant to provisions contained in this Indenture or the terms of the Debt Securities of such series or a supplemental indenture establishing such series, if such be the case, together with a brief statement of the facts permitting such redemption, (4) if less than all Outstanding Debt Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Debt Securities to be redeemed, (5) that on the Redemption Date the Redemption Price will become due and payable upon each such Debt Security to be redeemed, and that interest thereon, if any, shall cease to accrue on and after said date, (6) the Place or Places of Payment where such Debt Securities are to be surrendered for payment of the Redemption Price, and (7) that the redemption is for a sinking fund, if such is the case. SECTION 1205. DEPOSIT OF REDEMPTION PRICE. On or prior to the Redemption Date for any Debt Securities, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying 68 Agent, segregate and hold in trust as provided in SECTION 1103) an amount of money in the Currency or Currencies in which such Debt Securities are denominated (except as provided pursuant to SECTION 301) sufficient to pay the Redemption Price of such Debt Securities or any portions thereof that are to be redeemed on that date. SECTION 1206. DEBT SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, any Debt Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price in the Currency in which the Debt Securities of such series are payable (except as otherwise specified pursuant to SECTIONS 301 or 310), and from and after such date (unless the Company shall default in the payment of the Redemption Price) such Debt Securities shall cease to bear interest. Upon surrender of any such Debt Security for redemption in accordance with said notice, such Debt Security shall be paid by the Company at the Redemption Price; PROVIDED, HOWEVER, that, unless otherwise specified as contemplated by SECTION 301, installments of interest on Debt Securities that have a Stated Maturity or on prior to the Redemption Date for such Debt Securities shall be payable according to the terms of such Debt Securities and the provisions of SECTION 307. If any Debt Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Debt Security. SECTION 1207. DEBT SECURITIES REDEEMED IN PART. Any Debt Security that is to be redeemed only in part shall be surrendered at the Corporate Trust Office or such other office or agency of the Company as is specified pursuant to SECTION 301 with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing, and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Debt Security without service charge, a new Debt Security or Debt Securities of the same series, of like tenor and form, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Debt Security so surrendered. In the case of a Debt Security providing appropriate space for such notation, at the option of the Holder thereof, the Trustee, in lieu of delivering a new Debt Security or Debt Securities as aforesaid, may make a notation on such Debt Security of the payment of the redeemed portion thereof. 69 ARTICLE THIRTEEN SINKING FUNDS SECTION 1301. APPLICABILITY OF ARTICLE. The provisions of this ARTICLE THIRTEEN shall be applicable to any sinking fund for the retirement of Debt Securities of a series except as otherwise specified pursuant to SECTION 301 for Debt Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Debt Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Debt Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Debt Securities of any series, the amount of any cash sinking fund payment may be subject to reduction as provided in SECTION 1302. Each sinking fund payment shall be applied to the redemption of Debt Securities of any series as provided for by the terms of Debt Securities of such series. SECTION 1302. SATISFACTION OF MANDATORY SINKING FUND PAYMENTS WITH DEBT SECURITIES. In lieu of making all or any part of a mandatory sinking fund payment with respect to any Debt Securities of a series in cash, the Company may at its option, at any time no less than 45 days prior to the date on which such sinking fund payment is due, deliver to the Trustee Debt Securities of such series theretofore purchased or otherwise acquired by the Company, except Debt Securities of such series that have been redeemed through the application of mandatory or optional sinking fund payments pursuant to the terms of the Debt Securities of such series, accompanied by a Company Order instructing the Trustee to credit such obligations and stating that the Debt Securities of such series were originally issued by the Company by way of bona fide sale or other negotiation for value; PROVIDED that such Debt Securities shall not have been previously so credited. Such Debt Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Debt Securities for redemption through operation of the sinking fund and the amount of such mandatary sinking fund payment shall be reduced accordingly. SECTION 1303. REDEMPTION OF DEBT SECURITIES FOR SINKING FUND. Not less than 60 days prior to each sinking fund payment date for any series of Debt Securities (unless a shorter period shall be satisfactory to the Trustee), the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, that is to be satisfied by payment of cash in the Currency or Currencies in which the Debt Securities of such series are denominated (except as provided pursuant to SECTION 301) and the portion thereof, if any, that is to be satisfied by delivering and crediting Debt Securities of such series pursuant to SECTION 1302 and whether the Company intends to exercise its rights to make a 70 permitted optional sinking fund payment with respect to such series. Such certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the Company to deliver such certificate, the sinking fund payment due on the next succeeding sinking fund payment date for such series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of the Debt Securities of such series subject to a mandatory sinking fund payment without the right to deliver or credit Debt Securities as provided in SECTION 1302 and without the right to make any optional sinking fund payment with respect to such series at such time. Any sinking fund payment or payments (mandatory or optional) made in cash plus any unused balance of any preceding sinking fund payments made with respect to the Debt Securities of any particular series shall be applied by the Trustee (or by the Company if the Company is acting as its own Paying Agent) on the sinking fund payment date on which such payment is made (or, if such payment is made before a sinking fund payment date, on the sinking fund payment date immediately following the date of such payment) to the redemption of Debt Securities of such series at the Redemption Price specified in such Debt Securities with respect to the sinking fund. Any sinking fund moneys not so applied or allocated by the Trustee (or by the Company if the Company is acting as its own Paying Agent) to the redemption of Debt Securities shall be added to the next sinking fund payment received by the Trustee (or if the Company is acting as its own Paying Agent, segregated and held in trust as provided in SECTION 1103) for such series and, together with such payment (or such amount so segregated) shall be applied in accordance with the provisions of this Section. Any and all sinking fund moneys with respect to the Debt Securities of any particular series held by the Trustee (or if the Company is acting as its own Paying Agent, segregated and held in trust as provided in SECTION 1103) on the last sinking fund payment date with respect to Debt Securities of such series and not held for the payment or redemption of particular Debt Securities of such series shall be applied by the Trustee (or by the Company if the Company is acting as its own Paying Agent), together with other moneys, if necessary, to be deposited (or segregated) sufficient for the purpose, to the payment of the principal of the Debt Securities of such series at Maturity. The Trustee shall select or cause to be selected the Debt Securities to be redeemed upon such sinking fund payment date in the manner specified in SECTION 1203 and the Company shall cause notice of the redemption thereof to be given in the manner provided in SECTION 1204. Such notice having been duly given, the redemption of such Debt Securities shall be made upon the terms and in the manner stated in SECTION 1206. On or before each sinking fund payment date, the Company shall pay to the Trustee (or, if the Company is acting as its own Paying Agent, the Company shall segregate and hold in trust as provided in SECTION 1103) in cash a sum, in the Currency or Currencies in which Debt Securities of such series are denominated (except as provided pursuant to SECTIONS 301 or 310), equal to the principal and interest accrued to the Redemption Date for Debt Securities or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section. 71 Neither the Trustee nor the Company shall redeem any Debt Securities of a series with sinking fund moneys or mail any notice of redemption of Debt Securities of such series by operation of the sinking fund for such series during the continuance of a default in payment of interest, if any, on any Debt Securities of such series or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) with respect to the Debt Securities of such series, except that if the notice of redemption shall have been provided in accordance with the provisions hereof, the Trustee (or the Company, if the Company is then acting as its own Paying Agent) shall redeem such Debt Securities if cash sufficient for that purpose shall be deposited with the Trustee (or segregated by the Company) for that purpose in accordance with the terms of this Article. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such default or Event of Default, be held as security for the payment of the Debt Securities of such series; PROVIDED, HOWEVER, that in case such default or Event of Default shall have been cured or waived as provided herein, such moneys shall thereafter be applied on the next sinking fund payment date for the Debt Securities of such series on which such moneys may be applied pursuant to the provisions of this Section. ARTICLE FOURTEEN DEFEASANCE SECTION 1401. APPLICABILITY OF ARTICLE. If, pursuant to SECTION 301, provision is made for the defeasance of Debt Securities of a series, and if the Debt Securities of such series are denominated and payable only in Dollars (except as provided pursuant to SECTION 301) then the provisions of this Article shall be applicable except as otherwise specified pursuant to SECTION 301 for Debt Securities of such series. Defeasance provisions, if any, for Debt Securities denominated in a Foreign Currency or Currencies may be specified pursuant to SECTION 301. SECTION 1402. DEFEASANCE UPON DEPOSIT OF MONEYS OR U.S. GOVERNMENT OBLIGATIONS. At the Company's option, either (a) the Company shall be deemed to have been Discharged (as defined below) from its obligations with respect to Debt Securities of any series on the 91st day after the applicable conditions set forth below have been satisfied or (b) the Company shall cease to be under any obligation to comply with any term, provision or condition set forth in SECTIONS 901, 1105, 1106, 1107, 1108 and 1109 with respect to Debt Securities of any series (and, if so specified pursuant to SECTION 301, any other restrictive covenant added for the benefit of such series pursuant to SECTION 301) at any time after the applicable conditions set forth below have been satisfied: (1) the Company shall have deposited or caused to be deposited irrevocably with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated 72 solely to, the benefit of the Holders of the Debt Securities of such series (i) money in an amount, or (ii) U.S. Government Obligations (as defined below) which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (iii) a combination of (i) and (ii), sufficient, in the opinion (with respect to (i) and (ii)) of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge each installment of principal (including any mandatory sinking fund payments) of and premium, if any, and interest on, the Outstanding Debt Securities of such series on the dates such installments of interest or principal and premium are due; (2) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (3) if the Debt Securities of such series are then listed on any national securities exchange, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Company's exercise of its option under this Section would not cause such Debt Securities to be delisted; (4) no Event of Default or event (including such deposit) which, with notice or lapse of time or both, would become an Event of Default with respect to the Debt Securities of such series shall have occurred and be continuing on the date of such deposit and no Event of Default under SECTION 501(5) or SECTION 501(6) or event which with the giving of notice or lapse of time, or both, would become an Event of Default under SECTION 501(5) or SECTION 501(6) shall have occurred and be continuing on the 91st day after such date; and (5) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Debt Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance or Discharge. "Discharged" means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by, and obligations under, the Debt Securities of such series and to have satisfied all the obligations under this Indenture relating to the Debt Securities of such series (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except (A) the rights of Holders of Debt Securities of such series to receive, from the trust fund described in clause (1) above, payment of the principal of (and premium, if any) and interest on such Debt Securities when such payments are due, (B) the Company's obligations with respect to the Debt Securities of such series under SECTIONS 304, 305, 306, 1103 and 1403 and (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder. 73 "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii), are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. SECTION 1403. DEPOSIT MONEYS AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST. All moneys and U.S. Government Obligations deposited with the Trustee pursuant to SECTION 1402 in respect of Debt Securities of a series shall be held in trust and applied by it, in accordance with the provisions of such Debt Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Debt Securities, of all sums due and to become due thereon for principal (and premium, if any) and interest, if any, but such money need not be segregated from other funds except to the extent required by law. SECTION 1404. REPAYMENT TO COMPANY. The Trustee and any Paying Agent shall promptly pay or return to the Company upon Company Request any moneys or U.S. Government Obligations held by them at any time that are not required for the payment of the principal of (and premium, if any) and interest on the Debt Securities of any series for which money or U.S. Government Obligations have been deposited pursuant to SECTION 1402. The provisions of the last paragraph of SECTION 1103 shall apply to any money held by the Trustee or any Paying Agent under this Article that remains unclaimed for two years after the Maturity of any series of Debt Securities for which money or U.S. Government Obligations have been deposited pursuant to SECTION 1402. 74 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. COLUMBIA HEALTHCARE CORPORATION By: ________David G. Anderson______ Print Name: __David G. Anderson____ Title: _Vice President -- Finance__ Attest: By: ______Joan O. Kroger______ Print Name: __Joan O. Kroger__ Title: __Corporate Secretary__ Seal THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By: ______John R. Prendiville______ Print Name: __John R. Prendiville__ Title: _______Vice President_______ Attest: By: ______Grace A. Gorka______ Print Name: __Grace A. Gorka__ Title: _____Trust Officer_____ Seal 75 STATE OF ) ) ss: COUNTY OF ) On the 15th day of December 1993, before me personally came David G. Anderson to me known, who, being by me duly sworn, did depose and say that he is Vice President of Finance of Columbia Healthcare Corporation, one of the corpora- tions described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ____Margaret Wood Schneider__ Notary Public SEAL 76 STATE OF ) ) ss: COUNTY OF ) On the 16th day of December 1993, before me personally came John R. Prendiville to me known, who, being by me duly sworn, did depose and say that he is Vice President of The First National Bank of Chicago, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said association, and that he signed his name thereto by like authority. _______Somsri Helmer________ Notary Public SEAL 77 EX-10.11 7 EXHIBIT 10.11--EMPLOYMENT AGREEMENT POLLARD EXHIBIT 10.11 AGREEMENT THIS AGREEMENT is made by and between Carl F. Pollard ("Pollard"), and Columbia Healthcare Corporation, a Delaware corporation and successor of Columbia Hospital Corporation, a Nevada corporation (individually or jointly "Columbia"). W I T N E S E T H : WHEREAS, Pollard has entered into that certain employment agreement, dated August 31, 1993, regarding his employment with Columbia (the "Columbia Employment Agreement"); and WHEREAS, the parties desire to enter into this Agreement to modify, preserve and secure certain of Pollard's benefits under the Columbia Employment Agreement; NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained and other valuable consideration, the parties agree as follows: 1. CONTINUED BOARD SERVICE. Pollard agrees to continue to serve on Columbia's Board of Directors in the capacity as Chairman of the Executive Committee and devote his best efforts to serving Columbia in that role. 2. CONFIDENTIAL INFORMATION. (i) Pollard recognizes and acknowledges that during the term of his employment, he has or will develop, have access to and come into possession of trade secrets and confidential information of Columbia, including, without limitation, software systems, specifications, programs and documentation, the methods and data which Columbia owns, plans or develops, whether for its own use or for use by its clients, developments, designs, inventions and improvements, trade secrets and works of authorship, customer lists, supplier lists, proposals, marketing plans and procedures, all of which are confidential and are the property of Columbia. Pollard further recognizes and acknowledges that in order to enable Columbia to perform services for its customers, those customers may furnish to Columbia confidential information concerning their business affairs, property, methods of operation or other data and that the goodwill afforded to Columbia and its employees requires keeping such services and information confidential. All of these materials and information including, without limitation, those relating to Columbia's systems and customers, will be referred to below as "Proprietary Information." (ii) Pollard agrees that during the term of Pollard's employment with Columbia and thereafter, Pollard will keep any and all Proprietary Information confidential and will not disclose any Proprietary Information, directly or indirectly, to any third person or entity, without the prior written consent of Columbia. Pollard further agrees that, during the term of Pollard's employment with Columbia and thereafter, Pollard will not use, handle, copy or duplicate, in part or in whole, any Proprietary Information, except as directed by Columbia and in the ordinary course of Columbia's business. This confidentiality covenant has no temporal, geographic or territorial restriction. (iii) Pollard agrees that upon request by Columbia, and in any event immediately upon termination of Pollard's employment, Pollard shall turn over to Columbia all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, software, cards, surveys, maps, logs, machines, technical data, work product or any other tangible product or document which has been produced by, received by or otherwise submitted or made available to Pollard during or prior to Pollard's employment with Columbia. (iv) Pollard understands and agrees that all Proprietary Information is and shall remain the property of Columbia and that Pollard has not and will not appropriate for Pollard's own use or for the use of any third party any Proprietary Information. Furthermore, Pollard hereby assigns and agrees to assign to Columbia or its subsidiaries or affiliates, as appropriate, its successors, assigns or nominees, Pollard's entire right, title and interest in any developments, designs, patents, inventions and improvements, trade secrets, trademarks, copyrightable subject matter or other Proprietary Information which Pollard has made or conceived, or may make or conceive, either solely or jointly with others, while providing services to Columbia, or with the use of time, material or facilities of Columbia or relating to any actual or anticipated business, research, development, product, service or activity of Columbia known to Pollard while employed at Columbia, or suggested by or resulting from any task assigned to Pollard or work performed by Pollard for or on behalf of Columbia, whether or not such work was performed prior to the date of this Agreement. (v) For purposes of the foregoing, service by the Pollard with Galen and Humana Inc. will be deemed service with Columbia. 3. COVENANT NOT TO COMPETE. Pollard agrees that because of the confidential and sensitive nature of the Proprietary Information and because the use of, or even the appearance to Columbia and its reputation, or to customers of Columbia, Pollard will not, from the date of this Agreement until the expiration of one (1) year after the date on which 2 Pollard's employment as an employee of Columbia terminates for any reason, directly or indirectly, own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including as director, officer, consultant, independent contractor, employee, partner, or investor with any business, enterprise, organization or other individual or entity which solicits business, performs services or delivers goods that are comparable to or competitive with any business of Columbia; provided, however, that the ownership of less than five percent (5%) of the outstanding capital stock of any entity with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, shall not be prohibited by this Section 3. 4. NON-SOLICITATION. Pollard agrees that during the term of Pollard's employment with Columbia and for a period of three (3) years thereafter, Pollard will not interfere with Columbia's relationship with, or endeavor to employ or entice away from Columbia, any business, enterprise, organization or other individual or entity, which is an employee, customer or supplier of Columbia, or which maintains a business relationship with any business of Columbia. 5. BENEFITS ON AND AFTER TERMINATION. In consideration of Pollard's promises contained herein and his termination as an employee of Columbia, and in fulfillment of Columbia's obligations under the Columbia Employment Agreement, the parties agree to the following: (i) At the time of Pollard's resignation, he shall be paid a lump sum cash payment equal to eighty nine thousand, two hundred fifty dollars multiplied by the number of months (and fraction thereof), remaining between the effective date of Pollard's resignation and February 28, 1997. (ii) Columbia shall continue to carry at its expense life insurance coverage on Pollard's life to age sixty-five (65) in the amount of one million, seven hundred and fifty thousand dollars ($1,750,000.00) payable to Pollard's beneficiary. (iii) Columbia shall continue health insurance coverage for Pollard and his family, under an insured health program available to Columbia employees, until Pollard's age sixty-five (65). The cost to Pollard for such coverage shall be the cost under the Consolidated Omnibus Budget Reconciliation Act (COBRA) minus the cost for such coverage Columbia would pay if Pollard were an employee. (i.e. The normal Company portion shall be paid by the Company.) Pollard's spouse shall also be entitled, as Pollard's dependent, to continuation of health insurance coverage until she reaches age sixty-five (65) under the same plans as Pollard and subject to the same terms and cost of coverage under those plans as Pollard, however once Pollard reaches the age of sixty-five and is entitled to coverage under Medicare (or its successor), he shall not be entitled to dependent coverage under his spouse's coverage. While Pollard is a Director of the Company, he may choose to receive health insurance benefits under the Company's then current Directors' plan, if any. 3 (iv) There shall be immediate and full vesting of any of Pollard's stock options which are not otherwise exercisable or payable as of the date of termination of employment. Pollard shall be treated as retiring from the employ of the Company so that such stock options and any other vested but unexercised options shall not expire until two years from the date of such retirement. This paragraph shall not apply to the stock option referenced in subparagraph (v) below. (v) Pollard shall be granted stock options to purchase three hundred thousand (300,000) shares of Columbia stock at the earliest possible date. Such options shall (A) be at a purchase price equal to the stock's fair market value at date of grant, (B) be immediately exercisable, and (C) have a ten (10) year term. (vi) Pollard shall be supplied office space and equipment and secretarial help under the following terms: (A) Columbia shall lease office space of Pollard's choosing (of approximately one thousand (1,000) square feet) for a period of five (5) years from Pollard's resignation with an option for another five (5) years; such option to renew by the Company shall be at Pollard's sole discretion. The cost of such (including three (3) parking spaces) shall be at Columbia's expense except that any tenant improvements over and above the landlord's tenant allowance shall be split equally between Columbia and Pollard. (B) Pollard shall have the use of all his current office furniture and fixtures for the duration of the lease. (C) Pollard's current secretary shall continue in such capacity in such leased space. She shall remain an employee of Columbia during the term of such lease with all the benefits of a Columbia employee and shall be considered a third party beneficiary of this Agreement. She shall be entitled to annual pay increases equal to at least the average percentage pay increases of all other executive secretaries. If at any time during the ten (10) year period following Pollard's resignation, his current secretary ceases for any reason to serve as his secretary and elects to return to a job at the Company's corporate headquarters or at one of its facilities, she shall be entitled to an offer of a position comparable in grade and salary to her then current position. Should this occur, she shall be subject to the same terms and conditions of employment as all other Columbia employees. Pollard shall have the use of all her current office furniture and fixtures during the term of the lease. If she should leave Columbia's employ or otherwise cease to serve as Pollard's secretary during such ten (10) year period, Columbia shall pay Pollard at the rate of twenty-five thousand per year for him to obtain secretarial help. 4 EX-10.12 8 EXHIBIT 10.12--EMPLOYMENT AGREEMENT BOHANON EXHIBIT 10.12 AGREEMENT THIS AGREEMENT is made by and between James D. Bohanon ("Bohanon" or "Employee") and Columbia Healthcare Corporation, a Delaware corporation and the successor of Columbia Hospital Corporation, a Nevada corporation (individually or jointly "Columbia"). W I T N E S S E T H : WHEREAS, Bohanon has entered into that certain employment agreement, dated September 1, 1993, regarding his employment with Columbia (the "Columbia Employment Agreement"); and WHEREAS, Bohanon has agreed to relinquish his position as Co-Chief Operating Officer of Columbia; and WHEREAS, the parties desire to enter into this Agreement to modify, preserve and secure certain of Bohanon's benefits under the Columbia Employment Agreement; NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained and other valuable consideration, the parties agree as follows: 1. TERMINATION OF EMPLOYMENT. Employee agrees to resign his employment with Columbia. 2. CONFIDENTIAL INFORMATION. (i) Employee recognizes and acknowledges that during the term of employment Employee will develop, have access to and come into possession of trade secrets and confidential information of Columbia, including, without limitation, software systems, specifications, programs and documentation, the methods and data which Columbia owns, plans or develops, whether for its own use or for use by its clients, developments, designs, inventions and improvements, trade secrets and works of authorship, customer lists, supplier lists, proposals, marketing plans and procedures, all of which are confidential and are the property of Columbia. Employee further recognizes and acknowledges that in order to enable Columbia to perform services for its customers, those customers may furnish to Columbia confidential information concerning their business affairs, property, methods of operation or other data and that the goodwill afforded to Columbia and its employees requires keeping such services and information confidential. All of these materials and information including, without limitation, those relating to Columbia's systems and customers, will be referred to below as "Proprietary Information." (ii) Employee agrees that during the term of Employee's employment with Columbia and thereafter, Employee will keep any and all Proprietary Information confidential and will not disclose any Proprietary Information, directly or indirectly, to any third person or entity, without the prior written consent of Columbia. Employee further agrees that, during the term of Employee's employment with Columbia and thereafter, Employee will not use, handle, copy or duplicate, in part or in whole, any Proprietary Information, except as directed by Columbia and in the ordinary course of Columbia's business. This confidentiality covenant has no temporal, geographic or territorial restriction. (iii) Employee agrees that upon request by Columbia, and in any event immediately upon termination of Employee's employment, Employee shall turn over to Columbia all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, software, cards, surveys, maps, logs, machines, technical data, work product or any other tangible product or document which has been produced by, received by or otherwise submitted or made available to Employee during or prior to Employee's employment with Columbia. (iv) Employee understands and agrees that all Proprietary Information is and shall remain the property of Columbia and that Employee has not and will not appropriate for Employee's own use or for the use of any third party any Proprietary Information. Furthermore, Employee hereby assigns or agrees to assign to Columbia or its subsidiaries or affiliates, as appropriate, its successors, assigns or nominees, Employee's entire right, title and interest in any developments, designs, patents, inventions and improvements, trade secrets, trademarks, copyrightable subject matter or other Proprietary Information which Employee has made or conceived, or may make or conceive, either solely or jointly with others, while providing services to Columbia, or with the use of time, material or facilities of Columbia or relating to any actual or anticipated business, research, development, product, service or activity of Columbia known to Employee while employed at Columbia, or suggested by or resulting from any task assigned to Employee or work performed by Employee for or on behalf of Columbia, whether or not such work was performed prior to the date of this Agreement. (v) For purposes of the foregoing, service by the Employee with Galen and Humana Inc. prior to the Effective Time will be deemed service with Columbia. 3. COVENANT NOT TO COMPETE. Employee agrees that because of the confidential and sensitive nature of the Proprietary Information and because the use of, or even the appearance of the use of, the Proprietary Information in certain circumstances may cause irreparable damage to Columbia and its reputation, or to customers of Columbia, Employee will not, from the date of this Agreement until the expiration of one (1) year after the date on which Employee's employment with Columbia terminates for any reason, directly or indirectly, own, manage, operate, join, control, 2 be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including as director, officer, consultant, independent contractor, employee, partner, or investor with any business, enterprise, organization or other individual or entity which solicits business, performs services or delivers goods that are comparable to or competitive with any business of Columbia; provided, however, that the ownership of less than five percent (5%) of the outstanding capital stock of any entity with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, shall not be prohibited by this Section 4. 4. NON-SOLICITATION. Employee agrees that during the term of Employee's employment with Columbia and for a period of three (3) years thereafter, Employee will not interfere with Columbia's relationship with, or endeavor to employ or entice away from Columbia, any business, enterprise, organization or other individual or entity, which is an employee, customer or supplier of Columbia, or which maintains a business relationship with any business of Columbia. 5. BENEFITS ON AND AFTER TERMINATION . In consideration of Bohanon's promises contained herein and his termination as an employee of Columbia, and in fulfillment of Columbia's obligations under the Columbia Employment Agreement, the parties agree to the following: (i) At the time of Bohanon's resignation, he shall be paid a lump sum cash payment equal to Fifty-Three Thousand Eight Hundred and Fifty Dollars ($53,850.00) multiplied by the number of months (and fraction thereof), remaining between the effective date of Bohanon's resignation and February 28, 1998. (ii) Columbia shall continue to carry at its expense life insurance coverage on Bohanon's life to age sixty-five (65) in the amount of One Million, Seventy-Five Thousand Dollars ($1,075,000.00) payable to Bohanon's beneficiary. (iii) Columbia shall continue health insurance coverage for Bohanon and his family, under an insured health program available to Columbia employees, until Bohanon's age sixty-five (65). The cost to Bohanon for such coverage shall be the cost under the Consolidated Omnibus Budget Reconciliation Act (COBRA) minus the cost for such coverage Columbia would pay if Bohanon were an employee. (i.e. The normal Company portion shall be paid by the Company.) Bohanon's spouse shall also be entitled, as Bohanon's dependent, to continuation of health insurance coverage until she reaches age sixty-five (65) under the same plans as Bohanon and subject to the same terms and cost of coverage under those plans as Bohanon, however once Bohanon reaches the age of sixty-five and is entitled to coverage under Medicare (or its successor), he shall not be entitled to dependent coverage under his spouse's coverage. (iv) There shall be immediate and full vesting of any of Bohanon's stock options which are not otherwise exercisable or payable as of the date of termination of employment. Bohanon shall be treated as retiring from the employ of the Company 3 so that such stock options and any other vested but unexercised options shall not expire until two years from the date of such retirement. This paragraph shall not apply to the SARs referenced in subparagraph (v) below. (v) Bohanon is hereby granted stock appreciation rights with respect to 300,000 shares of Columbia Common Stock (the "Shares") at an exercise price ("Exercise Price") of $27.1875 per share (the "SARs"). The SARs are fully exercisable and shall expire August 31, 1997. Upon exercise of an SAR, Employee shall be entitled to receive an amount, payable in cash, determined by multiplying (A) the excess of the fair market value of a Share on the date of exercise over the Exercise Price by (B) the number of Shares as to which the SAR is being exercised (for this purpose fair market value of a Share shall be the average between the high and the low trading prices of a Share on the principal exchange on which the Shares are traded). Notwithstanding the foregoing, for the one (1) year period between September 1, 1994 and up to and including August 31, 1995, Bohanon may, at his sole discretion, relinquish the SARs described herein and receive in lieu thereof a lump sum payment of one million dollars ($1,000,000) plus an additional amount sufficient to enable Bohanon to pay all federal, state and local taxes resulting from his receipt of such payment so that Bohanon will receive an amount, net of all taxes, equal to one million dollars ($1,000,000) (the "Alternative Cash Payment"). For this purpose, the amount of the Alternative Cash Payment will be determined assuming Bohanon's effective federal, state and local tax rates are the highest marginal tax rate applicable. In the event of Bohanon's death or disability, the SARs shall be exercisable by the person or persons to whom those rights pass by will or by the laws of descent and distribution or if appropriate by the legal representative of Bohanon or his estate under the same terms contained herein. 6. BINDING EFFECT. This Agreement and any amendments hereto shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. 7. PRIOR AGREEMENT. Upon Bohanon's resignation as an employee of Columbia, this agreement shall supersede the Columbia Employment Agreement. 8. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky without regard to its rules of conflict of laws. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the Commonwealth of Kentucky and of the United States of America located in the Commonwealth of Kentucky for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby; and agree not to commence any litigation relating thereto except in such courts. 9. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any 4 other jurisdiction. If any provision of the Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. IN WITNESS WHEREOF, Columbia has caused this Agreement to be executed by its duly authorized officer and Bohanon has executed this Agreement, each as of the day and year set forth below. COLUMBIA HEALTHCARE CORPORATION Date: ______________________ By: ___________________________________ Richard L. Scott President and Chief Executive Officer Date: ______________________ Employee: _____________________________ James D. Bohanon 5 AGREEMENT THIS AGREEMENT is made by and between James D. Bohanon ("Bohanon" or "Employee") and Columbia Healthcare Corporation, a Delaware corporation and the successor of Columbia Hospital Corporation, a Nevada corporation (individually or jointly "Columbia"). W I T N E S S E T H : WHEREAS, Bohanon has entered into that certain employment agreement, dated August 31, 1993, regarding his employment with Columbia (the "Columbia Employment Agreement"), which was modified and superseded by an Agreement between the parties dated December 16, 1993 (the "Employment Termination Agreement"); and WHEREAS, Bohanon entered into that certain agreement dated February 15, 1993 with Galen Health Care, Inc. ("Galen") regarding termination benefits following a change in control (the "Severance Protection Agreement") which Columbia is obligated under as successor to Galen; and WHEREAS, the parties desire to clarify Bohanon's benefits under such agreements; NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained and other valuable consideration, the parties agree that upon his resignation as an employee of Columbia, Bohanon shall be entitled to the benefits under his Severance Protection Agreement. However, notwithstanding the above, the parties agree that Bohanon is not entitled to the benefits described in Section 2(a)(3)(ii) of his Severance Protection Agreement. IN WITNESS WHEREOF, Columbia has caused this Agreement to be executed by its duly authorized officer and Bohanon has executed this Agreement, each as of the day and year set forth below. COLUMBIA HEALTHCARE CORPORATION Date: ______________________ By: ___________________________________ Richard L. Scott President and Chief Executive Officer Date: ______________________ Employee: _____________________________ James D. Bohanon 6 EX-10.15 9 EXHIBIT 10.15 SEVERANCE AGREEMENT SEVERANCE AGREEMENT THIS AGREEMENT is made as of November 1, 1993, by and between HCA-Hospital Corporation of America, a Delaware corporation (the "Company"), and the Subsidiary (as hereinafter defined) which employs the Employee, and ___________________________ (the "Employee"). WHEREAS, the Board of Directors of the company (the "Board") desires to foster the continuous employment of the Employee and has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Employee to his duties from distractions which could arise in the event of a threatened Change in Control of the Company: NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the Employee agree as follows: 1. TERM OF AGREEMENT. This Agreement shall commence as of the date hereof and shall continue in effect until December 31, 1994; provided, however, that if a Change in Control (as hereinafter defined) occurs during the term of this Agreement, the term of this Agreement shall automatically be extended for a period of thirty-six (36) months after the end of the month in which the Change in Control occurs. Furthermore, if the Employee's employment with the Company shall be terminated prior to a Change in Control, this Agreement shall automatically expire. 2. TERMINATION BENEFITS. (a) If, following a Change in Control, and during the term of this Agreement (including any extensions of such term as provided in Section hereof), the Employee's employment with the Company shall be terminated, the Employee shall be entitled to the following compensation and benefits (in addition to any non-severance compensation and benefits provided for under any of the Company's employee benefit plans, policies and practices or under the terms of any other contracts, but in lieu of any severance pay under any Company employee benefit plan, policy and practice or under the terms of any other contract including any employment contract): 1) If the Employee's employment with the company shall be terminated, (A) by reason of the Employee's Disability or Retirement, (B) by reason of the Employee's death or (C) by the Employee other than for Good Reason, the Company shall pay the Employee his full base salary through the Date of Termination at the greater of the rate in effect at the time the Change in Control occurred or when the Notice of Termination was given (or the Date of Termination in the case of the Employee's death), plus any bonuses or incentive compensation which pursuant to the terms of any compensation or benefit plan have been earned as of the Date of Termination. 2) If the Employee's employment with the Company shall be terminated for Cause, the Company shall pay the Employee his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Employee under this Agreement. 3) If the Employee's employment with the Company shall be terminated, (A) by the Company other than for Cause or Disability, or (B) by the Employee for Good Reason, then the following provisions shall apply: (i) The Company shall, within five (5) days after the Date of Termination, pay the Employee (1) his full salary through the Date of Termination at the greater of the rate in effect at the time the Change in Control occurred or when the Notice of Termination was given, plus (2) any bonuses or incentive compensation which pursuant to the terms of any compensation or benefit plan have been earned but which have not yet been paid plus (3) as long as the Company, as a whole, is then performing, as evidenced by its most recently available monthly operating results, at a level not less than 90% of its budgeted level, an amount equal to the target amount the Employee could have earned under the Company's annual incentive plan with respect to the fiscal year of the Company in which the Date of Termination occurs multiplied by a fraction, the numerator of which is the number of full months the Employee was employed by the Company during the fiscal year of the Company in which the Date of Termination occurs and the denominator of which is 12; (ii) The Company shall, within five (5) days after the Date of Termination, pay the Employee a lump sum (together with the amounts payable pursuant to clause (iii) below, the "Severance Payments") in an amount equal to the product of (A) one times (B) the sum of (1) an amount equal to the Employee's Annual Base Salary at the rate in effect on October 2, 1993 and (2) the target amount the Employee could have earned under the Company's annual incentive plan with respect to the fiscal year of the Company ending December 31, 1993. (iii) The Company shall maintain in full force and effect for the benefit of the Employee and the Employee's dependents and beneficiaries, at the Company's expense (less the amount such individual would have paid for such coverage had him employment not terminated) until the earlier of (A) the expiration of 18 months following the date of Termination or (B) the effective date of the Employee's employment on a substantially full-time basis by a new employer (whether as an employee, consultant or independent contractor), all medical insurance, -2- under plans and programs in which the Employee and/or the Employee's dependents and beneficiaries participated immediately prior to the Date of Termination, provided that continued participation is possible under the general terms and provisions of such plans and programs. If participation in any such plan or program is barred, the Company shall arrange at its own expense (less the amount such individual would have paid for such coverage had his employment not terminated) to provide the Employee with benefits substantially similar to those which he was entitled to receive under such plans and programs. (iv) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Employee in connection with a Change in Control or the termination of the Employee's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control of the Company or any person affiliated with the Company or such person) (all such payments and benefits, including the Severance Payments, being hereinafter called "Total Payments") would not be deductible (in whole or in part), by the Company, an affiliate or Person making such payment or providing such benefit as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), then, to the extent necessary to eliminate the disallowance of the deduction under Section 280G of the Code with respect to such portion of the Total Payments (and after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement) the Severance Payments shall be reduced (if necessary, to zero). For purposes of this limitation (w) no portion of the Total Payments the receipt or enjoyment of which the Employee shall have effectively waived in writing prior to the Date of Termination shall be taken into account, (x) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Employee does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code), (y) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (w) or (x) in their entirety constitute reasonable compensation for services actually rendered, within the meaning of Section 280G(B)(4)(B) of the Code, or are not otherwise subject to disallowance as deductions under Section 280G of the Code, in the opinion of the tax counsel referred to in clause (x), and (z) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) -3- of the Code. If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Section 2(a)(3)(iv), the aggregate "parachute payments" paid to or for the Employee's benefit are in an amount that would result in any portion of such "parachute payments" not being deductible by reason of Section 280G of the Code, then the Employee shall have an obligation to pay the Company upon demand an amount equal to the excess of the aggregate "parachute payments" paid to or for the Employee's benefit over the aggregate "parachute payments" that could have been paid to or for the Employee's benefit without any portion of such "parachute payments" not being deductible by reason of Section 280G of the Code. (b) The Employee shall not be required to mitigate the amount of any payment or benefit provided for in Paragraph 2(a) by seeking other employment or otherwise; nor shall the amount of any payment or benefit provided for in Paragraph 2(a) be reduced by any compensation earned by the Employee as a result of employment or otherwise. The amount of any payment or benefit provided for in Section 2 shall be in lieu of any compensation or benefits for severance pay due the Employee under any other written agreement entered into between the Company and the Employee. Payment to the Employee pursuant to this Agreement shall constitute the entire obligation of the Company and the Subsidiary for severance pay and full settlement of any claim for severance pay under law or in equity that the Employee might otherwise assert against the Company and any Subsidiary or any of their employees, officers or directors on account of the Employee's termination. (c) For purposes of this Agreement the following definitions shall apply: 1) "Change in Control" shall mean any of the following events: (i) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term Person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the combined voting power of the ten outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of -4- its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a "Subsidiary") or (ii) the Company or any Subsidiary. (ii) The individuals who, as of the date hereof, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least two-thirds of the Board; provided, however, that if the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if (1) such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest or (2) such individual was designated by a Person who has entered into an agreement with the Company to effect a transaction in clause (i) or (iii) of this Section 2(c)(1); or (iii) Approval by stockholders of the Company of: (1) A merger, consolidation or reorganization involving the Company, unless (A) The stockholders of the Company, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least seventy-five percent (75%) of the combined voting power of the outstanding Voting Securities of the corporation resulting from such merger or consolidation or reorganization or its parent corporation (the "surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization; (B) The individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation; and -5- (C) No Person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation of any subsidiary, or any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation's then outstanding Voting Securities. (2) A complete liquidation or dissolution of the Company; or (3) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). Not withstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the ten outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. 2) "Disability" shall mean a physical or mental illness which impairs the Employee's ability to substantially perform his duties as an Employee and as a result of which the Employee shall have been absent from his duties with the Company on a full-time basis for six (6) consecutive months. 3) "Retirement" shall mean the voluntary termination of the Employee's employment after having attained age sixty-five (65) or such other age as shall have been fixed in any qualified retirement arrangement established by the Company with the Employee's consent. 4) A termination for "Cause" is a termination (i) by reason of the conviction of the Employee, by a court of competent jurisdiction and following the exhaustion of all possible appeals, of a criminal act classified as a felony or involving moral turpitude or (ii) pursuant to a determination by no less than a majority of the persons designated by the Company prior to Change in Control -6- to serve as members of the board of directors of the ultimate parent company following a merger, consolidation or reorganization involving the Company and still serving the ultimate parent company as a member of the board of directors, that the Employee either (x) intentionally failed substantially to perform his reasonably assigned duties with the Company (other than a failure resulting from the Employee's incapacity due to physical or mental illness or from the Employee's assignment of duties that would constitute "Good Reason" as hereinafter defined) or (y) intentionally acted in a fraudulent and unethical manner in the course of performing his duties. No act, nor failure to act on the Employee's part, shall be considered "intentional" unless the Employee has acted, or failed to act, with a lack of good faith and with a lack of reasonable belief that the Employee's action or failure to act was in the best interest of the Company 5) "Good Reason" shall mean the occurrence after a Change in Control of any of the following events without the Employee's express written consent: (i) any change in the Employee's title, authorities responsibilities (including reporting responsibilities) which, in the Employee's reasonable judgement, represents an adverse change from his status, title, position or responsibilities (including reporting responsibilities) which were in effect immediately prior to the Change in Control or from his status, title, position or responsibilities (including reporting responsibilities) which were in effect following a change in Control pursuant to the Employee's consent to accept any such change; the assignment to him of any duties or work responsibilities which, in his reasonable judgment, are inconsistent with such status, title, position or work responsibilities; or any removal of the Employee from, or failure to reappoint or reelect him to any of such positions, except if any such changes are because of Disability, Retirement, death or Cause; (ii) a reduction by the Company in (or the failure by the Company to pay any portion of) the Employee's Annual Base Salary as in effect on the date hereof or as the same may be increased from time to time; (iii) the relocation of the Employee's office at which he is to perform his duties, to a location more that (30) miles from the location at which the Employee performed his duties prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with his business travel obligations prior to the Change in Control; -7- (iv) the adverse and substantial alteration of the nature and quality of the office space within which the Employee performed his duties prior to a Change in Control as well as in the secretarial and administrative support provided to the Employee, provided however that a reasonable alteration of the secretarial or administrative support provided to the Employee as a result of reasonable measures implemented by the Company to effectuate a cost-reduction or consolidation program shall not constitute Good Reason hereunder; (v) the failure by the Company to provide (until the expiration of two (2) years after the occurrence of a Change in Control) to the Employee compensation and benefits (including, without limitation, incentive, bonus and other compensation plans and any vacation, medical, hospitalization, life insurance, dental or disability benefit plan), or cash compensation in lieu thereof, which are, in the aggregate, no less favorable than those provided by the Company to the Employee immediately prior to the occurrence of the Change in Control; (vi) any material breach by the Company of any provision of this Agreement; (vii) the failure of the Company to obtain a satisfactory agreement from any successor or assign of the Company to assume and agree to perform this Agreement, as contemplated in Section 3 hereof; or (viii) any purported termination of the Employee's employment which is not effected pursuant to a Notice of Termination substantially satisfying the requirements of Paragraph 2(c)(6) below; and for purposes of this Agreement, no such purported termination shall be effective. The Employee's right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. Continuation of employment by the Employee shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting "Good Reason" hereunder provided, however, that the Employee's continued employment after the expiration of sixty (60) days from any action which would constitute Good Reason under paragraph (i) above shall constitute a waiver of rights with respect to such action constituting Good Reason hereunder. 6) "Notice of Termination" shall mean a notice which shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment. Any purported termination by the Company or by the Employee shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 5 hereof. For -8- purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 7) "Date of Termination" shall mean: (i) if the Employee's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Employee shall not have returned to the performance of his duties with the Company on a full-time basis during such thirty (30) day period); (ii) if the Employee's employment is terminated on account of his death, the date of his death; and (iii) if the Employee's employment is terminated for any other reason, the date specified in the Notice of Termination (which in the case of a termination pursuant to Paragraph 2(c)(4) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Paragraph 2(c)(5) above shall not be more than sixty (60) days, after the date such Notice of Termination is given); provided that if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined either by mutual written agreement of the parties, or by the final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been taken). 8) "Annual Base Salary" shall mean that yearly compensation rate established from time to time by the Company as an employee's regular compensation for the next succeeding twelve (12) month period, payable to an employee by the Company's payroll checks on a periodic basis. 3. SUCCESSORS; BINDING AGREEMENT. (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. For convenience only, and not as an acknowledgement that the Company employs the Employee, "Company" is used in this Agreement to identify either the Company, the -9- Company and one or more of its Subsidiaries or the Subsidiary which employs the Employee, as the context shall require. (b) This Agreement shall inure to the benefit of and be enforceable by the Employee's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee's devisee, legatee or other designee and if there is no such devisee, legatee or designee, to the Employees's estate. 4. FEES AND EXPENSES. Following a Change in Control, the Company shall pay all reasonable legal fees and related expenses (including the reasonable costs of experts, evidence and counsel), when and as incurred by the Employee, as a result of (a) contesting or disputing any termination of employment of the Employee whether or not such contest or dispute is resolved in the Employee's favor but if only such contest or dispute is pursued by the Employee in good faith or (b) the Employee seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Employee is or may be entitled to receive benefits (but only if the Employee acts in good faith in seeking to obtain or enforce such right or benefit) or (c) any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit hereunder. 5. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt. 6. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing and signed by the Employee and such officer of the Company as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The obligations of the Company under Section 2 shall survive the expiration of the term of this Agreement. -10- 7. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of Tennessee without giving effect to the conflicts of laws principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in Davidson County in the State of Tennessee and the parties hereto hereby consent to the jurisdiction of such courts. 8. SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written between the parties hereto with respect to the subject matter hereof. 10. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Employee may qualify, nor shall anything herein limit or reduce such rights as the Employee may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. HCA-HOSPITAL CORPORATION OF AMERICA By: ------------------------------------ Thomas F. Frist, Jr. Chairman of the Board, President and Chief Executive Officer HOSPITAL CORPORATION OF AMERICA By: ------------------------------------ Philip R. Patton Senior Vice President, Human Resources --------------------------------------- Employee: -11- EX-10.16 10 EXHIBIT 10.16--ASSUMPTION AGREEMENT EXHIBIT 10.16 ASSUMPTION AGREEMENT This Assumption Agreement is made as of February 10, 1994, by and among Columbia Healthcare Corporation, a Delaware corporation ("Columbia"), CHOS Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Columbia ("New HCA"), and HCA-Hospital Corporation of America, a Delaware corporation ("Old HCA"). WHEREAS, Old HCA, certain subsidiary corporations of Old HCA and the 75 individuals listed on Exhibit A hereto have entered into substantially identical Severance Agreements, each dated as of November 1, 1993 (the "Severance Agreements"); WHEREAS, concurrently with the execution hereof on February 10, 1994, Old HCA was acquired by Columbia pursuant to the merger (the "Merger") of Old HCA with and into New HCA, with New HCA being the surviving corporation and changing its name to HCA-Hospital Corporation of America; WHEREAS, in Paragraph 3 of the Severance Agreements Old HCA covenants to require any successor to assume all obligations of Old HCA under the Severance Agreements; and WHEREAS, it is a "Good Reason" under Paragraph 2(c)(5)(vii) of the Severance Agreements for Old HCA to fail to obtain a satisfactory agreement from any successor of Old HCA to assume the Severance Agreements as contemplated by Paragraph 3 of the Severance Agreements; WHEREAS, the parties have prepared this instrument to constitute the assumption required by Paragraph 3 of the Severance Agreements and to clarify, after such assumption, where any Notice of Termination from an Employee (as defined in the Severance Agreements) should be sent; NOW, THEREFORE, the parties hereto agree as follows: 1. Assumption. New HCA hereby assumes all obligations of Old HCA under the Severance Agreements and New HCA agrees to perform the Severance Agreements in the same manner and to the same extent that Old HCA would be required to perform the Severance Agreements if the Merger had not occurred. 2. Notice of Termination. Any Notice of Termination sent by an Employee may be sent addressed only to Columbia at (i) 201 West Main Street, Louisville, Kentucky 40202, Attention: Richard L. Scott, President and Chief Executive Officer with a copy to the same address Attention: General Counsel or (ii) such other address as Columbia or New HCA shall have forwarded to an Employee in writing for this purpose. IN WITNESS WHEREOF, the parties hereto have executed this Assumption Agreement as of the date first set forth above. COLUMBIA HEALTHCARE CORPORATION By: ____________________________ CHOS ACQUISITION CORPORATION By: ___________________________ HCA-HOSPITAL CORPORATION OF AMERICA By: ____________________________ EX-10.17 11 EXHIBIT 10.17--SEVERENCE PAY AGREEMENT EXHIBIT 10.17 SEVERANCE PAY AGREEMENT THIS SEVERANCE PAY AGREEMENT ("Severance Agreement"), dated as of June 10, 1993, but effective as of the Effective Time (as defined in the Merger Agreement), is entered into by and between __________________________ ("Employee") and Columbia Hospital Corporation, a Nevada corporation ("Columbia"). WITNESSETH WHEREAS, Columbia and Galen Health Care, Inc. ("Galen") have entered into an Agreement and Plan of Merger, dated as of June 10, 1993 (the"Merger Agreement"); and WHEREAS, Schedule 6.11(E) to the Merger Agreement contemplates that Columbia and Employee will enter into this Severance Agreement; and WHEREAS, Employee is a valued employee of Columbia and Columbia wishes to recognize Employee"s prior commitment to the development of Columbia and to ensure Employee's continuing commitment to Columbia after the Merger by entering into this Severance Agreement with Employee; NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee and Columbia hereby agree as follows: 1. If at any time within two years following the Effective Time, a. Richard L. Scott does not retain the position and duties of Chief Executive Officer of Columbia for any reason (a "Scott Constructive Termination"), and b. at any time prior to 12 months after the Scott Constructive Termination, the employment of Employee with Columbia is terminated for any reason or Employee's responsibilities are reduced from those held just prior to the date of the Scott Constructive Termination"), then Columbia will pay to Employee a lump sum severance payment. The severance payment shall be in an amount equal to one times the greater of (i) Employee's annual base salary in effect at the 1 time of the Merger or (ii) Employee's annual base salary in effect at the date of the Employee's Constructive Termination. Full payment of the severance payment shall be made within ten days following the Employee Constructive Termination. 2. In addition, upon a Scott Constructive Termination, Columbia will pay to the Employee an amount in cash based on Employee's 2.7293% interest in the unfunded bonus pool maintained by Columbia (the "Bonus Pool"). The Bonus Pool shall initially consist of $6,327,246.00 and will be increased or decreased by $505,625 each month for each whole dollar increase or decrease in the month-end closing price of Columbia's Common Stock, par value $.01 per share. 3. In the event that any payment or benefit (within the meaning of Section 280(7)(b)(2) of the Internal Revenue Code at 1986, as amended (the "Code")) paid to Employee pursuant to the terms of this Severance Agreement, would be subject to the excise tax imposed by Section 4999 of the Code and/or any interest or penalties (excluding any interest or penalties imposed by reason of Employee's failure to file a timely tax return or pay taxes shown due on his or her return) with respect to such excise tax (collectively referred to as the "Excise Tax"), then Employee shall be entitled to receive an additional payment (a "Gross-Up Payment"). The Gross-Up Payment shall equal the amount of the Excise Tax imposed upon the payments, including the Gross-Up Payment. 4. Any disputes concerning this Severance Agreement and the arrangements contemplated hereby shall be resolved and enforced through the use of arbitration provided through the American Arbitration Association. Any necessary arbitration meetings shall be conducted in Louisville, Kentucky. All expenses directly related to arbitration proceedings, including reasonable attorneys' fees for Employee's representation will be paid by Columbia or its successors. 5. This Severance Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 6. Columbia or its successors shall pay all legal fees and related expenses (including the costs of experts, evidence, and counsel) incurred by Employee as a result of (a) any Employee Constructive Termination (including all such fees and expenses incurred in contesting or disputing any such termination whether or not such contest or dispute is resolved in Employee's favor), (b) Employee seeking to obtain or enforce any right or benefit provided by this Severance Agreement, or (c) Employee's challenge of any determination by the IRS that payments would be subject to the excise tax imposed by Section 4999 of the Code. 7. Employee shall not be required to mitigate the amount of any payment under this Severance Agreement by seeking other employment; nor shall any compensation earned by Employee as a result of employment or otherwise reduce the amount of any payment pursuant to this Severance Agreement. 2 IN WITNESS WHEREOF, Columbia has caused this Severance Agreement to be executed by its duly authorized officer, and Employee has executed this Severance Agreement, each as of the day and year first above written. Columbia Hospital Corporation By: _________________________ Employee _____________________________ 3 EX-10.19 12 EXHIBIT 10.19--ANNUAL INCENTIVE PLAN SUMMARY EXHIBIT 10.19 COLUMBIA/HCA HEALTHCARE CORPORATION ANNUAL INCENTIVE PLAN SUMMARY PURPOSE AND ADMINISTRATION OF THE PLAN The Annual Incentive Plan ("Plan") is established to encourage outstanding performance of employees who are in a position to make substantial contributions to the success of the Company. The SVP, Human Resources shall be responsible for administration of the Plan. The CEO of Columbia/HCA Healthcare Corporation shall have full power and final authority to interpret the Plan. PARTICIPATION Eligibility to participate in the Plan shall be extended generally to all full time regular/corporate employees with at least 3 months employment in the fiscal year ("Participants") subject to approval by the CEO of Columbia/HCA Healthcare Corporation. For a Participant added during the Fiscal Year, the payout shall be determined pursuant to the Plan and prorated. Proration shall also be condsidered for employees who transfer to a position eligible for a different incentive target. Employees are not eligible to participate in more than one plan at a time. INCENTIVE CALCULATION AND PAYMENT Plan payments for Participants are based on criteria detailed on Exhibit A attached. As soon as practical, after the Fiscal Year, when the financial results of the Company are known, the appropriate senior officer will review and recommend plan payments. The CEO of Columbia/HCA Healthcare Corporation may make adjustments to performance targets deemed necessary to avoid unwarranted penalties or windfalls. Such adjustments will recognize uncontrollable outside factors and will be kept to a minimum. Payments shall be made as soon as practicable, after the annual audit report has been issued, but in no event later than three months after the Fiscal Year. The Plan payment for each Participant will be paid in accordance with a payout schedule after it has been reviewed by the CEO of Columbia/HCA Healthcare Corporation. This Plan is not a "qualified" plan for tax purposes, and any payments are subject to tax withholding requirements. TERMINATION OF PARTICIPANT In the event a payment is due pursuant to the Plan and a Participant's employment with the Company is terminated prior to the payment by reason of retirement, total and permanent disability or death, such Participant (or estate in event of death) shall receive a pro rata payment as soon as practical after the Fiscal Year, but in no event later than three months after the Fiscal Year. A Participant who is otherwise voluntarily or involuntarily separated prior to the PAYMENT of any Incentive Compensation shall cease to be a Participant and shall not have earned any right to receive any payments pursuant to the Plan. MISCELLANEOUS The CEO of Columbia/HCA Healthcare Corporation may interpret, modify, amend or terminate the Plan in whole or in part at any time, provided that no such action shall negatively affect the payment of Incentive Compensation allocated with respect to any Fiscal Year which has ended. EXHIBIT A COLUMBIA/HCA HEALTHCARE CORPORATION ANNUAL INCENTIVE PLAN Participant:___________________________________________Title:___________________ Department:___________________________________ Incentive Target:________ INCENTIVE COMPONENT % OF TOTAL AWARD ------------------- ---------------- Acheivement of Earnings per Share 75% (before extraordinary events) Discretionary 25% --- 100% EARNINGS PER SHARE COMPONENT DISCRETIONARY COMPONENT Performance Factor Specific departmental goals and objectives % OF TARGET % PAYOUT may be applied to ----------- -------- completely or partially < 95 0 replace discretionary 95 to 97 50 criteria 97 to 99 75 99 to 102 100 102 to 105 120 105 to 110 140 > 110 150 INCENTIVE CALCULATION: STANDARD AWARD: ADJUSTED AWARD: AWARD __________________________ Base salary (end of year): $ _______________ Component STANDARD PERF.FACTOR TOTAL Incentive Compensation Target:__________% EPS (75%) $___________ x __________% = $__________ Standard Award: $_______________ Discrect. (25%) $___________ x (1)_______ % ? $__________ $ _(1) Discretionary component "pool" can be adjusted by EPS performance factor.
Note: Proration of components or target due to employee transfer or change in status will be made at the discretion of Columbia/HCA Healthcare Corporation CEO. EX-10.20 13 EXHIBIT 10.20 BOARD MANDATORY RETIREMENT POL. BOARD MANDATORY RETIREMENT POLICY MANDATORY BOARD RETIREMENT POLICY No person shall be nominated by the Nominating Committee of the Company's Board of Directors to a term of office on the Company's Board of Directors who has attained the age of 70 or more before the first day of the proposed term of offices; provided, however, the foregoing policy shall be inapplicable to current directors of the Company aged 70 or more whose current term of office, on the date hereof, expires subsequent to the Company's 1994 Annual Meeting of Stockholders; If any person aged 70 or greater is nominated for election to a term of office at the Company's 1994 Annual Meeting of Stockholders, then any such person shall, prior to taking office, agree to resign his or her directorship effective June 30, 1995. EX-11 14 EXHIBIT 11 EXHIBIT 11 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 --------- --------- --------- PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Earnings: Income from continuing operations........................................................ $ 575 $ 239 $ 353 Preferred stock dividend requirements.................................................... - - (18) --------- --------- --------- Income applicable to common stock.................................................... 575 239 335 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit)........................................................... 16 (108) 16 Costs associated with discontinuance of health plan segment, net of income tax benefit............................................................................... - (17) - Extraordinary loss on extinguishment of debt, net of income tax benefit............................................................................. (84) - - Cumulative effect on prior years of a change in accounting for income taxes........................................................................ - 51 - --------- --------- --------- Net income......................................................................... $ 507 $ 165 $ 351 --------- --------- --------- --------- --------- --------- Shares used in the computation (in thousands): Columbia: Weighted average common shares outstanding............................................. 150,017 144,897 138,936 Dilutive effect of common stock equivalents............................................ 966 718 750 --------- --------- --------- Columbia common and common equivalent shares........................................... 150,983 145,615 139,686 --------- --------- --------- HCA: Weighted average common shares outstanding............................................. 175,374 149,547 113,480 Dilutive effect of common stock equivalents............................................ 3,901 24,690 20,109 --------- --------- --------- HCA common and common equivalent shares................................................ 179,275 174,237 133,589 Merger exchange ratio.................................................................. 1.05 1.05 1.05 --------- --------- --------- Adjusted HCA common and common equivalent shares....................................... 188,239 182,949 140,268 --------- --------- --------- Shares used in earnings per common and common equivalent share computations................................................................ 339,222 328,564 279,954 --------- --------- --------- --------- --------- --------- Primary earnings per common and common equivalent share: Income from continuing operations........................................................ $ 1.70 $ .73 $ 1.20 Discontinued operations: Income (loss) from operations of discontinued health plan segment...................... .04 (.33) .05 Costs associated with discontinuance of health plan segment............................ - (.06) - Extraordinary loss on extinguishment of debt............................................. (.24) - - Cumulative effect on prior years of a change in accounting for income taxes.............. - .16 - --------- --------- --------- Net income......................................................................... $ 1.50 $ .50 $ 1.25 --------- --------- --------- --------- --------- ---------
EXHIBIT 11 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 --------- --------- --------- FULLY DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Earnings: Income applicable to commmon stock..................................................... $ 575 $ 239 $ 335 Interest addback on convertible securities, net of income taxes........................ 3 2 2 --------- --------- --------- Adjusted income applicable to common stock......................................... 578 241 337 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit)......................................................... 16 (108) 16 Costs associated with discontinuance of health plan segment, net of income tax benefit............................................................................. - (17) - Extraordinary loss on extinguishment of debt, net of income tax benefit........................................................................... (84) - - Cumulative effect on prior years of a change in accounting for income taxes...................................................................... - 51 - --------- --------- --------- Net income......................................................................... $ 510 $ 167 $ 353 --------- --------- --------- --------- --------- --------- Shares used in the computation (in thousands): Columbia: Weighted average common shares outstanding........................................... 150,017 144,897 138,936 Dilutive effect of common stock equivalents and other dilutive securities................................................................. 3,426 3,029 2,650 --------- --------- --------- Columbia common and common equivalent shares......................................... 153,443 147,926 141,586 --------- --------- --------- HCA: Weighted average common shares outstanding........................................... 175,374 149,547 113,480 Dilutive effect of common stock equivalents and other dilutive securities................................................................. 4,352 24,941 20,290 --------- --------- --------- HCA common and common equivalent shares.............................................. 179,726 174,488 133,770 Merger exchange ratio................................................................ 1.05 1.05 1.05 --------- --------- --------- Adjusted HCA common and common equivalent shares..................................... 188,712 183,213 140,459 --------- --------- --------- Shares used in earnings per common and common equivalent share computations................................................................ 342,155 331,139 282,045 --------- --------- --------- --------- --------- --------- Fully diluted earnings per common and common equivalent share: Income from continuing operations...................................................... $ 1.69 $ .73 $ 1.20 Discontinued operations: Income (loss) from operations of discontinued health plan segment.................... .04 (.33) .05 Costs associated with discontinuance of health plan segment.......................... - (.06) - Extraordinary loss on extinguishment of debt........................................... (.24) - - Cumulative effect on prior years of a change in accounting for income taxes.......................................................................... - .16 - --------- --------- --------- Net income......................................................................... $ 1.49 $ .50 $ 1.25 --------- --------- --------- --------- --------- ---------
EX-12.1 15 EXHIBIT 12.1 EXHIBIT 12.1 COLUMBIA HEALTHCARE CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED) (DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- Earnings: Income from continuing operations before minority interests and income taxes................................................................ $ 329 $ 339 $ 569 $ 529 $ 472 Fixed charges, exclusive of capitalized interest...................... 156 144 136 137 161 --------- --------- --------- --------- --------- $ 485 $ 483 $ 705 $ 666 $ 633 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Fixed charges: Interest charged to expense........................................... $ 129 $ 117 $ 111 $ 119 $ 147 One-third of rent expense and amortization of deferred loan costs (a).................................................................. 27 27 25 18 14 --------- --------- --------- --------- --------- Fixed charges, exclusive of capitalized interest...................... 156 144 136 137 161 Capitalized interest.................................................. 6 8 7 4 3 --------- --------- --------- --------- --------- $ 162 $ 152 $ 143 $ 141 $ 164 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of earnings to fixed charges...................................... 2.99 3.16 4.94 4.72 3.85 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- - ------------------------ (a) One-third of rent expense is considered representative of the underlying interest.
EX-12.2 16 EXHIBIT 12.2 EXHIBIT 12.2 COLUMBIA/HCA HEALTHCARE CORPORATION SUPPLEMENTAL COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED) (DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- Earnings: Income from continuing operations before minority interests and income taxes........................................... $ 978 $ 543 $ 551 $ 641 $ 611 Fixed charges, exclusive of capitalized interest............ 387 465 655 737 704 --------- --------- --------- --------- --------- $ 1,365 $ 1,008 $ 1,206 $ 1,378 $ 1,315 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Fixed charges: Interest charged to expense................................. $ 321 $ 401 $ 597 $ 694 $ 667 One-third of rent expense and amortization of deferred loan costs (a).................................................. 66 64 58 43 37 --------- --------- --------- --------- --------- Fixed charges, exclusive of capitalized interest............ 387 465 655 737 704 Capitalized interest........................................ 12 12 9 8 13 --------- --------- --------- --------- --------- $ 399 $ 477 $ 664 $ 745 $ 717 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of earnings to fixed charges............................ 3.42 2.11 1.82 1.85 1.83 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- - ------------------------ (a) One-third of rent expense is considered representative of the underlying interest.
EX-21 17 EXHIBIT 21 SUBSIDIARY LIST COLUMBIA/HCA HEALTHCARE CORPORATION SUBSIDIARY-PARTNERSHIP LIST/HOSPITAL AND OTHER PART I ALABAMA Columbia/HCA Montgomery Healthcare System, Inc. East Montgomery Medical Center, Inc. Florence Hospital, Inc. Galen Medical Corporation - Doing Business As: Florence Hospital (Florence, AL) Medical Center Enterprise (Enterprise, AL) Medical Center Hospital (Huntsville, AL) Medical Center Shoals (Muscle Shoals, AL) Montgomery Regional Medical Center (Montgomery, AL) Northwest Medical Center (Russellville, AL) Colonial Manor Professional Building Montgomery Regional Medical Center Allied Health Institutes Shoals Medical Building HCA Health Services of Alabama, Inc. Medical Center Shoals, Inc. Montgomery Regional Medical Center, Inc. North Alabama Healthcare System, Inc. Northwest Regional Hospital, Inc. ARKANSAS HCA Health Services of Arkansas, Inc. HCA Health Services of Midwest, Inc. - Doing Business As: Doctors Hospital (Little Rock, AR) ARIZONA Galen of Arizona, Inc. - Doing Business As: Healthwest Regional Medical Center (Phoenix, AZ) Paradise Valley Hospital (Phoenix, AZ) Doctors Medical Plaza South (Phoenix, AZ) HCA Health Services of Arizona, Inc. Paradise Valley Psychiatric Services, Inc. CALIFORNIA Galen-Soch, Inc. HCA Allied Health Services of San Diego, Inc. HCA Health Services of California, Inc. HCA Hospital Services of San Diego, Inc. Hospital Corporation of California Huntington Intercommunity Hospital - Doing Business As: Huntington Beach Medical Center (Huntington Beach, CA) Huntington Beach Diagnostics Imaging Center LE Corporation - Doing Business As: The Oaks Retirement Center (Pasadena, CA) Las Encinas Hospital - Doing Business As: Las Encinas Hospital (Pasadena, CA) Los Robles Regional Medical Center - Doing Business As: Los Robles Regional Medical Center - (Thousand Oaks, CA) Psychiatric Company of California, Inc. SLCO, Inc. - Doing Business As: San Leandro Hospital (San Leandro, CA) Sutter Corporation * CALIFORNIA (Cont.) West Anaheim Community Hospital - Doing Business As: West Anaheim Medical Center (Anaheim, CA) West Hills Hospital - Doing Business As: West Hills Regional Medical Center (Canoga Park, CA) Westminster Community Hospital COLORADO Columbine Psychiatric Center, Inc. - Doing Business As: Columbine Psychiatric Center (Littleton, CO) Galen of Aurora, Inc. - Doing Business As: Aurora Regional Medical Center (Aurora, CO) Aurora Physicians Building HCA Health Services of Colorado, Inc. Health Care Indemnity, Inc. * MOVCO, Inc. DELAWARE American Medicorp Development Co. * - Doing Business As: Columbia County Medical Plaza (GA) Cypress Medical Office Building (FL) Doctors Medical Plaza-North (Phoenix, AZ) East Ridge Doctors Building (TN) East Ridge Professional Building (TN) Enterprise Medical Plaza (Huntsville, AL) Sunrise Medical Tower I (3201 S. Maryland Parkway) (NV) Sunrise Medical Tower II (3121 S. Maryland Parkway) (NV) CHC Finance Co. CHC Holdings, Inc. Columbia/HCA Healthcare Corporation * - Doing Business As: Healthcare Symposium (KY) DELAWARE (Cont.) Columbia Hospital Corporation - Delaware Columbia Hospital Corporation of Fort Worth * Columbia Hospital Corporation of Houston * Delaware Psychiatric Company, Inc. - Doing Business As: Rockford Center (Newark, DE) Doctors Hospital of Augusta, Inc. * - Doing Business As: Augusta Regional Medical Center (Augusta, GA) Augusta Diagnostic Associates (Augusta, GA) Edison Homes-Southeast, Inc. * Extendicare Properties, Inc. * Galen BH, Inc. * Galendeco, Inc. * Galen Health Care, Inc. * - Doing Business As: North Suburban Medical Center (Thornton, CO) Southwest Hospital (Louisville, KY) Southwest Medical Plaza (Louisville, KY) San Leandro Medical Center Professional Building (San Leandro, CA) Galen Health Institutes, Inc. * - Doing Business As: The Health Institute of Louisville (Louisville, KY) The Health Institute of San Antonio (San Antonio, TX) The Health Institute of Tampa Bay (Tampa Bay, FL) Galen Hospital Alaska, Inc. * Alaska Regional Hospital (Anchorage, AK) Galen Hospital Corporation, Inc. * - Doing Business As: Clear Lake Regional Medical Center (Webster, TX) San Antonio Regional Hospital (San Antonio, TX) Village Oaks Medical Center (San Antonio, TX) Women's and Children's Hospital (San Antonio, TX) DELAWARE (Cont.) The Women's Hospital - Indianapolis (Indianapolis, IN) Bandera Medical Clinic (Bandera, TX) Floresville Medical Clinic (Floresville, TX) McQueeney Medical Clinic (McQueeney, TX) Southwest Fertility Institute (San Antonio, TX) The Woman's Place (San Antonio, TX) HCA - Hospital Corporation of America HCA Health Alliance, Inc. HCA Health Services of Midwest, Inc. HCA Holding Corporation HCA International, Inc. HCA Investments, Inc. HCA Psychiatric Company HCA, Inc. Health Services (Delaware), Inc. Health Services Acquisition Corp. H.H.U.K., Inc. Healthcare Technology Assessment Corporation Lakeland Manor, Inc. Managed Prescription Network, Inc. Medical Specialties, Inc. * - Doing Business As: Argyle Family Practice Center (FL) Columbia County Urgent Care Center (GA) Coral Springs Family Medicine (FL) Park Medical Center (FL) Parkway Medical Associates (FL) West Augusta Imaging Center (GA) West Augusta Radiation Oncology Center (GA) Mobile Corps., Inc. * PMM, Inc. * - Doing Business As: Augusta Womens Medical Group (Augusta, GA) Plum Creek Medical Corporation (Aurora, CO) DELAWARE (Cont.) Primary Medical Management, Inc. * - Doing Business As: Agoura Hills Medical Group (Los Angeles County, CA) Biltmore Women's Health Center (Phoenix, AZ) Saguaro Medical Center (Scottsdale, AZ) The Carrollton Center for Family Health Care (Carrollton, TX) Westlake Women's Health Management Center (West Lakes Village, CA) South Florida Lithotripter Associates, L.P. (See Partnership Section) Suburban Medical Center at Hoffman Estates, Inc. * - Doing Business As: Hoffman Estates Medical Center (Hoffman Estates, IL) Sun Bay Medical Office Building, Inc. * FLORIDA Bay Hospital, Inc. - Doing Business As: Gulf Coast Hospital (Panama City, FL) Broward Healthcare System, Inc. Cedarcare, Inc. Cedars BTW Program, Inc. Cedars Health Care Group, Ltd. (See Partnership Section) Cedars Medical Center (Miami, FL) (Victoria Pavilion is a division of this hospital) Central Florida Regional Hospital, Inc. - Doing Business As: Central Florida Regional Hospital (Sanford, FL) Charlotte Community Hospital, Inc. * Collier County Home Health Agency, Inc. - Doing Business As: Able Care 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 FLORIDA (Cont.) Columbia Hospital Corporation of South Broward - Doing Business As: Westside Regional Medical Center (Plantation, FL) 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 Park Healthcare System, Inc. Community Hospital of the Palm Beaches, Inc. - Doing Business As: Palm Beaches Medical Center (West Palm Beach, FL) The Arthritis Center at Palm Beaches Medical Center (West Palm Beach, FL) Community Hospitals of Galen, Inc. - Doing Business As: Pompano Beach Medical Center (Pompano Beach, FL) Coral Springs Surgi-Center, Ltd. (See Partnership Section) Outpatient Surgery Center at Coral Springs (Coral Springs, FL) DBPCO, Inc. Daytona Medical Center, Inc. - Doing Business As: NSB Medical Associates Deering Hospital, Inc. Deering Marketing and Communication Services, Inc. Doctors Osteopathic Medical Center, Inc. Gulf Coast Hospital (Ft. Myers, FL) Englewood Community Hospital, Inc. Englewood Community Hospital (Englewood, FL) Fawcett Memorial Hospital, Inc. * Fawcett Memorial Hospital (Port Charlotte, FL) Florida Home Health Services-Private Care, Inc. FLORIDA (Cont.) Florida Medical Collection Services, Inc. Florida Psychiatric Company, Inc. Galencare, Inc. - Doing Business As: Brandon Hospital (Brandon, FL) Destin Hospital (Destin, FL) Northside Hospital (St. Petersburg, FL) West Central Florida-Shared Services (St. Petersburg, FL) Galen Hospital-Pembroke Pines, Inc. - Doing Business As: Pembroke Pines Hospital (Pembroke Pines, FL) P & L Associates (Limited Partnership) (Pembroke Pines, FL) Galen of Florida, Inc. - Doing Business As: Dade City Hospital (Dade City, FL) Daytona Medical Center (Daytona Beach, FL) Fort Walton Beach Medical Center (Ft. Walton Beach, FL) Orange Park Medical Center (Orange Park, FL) Osceola Regional Hospital (Kissimmee, FL) St. Petersburg General Hospital (St. Petersburg, FL) Bushnell Family Practice Center (Bushnell, FL) Dade City Professional Building (Dade City, FL) Normandy Manor Transitional Living Facility (Orlando, FL) Grant Center Hospital of Ocala, Inc. HCA Development Corporation of Florida HCA Family Care Center, Inc. HCA Health Services of Florida, Inc. - Doing Business As: Bayonet Point/Hudson Medical Center (Hudson, FL) L.W. Blake Hospital (Bradenton, FL) Medical Center of Port St. Lucie (Port St. Lucie, FL) North Florida Regional Medical Center (Gainesville, FL) Northwest Regional Hospital (Margate, FL) Oak Hill Hospital (Spring Hill, FL) HCA Healthcare - Florida, Inc. HCA of Florida, Inc. HCA Physician Services of Tamarac, Inc. HSCO, Inc. FLORIDA (Cont.) Kendall Healthcare Group, Ltd. (See Partnership Section) Kendall Regional Medical Center (Miami, FL) First Health Center (Miami, FL) Kendall Therapy Center (Miami, FL) Kendall Therapy Center, Ltd. (See Partnership Section) Lake Forest Utilities, Inc. Largo Medical Center, Inc. - Doing Business As: Medical Center Hospital - Largo, FL (Largo, FL) Lawnwood Medical Center, Inc. - Doing Business As: Harbour Shores Hospital of Lawnwood (Ft. Pierce, FL) Lawnwood Regional Medical Center (Ft. Pierce, FL) Lucerne Medical Center, Inc. - Doing Business As: Lucerne Medical Center (Orlando, FL) M & M of Ocala, Inc. Marion Community Hospital, Inc. - Doing Business As: Marion Community Hospital (Ocala, FL) Medical Park Diagnostic Multicenter, Ltd. (See Partnership Section) Medical Park Diagnostic Center (Miami, FL) MedPlan, Inc. Miami Beach Healthcare Group, Ltd. (See Partnership Section) Aventura Hospital and Medical Center (Miami, FL) Miami Heart Institute-North (Miami Beach, FL) Miami Heart Institute-South (Miami Beach, FL) Naples Rehabilitative Services, Inc. Naples Rehab Center (Naples, FL) New Port Richey Hospital, Inc. - Doing Business As: New Port Richey Hospital (New Port Richey, FL) North Florida Immediate Care Center, Inc. FLORIDA (Cont.) North Miami Beach Surgical Center, Inc. (See Partnership Section) North Miami Beach Surgical Center (North Miami Beach, FL) Northwest Regional Hospital, Inc. Northwest Regional Investment, Inc. Oak Hill Acquisition, Inc. Okaloosa Hospital, Inc. - Doing Business As: Twin Cities Hospital (Niceville, FL) Okeechobee Hospital, Inc. - Doing Business As: Raulerson Hospital (Okeechobee, FL) Orlando Depression Center, Inc. Orlando Depression Center (Orlando, FL) Osceola Regional Hospital, Inc. - Doing Business As: TRICO Home Health Agency Palm Beach Healthcare System, Inc. Premier Tropic Staffing, Inc. Pulmonary Care Services, Inc. Putnam Hospital, Inc. - Doing Business As: Putnam Community Hospital (Palatka, FL) Rehabilitative Health Services, Inc. Sarasota Doctors Hospital, Inc. South Broward Healthcare Group, Ltd (See Partnership Section) South Dade Healthcare Group, Ltd. (See Partnership Section) Deering Hospital (Miami, FL) Grant Center of Deering (Ft. Myers, FL) Southwest Florida Health System, Inc. Southwest Florida Magnetic Imaging Services, Inc. FLORIDA (Cont.) Southwest Florida Regional Medical Center, Inc. Southwest Florida Regional Medical Center (Fort Myers, FL) Systems Medical Management, Inc. The Health Advantage Network (Orlando, FL) Surgical Park Center, Ltd. (See Partnership Section) Radial Keratomy Institute of Surgical Park Surgical Park Center (Miami, FL) TSI Investments, Inc. Tallahassee Medical Center, Inc. - Doing Business As: Tallahassee Community Hospital (Tallahassee, FL) Tamarac Acquisition Corporation Tamarac Hospital Corporation, Inc. Turtle Creek of Florida Self-Insurance Trust University Hospital, Ltd. (See Partnership Section) University Hospital (Tamarac, FL) University Pavilion (Tamarac, FL) University Psychiatric Center, Inc. Volusia Healthcare Network, Inc. Victoria Hospital Partnership (See Partnership Section) West Florida Regional Medical Center, Inc. - Doing Business As: Okaloosa Cancer Care Center (Crestview, FL) West Florida Regional Medical Center (Pensacola, FL) West Lake Joint Venture Investments, Inc. Winter Park Healthcare Group, Ltd. (See Partnership Section) - Doing Business As: Winter Park Memorial Hospital GEORGIA CMC Ventures, Inc. Coliseum Associates, Inc. GEORGIA (Cont.) Coliseum Park Hospital, Inc. - Doing Business As: Coliseum Medical Centers (Macon, GA) Dublin Community Hospital, Inc. - Doing Business As: Fairview Park Hospital (Dublin, GA) Georgia Psychiatric Company, Inc. - Doing Business As: Coliseum Psychiatric Hospital (Macon, GA) Gwinnett Community Hospital, Inc. - Doing Business As: Eastside Medical Center (Snellville, GA) HCA Health Services of Georgia, Inc. - Doing Business As: Hughston Sports Medicine Hospital (Columbus, GA) Northlake Regional Medical Center (Atlanta, GA) HCA Health Services of Gwinnett County, Inc. HCA Parkway Investments, Inc. Health Care Management Corporation Med Corp., Inc. MedFirst, Inc. Medical Center-West, Inc. - Doing Business As: Parkway Medical Center (Lithia Springs, GA) Palmyra Park Hospital, Inc. - Doing Business As: Palmyra Medical Centers (Albany, GA) Redmond Oncology Services, Inc. Redmond Park Health Services, Inc. Redmond Park Hospital, Inc. - Doing Business As: Redmond Regional Medical Center (Rome, GA) West Paces Ferry Hospital, Inc. - Doing Business As: West Paces Medical Center (Atlanta, GA) West Paces Services, Inc. IDAHO HCA Health Services of Idaho, Inc. HCA of Idaho, Inc. ILLINOIS Chicago Grant Hospital, Inc. - Doing Business As: Grant Hospital (*of Chicago) *Pending Galen Hospital Illinois, Inc. - Doing Business As: Michael Reese Hospital and Medical Center (Chicago, IL) f/k/a HH-Michael Reese Michael Reese - North Michael Reese - One Day Surgery Michael Reese Sears Tower Galen of Illinois, Inc. - Doing Business As: Community Medical Plaza Illinois Psychiatric Hospital Company, Inc. - Doing Business As: Chicago Lakeshore Hospital (Chicago, IL) Riveredge Hospital (Forest Park, IL) Woodland Hospital (Hoffman Estates, IL) Smith Laboratories, Inc. INDIANA BAMI-COL, Inc. * Basic American Medical, Inc. * F & E Community Developers of Florida, Inc. * Thomasville Hospital, Inc. * IOWA HCA Health Services of Iowa, Inc. KANSAS Galen of Kansas, Inc.* - Doing Business As: Independence Regional Health Center (Independence, MO) Overland Park Regional Medical Center (Overland Park, KS) Columbia School - Adult Day Care Center Galichia Laboratories, Inc. HCA Health Services of Kansas, Inc. - Doing Business As: Wesley Medical Center (Wichita, KS) OB-GYN Diagostics, Inc. Western Plains Regional Hospital, Inc. - Doing Business As: Western Plains Regional Hospital (Dodge City, KS) KENTUCKY A. C. Medical, Inc. B.G. MRI, Inc. Frankfort Hospital, Inc. - Doing Business As: King's Daughters Memorial Hospital (Frankfort, KY) GALENCO, Inc. GSD, Inc. * Galen International Holdings, Inc. Galen of Kentucky, Inc. * - Doing Business As: Audubon Regional Medical Center (Louisville, KY) Lake Cumberland Regional Hospital (Somerset, KY) Cumberland Suburban Medical Center (Louisville, KY) Advanced Cardiovascular Institute Audubon Medical Plaza Lake Cumberland Home Health Agency Regional Hospital Services Suburban Medical Plaza Greenview Hospital, Inc. - Doing Business As: Greenview Hospital (Bowling Green, KY) Same Day Surgery (Bowling Green, KY) LACO, Inc. South Central Kentucky Corp. Subco of Kentucky, Inc. Tri-County Community Hospital, Inc. * (Owns the real property known as Miami Heart Institute-South, leases to Miami Beach Healthcare Group, Ltd.) LOUISIANA Galen of Louisiana, Inc. - Doing Business As: Avoyelles Hospital (Marksville, LA) Oakdale Community Hospital (Oakdale, LA) Springhill Medical Center (Springhill, LA) Ville Platte Medical Center (Ville Platte, LA) HCA Health Services of Louisiana, Inc. - Doing Business As: North Monroe Hospital (Monroe, LA) HCA Highland Hospital, Inc. - Doing Business As: Highland Hospital (Shreveport, LA) Lake Area Medical Center, Inc. Lake Charles Surgery Center, Inc. - Doing Business As: Surgicare of Lake Charles Lakeside Associates, Inc. Louisiana Psychiatric Company, Inc. - Doing Business As: Cypress Hospital (Lafayette, LA) DePaul Hospital (New Orleans, LA) WGH, Inc. - Doing Business As: Winn Parish Medical Center (Winnfield, LA) MISSISSIPPI Galen of Mississippi, Inc. MISSOURI Business Health Services, Inc. Clinical Management Services, Inc. Clinical Specialities, Inc. Forum Springfield, Inc. HCA Health Services of Missouri, Inc. HEI Missouri, Inc. * HEI Sullivan, Inc. Kensington Care Services, Inc. M.W.A., Inc. Midwest Psychiatric Center, Inc. - Doing Business As: Research Psychiatric Center (Kansas City, MO) Oak Grove Medical Clinic, Inc. Precise Imaging, Inc. PRI-MED, Inc. Regional Multicare Group, Inc. Truman-Forest Pharmacy, Inc. NEVADA CHC Venture Co. Columbia Hospital Corporation of West Houston * HCA Health Services of Nevada, Inc. National Care Services Corp. of Nevada - Doing Business As: Sunrise Diagnostic Center Sunrise Medical Tower III (3006 S. Maryland Parkway) (NV) Sunrise Medical Tower IV (3196 S. Maryland Parkway) (NV) Sunrise Professional Pharmacy Nevada Psychiatric Company, Inc. Sunrise Hospital - Doing Business As: Sunrise Hospital and Medical Center (Las Vegas, NV) Sunrise Children's Hospital (Las Vegas, NV) NEW HAMPSHIRE HCA Health Services of New Hampshire, Inc. - Doing Business As: Parkland Medical Center (Derry, NH) Portsmouth Hospital (Portsmouth, NH) Portsmouth Pavilion (Portsmouth, NH) Regional Psychiatric Company, Inc. NEW JERSEY HCA Health Services of New Jersey, Inc. NEW MEXICO Guadalupe Medical Center, Inc. - Doing Business As: Guadalupe Medical Center (Carlsbad, NM) HCA Health Services of New Mexico, Inc. Hobbs Community Hospital, Inc. - Doing Business As: Lea Regional Hospital (Hobbs, NM) New Mexico Psychiatric Company, Inc. - Doing Business As: Heights Psychiatric Hospital (Albuquerque, NM) NORTH CAROLINA Cumberland Medical Center, Inc. - Doing Business As: Highsmith-Rainey Memorial Hospital (Fayetteville, NC) Galen of North Carolina, Inc. HCA-Raleigh Community Hospital, Inc. - Doing Business As: Raleigh Community Hospital (Raleigh, NC) Raleigh Community Physical Therapy & Sports Medicine Center Wake Psychiatric Hospital, Inc. - Doing Business As: Holly Hill Hospital (Raleigh, NC) OKLAHOMA HCA Affiliated Services of Oklahoma, Inc. HCA Health Services of Oklahoma, Inc. - Doing Business As: Presbyterian Hospital (Oklahoma City, OK) St. Mary's Hospital (Enid, OK) OREGON HCA of Oregon, Inc. PENNSYLVANIA Basic American Medical Equipment Company, Inc. * RHODE ISLAND HCA Health Services of Rhode Island, Inc. SOUTH CAROLINA Aiken Community Hospital, Inc. - Doing Business As: Aiken Regional Medical Center (Aiken, SC) The Aurora Pavilion (Aiken, SC) Aiken Health Services HCA Healthcare - South Carolina, Inc. HCA South Carolina Health Services, Inc. Low Country Health Services, Inc. of the Southeast Myrtle Beach Hospital, Inc. - Doing Business As: Grand Strand General Hospital (Myrtle Beach, SC) North Trident Regional Hospital, Inc. - Doing Business As: Trident Regional Medical Center (Charleston, SC) TENNESSEE Athens Community Hospital, Inc. - Doing Business As: Athens Community Hospital (Athens, TN) Chattanooga Healthcare Network, Inc. Community and Occupational Health Services, Inc. Diagnostic Center Hospital Corporation Galen of Tennessee, Inc. - Doing Business As: East Ridge Hospital (East Ridge, TN) General Care Corp. - Doing Business As: Regional Hospital of Jackson (Jackson, TN) HCA Capital Corporation HCA Crossroads Residential Centers, Inc. HCA Development Company, Inc. HCA Donelson Investments, Inc. HCA Finance, Inc. TENNESSEE (Cont.) HCA Health Services of Tennessee, Inc. - Doing Business As: Centennial Medical Center at West Side Hospital (Nashville, TN) Centennial Medical Center at Park View (Nashville, TN) Centennial Medical Center/Parthenon Pavilion (Nashville, TN) Donelson Hospital (Nashville, TN) Smyrna Medical Center (Smyrna, TN) Southern Hills Medical Center (Nashville, TN) HCA Home and Clinical Services, Inc. HCA Information Services, Inc. HCA International Company HCA Medical Services, Inc. HCA Physician Services, Inc. HCA Properties, Inc. HCA Psychiatric Company HCA Realty, Inc. HCA Southern Hills Investments, Inc. Health Enterprises, Inc. Hospital Capital Corporation Hospital Corporation of Tennessee - Doing Business As: Volunteer General Hospital (Martin, TN) Hospital Realty Corporation Indian Path Hospital, Inc. - Doing Business As: Indian Path Medical Center (Kingsport, TN) IPH, Inc. Judy's Foods, Inc. Medical Equipment Management Corp. Nashville Healthcare Network, Inc. Nashville Healthcare Properties, Inc. Nashville Psychiatric Company, Inc. TENNESSEE (Cont.) Park Plaza Realty, Inc. Parkridge Hospital, Inc. - Doing Business As: Parkridge Medical Center (Chattanooga, TN) Parthenon Financial Services, Inc. Parthenon Insurance Company Parthenon Travel Services, Inc. TCPN, Inc. Tennessee Psychiatric Company, Inc. - Doing Business As: Indian Path Pavilion (Kingsport, TN) The Center for Health Services, Inc. Valley Psychiatric Hospital Corporation - Doing Business As: Valley Psychiatric Hospital (Chattanooga, TN) Vanderbilt Child & Adolescent Psych. Hospital, Ltd - Doing Business As: Vanderbilt Child and Adolescent Psychiatric Hosp. (Nashville, TN) WDC, Inc. TEXAS Arlington Diagnostic South, Inc. BMSH, Inc. Bay Area Healthcare Group, Ltd. (See Partnership Section) Bay Area Medical Center (Corpus Christi, TX) Bayview Hospital (Corpus Christi, TX) Doctors Regional Medical Center (Corpus Christi, TX) Beaumont Hospital, Inc. - Doing Business As: Beaumont Regional Medical Center (Beaumont, TX) Bellaire Imaging, Inc. Brazos Acquisition Corp. CHC Management, Ltd. (See Partnership Section) CHC Payroll Corporation* TEXAS (Cont.) CHC Realty Corporation CHC-DC, Inc. CHC-El Paso Corporation CHC-Miami Corporation CHC-Psychiatric Management Ltd. (See Partnership Section) Columbia/HCA San Antonio, Inc. Columbia Bay Area Realty, Ltd. (See Partnership Section) Columbia Hospital Corporation At The Medical Center Columbia Hospital Corporation of Arlington Columbia Hospital Corporation of Bay Area Columbia Hospital Corporation of Beaumont Columbia Hospital Corporation of Corpus Christi Columbia Hospital Securities Corporation * Columbia Hospital-Arlington (WC), Ltd. (See Partnership Section) Columbia Hospital-El Pasco, Ltd. (See Partnership Section) Columbia Hospital-Miami, Ltd. (See Partnership Section) Columbia Hospital-Tarmarac, Ltd. (See Partnership Section) Columbia Psychiatric Management Co. Corpus Christi Healthcare Group, Ltd. (See Partnership Section) Doctors Hospital of Corpus Christi, Inc. E.P. Physical Therapy Centers, Inc. El Paso Healthcare Systems, Ltd. (See Partnership Section) Columbia Behavioral Center (El Paso, TX) Columbia Medical Center-East (El Paso, TX) Columbia Medical Center-West (El Paso, TX) Columbia Back Institute (El Paso, TX) Columbia Diagnostic Centers (El Paso, TX) Columbia Healthcare System (El Paso, TX) Columbia LifeCare Center (El Paso, TX) Columbia Regional Oncology Center (El Paso, TX) TEXAS (Cont.) El Paso Pathology Group, P.A. El Paso Physical Therapy Center, Ltd. (See Partnership Section) Columbia Physical Therapy Center (El Paso, TX) (2 facilities) Fort Worth Investments, Inc. Fort Worth Medical Plaza, Inc. - Doing Business As: Medical Plaza Hospital (Ft. Worth, TX) Galen Hospital of Baytown, Inc. Galen Hospitals of Texas, Inc. - Doing Business As: Abilene Regional Medical Center (Abilene, TX) Brazos Valley Medical Center (College Station, TX) Medical City Dallas Hospital (Dallas, TX) Abilene Heart & Vascular Institute Bryan Professional Building Brazos Valley Surgical Center Medical City Dallas - Ambulatory Surgery Center WellHealth Center West Texas Professional Building Golden Triangle Healthcare Group, Ltd. (See Partnership Section) Greater Houston Preferred Provider Option Inc. - Doing Business As: Greater Houston PPO (Operates out of Clear Lake Regional Medical Center) HCA Health Services of Texas, Inc. - Doing Business As: Denton Community Hospital (Denton, TX) HCA Lewisville Hospital (Lewisville, TX) HCA South Austin Medical Center (Austin, TX) Medical Center Hospital - Houston, TX (Houston, TX) North Hills Medical Center (North Richland Hills, TX) Rio Grande Regional Hospital (McAllen, TX) Spring Branch Medical Center (Houston, TX) West Houston Medical Center (Houston, TX) HCA Alliance Airport Clinic HCA-Arlington, Inc. - Doing Business As: HCA Arlington Medical Center (Arlington, TX) HCA Physician Services of North Texas, Inc. HCA Plano Imaging, Inc. HCA-Arlington, Inc. HEI Construction, Inc. HEI Orange, Inc. HEI Publishing, Inc. HEI Sealy, Inc. HSP of Texas, Inc. - Doing Business As: Medical Center of Plano (Plano, TX) Lockhart Acquisition Corp. MGH Medical, Inc. - Doing Business As: Metropolitan Hospital (San Antonio, TX) Metropolitan Transitional Care Unit (San Antonio, TX) Med Plus of El Paso, Inc. Medical Center Del Oro Hospital, Inc. Medical Software Integration Management, Inc. * Navarro Memorial Hospital, Inc. - Doing Business As: Navarro Regional Hospital (Corsicana, TX) Physicians MRI Services, Inc. Quantum/Belliare Imaging, Ltd. (See Partnership Section) Rio Grande Development Corp. Rio Grande Regional Investments, Inc. Rosewood Professional Office Building, Ltd. (See Partnership Section) San Antonio Regional Hospital, Inc. Silsbee Hospital, Inc. Silsbee Doctors Hospital (Silsbee, TX) Sun Towers/Vista Hills Holding Co. Texas Psychiatric Company, Inc. - Doing Business As: Beaumont Neurological Hospital (Beaumont, TX) TEXAS (Cont.) Village Oaks Medical Center, Inc. W & C Hospital, Inc. Waco Hospital Corp. West Houston ASC, Inc. West Houston Healthcare Group, Ltd. (See Partnership Section) Bellaire General Hospital (Houston, TX) Heights Hospital (Houston, TX) Rosewood Medical Center (Houston, TX) Sam Houston Memorial Hospital (Houston, TX) Champions Treatment Center (Houston, TX) Willow Creek Hospital, Ltd. (See Partnership Section) Women's Hospital of Texas, Inc. - Doing Business As: Women's Hospital of Texas (Houston, TX) UTAH General Hospitals of Galen, Inc. * - Doing Business As: Cartersville Medical Center (Cartersville, GA) Davis Hospital and Medical Center (Layton, UT) Peachtree Regional Hospital (Newnan, GA) Peachtree Health and Fitness Center (Newnan, GA) HCA Health Services of Utah, Inc. - Doing Business As: St. Mark's Hospital (Salt Lake City, UT) St. Mark's Investments, Inc. VIRGINIA Ambulatory Services Management Corp. of Chesterfield Co Brandermill Medical Ancillaries, Inc. Chicago Medical School Hospital, Inc. * Chippenham Hospital, Inc. - Doing Business As: Chippenham Hospital (Richmond, VA) Tucker Pavilion (Richmond, VA) Circle Terrace Hospital Corporation Galen-Med, Inc. * - Doing Business As: Clinch Valley Medical Center (Richlands, VA) East Montgomery Medical Center (Montgomery, AL) Lake Area Medical Center (Lake Charles, LA) Lakeland Medical Center (New Orleans, LA) Galen of Virginia, Inc. * - Doing Business As: University of Louisville Hospital (Louisville, KY) Galen Virginia Hospital Corporation HCA Ambulatory Surgery Investments, Inc. HCA Health Services of Norfolk, Inc. HCA Health Services of Portsmouth, Inc. HCA Health Services of Virginia, Inc. - Doing Business As: Henrico Doctors Hospital (Richmond, VA) Lewis-Gale Psychiatric Center (Salem, VA) Reston Hospital Center (Reston, VA) Health Resource Productions, Inc. Johnston-Willis Limited - Doing Business As: Johnston-Willis Hospital (Richmond, VA) Lewis-Gale Hospital, Inc. - Doing Business As: Lewis-Gale Hospital (Salem, VA) NOCO, Inc. Richmond West End Real Estate, Inc. Skipfor, Inc. United Ambulance Service, Inc. Virginia Psychiatric Company, Inc. - Doing Business As: Dominion Hospital (Falls Church, VA) Peninsula Hospital (Hampton, VA) Poplar Springs Hospital (Petersburg, VA) WASHINGTON ACH, Inc. WEST VIRGINIA Galen of West Virginia, Inc. * - Doing Business As: Greenbrier Valley Medical Center (Ronceverte, WV) St. Luke's Hospital (Bluefield, WV) Galen Shared Services (Mobile Lithotripter) HCA Health Services of West Virginia, Inc. HMC (WV), Inc. Hospital Corporation of America Raleigh General Hospital - Doing Business As: Raleigh General Hospital (Beckley, WV) Teays Valley Health Services, Inc. - Doing Business As: Putnam General Hospital (Hurricane, WV) Tri Cities Health Services Corp. - Doing Business As: River Park Hospital (Huntington, WV) WISCONSIN Psychiatric Company of Dane County, Inc. GRAND CAYMAN ISLANDS Partners & Affiliates Casualty Excess Ltd. SWITZERLAND Societe Anonyme de l'Exploitation de l'Hopital de la Tour - Doing Business as: Hopital de la Tour Permanence de l'Hopital de la Tour S.A. - Doing Business As: Geneva Out-Patient Clinic UNITED KINGDOM The Wellington Private Hospital Limited - with the following unincorporated division - Doing Business As: The Wellington Hospital EX-23 18 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Columbia/HCA Healthcare Corporation (including its predecessors) on Form S-3 (File Nos. 33-52379 and 33-50985) of our report (which includes an explanatory paragraph on a change in accounting for income taxes) dated February 28, 1994, on our audit of the consolidated financial statements and financial statement schedules of Columbia Healthcare Corporation as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, which report is included in this Annual Report on Form 10-K. We also consent to the incorporation by reference in the registration statements of Columbia/HCA Healthcare Corporation (including its predecessors) on Form S-3 (File Nos. 33-52379 and 33-50985) of our report (which includes explanatory paragraphs regarding the merger of Columbia Healthcare Corporation and HCA - Hospital Corporation of America and a change in accounting for income taxes) dated February 28, 1994, except for Note 15, as to which the date is March 24, 1994, on our audit of the supplemental consolidated financial statements and financial statement schedules of Columbia/HCA Healthcare Corporation as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND Louisville, Kentucky March 31, 1994 -----END PRIVACY-ENHANCED MESSAGE-----