HCA INC. - PRER14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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HCA INC. |
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(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant) |
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Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11. |
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(1) |
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Title of each class of securities to which transaction applies: |
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Common stock, par value $.01 per share, of HCA Inc. and
nonvoting common stock, par value $.01 per share, of HCA
Inc. (collectively, the HCA Common Stock) |
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(2) |
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Aggregate number of securities to which transaction applies: |
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409,547,671 shares of HCA Common Stock; 28,045,175 options
to purchase HCA Common Stock; restricted share units with
respect to 134,261 shares of HCA Common Stock; Warrants
with respect to 16,910 shares of HCA Common Stock. |
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(3) |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined): |
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The transaction value was determined based upon the sum of
(a) $51.00 per share of 409,547,671 shares of HCA
Common Stock, (b) $51.00 minus the weighted average
exercise price of $39.40 per share of outstanding options
to purchase 24,941,169 shares of HCA Common Stock,
(c) $51.00 minus the weighted average exercise price of
$20.34 per share of outstanding options to
purchase 3,104,006 shares of HCA Common Stock,
(d) $51.00 per share of restricted share units with
respect to 134,261 shares of HCA Common Stock; and
(e) $51.00 minus the exercise price of $2.29 per share
of outstanding warrants to purchase 16,910 shares of
HCA Common Stock. |
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(4) |
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Proposed maximum aggregate value of transaction: |
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$21,279,088,602.46 |
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(5) |
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Total fee paid: |
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$2,276,862.48 |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing. |
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(1) |
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Amount Previously
Paid: |
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(2) |
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Form, Schedule or Registration Statement
No.: |
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(3) |
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Filing
Party: |
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(4) |
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Date
Filed: |
One Park Plaza
Nashville, Tennessee 37203
,
2006
Dear Fellow Shareholder:
On July 24, 2006, HCA Inc., a Delaware corporation
(HCA or the Company), entered into an
Agreement and Plan of Merger (the merger agreement)
with Hercules Holding II, LLC, a Delaware limited liability
company (Parent), and Hercules Acquisition
Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent (Merger Sub). Parent is
currently owned by private equity funds sponsored by Bain
Capital Partners, LLC, Kohlberg Kravis Roberts & Co.
L.P. and Merrill Lynch Global Partners, Inc. (d/b/a Merrill
Lynch Global Private Equity). Under the terms of the merger
agreement, Merger Sub will be merged with and into the Company,
with the Company continuing as the surviving corporation (the
merger). If the merger is completed, you will be
entitled to receive $51.00 in cash for each share of HCA common
stock that you own.
A special meeting of our shareholders will be held
on , 2006,
at .m.,
local time, to vote on a proposal to adopt the merger agreement
so that the merger can occur. The special meeting will be held
at HCAs executive offices located at One Park Plaza,
Nashville, Tennessee 37203. Notice of the special meeting and
the related proxy statement is enclosed.
The accompanying proxy statement gives you detailed information
about the special meeting and the merger and includes the merger
agreement as Annex A. The receipt of cash in exchange for
shares of HCA common stock in the merger will constitute a
taxable transaction to U.S. persons for U.S. federal
income tax purposes. We encourage you to read the proxy
statement and the merger agreement carefully.
Our board of directors has determined that the merger is
advisable and that the terms of the merger are fair to and in
the best interests of HCA and its shareholders (other than HCA
founder and director Dr. Thomas F. Frist, Jr., members
of Dr. Frists family and his and their affiliates,
affiliates of Parent and certain executive officers and other
members of senior management of HCA who will invest in equity
securities of the surviving corporation in connection with the
merger as further described in the accompanying proxy
statement), and approved the merger agreement and the
transactions contemplated thereby, including the merger. This
recommendation is based, in large part, upon the unanimous
recommendation of the special committee of the board of
directors consisting of five independent and disinterested
directors.
Your vote is very important. We cannot complete the
merger unless holders of a majority of all outstanding shares of
HCA common stock entitled to vote on the matter vote to adopt
the merger agreement. Our board of directors recommends that
you vote FOR the proposal to adopt the merger
agreement. The failure of any shareholder to vote on the
proposal to adopt the merger agreement will have the same effect
as a vote against the adoption of the merger agreement.
Whether or not you plan to attend the special meeting, please
complete, date, sign and return, as promptly as possible, the
enclosed proxy in the accompanying reply envelope, or submit
your proxy by telephone or the Internet. Shareholders who attend
the meeting may revoke their proxies and vote in person.
Our board of directors and management appreciate your continuing
support of the Company, and we urge you to support this
transaction.
Sincerely,
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Frederick W. Gluck
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Jack O. Bovender, Jr. |
Chairman of the Special Committee |
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Chairman of the Board and Chief Executive Officer |
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
The proxy statement is
dated ,
2006, and is first being mailed to shareholders on or
about ,
2006.
One Park Plaza
Nashville, Tennessee 37203
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held
On ,
2006
Dear Shareholder:
PLEASE TAKE NOTICE that a special meeting of shareholders of HCA
Inc., a Delaware corporation (the Company), will be
held
on , ,
2006,
at .m.
local time, at the Companys executive offices located at
One Park Plaza, Nashville, Tennessee, for the following purposes:
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1. To consider and vote on a proposal to adopt the
Agreement and Plan of Merger (the merger agreement),
dated as of July 24, 2006, by and among the Company,
Hercules Holding II, LLC, a Delaware limited liability
company (Parent), and Hercules Acquisition
Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent (Merger Sub), as the merger
agreement may be amended from time to time. |
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2. To approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the meeting to adopt the
merger agreement. |
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3. To act upon other business as may properly come before
the special meeting and any and all adjourned or postponed
sessions thereof. |
The record date for the determination of shareholders entitled
to notice of and to vote at the special meeting is
October 6, 2006. Accordingly, only shareholders of record
as of that date will be entitled to notice of and to vote at the
special meeting or any adjournment or postponement thereof. A
list of our shareholders will be available at our principal
executive offices at One Park Plaza, Nashville, Tennessee,
during ordinary business hours for ten days prior to the special
meeting.
We urge you to read the accompanying proxy statement carefully
as it sets forth details of the proposed merger and other
important information related to the merger.
Your vote is important, regardless of the number of shares of
the Companys common stock you own. The adoption of the
merger agreement requires the affirmative approval of the
holders of a majority of the outstanding shares of the
Companys common stock entitled to vote thereon. The
adjournment proposal requires the affirmative vote of a majority
of the shares of the Companys common stock present at the
special meeting and entitled to vote thereon. Even if you plan
to attend the special meeting in person, we request that you
complete, sign, date and return the enclosed proxy or submit
your proxy by telephone or the Internet prior to the special
meeting and thus ensure that your shares will be represented at
the special meeting if you are unable to attend. If you fail to
return your proxy card or fail to submit your proxy by phone or
the Internet, your shares will not be counted for purposes of
determining whether a quorum is present at the meeting and will
have the same effect as a vote against the adoption of the
merger agreement, but will not affect the outcome of the vote
regarding the adjournment proposal.
Please note that space limitations make it necessary to limit
attendance at the special meeting to shareholders. Registration
will begin
at .m.
local time. If you attend, please note that you may be asked to
present valid picture identification. Street name
holders will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras,
recording devices and other electronic devices will not be
permitted at the special meeting.
Shareholders of the Company who do not vote in favor of the
adoption of the merger agreement will have the right to seek
appraisal of the fair value of their shares of the
Companys common stock if they deliver a demand for
appraisal before the vote is taken on the merger agreement and
comply with all requirements of Delaware law, which are
summarized in the accompanying proxy statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE
ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE, OR SUBMIT
YOUR PROXY BY TELEPHONE OR THE INTERNET. SHAREHOLDERS WHO ATTEND
THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
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By Order of the Board of Directors, |
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John M. Franck II |
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Vice President and Corporate Secretary |
Nashville, Tennessee
,
2006
TABLE OF CONTENTS
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References to HCA, the Company,
we, our or us in this proxy
statement refer to HCA Inc. and its affiliates unless otherwise
indicated by context.
SUMMARY TERM SHEET
This Summary Term Sheet, together with the Questions
and Answers About the Special Meeting and the Merger,
summarizes the material information in the proxy statement. You
should carefully read this entire proxy statement and the other
documents to which this proxy statement refers you for a more
complete understanding of the matters being considered at the
special meeting. In addition, this proxy statement incorporates
by reference important business and financial information about
HCA. You may obtain the information incorporated by reference
into this proxy statement without charge by following the
instructions in Where You Can Find More Information
beginning on page 92.
The Merger and the Merger Agreement
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The Parties to the Merger (see page 15). HCA, a
Delaware corporation, is one of the leading health care services
companies in the United States. Hercules Holding II, LLC, a
Delaware limited liability company (Parent), was
formed solely for the purpose of effecting the merger (as
defined below) and the transactions related to the merger.
Parent has not engaged in any business except in furtherance of
this purpose. Hercules Acquisition Corporation, a Delaware
corporation and a direct wholly-owned subsidiary of Parent
(Merger Sub), was formed solely for the purpose of
effecting the merger. Merger Sub has not engaged in any business
except in furtherance of this purpose. Parent is currently owned
by private equity funds sponsored by Bain Capital Partners, LLC
(Bain), Kohlberg Kravis Roberts & Co. L.P.
(KKR) and Merrill Lynch Global Partners, Inc. (d/b/a
Merrill Lynch Global Private Equity) (Merrill Lynch Global
Private Equity) (collectively referred to in this proxy
statement as the sponsors). The sponsors,
collectively, with HCA founder and director Dr. Thomas F.
Frist, Jr. and his son, Thomas F. Frist III, and certain
entities affiliated with Dr. Frist (the Frist
Entities) who have committed to contribute a portion of
their shares of HCA Common Stock to Parent in connection with
the merger in exchange for a portion of the equity securities of
Parent (which right may be assigned, in part, to Dr. Frist
and other permitted assignees) are sometimes collectively
referred to in this proxy statement as the Investor
Group. |
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The Merger. You are being asked to vote to adopt an
agreement and plan of merger (the merger agreement)
providing for the recapitalization of HCA by Parent. Pursuant to
the merger agreement, Merger Sub will merge with and into HCA
(the merger). HCA will be the surviving corporation
in the merger (the surviving corporation) and will
continue to do business as HCA following the merger.
As a result of the merger, HCA will cease to be an independent,
publicly traded company. See The Merger Agreement
beginning on page 62. |
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Merger Consideration. If the merger is completed, you
will be entitled to receive $51.00 in cash, without interest and
less any applicable withholding taxes, for each share of HCA
capital stock (consisting of common stock, par value
$.01 per share, and nonvoting common stock, par value
$.01 per share (collectively, the HCA Common
Stock)) that you own. See The Merger
Agreement Merger Consideration beginning on
page 62. |
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Treatment of Outstanding Options, Restricted Shares and
Restricted Share Units. Upon consummation of the merger,
except as otherwise agreed by a holder and Parent, all
outstanding options to acquire HCA Common Stock will become
fully vested and immediately exercisable. All such options
(other than certain options held by certain Management Rollover
Holders (as defined below under Interests
of the Companys Directors and Executive Officers in the
Merger)) not exercised prior to the merger will be
cancelled and converted into the right to receive a cash payment
equal to the number of shares of HCA Common Stock underlying the
options multiplied by the amount (if any) by which $51.00
exceeds the option exercise price, without interest and less any
applicable withholding taxes. Additionally, except as otherwise
agreed by a holder and Parent, |
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all shares of restricted stock and restricted share units will
vest and those shares or units will be cancelled and converted
into the right to receive a cash payment equal to the number of
outstanding restricted shares or restricted share units
multiplied by $51.00 (together with the value of any deemed
dividend equivalents accrued but unpaid with respect to
restricted share units), without interest and less any
applicable withholding taxes. Certain options to purchase HCA
Common Stock held by certain of the Management Rollover Holders
that are not exercised prior to consummation of the merger will
be converted into options to acquire shares of common stock of
the surviving corporation. In addition, certain of the
Management Rollover Holders may elect to exchange certain
unrestricted shares of HCA Common Stock for shares of common
stock of the surviving corporation. See Special
Factors Interests of the Companys Directors
and Executive Officers in the Merger and The Merger
Agreement Treatment of Options and Other
Awards beginning on pages 51 and 62, respectively. |
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Conditions to the Merger (see page 69). The
consummation of the merger depends on the satisfaction or waiver
of a number of conditions, including the following: |
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of
voting HCA Common Stock; |
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no injunction, judgment, order or law which prohibits, restrains
or renders illegal the consummation of the merger shall be in
effect; |
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the waiting period (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the HSR Act), must have expired or been
terminated; |
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HCAs and Parents and Merger Subs respective
representations and warranties in the merger agreement must be
true and correct as of the closing date in the manner described
under the caption The Merger Agreement
Conditions to the Merger beginning on
page 69; and |
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HCA and Parent and Merger Sub must have performed in all
material respects all obligations that each is required to
perform under the merger agreement. |
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Restrictions on Solicitations of Other Offers (see
page 70). |
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The merger agreement provides that, until 11:59 p.m., New
York time, on September 12, 2006 (the go-shop
period), we were permitted to initiate, solicit and
encourage an acquisition proposal for us (including by way of
providing information), and enter into and maintain discussions
or negotiations concerning an acquisition proposal for us or
otherwise cooperate with or assist or participate in, or
facilitate any such inquiries, proposals, discussions or
negotiations. Prior to terminating the merger agreement or
entering into an acquisition agreement with respect to any such
proposal, the Company was required to comply with certain terms
of the merger agreement described under The Merger
Agreement Recommendation Withdrawal/ Termination in
Connection with a Superior Proposal, including negotiating
with Parent and Merger Sub in good faith to make adjustments to
the merger agreement and, if required, paying a termination fee,
see page 71. We did not receive any acquisition proposals
during the go-shop period. |
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The merger agreement provides that from and after the expiration
of the go-shop period, we are generally not permitted to: |
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initiate, solicit or knowingly encourage (including by way of
providing information) the submission of any inquiries,
proposals or offers or any other efforts or attempts that
constitute or may reasonably be expected to lead to, an
acquisition proposal for us or engage in any discussions or
negotiations (other than with a person who submitted a proposal
prior to the expiration of the go-shop period under certain
circumstances) with respect thereto, or otherwise knowingly
cooperate with or knowingly assist or participate in, or
knowingly facilitate any such inquiries, proposals, discussions
or negotiations; or |
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approve or recommend, or publicly propose to approve or
recommend, any acquisition proposal for us or enter into any
merger agreement, letter of intent, agreement in principle,
share purchase agreement, asset purchase agreement or share
exchange agreement, option agreement or other similar agreement
providing for or relating to any acquisition proposal for us or
enter into any agreement or agreement in principle requiring us
to abandon, terminate or fail to consummate the transactions
contemplated by the merger agreement or breach our obligations
under the merger agreement or propose or agree to do any of the
foregoing. |
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Notwithstanding these restrictions, under certain circumstances,
our board of directors (acting through the special committee if
such committee still exists) may respond to a bona fide
unsolicited written proposal for an alternative acquisition or
terminate the merger agreement and enter into an acquisition
agreement with respect to a superior proposal, so long as the
Company complies with certain terms of the merger agreement
described under The Merger Agreement
Recommendation Withdrawal/ Termination in Connection with a
Superior Proposal, including negotiating with Parent and
Merger Sub in good faith to make adjustments to the merger
agreement prior to termination and, if required, paying a
termination fee, see page 71. |
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The merger agreement provides that Dr. Frist shall not be
prevented from engaging in a due diligence discussion with any
third party who has been provided with and has agreed in writing
to comply with the limitations described below if specifically
requested to do so by the special committee of HCAs board
of directors or Credit Suisse Securities (USA) LLC (Credit
Suisse). However, other than with respect to public
disclosure obligations required by applicable law,
(1) Dr. Frist shall not disclose to any such third
party any information regarding the transactions contemplated by
the merger agreement or any agreements, understandings or
arrangements in connection therewith or any assumptions,
information, evaluations or views of Parent and its affiliates,
and (2) Dr. Frist shall not be permitted to have any
discussions, agreements, understandings or arrangements with any
third party regarding any participation, investment, involvement
or interest of any nature whatsoever in any form of transaction
similar to, or in the alternative to, the transactions
contemplated by the merger agreement, including the merger. |
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Termination of the Merger Agreement (see page 72).
The merger agreement may be terminated: |
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By mutual written consent of HCA, on the one hand, and Parent or
Merger Sub, on the other hand; |
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By either HCA, on the one hand, or Parent or Merger Sub, on the
other hand, if: |
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there shall be any final and nonappealable law that makes
consummation of the merger illegal or otherwise prohibited; |
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the merger is not completed on or before December 19, 2006,
or (if the marketing period (as defined below under
The Merger Agreement Marketing Period)
has not ended on or before December 19, 2006) on or before
January 31, 2007, so long as the failure to complete the
merger is not the result of, or caused by, the failure of the
terminating party to comply with the terms of the merger
agreement; or |
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our shareholders do not adopt the merger agreement at the
special meeting or any adjournment or postponement
thereof; or |
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By Parent or Merger Sub, if: |
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our board of directors or a committee of our board of directors
withdraws, modifies or qualifies, or publicly proposes to
withdraw, modify or qualify, in a manner adverse to Parent or
Merger Sub, its recommendation that our shareholders adopt the
merger agreement, or takes action or makes any public statement
in connection with the special meeting inconsistent with such
recommendation, or approves or recommends, or resolves to
approve or recommend, any takeover proposal by a third party
other than the merger; or |
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we have breached or failed to perform any of our
representations, warranties, covenants or agreements under the
merger agreement which would give rise to the failure of certain
conditions to closing to be satisfied and where that breach or
failure to perform cannot be cured by December 19, 2006 (or
January 31, 2007 if the termination date is extended as
described above); or |
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prior to obtaining the vote of shareholders at the special
meeting, we receive a superior proposal and concurrently enter
into a definitive agreement with respect to such superior
proposal, provided that we have complied with our obligations
under the merger agreement described under The Merger
Agreement Restrictions on Solicitations of Other
Offers and The Merger
Agreement Recommendation Withdrawal/Termination
in Connection with a Superior Proposal beginning on
pages 70 and 71, respectively, and provided that we have
paid the termination fee owed to Parent as described under
The Merger Agreement Termination Fees
beginning on page 73; |
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Parent or Merger Sub has breached or failed to perform any of
its representations, warranties, covenants or agreements under
the merger agreement which would give rise to the failure of
certain conditions to closing to be satisfied if that breach or
failure to perform cannot be cured by December 19, 2006 (or
January 31, 2007 if the termination date is extended as
described above); or |
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certain conditions to closing have been satisfied or waived and
Parent has not consummated the merger within five calendar days
after the final day of the marketing period. |
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Termination Fees (see page 73). If the merger
agreement is terminated under certain circumstances: |
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the Company will be obligated to pay a termination fee of
$500 million as directed by Parent; |
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the Company will be obligated to pay the expenses of Parent, up
to $50 million; or |
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Parent will be obligated to pay us a termination fee of
$500 million. Each member of the Investor Group, including
the Frist Entities but not including Dr. Frist, has agreed
severally to guarantee the obligation of Parent to pay this
termination fee subject to a cap. This cap is equal to such
members pro rata share of $500 million, which share
is proportionate to its equity commitment to Parent as compared
to the equity commitments of the other guarantors. |
The Special Meeting
See Questions and Answers About the Special Meeting and
the Merger beginning on page 9 and The Special
Meeting beginning on page 16.
Other Important Considerations
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The Special Committee and its Recommendation. The special
committee is a committee of our board of directors that was
formed on June 30, 2006 for the purpose of reviewing,
evaluating and, as appropriate, negotiating a possible
transaction relating to the sale of the Company. The special
committee is comprised of five independent and disinterested
directors. The members of the special committee are Frederick W.
Gluck, Glenda A. Hatchett, Charles O. Holliday, Jr., T.
Michael Long and Kent C. Nelson. The special committee
unanimously determined that the merger agreement and the
transactions contemplated thereby, including the merger, are
fair to and in the best interests of our shareholders (other
than Dr. Frist, members of the Frist family and his and
their affiliates (including the Frist Entities), holders of
shares of HCA Common Stock who are affiliates of Parent and the
Management Rollover Holders) (such shareholders being referred
to in this proxy statement collectively as the
unaffiliated shareholders) and recommended to our
board of directors that the merger agreement and the
transactions contemplated thereby, including the |
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merger, be approved and declared advisable by our board of
directors and that our board of directors recommend adoption by
the shareholders of the merger agreement. For a discussion of
the material factors considered by the board of directors and
the special committee in reaching its conclusions and the
reasons why the board of directors and the special committee
determined that the merger is fair, see Special
Factors Reasons for the Merger; Recommendation of
the Special Committee and of Our Board of Directors; Fairness of
the Merger beginning on page 27. |
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Board Recommendation. The Companys board of
directors, acting upon the unanimous recommendation of the
special committee, recommends that HCAs shareholders vote
FOR the adoption of the merger agreement, and
FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies. See Special
Factors Reasons for the Merger; Recommendation of
the Special Committee and of Our Board of Directors; Fairness of
the Merger beginning on page 27. |
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Share Ownership of Directors and Executive Officers. As
of October 6, 2006, the record date, the directors and executive
officers of HCA (other than Dr. Frist) held and are
entitled to vote, in the aggregate, shares of HCA Common Stock
representing approximately % of
the outstanding shares of the voting HCA Common Stock. The
directors and executive officers have informed HCA that they
currently intend to vote all of their shares of HCA Common Stock
FOR the adoption of the merger agreement and
FOR the adjournment proposal, if necessary. In
addition, the Frist Entities, representing
approximately % of the outstanding
shares of the voting HCA Common Stock, have entered into an
agreement with the sponsors and certain other equity investors
to vote their shares in favor of adopting the merger agreement.
It is the current intention of Dr. Frist and members of his
immediate family to vote other shares beneficially owned by
them, representing approximately % of the outstanding
shares of the voting HCA Common Stock, to adopt the merger
agreement, other than approximately 109,000 shares that are
held by a charitable foundation formed by Dr. Frist, which
will not be voted in the merger. See The Special
Meeting Voting Rights; Quorum; Vote Required for
Approval beginning on page 16. |
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Interests of the Companys Directors and Executive
Officers in the Merger. Upon the consummation of the merger,
except as may be agreed by a holder or participant and Parent,
(1) all stock options held by our directors and officers
will vest and all vested and unexercised stock options will
generally be cashed out in an amount equal to the excess (if
any) of $51.00 over the option exercise price, (2) all
shares of restricted stock and restricted share units will vest,
become free of restrictions and will be cashed out at
$51.00 per share (together with the value of any deemed
dividend equivalents accrued but unpaid with respect to
restricted share units), (3) all salary amounts withheld on
behalf of the participants in the HCA stock purchase plans
through the closing date of the merger will be deemed to have
been used to purchase HCA Common Stock under the terms of these
plans, using the closing date of the merger as the last date of
the applicable offering period under these plans, and converted
into the right to receive, effectively, a cash payment equal to
the number of shares deemed purchased under these plans
multiplied by $51.00, and (4) executives who are
covered officers under the 2006 Senior Officer
Performance Excellence Program will be paid their 2006 annual
bonus at the target level as provided under such program. The
maximum total cash payments our directors and executive officers
may receive in respect of their beneficially owned HCA
securities and other compensation plans upon the consummation of
the merger are as follows: Jack O.
Bovender, Jr. $45,769,120; Richard M.
Bracken $20,279,511; R. Milton Johnson
$10,721,606; Samuel N. Hazen $12,664,316; Robert A.
Waterman $12,250,270; other 17 senior executive
officers $102,524,413; Dr. Thomas F.
Frist, Jr. $135,423,065; directors other than
Dr. Frist and Messrs. Bovender and Bracken
$12,265,490; in each case as more fully described on
pages 54 and 58. In addition, under the Companys
Supplemental Executive Retirement Plan (the SERP),
upon the consummation of the merger, all current participants
will become fully vested in their retirement benefits, the
normal retirement age for collecting benefits under the SERP
will be reduced from 62 to 60, and current participants will be
entitled to certain additional benefits upon certain |
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terminations of employment and to certain protections against
the amendment or termination of the SERP. Certain of our
executive officers (such officers, together with such other
employees who are permitted to invest by the payment of cash
and/or contribution of their HCA equity securities to the
surviving corporation, are sometimes referred to herein
collectively as the Management Rollover Holders)
have also made commitments to roll over options to purchase HCA
Common Stock into and/or otherwise invest in the equity
securities of the surviving corporation, including by electing
to exchange unrestricted shares of HCA Common Stock for shares
of common stock of the surviving corporation. The Frist Entities
have committed to contribute 15,686,275 shares of HCA
Common Stock to Parent in connection with the merger in exchange
for a portion of the equity securities of Parent. In addition,
Dr. Frist, certain members of his immediate family and
certain entities controlled by them may contribute shares of HCA
Common Stock to Parent in connection with the commitment by the
Frist Entities. The Frist Entities may also invite certain
additional investors selected by them to assume a portion of the
Frist Entities equity commitment (the Frist
Sell-Down). Participants in the Frist Sell-Down, together
with any other assignees of the Frist Entities roll over
equity commitment, are collectively referred to as the
Frist permitted assignees. The Frist Sell-Down will
reduce the Frist Entities equity commitment amount, but
the Frist Entities will control in all respects (including
voting and disposition) the interests in Parent that the Frist
Sell-Down participants are entitled to receive in exchange for
funding the Frist Entities equity commitments. The
surviving corporation will grant new stock options in the
surviving corporation to certain of our executive officers, who
will also enter into new employment agreements with the
surviving corporation and/or become directors of the surviving
corporation. The Frist Entities will have the right to designate
two directors of Parents board of directors after the
merger is consummated, and Jack O. Bovender, Jr., the
Companys Chairman and Chief Executive Officer, and Richard
M. Bracken, the Companys President and a current director,
will have the right to serve as directors of the surviving
corporation so long as they are officers of the surviving
corporation. These and other interests of our executive officers
and directors, some of which may be different than those of our
shareholders generally, are more fully described, together with
a more detailed description of the total cash payments our
executive officers will receive in connection with the merger,
under Special Factors Interests of the
Companys Directors and Executive Officers in the
Merger beginning on page 51. |
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Opinions of Credit Suisse Securities (USA) LLC and
Morgan Stanley & Co. Incorporated. In connection
with the proposed merger, the special committees financial
advisors, Credit Suisse and Morgan Stanley & Co.
Incorporated (Morgan Stanley), each have delivered
an opinion as to the fairness from a financial point of view to
the unaffiliated shareholders of the merger consideration to be
received by such holders in the merger. |
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The full text of the opinions of Credit Suisse and Morgan
Stanley, which set forth the procedures followed, assumptions
made, matters considered and limitations on review undertaken by
Credit Suisse and Morgan Stanley, as applicable, in connection
with their opinions, are attached as Annex B and
Annex C, respectively, to this proxy statement. Credit
Suisse and Morgan Stanley provided their opinions for the
information and assistance of the special committee in
connection with its consideration of the merger, and the
opinions of Credit Suisse and Morgan Stanley are not
recommendations as to how any shareholder should vote or act
with respect to any matter relating to the merger. We
encourage you to read the opinions carefully and in their
entirety. For a more complete description of the opinions and
the review undertaken in connection with such opinions, together
with the fees payable to Credit Suisse and Morgan Stanley, see
Special Factors Opinions of Financial
Advisors beginning on page 33. Under the terms of its
engagement letter, Credit Suisse provided the special committee
with financial advisory services and HCA agreed to pay Credit
Suisse a fee of $20.0 million, $5.0 million of which
became payable upon delivery of Credit Suisses opinion,
plus approximately $4.4 million to be paid if the merger is
consummated at the current price. Under the terms of its
engagement letter, Morgan Stanley provided the special committee
financial advisory services and HCA agreed to pay Morgan Stanley
a $1.0 million advisory fee, which was payable upon Morgan
Stanleys engagement, a $12.0 million |
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transaction fee, which will become payable upon the closing of
the merger (if not paid earlier in certain circumstances), and a
discretionary fee of up to $4.0 million as determined by
the special committee, based upon the special committees
view of Morgan Stanleys overall performance on the
transaction, upon the earlier of the termination of Morgan
Stanleys engagement and the closing of the merger. The fee
was not contingent upon the outcome of Morgan Stanleys
financial opinion. |
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Sources of Financing. The merger agreement does not
contain any condition relating to the receipt of financing by
Parent. HCA and Parent estimate that the total amount of funds
necessary to consummate the merger and related transactions,
including the new financing arrangements, the refinancing of
certain existing indebtedness and the payment of customary fees
and expenses in connection with the proposed merger and
financing arrangements, will be approximately $26 billion,
which is expected to be funded by new credit facilities, private
and/or public offerings of debt securities and equity financing.
Funding of the equity and debt financing is subject to the
satisfaction of the conditions set forth in the commitment
letters pursuant to which the financing will be provided. See
Special Factors Financing of the Merger
beginning on page 47. The following arrangements are in
place to provide the necessary financing for the merger,
including the payment of related transaction costs, charges,
fees and expenses: |
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Equity Financing. Parent has received roll over
commitments from the Frist Entities of 15,686,275 shares of
HCA Common Stock which, based on the merger consideration per
share of HCA Common Stock, have an aggregate value of
$800 million, and equity commitments from the other members
of the Investor Group (other than Dr. Frist and his son,
Thomas F. Frist III) totaling $4.5 billion, for aggregate
roll over and equity commitments totaling $5.3 billion. In
connection with this equity financing, the sponsors intend to
assign up to $180 million of their equity commitments in the
aggregate to the Frist Entities, which would reduce the
sponsors commitments accordingly and increase the
aggregate commitment of the Frist Entities to $980 million. |
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Debt Financing. Parent has received a debt commitment
letter from Bank of America, N.A., Banc of America Bridge LLC,
Banc of America Securities LLC, JPMorgan Chase Bank, N.A.,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc.,
Merrill Lynch Capital Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated to provide (a) up to
$16.80 billion of senior secured credit facilities and
(b) up to $5.70 billion of senior secured second lien
loans under a bridge facility. |
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Regulatory Approvals (see page 46). Under the HSR
Act, and the rules promulgated thereunder by the Federal Trade
Commission (FTC), the merger may not be completed
until notification and report forms have been filed with the FTC
and the Antitrust Division of the Department of Justice
(DOJ) and the applicable waiting period has expired
or been terminated. HCA and Parent filed notification and report
forms under the HSR Act with the FTC and the Antitrust Division
on August 7, 2006. The waiting period was terminated on
August 18, 2006. |
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Though not a condition to the consummation of the merger, U.S.
federal and state laws and regulations, as well as the laws and
regulations of the United Kingdom and Switzerland, may require
that we or Parent obtain approvals or certificates of need from,
file new license and/or permit applications with, and/or provide
notice to, applicable governmental authorities in connection
with the merger. |
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Applicability of Rules Related to Going
Private Transactions; Position of Dr. Frist, the
Frist Entities, Thomas F. Frist III, Messrs. Bovender and
Bracken, Parent, Merger Sub and the Sponsors as to Fairness and
Their Reasons for the Merger (see pages 31-32 and
40-42). The requirements of
Rule 13e-3 under
the Securities Exchange Act of 1934, as amended (the
Exchange Act), apply to the merger because
Dr. Frist and Messrs. Bovender and Bracken are deemed
to be engaged in a going private transaction under
the applicable rules. In addition, the Frist Entities, Dr.
Frists son, Thomas F. Frist III, Parent, Merger Sub and
the sponsors could be deemed to be |
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engaged in a going private transaction under these
rules. To comply with the requirements of
Rule 13e-3, our
board of directors, Dr. Frist, the Frist Entities, Thomas
F. Frist III, Messrs. Bovender and Bracken, Parent, Merger
Sub and the sponsors make certain statements as to, among other
matters, their purposes and reasons for the merger, and their
belief as to the fairness of the merger to our unaffiliated
shareholders. |
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Each of the special committee and the board of directors has
determined that the merger agreement and the transactions
contemplated thereby, including the merger, are advisable, fair
to and in the best interests of our unaffiliated shareholders.
In evaluating the merger, the special committee consulted with
its independent legal and financial advisors, reviewed a
significant amount of information and considered a number of
factors and procedural safeguards set forth below in
Special Factors Reasons for the Merger;
Recommendation of the Special Committee and of Our Board of
Directors; Fairness of the Merger. Based upon the
foregoing, and consistent with its general recommendation to
shareholders, the special committee and our board of directors
believe that the merger agreement and the merger are
substantively and procedurally fair to our unaffiliated
shareholders. |
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U.S. Federal Income Tax Consequences. If you are a U.S.
holder (as defined below), the merger will be a taxable
transaction for U.S. federal income tax purposes. Your
receipt of cash in exchange for your shares of HCA Common Stock
in the merger generally will cause you to recognize a gain or
loss measured by the difference, if any, between the cash you
receive in the merger (determined before the deduction of any
applicable withholding taxes) and your adjusted tax basis in
your shares of HCA Common Stock. If you are a non-U.S. holder
(as defined below), the merger generally will not be a taxable
transaction to you for U.S. federal income tax purposes unless
you have certain connections to the United States. Under
U.S. federal income tax law, all holders will be subject to
information reporting on cash received in the merger unless an
exemption applies. Backup withholding may also apply with
respect to cash you receive in the merger, unless you provide
proof of an applicable exemption or a correct taxpayer
identification number and otherwise comply with the applicable
requirements of the backup withholding rules. You should consult
your own tax advisor for a full understanding of how the merger
will affect your federal, state and local and/or foreign taxes
and, if applicable, the tax consequences of the receipt of cash
in connection with the cancellation of your options to purchase
shares of HCA Common Stock, your shares of restricted stock
and/or your restricted share units, including the transactions
described in this proxy statement relating to our other equity
compensation and benefit plans. See Special
Factors Material U.S. Federal Income Tax
Consequences of the Merger to Our Shareholders beginning
on page 58. |
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Appraisal Rights. Under Delaware law, holders of HCA
Common Stock who do not vote in favor of adopting the merger
agreement will have the right to seek appraisal of the fair
value of their shares as determined by the Delaware Court of
Chancery if the merger is completed, but only if they comply
with all requirements of Delaware law, which are summarized in
this proxy statement. This appraisal amount could be more than,
the same as or less than the amount a shareholder would be
entitled to receive under the terms of the merger agreement. Any
holder of HCA Common Stock intending to exercise such
holders appraisal rights, among other things, must submit
a written demand for an appraisal to us prior to the vote on the
adoption of the merger agreement and must not vote or otherwise
submit a proxy in favor of adoption of the merger agreement.
Your failure to follow exactly the procedures specified under
Delaware law will result in the loss of your appraisal rights.
See The Special Meeting Rights of Shareholders
Who Object to the Merger and Dissenters Rights
of Appraisal beginning on pages 18 and 76,
respectively, and the text of the Delaware appraisal rights
statute reproduced in its entirety as Annex D. |
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Market Price of HCA Common Stock (see page 87). The
closing sale price of HCA Common Stock on the New York Stock
Exchange (the NYSE) on July 18, 2006, the last
trading day prior to press reports of rumors regarding a
potential acquisition of HCA, was $43.29 per share. The
$51.00 per share to be paid for each share of HCA Common
Stock in the merger represents a premium of approximately 18% to
the closing price on July 18, 2006. |
8
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE
MERGER
The following questions and answers are intended to address
briefly some commonly asked questions regarding the merger, the
merger agreement and the special meeting. These questions and
answers do not address all questions that may be important to
you as an HCA shareholder. Please refer to the Summary
Term Sheet and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement, which you should read
carefully.
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When and where is the special meeting? |
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The special meeting of shareholders of HCA will be held
on , ,
2006,
at .m.
local time, at the Companys executive offices located at
One Park Plaza, Nashville, Tennessee 37203. |
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What matters will be voted on at the special meeting? |
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You will be asked to consider and vote on the following
proposals: |
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to adopt the merger agreement; |
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to approve the adjournment of the special meeting, if necessary
or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the meeting to adopt the
merger agreement; and |
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to act upon other business that may properly come before the
special meeting or any adjournment or postponement thereof. |
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How does HCAs board of directors recommend that I vote
on the proposals? |
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The board of directors recommends that you vote: |
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FOR the proposal to adopt the merger
agreement; and |
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FOR the adjournment proposal. |
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Who is entitled to vote at the special meeting? |
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All holders of HCA Common Stock are entitled to notice, but only
shareholders of record holding voting HCA Common Stock as of the
close of business on October 6, 2006, the record date for
the special meeting, are entitled to vote at the special
meeting. As of the record date, there were
approximately shares
of voting HCA Common Stock outstanding.
Approximately holders
of record held such shares. Every holder of voting HCA Common
Stock is entitled to one vote for each such share the
shareholder held as of the record date. |
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Please note that space limitations make it necessary to limit
attendance at the special meeting to shareholders. Registration
will begin
at .m.,
local time. If you attend, please note that you may be asked to
present valid picture identification. Street name
holders will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras,
recording devices and other electronic devices are not permitted
at the meeting. |
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What vote is required for HCAs shareholders to adopt
the merger agreement? How do HCAs directors and officers
intend to vote? |
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An affirmative vote of the holders of a majority of all
outstanding shares of HCA Common Stock entitled to vote on the
matter is required to adopt the merger agreement. Our directors
and executive officers have informed us that they currently
intend to vote all of their shares of HCA Common Stock for the
adoption of the merger agreement. In addition, the Frist
Entities (representing
approximately % of the voting HCA
Common Stock outstanding) have entered into an agreement with
the sponsors and certain other equity investors pursuant to
which they have agreed to vote their shares in favor of the
adoption of the merger agreement. It is also the current
intention of Dr. Frist and members of his immediate family
to vote other shares beneficially owned by them, representing |
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approximately %
of the outstanding shares of the voting HCA Common Stock, to
adopt the merger agreement, other than approximately
109,000 shares that are held by a charitable foundation
formed by Dr. Frist, which will not be voted in the merger. |
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What vote is required for HCAs shareholders to approve
the proposal to adjourn the special meeting, if necessary, to
solicit additional proxies? |
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The proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the shares of
HCA Common Stock present or represented by proxy at the meeting
and entitled to vote on the matter. |
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Who is soliciting my vote? |
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This proxy solicitation is being made and paid for by HCA. In
addition, we have retained Georgeson Inc. to assist in the
solicitation. We will pay Georgeson Inc. approximately
$20,000 plus
out-of-pocket expenses
for its assistance. Our directors, officers and employees may
also solicit proxies by personal interview, mail,
e-mail, telephone,
facsimile or by other means of communication. These persons will
not be paid additional remuneration for their efforts. We will
also request brokers and other fiduciaries to forward proxy
solicitation material to the beneficial owners of shares of HCA
Common Stock that the brokers and fiduciaries hold of record. We
will reimburse them for their reasonable
out-of-pocket expenses. |
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What do I need to do now? |
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Even if you plan to attend the special meeting, after carefully
reading and considering the information contained in this proxy
statement, if you hold your shares in your own name as the
shareholder of record, please vote your shares by completing,
signing, dating and returning the enclosed proxy card; using the
telephone number printed on your proxy card; or using the
Internet voting instructions printed on your proxy card. You can
also attend the special meeting and vote, or change your prior
vote, in person. Do NOT enclose or return your stock
certificate(s) with your proxy. If you hold your shares in
street name through a broker, bank or other nominee,
then you received this proxy statement from the nominee, along
with the nominees proxy card which includes voting
instructions and instructions on how to change your vote. |
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How do I vote? How can I revoke my vote? |
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You may vote by signing and dating each proxy card you receive
and returning it in the enclosed prepaid envelope or as
described below if you hold your shares in street
name. If you return your signed proxy card, but do not
mark the boxes showing how you wish to vote, your shares will be
voted FOR the proposal to adopt the merger agreement
and FOR the adjournment proposal. You have the right
to revoke your proxy at any time before the vote taken at the
special meeting: |
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if you hold your shares in your name as a shareholder of record,
by notifying our Vice President and Corporate Secretary, John M.
Franck II, at One Park Plaza, Nashville, Tennessee 37203; |
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by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy; you must vote in person at the meeting); |
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by submitting a later-dated proxy card; or |
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if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions. |
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Can I vote by telephone or electronically? |
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If you hold your shares in your name as a shareholder of record,
you may vote by telephone or electronically through the Internet
by following the instructions included with your proxy card. |
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If your shares are held by your broker, bank or other nominee,
often referred to as held in street name, please
check your proxy card or contact your broker, bank or nominee to
determine whether you will be able to vote by telephone or
electronically. |
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If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me? |
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Your broker, bank or other nominee will only be permitted to
vote your shares if you instruct your broker, bank or other
nominee how to vote. You should follow the procedures provided
by your broker, bank or other nominee regarding the voting of
your shares. If you do not instruct your broker, bank or other
nominee to vote your shares, your shares will not be voted and
the effect will be the same as a vote against the adoption of
the merger agreement and will not have an effect on the proposal
to adjourn the special meeting. |
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What do I do if I have money in the HCA Stock Fund of the
HCA 401(k) Plan? |
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If you have money invested in the HCA Stock Fund of the HCA
401(k) Plan, you do not actually own shares of HCA Common Stock.
You are instead credited with equivalent shares, which consist
of your interest in both shares of HCA Common Stock and cash
that are held by the HCA Stock Fund of the 401(k) Plan. The
number of equivalent shares you hold on any given day is equal
to your interest in the value of the HCA Common Stock and the
cash held by the HCA Stock Fund, divided by the closing market
price per share of HCA Common Stock on the NYSE on that day. |
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In accordance with the 401(k) Plan, the shares held in the HCA
Stock Fund are typically voted at the direction of our plan
administration committee, which is made up of certain members of
our management, and not by individual plan participants.
However, the plan administration committee has determined to
engage an independent fiduciary to vote the shares held in the
HCA Stock Fund in connection with the merger. Additionally, the
plan administration committee has decided to offer participants
pass-through voting rights based on a participants
interest or equivalent shares in the HCA
Stock Fund. You may exercise these pass-through voting rights
only by completing and returning the voting instruction card for
participants in the HCA Stock Fund of the HCA 401(k) Plan you
received with this proxy statement in accordance with the
procedures included therewith, or by following the instructions
for voting by telephone or the Internet described in the voting
instruction card, and before the deadline noted below. If
your voting instructions are received by 6:00 a.m., local
time, in Nashville, Tennessee
on ,
2006, the independent fiduciary will submit a proxy that
reflects your instructions. If your voting instructions are not
received by the date and time specified above, the independent
fiduciary will vote the shares of HCA Common Stock allocable to
your interest in the HCA Stock Fund in accordance with its
independent and sole discretion, and all such shares will be
voted in the same manner. Your voting instructions will be
kept confidential as required by the terms of the HCA 401(k)
Plan. You may not vote in person at the special meeting. |
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What do I do if I receive more than one proxy or set of
voting instructions? |
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If you also hold shares in street name, directly as
a record holder or otherwise through the Companys stock
purchase plans, or if you have money invested in the HCA Stock
Fund of the HCA 401(k) Plan, you may receive more than one proxy
and/or set of voting instructions relating to the special
meeting. These should each be voted and/or returned
separately as described elsewhere in this proxy statement in
order to ensure that all of your shares are voted. |
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How are votes counted? |
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For the proposal to adopt the merger agreement, you may
vote FOR, AGAINST or ABSTAIN. Abstentions will not be
counted as votes cast or shares voting on the proposal to adopt
the merger agreement, but will count for the purpose of
determining whether a quorum is present. If you abstain, it will
have the same effect as if you vote against the adoption of the
merger agreement. In addition, |
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if your shares are held in the name of a broker, bank or other
nominee, your broker, bank or other nominee will not be entitled
to vote your shares in the absence of specific instructions.
These non-voted shares, or broker non-votes, will be
counted for purposes of determining a quorum, but will have the
same effect as a vote against the adoption of the merger
agreement. |
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For the proposal to adjourn the special meeting, if necessary,
to solicit additional proxies, you may vote FOR, AGAINST or
ABSTAIN. Abstentions and broker non-votes will count for the
purpose of determining whether a quorum is present, but
abstentions and broker non-votes will not count as shares
present and entitled to vote on the proposal to adjourn the
meeting. As a result, abstentions and broker non-votes will have
no effect on the vote to adjourn the meeting, which requires the
vote of the holders of a majority of the shares of HCA Common
Stock present or represented by proxy at the meeting and
entitled to vote on the matter. |
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If you sign your proxy card without indicating your vote, your
shares will be voted FOR the adoption of the merger
agreement and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies, and in
accordance with the recommendations of our board of directors on
any other matters properly brought before the special meeting
for a vote. |
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Who will count the votes? |
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A representative of our transfer agent, National City Bank, will
count the votes and act as an inspector of election. Questions
concerning stock certificates or other matters pertaining to
your shares may be directed to National City Bank at
1-800-622-6757. |
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When is the merger expected to be completed? What is the
marketing period? |
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We are working toward completing the merger as quickly as
possible, and we anticipate that it will be completed in the
fourth quarter of 2006. In order to complete the merger, we must
obtain shareholder approval and the other closing conditions
under the merger agreement must be satisfied or waived (as
permitted by law). In addition, Parent is not obligated to
complete the merger until the expiration of a 20-business day
marketing period that it may use to complete its
financing for the merger. The marketing period begins to run
after we have obtained the shareholder approval and satisfied
other conditions under the merger agreement; provided that if
the marketing period would not end on or before
December 19, 2006, the marketing period will commence no
earlier than January 2, 2007. See The Merger
Agreement Marketing Period and The
Merger Agreement Conditions to the Merger
beginning on pages 68 and 69, respectively. |
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Should I send in my stock certificates now? |
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No. After the merger is completed, you will be sent a
letter of transmittal with detailed written instructions for
exchanging your HCA Common Stock certificates for the merger
consideration. If your shares are held in street
name by your broker, bank or other nominee you will
receive instructions from your broker, bank or other nominee as
to how to effect the surrender of your street name
shares in exchange for the merger consideration. Please do
not send your certificates in now. |
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How can I obtain additional information about HCA? |
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We will provide a copy of our Annual Report to Shareholders
and/or our Annual Report on
Form 10-K for the
year ended December 31, 2005, excluding certain of its
exhibits, and other filings, including our reports on
Form 10-Q, with the Securities and Exchange Commission
(SEC) without charge to any shareholder who makes a
written or oral request to the Office of Investor Relations, HCA
Inc., One Park Plaza, Nashville, Tennessee 37203;
(615) 344-9551.
Our Annual Report on
Form 10-K and
other SEC filings also may be accessed on the world wide web at
http://www.sec.gov or on the Investor Relations page of the
Companys website at http://www.hcahealthcare.com. Our
website address is provided as an inactive textual reference
only. |
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The information provided on our website is not part of this
proxy statement, and therefore is not incorporated by reference.
For a more detailed description of the information available,
please refer to Where You Can Find More Information
beginning on page 92. |
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Q. |
Who can help answer my questions? |
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A. |
If you have additional questions about the merger after reading
this proxy statement, please call our proxy solicitor, Georgeson
Inc., toll-free at (888) 264-7052 (banks and brokerage firms
call collect at (212) 440-9800). |
13
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in
this proxy statement, contain forward-looking statements based
on estimates and assumptions. Forward-looking statements include
information concerning possible or assumed future results of
operations of the Company, the expected completion and timing of
the merger and other information relating to the merger. There
are forward-looking statements throughout this proxy statement,
including, without limitation, under the headings Summary
Term Sheet, Special Factors, Important
Information About HCA Projected Financial
Information and in statements containing the words
believes, plans, expects,
anticipates, intends,
estimates or other similar expressions. You should
be aware that forward-looking statements involve known and
unknown risks and uncertainties. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable, we cannot assure you that the actual results or
developments we anticipate will be realized, or even if
realized, that they will have the expected effects on the
business or operations of the Company. These forward-looking
statements speak only as of the date on which the statements
were made and we undertake no obligation to publicly update or
revise any forward-looking statements made in this proxy
statement or elsewhere as a result of new information, future
events or otherwise. In addition to other factors and matters
contained or incorporated in this document, we believe the
following factors could cause actual results to differ
materially from those discussed in the forward-looking
statements:
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the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement; |
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the outcome of any legal proceedings that have been or may be
instituted against HCA and others relating to the merger
agreement; |
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the inability to complete the merger due to the failure to
obtain shareholder approval or the failure to satisfy other
conditions to consummation of the merger; |
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the failure to obtain the necessary debt financing arrangements
set forth in commitment letters received in connection with the
merger; |
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the failure of the merger to close for any other reason; |
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risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention
as a result of the merger; |
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the effect of the announcement of the merger on our customer
relationships, operating results and business generally; |
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the ability to recognize the benefits of the merger; |
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the amount of the costs, fees, expenses and charges related to
the merger and the actual terms of certain financings that will
be obtained for the merger; |
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the impact of the substantial indebtedness incurred to finance
the consummation of the merger; |
and other risks detailed in our current filings with the SEC,
including our most recent filings on
Form 10-Q
and 10-K. See
Where You Can Find More Information beginning on
page 92. Many of the factors that will determine our future
results are beyond our ability to control or predict. In light
of the significant uncertainties inherent in the forward-looking
statements contained herein, readers should not place undue
reliance on forward-looking statements, which reflect
managements views only as of the date hereof. We cannot
guarantee any future results, levels of activity, performance or
achievements. The statements made in this proxy statement
represent our views as of the date of this proxy statement, and
it should not be assumed that the statements made herein remain
accurate as of any future date. Moreover, we assume no
obligation to update forward-looking statements or update the
reasons that actual results could differ materially from those
anticipated in forward-looking statements, except as required by
law.
14
THE PARTIES TO THE MERGER
HCA
HCA is a Delaware corporation with its headquarters in
Nashville, Tennessee. We are one of the leading health care
services companies in the United States. HCA is a holding
company whose affiliates own and operate hospitals and related
health care entities. The term affiliates includes
direct and indirect subsidiaries of HCA and partnerships and
joint ventures in which such subsidiaries are partners. As of
June 30, 2006, we operated 176 hospitals, 92 freestanding
surgery centers and facilities which provided extensive
outpatient and ancillary services. Affiliates of HCA are also
partners in joint ventures that own and operate seven hospitals
and nine freestanding surgery centers which are accounted for
using the equity method. Our facilities are located in
21 states, England and Switzerland.
HCAs primary objective is to provide the communities we
serve a comprehensive array of quality health care services in
the most cost-effective manner possible. Our general, acute care
hospitals typically provide a full range of services to
accommodate such medical specialties as internal medicine,
general surgery, cardiology, oncology, neurosurgery, orthopedics
and obstetrics, as well as diagnostic and emergency services.
Outpatient and ancillary health care services are provided by
our general, acute care hospitals, freestanding surgery centers,
diagnostic centers and rehabilitation facilities. Our
psychiatric hospitals provide a full range of mental health care
services through inpatient, partial hospitalization and
outpatient settings.
HCAs principal executive offices are located at One Park
Plaza, Nashville, Tennessee 37203, and our telephone number is
(615) 344-9551.
For more information about HCA, please visit our website at
www.hcahealthcare.com. Our website address is provided as an
inactive textual reference only. The information provided on our
website is not part of this proxy statement, and therefore is
not incorporated by reference. HCA is publicly traded on the
NYSE under the symbol HCA.
Parent
Hercules Holding II, LLC, which we refer to as Parent, is a
Delaware limited liability company that was formed solely for
the purpose of acquiring HCA. Parent has not engaged in any
business except as contemplated by the merger agreement. The
principal office addresses of Parent are c/o Bain Capital
Partners, LLC, 111 Huntington Avenue, Boston,
MA 02199, c/o Kohlberg Kravis Roberts & Co.
L.P., 2800 Sand Hill Road, Suite 200, Menlo Park,
CA 94025 and c/o Merrill Lynch Global Private Equity,
Four World Financial Center, Floor 23, New York, NY
10080. The telephone number at each of the principal offices is
(617) 516-2000, (650) 233-6560 and
(212) 449-1000, respectively.
Merger Sub
Hercules Acquisition Corporation, which we refer to as Merger
Sub, is a Delaware corporation that was formed solely for the
purpose of completing the proposed merger. Upon the consummation
of the proposed merger, Hercules Acquisition Corporation will
cease to exist and HCA will continue as the surviving
corporation. Hercules Acquisition Corporation is wholly-owned by
Parent and has not engaged in any business except as
contemplated by the merger agreement. The principal office
addresses of Merger Sub are c/o Bain Capital Partners, LLC,
111 Huntington Avenue, Boston, MA 02199,
c/o Kohlberg Kravis Roberts & Co. L.P.,
2800 Sand Hill Road, Suite 200, Menlo Park,
CA 94025 and c/o Merrill Lynch Global Private Equity,
Four World Financial Center, Floor 23, New York, NY
10080. The telephone number at each of the principal offices is
(617) 516-2000, (650) 233-6560 and
(212) 449-1000, respectively.
Additional information concerning these transaction participants
is set forth on Annex E to this proxy statement.
15
THE SPECIAL MEETING
This proxy statement is furnished in connection with the
solicitation of proxies by our board of directors in connection
with the special meeting of our shareholders relating to the
merger.
Date, Time and Place of the Special Meeting
The special meeting is scheduled to be held as follows:
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Place: |
One Park Plaza
Nashville, Tennessee 37203 |
Proposals to be Considered at the Special Meeting
At the special meeting, you will be asked to vote on a proposal
to adopt the merger agreement, and to approve the adjournment of
the special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the meeting to adopt the merger agreement. A copy of the
merger agreement is attached as Annex A to this proxy
statement.
Record Date
We have fixed the close of business on October 6, 2006 as
the record date for the special meeting, and only holders of
record of voting HCA Common Stock on the record date are
entitled to vote at the special meeting. On the record date,
there
were shares
of HCA Common Stock outstanding and entitled to vote.
Voting Rights; Quorum; Vote Required for Approval
Each share of voting HCA Common Stock entitles its holder to one
vote on all matters properly coming before the special meeting.
The presence in person or representation by proxy of
shareholders entitled to cast a majority of the votes of all
issued and outstanding shares entitled to vote, shall constitute
a quorum for the purpose of considering the proposals. Shares of
voting HCA Common Stock represented at the special meeting but
not voted, including shares of HCA Common Stock for which
proxies have been received but for which shareholders have
abstained, will be treated as present at the special meeting for
purposes of determining the presence or absence of a quorum for
the transaction of all business. In the event that a quorum is
not present at the special meeting, it is expected that the
meeting will be adjourned or postponed to solicit additional
proxies.
Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of HCA
Common Stock entitled to vote on the matter. For the proposal to
adopt the merger agreement, you may vote FOR, AGAINST or
ABSTAIN. Abstentions will not be counted as votes cast or shares
voting on the proposal to adopt the merger agreement, but will
count for the purpose of determining whether a quorum is
present. If you abstain, it will have the same effect as if
you vote against the adoption of the merger agreement. In
addition, if your shares are held in the name of a broker, bank
or other nominee, your broker, bank or other nominee will not be
entitled to vote your shares in the absence of specific
instructions. These non-voted shares, or broker
non-votes, will be counted for purposes of determining a
quorum, but will have the same effect as a vote against the
adoption of the merger agreement. Your broker, bank or
nominee will vote your shares only if you provide instructions
on how to vote by following the instructions provided to you by
your broker, bank or nominee.
The proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the outstanding
shares of HCA Common
16
Stock present or represented by proxy at the special meeting and
entitled to vote on the matter. For the proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies, you may vote FOR, AGAINST or ABSTAIN.
Abstentions and broker non-votes will count for the purpose of
determining whether a quorum is present, but abstentions and
broker non-votes will not count as shares present and entitled
to vote on the proposal to adjourn the meeting. As a result,
abstentions and broker non-votes will have no effect on the vote
to adjourn the special meeting, which requires the vote of the
holders of a majority of the shares of HCA Common Stock present
or represented by proxy at the meeting and entitled to vote on
the matter.
As of October 6, 2006, the record date, the directors and
executive officers of HCA (other than Dr. Frist) held and
are entitled to vote, in the
aggregate, shares
of HCA Common Stock, representing
approximately % of the outstanding
voting HCA Common Stock. The directors and executive officers
have informed HCA that they currently intend to vote all of
their shares of HCA Common Stock FOR the adoption of
the merger agreement and FOR the adjournment
proposal. In addition, the Frist Entities, representing
approximately % of the outstanding
shares of voting HCA Common Stock, have entered into an
agreement with the sponsors and certain other equity investors
to vote their shares in favor of adopting the merger agreement.
It is also the current intention of Dr. Frist and members
of his immediate family to vote other shares beneficially owned
by them, representing
approximately %
of the outstanding shares of the voting HCA Common Stock,
to adopt the merger agreement, other than approximately
109,000 shares that are held by a charitable foundation
formed by Dr. Frist which will not be voted in the merger.
If our directors (including persons related to Dr. Frist
and the Frist Entities) and executive officers vote their shares
in favor of adopting the merger
agreement, % of the outstanding
shares of voting HCA Common Stock will have voted for the
proposal to adopt the merger agreement. This means that
additional holders of
approximately % of all shares
entitled to vote at the special meeting would need to vote for
the proposal to adopt the merger agreement in order for it to be
adopted.
Voting and Revocation of Proxies
Shareholders of record may submit proxies by mail. Shareholders
who wish to submit a proxy by mail should mark, date, sign and
return the proxy card in the envelope furnished. If you hold
your shares in your name as a shareholder of record, you may
vote by telephone or electronically through the Internet by
following the instructions included with your proxy card.
Shareholders who hold shares beneficially through a nominee
(such as a bank or broker) may be able to submit a proxy by
mail, or by telephone or the Internet if those services are
offered by the nominee.
Proxies received at any time before the special meeting, and not
revoked or superseded before being voted, will be voted at the
special meeting. Where a specification is indicated by the
proxy, it will be voted in accordance with the specification. If
you sign your proxy card without indicating your vote, your
shares will be voted FOR the adoption of the merger
agreement and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies, and in
accordance with the recommendations of our board of directors on
any other matters properly brought before the special meeting
for a vote.
You have the right to revoke your proxy at any time before the
vote taken at the special meeting:
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if you hold your shares in your name as a shareholder of record,
by notifying our Vice President and Corporate Secretary, John M.
Franck II, at One Park Plaza, Nashville, Tennessee 37203; |
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by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy; you must vote in person at the meeting); |
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by submitting a later-dated proxy card; or |
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if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions. |
17
Please do not send in your stock certificates with your proxy
card. When the merger is completed, a separate letter of
transmittal will be mailed to you that will enable you to
receive the merger consideration.
Rights of Shareholders Who Object to the Merger
Shareholders of HCA are entitled to appraisal rights under
Delaware law in connection with the merger. This means that you
are entitled to have the value of your shares determined by the
Delaware Court of Chancery and to receive payment based on that
valuation. The ultimate amount you receive as a dissenting
shareholder in an appraisal proceeding may be more than, the
same as or less than the amount you would have received under
the merger agreement.
To exercise your appraisal rights, you must submit a written
demand for appraisal to the Company before the vote is taken on
the merger agreement and you must not vote in favor of the
adoption of the merger agreement. Your failure to follow exactly
the procedures specified under Delaware law will result in the
loss of your appraisal rights. See Dissenters Rights
of Appraisal beginning on page 76 and the text of the
Delaware appraisal rights statute reproduced in its entirety as
Annex D.
Solicitation of Proxies
This proxy solicitation is being made and paid for by HCA on
behalf of its board of directors. In addition, we have retained
Georgeson Inc. to assist in the solicitation. We will pay
Georgeson Inc. approximately $20,000 plus
out-of-pocket expenses
for their assistance. Our directors, officers and employees may
also solicit proxies by personal interview, mail,
e-mail, telephone,
facsimile or other means of communication. These persons will
not be paid additional remuneration for their efforts. We will
also request brokers and other fiduciaries to forward proxy
solicitation material to the beneficial owners of shares of HCA
Common Stock that the brokers and fiduciaries hold of record. We
will reimburse them for their reasonable
out-of-pocket expenses.
In addition, we will indemnify Georgeson Inc. against any losses
arising out of that firms proxy soliciting services on our
behalf.
Other Business
We are not currently aware of any business to be acted upon at
the special meeting other than the matters discussed in this
proxy statement. Under our bylaws, business transacted at the
special meeting is limited to the purposes stated in the notice
of the special meeting, which is provided at the beginning of
this proxy statement. If other matters do properly come before
the special meeting, or at any adjournment or postponement of
the special meeting, we intend that shares of voting HCA Common
Stock represented by properly submitted proxies will be voted in
accordance with the recommendations of our board of directors.
Questions and Additional Information
If you have more questions about the merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please call our proxy solicitor, Georgeson Inc., toll-free at
(888) 264-7052
(banks and brokerage firms call collect at
(212) 440-9800),
or contact HCA in writing at our principal executive offices at
One Park Plaza, Nashville, Tennessee 37203, Attention: John M.
Franck II, Vice President and Corporate Secretary, or by
telephone at
(615) 344-9551.
Availability of Documents
The reports, opinions or appraisals referenced in this proxy
statement and filed as exhibits to the
Schedule 13E-3
filed by the Company concurrently with this proxy statement will
be made available for inspection and copying at the principal
executive offices of the Company during its regular business
hours by any interested holder of HCA Common Stock.
18
SPECIAL FACTORS
This discussion of the merger is qualified by reference to
the merger agreement, which is attached to this proxy statement
as Annex A. You should read the entire merger agreement
carefully as it is the legal document that governs the
merger.
Background of the Merger
The Company regularly reviews and evaluates its business
strategy and strategic alternatives with the goal of enhancing
shareholder value. As part of these reviews, management and the
board of directors on various occasions have received advice
from Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Merrill Lynch), one of the Companys financial
advisors. Merrill Lynch has advised the Company in connection
with various transactions over the last several years,
including, most recently, in connection with the Companys
repurchase of its outstanding shares in a modified
Dutch auction tender offer completed in November
2005.
Throughout early 2006, at the request of management, Merrill
Lynch reviewed with management various strategic alternatives
including potential acquisition opportunities (including
domestic for-profit and not-for-profit hospital providers,
international hospital providers and other ancillary healthcare
providers) and other financial alternatives for the Company,
including further leveraged recapitalizations. On April 5,
2006, Merrill Lynch met with management to discuss trends in
leveraged buyout transactions (including increased activity
within the private equity community and conditions in the
leveraged lending markets) and, based on managements
January 2006 projections, reviewed a hypothetical leveraged
buyout transaction involving the Company at a per share price
ranging from $55.00 to $59.00. The hypothetical transaction
assumed that the Company would perform in accordance with the
projections that had been provided by management to Merrill
Lynch in January 2006, assumed a leverage ratio of six times
debt to earnings before interest, taxes, depreciation and
amortization, and assumed that the Companys existing
$8.8 billion of public indebtedness would remain
outstanding. Management subsequently advised Merrill Lynch that
the January 2006 financial projections that Merrill Lynch had
used in its analysis had been revised downward by management in
light of the Companys operating results for the year to
date and provided these revised projections to Merrill Lynch.
After reviewing these revised projections, Merrill Lynch advised
management that, although a leveraged buyout transaction could
potentially be achieved based on the revised projections, the
transaction would likely be at a price range below the range
previously reviewed with management. The January 2006
projections, the revised projections provided to Merrill Lynch
in April 2006 and a further revised downward set of projections
prepared in May 2006 are all described below under
Important Information About HCA Projected
Financial Information.
Following the receipt of Merrill Lynchs advice that a
leveraged buyout transaction could potentially be achieved based
on the revised April projections, management decided that it
would be appropriate to explore further the feasibility of such
a transaction. On or about April 11, 2006, Dr. Frist
contacted a representative of Bain to discuss generally the
feasibility of a leveraged buyout transaction involving the
Company, the potential participation by management and
Dr. Frist in the transaction, and private equity firms with
the requisite resources and experience to participate in such a
transaction. On or about April 20, 2006, management
contacted representatives of Bain and KKR to set up a meeting
with members of management and Dr. Frist to explore further the
feasibility of a leveraged buyout transaction involving the
Company. Management contacted Bain and KKR because of the
reputations that Bain and KKR have as leading private equity
firms capable of completing large, complex leveraged buyout
transactions and, in part, because of Dr. Frists
investments in funds advised by Bain and managements and
Dr. Frists familiarity with KKR. On or around this
time, Merrill Lynch introduced management to Merrill Lynch
Global Private Equity, Merrill Lynchs private equity
affiliate.
On April 22, 23 and 24, 2006, the Company entered into
confidentiality agreements with each member of the sponsors.
On April 24, 2006, in response to managements and Dr.
Frists requests for a meeting, management, Dr. Frist
and Merrill Lynch met with representatives of the sponsors to
discuss, on a preliminary basis, the
19
feasibility of a leveraged buyout transaction of the Company by
the sponsors. Management and Dr. Frist assumed that they
would be required to participate with the sponsors in a
leveraged buyout transaction involving the Company. In
discussing the framework and possible structure of such a
transaction at the April 24 meeting, management and
Dr. Frist assumed a hypothetical capital structure for the
surviving corporation that included a contribution by management
and Dr. Frist of approximately $750 million to the
equity of the surviving corporation. Representatives of the
sponsors advised management and Dr. Frist that they would
perform a preliminary analysis and report to management and
Dr. Frist their conclusions regarding the feasibility of
such a transaction.
On May 3, 2006, representatives of the sponsors advised
management and Merrill Lynch of their preliminary conclusion
that an acquisition of the Company in a leveraged buyout
transaction was feasible and requested permission for the
sponsors and their potential financing sources to perform a due
diligence review of the Company so that the sponsors could
confirm this view and begin to formulate a proposal. On
May 4, 2006, management advised Mr. Frederick W.
Gluck, presiding director of the board of directors, and several
other directors individually, of the sponsors preliminary
view of the feasibility of a leveraged buyout transaction.
Mr. Gluck agreed with management that a special meeting of
the board of directors should be called to consider the matter.
At a special meeting of the board of directors held by telephone
on May 8, 2006, management advised the board of directors
of the discussions that had taken place to date with the
sponsors with respect to the exploration of the feasibility of a
possible leveraged buyout transaction involving the Company.
Management also advised the board of directors of the
sponsors request to perform due diligence to confirm their
preliminary view regarding the feasibility of such a
transaction. The board of directors was aware that
Dr. Frist and Messrs. Bovender and Bracken had met with
representatives of the sponsors regarding the feasibility of a
possible leveraged buyout transaction and that it would be
customary for management and Dr. Frist to participate in
such a transaction. For these reasons and because it was
customary for the board of directors to meet in executive
session for some portion of each meeting, Messrs. Bovender
and Bracken and Dr. Frist left the meeting, and the board
of directors met in executive session with a representative of
Bass, Berry & Sims PLC (Bass Berry), the
Companys regular corporate counsel, who reviewed the board
of directors fiduciary duties in connection with the
request of the sponsors. The board of directors then discussed
generally the strategic alternatives available to the Company,
including a leveraged buyout transaction. After discussion, the
board of directors determined to defer any decision on whether
to permit the sponsors to perform a due diligence review of the
Company until the May 24, 2006 regularly scheduled meeting
of the board of directors, in order to receive additional
information regarding all strategic alternatives available to
the Company.
A meeting of the board of directors was held on May 24,
2006. At the meeting, Dr. Frist and Messrs. Bovender
and Bracken excused themselves and the board of directors met in
executive session with a representative of Bass Berry who
reviewed the board of directors fiduciary duties in
connection with its evaluation of possible strategic
alternatives to be discussed at the meeting. Management and
Dr. Frist then rejoined the meeting and the board of
directors received a report from management on the
Companys
year-to-date operations
through April and conducted other regular business. The board of
directors continued its meeting on May 25, 2006, at which
representatives of Merrill Lynch reviewed with the board of
directors the strategic alternatives for the Company that
management, with the assistance of Merrill Lynch, had reviewed
since a meeting of the board of directors in
September 2005, the issues currently affecting the
healthcare industry generally as well as the Company, and
strategic alternatives for the Company going forward, including
continuing as a stand-alone company, or effecting acquisitions,
both in the United States and internationally, spin-offs or
divestitures of selected assets, additional stock repurchases, a
leveraged recapitalization or a leveraged buyout transaction. In
connection with the foregoing review, Merrill Lynch reviewed the
advantages and disadvantages to the Company of a number of
hypothetical transactions involving public and private
companies. Merrill Lynch noted that, despite the strategic
initiatives that the Company had taken over the last several
years, its valuation, along with that of its peers, had suffered
because of the key trends impacting the industry generally,
namely inconsistent revenues and increasing levels of bad debt
because of the increasing numbers of uninsured patients. Merrill
Lynch also noted that, because of the Companys size, it
was difficult to find actionable strategic
20
opportunities that could move the needle. Merrill
Lynch further noted that an open market repurchase strategy
would not substantially change the growth profile of the
Company, and that the Companys significant purchases of
its stock in the recent past had not proven to be a significant
long-term catalyst to higher stock prices. In connection with
its review of a possible, significant leveraged recapitalization
that would deliver a meaningful return to our shareholders,
Merrill Lynch noted that such a recapitalization would provide a
limited return given the increased cost of debt financing, would
make the Company vulnerable to a credit downgrade and would
curtail the Companys ability to execute significant
acquisitions for some period of time. Merrill Lynch also noted
that HCA as a private company could incur leverage substantially
greater than the leverage investors would likely find acceptable
for HCA as a public company. Messrs. Bovender and Bracken
and the representatives of Merrill Lynch were then excused from
the meeting, and Dr. Frist addressed the board of directors
regarding his views of the proposed transaction in light of his
long history with, and knowledge of the businesses of, the
Company and in his capacity as a founder of the Company. Dr.
Frist noted that the Companys earnings before interest,
taxes, depreciation and amortization and the Companys
stock price had both been relatively flat for the past several
years and that the proposed transaction would offer shareholders
an opportunity to immediately realize the value of their common
stock at a fair price. Dr. Frist also noted his view of the
disadvantages of HCAs public company status, in
particular, the complexity and expense of operating a public
company. Dr. Frist then excused himself from the meeting,
and the board of directors met in executive session with a
representative of Bass Berry. In executive session, the board of
directors discussed the strategic alternatives presented at the
meeting and discussed the sponsors request for permission
to perform due diligence on the Company so that the sponsors
could confirm their preliminary view regarding the feasibility
of a leveraged buyout transaction involving the Company. After
discussion, the board of directors met in executive session and,
after consideration of Merrill Lynchs presentation of the
Companys strategic alternatives, decided to allow the
sponsors and Banc of America Securities LLC (Banc of
America Securities), a potential financing source, to
undertake a due diligence investigation of the Company. As a
condition to their due diligence, the board of directors
required each sponsor to enter into a more extensive
confidentiality agreement, and Banc of America Securities to
enter into an appropriate confidentiality agreement, in each
case containing, among other things, standstill provisions. In
addition, the board of directors authorized Mr. Gluck in
his capacity as presiding director of the board of directors to
oversee the due diligence process and to report to the board of
directors on the process and any decisions made. The board of
directors also instructed management not to negotiate with the
sponsors representatives regarding the terms on which
management might participate with the sponsors in a transaction
involving the Company. In light of the possibility that the
Company might explore a leveraged buyout transaction in which
Dr. Frist and members of management might participate, the
board of directors also discussed at the May 25 executive
session the desirability of establishing a special committee
comprised of directors who were independent of the Company, the
sponsors, management and Dr. Frist. In connection with its
review of the strategic alternatives available to the Company at
the May 25 board of directors meeting, the board of directors
directed management to retain McKinsey & Company
(McKinsey) on behalf of the Company to analyze the
projections for the Company prepared by management in light of
McKinseys previous work for the Company and its expertise
in the healthcare industry generally.
The sponsors commenced a due diligence review of the Company on
May 26, 2006. As part of its due diligence, the sponsors
requested that the Company permit them to engage McKinsey as a
consultant. Mr. Gluck, acting for the board of directors,
denied this request but agreed that the results of
McKinseys analyses could be shared and discussed with the
sponsors.
On June 16, 2006, the board of directors met by telephone
in executive session without Dr. Frist and
Messrs. Bovender and Bracken and with a representative of
Bass Berry participating, and discussed further the desirability
of establishing a special committee comprised of directors who
were independent of the Company, the sponsors, management and
Dr. Frist. Mr. Gluck reviewed the steps he had taken,
in his capacity as presiding director, to prepare the board of
directors to meet its responsibilities in the event the
transaction was determined to be feasible and one that the board
of directors determined should be explored further, including
interviews of potential independent legal and financial advisors
who were experienced in advising special committees in similar
situations.
21
The sponsors requested that Citigroup Global Markets Inc.
(Citigroup), another potential financing source, be
permitted to conduct due diligence. Mr. Gluck, on behalf of
the board of directors, agreed provided that Citigroup would
agree not to, without the prior written consent of the Company,
enter into any exclusive agreement or arrangement with any
sponsor to provide or arrange financing in connection with a
possible transaction involving the Company. On June 26,
2006, Citigroup entered into a confidentiality agreement
containing that provision.
On June 30, 2006, the sponsors representatives
contacted management and stated that the sponsors had conducted
sufficient due diligence to confirm their view that a leveraged
buyout involving the Company was feasible and that the sponsors
expected to be in a position to determine whether to submit a
proposal regarding such a transaction by July 14, 2006. The
sponsors also requested the ability to include additional equity
and financing sources in the due diligence process as well as
the ability to engage in discussions with management and
Dr. Frist regarding their participation in such a
transaction.
At a special meeting of the board of directors held by telephone
on June 30, 2006, management advised the board of directors
about the sponsors conclusions and requests. In connection
with the sponsors request to engage in discussions with
management and Dr. Frist regarding a potential leveraged
buyout transaction involving the Company, management and
Dr. Frist advised the board of directors that they would be
prepared to discuss their participation in such a transaction.
The board of directors, acting in executive session without
Dr. Frist and Messrs. Bovender and Bracken
participating, established a special committee consisting of
Mr. Gluck (as Chairman), Mr. C. Michael Armstrong,
Mr. Charles O. Holliday, Jr., Mr. T. Michael Long
and Mr. Kent C. Nelson. The special committee was delegated
the full power and authority to, among other things, review,
evaluate and, if appropriate, negotiate a possible acquisition
of the Company by the sponsors and any alternatives thereto and,
as appropriate, reject or recommend to the full board of
directors a proposed transaction with the sponsors or any
alternative thereto.
Following the board of directors meeting on June 30, the
special committee held a telephonic meeting to consider the
retention of independent counsel and financial advisors.
Mr. Gluck noted that, as he had informed the board of
directors at its June 16 meeting, he had interviewed possible
legal and financial advisors. After discussion, the special
committee determined to engage Shearman & Sterling LLP
(Shearman & Sterling) as its legal advisor.
Representatives of Shearman & Sterling joined the
meeting and discussed the terms under which the special
committee might engage a financial advisor to the special
committee. Representatives of Credit Suisse were then invited to
join the meeting and, along with Shearman & Sterling,
discussed with the special committee certain preliminary matters
relating to the special committee process. The Credit Suisse
representatives then left the meeting, and, after discussion,
the special committee determined to engage Credit Suisse as its
financial advisor. In light of his role as a senior advisor to
our board of directors and his knowledge of the Company, and at
the request of the special committee, a senior representative of
Bass Berry agreed to be available to the special committee as
requested and to maintain confidential all matters relating to
the special committee, including the substance of any
deliberations and any process it may adopt in connection with
any possible transaction involving the Company. This senior
representative of Bass Berry attended this telephonic meeting on
June 30 and each meeting of the special committee thereafter.
A meeting of the special committee was held by telephone on
July 3, 2006. At the meeting, representatives of
Shearman & Sterling reviewed with the special committee
its fiduciary duties in connection with its consideration of a
possible proposal by the sponsors and all alternatives thereto.
The special committee also discussed with its advisors the
requests that had been made by the sponsors for the
Companys approval for discussions between the sponsors and
additional potential debt and equity sources, members of
management of the Company and Dr. Frist. After discussion,
the special committee determined that the sponsors should not be
permitted to approach additional debt or equity financing
sources at that time. The special committee also determined
that, provided that no exclusive arrangement be entered into
between the Frist family and the sponsors regarding a potential
transaction involving the Company, the sponsors should be
permitted to have preliminary discussions with Dr. Frist
regarding his support for a potential transaction and the terms
on which he and other members of his family might
22
participate in a potential transaction. The special committee
authorized management to engage at the Companys expense
legal counsel to represent management in connection with the
proposed transaction and determined that the sponsors could have
preliminary discussions with management regarding the general
terms on which management might participate in a transaction.
On July 5, 2006, at the request of the special committee,
management met with representatives of Credit Suisse in
Nashville and gave a presentation regarding the Companys
financial results and projections.
On July 7, 2006, Mr. Gluck had conversations with the
other members of the special committee regarding the
desirability of engaging Morgan Stanley as an additional
financial advisor to the special committee. The special
committee members agreed that the special committee should
engage Morgan Stanley as an additional financial advisor to the
special committee, because of the size and complexity of the
potential transaction.
On July 10, 2006, Mr. Armstrong submitted his
resignation from the special committee in order to avoid any
appearance of a possible conflict of interest as a result of his
position as a director of Citigroup, which had been identified
as a potential financing source for the sponsors. On
July 11, 2006, the board of directors of the Company
appointed Ms. Glenda A. Hatchett to the special committee
to replace Mr. Armstrong.
On July 11, 2006, representatives of Credit Suisse and
Shearman & Sterling met with representatives of
McKinsey to review McKinseys analyses to date of the
Company and its prospects, which analyses are summarized under
Important Information About HCA Projected
Financial Information beginning on page 83. Also on
July 11, 2006, representatives of Credit Suisse, Morgan
Stanley and Shearman & Sterling met with
representatives of the sponsors, Merrill Lynch and Citigroup as
well as the sponsors legal advisors, at Credit
Suisses offices in New York. During the meeting,
representatives of the sponsors made a presentation to
representatives of Credit Suisse, Morgan Stanley and
Shearman & Sterling regarding their views of the
Companys prospects and strategic alternatives. In
particular, the sponsors noted that they believed that the
Company was operating in a challenging environment, that its
growth had decelerated, and that it lacked actionable strategic
alternatives that could drive shareholder value. The sponsors
also noted that the Companys earnings per share over the
past several years had frequently been below Wall Street
consensus and that analysts were increasingly focused on the
impact of insurance gains and reserve reversals on the
Companys earnings per share. The sponsors discussed their
views of the present value of the Companys future stock
price through 2009, and noted that McKinseys view of the
projected growth in earnings of the Company through 2009 was
less optimistic than managements projections. The sponsors
also discussed their views regarding the likely trading ranges
of the Companys stock in light of the Companys
preliminary second quarter results and prospects for the
remainder of 2006 and 2007.
A meeting of the special committee was held by telephone on the
evening of July 11. At the meeting, the special committee
reviewed with its financial and legal advisors the process under
which the special committee would receive and respond to a
proposal from the sponsors. The special committee noted the
advantages of reaching a decision regarding whether to proceed
with a transaction with the sponsors before the date on which
the Company expected to announce its second quarter results
(which on the basis of preliminary results the special committee
understood would not meet Wall Street expectations), and of
avoiding the disruption to the Company and its operations that
would occur following the public announcement by the Company of
its receipt of a proposal from the sponsors if such a proposal,
and any ensuing proposals, were unacceptable to the special
committee. In light of these advantages, the special committee
determined to pursue a process whereby any proposal by the
sponsors would be considered by the special committee and, if
acceptable to the special committee, would be negotiated prior
to, and any definitive agreement in connection with such
proposal would be announced simultaneously with, the
Companys announcement of its second quarter results. The
special committee also discussed that it would be willing to
proceed with a process on this basis only if the financial and
other terms of the proposal were sufficiently attractive to the
special committee, including that the special committee would
retain the
23
ability to solicit and accept alternative proposals for the
acquisition of the Company even after the execution of a
definitive agreement with the sponsors. The special committee
authorized its advisors to pursue this process with the advisors
to the sponsors. In response to the request made by the sponsors
to representatives of the special committee, the special
committee also authorized the sponsors to approach JPMorgan
Chase Bank about possible participation as a financing source,
provided that JPMorgan Chase Bank would agree not to, without
the prior written consent of the Company, enter into any
exclusive agreement or arrangement with any sponsor to provide
or arrange financing in connection with a possible transaction
involving the Company.
Also at the July 11 meeting, the special committee formally
approved the engagement of Morgan Stanley as a second financial
advisor to the special committee, which engagement had been
agreed by the special committee on July 7, 2006.
Following their respective retentions, each of Credit Suisse,
Morgan Stanley and Shearman & Sterling conducted a due
diligence review of the Company, including meetings and
discussions with various members of senior management of the
Company.
On July 14, 2006, representatives of Credit Suisse and
Morgan Stanley met with management to review various strategic
alternatives that might be available to the Company, and
representatives of Shearman & Sterling and of Simpson
Thacher & Bartlett LLP (Simpson), counsel
to the sponsors, discussed the principal terms of a potential
merger agreement that might be entered into in the event the
special committee determined to pursue a proposal by the
sponsors. Also on July 14, representatives of Merrill Lynch
informed representatives of Credit Suisse that the sponsors
would be prepared to submit a proposal to acquire the Company
for $48.75 per share in cash, subject to negotiation of an
acceptable merger agreement, the ability of the sponsors to
arrange financing on acceptable terms and the ability of the
sponsors to reach acceptable arrangements with members of senior
management and Dr. Frist.
An all-day meeting of the special committee was held on
July 17, 2006 at the offices of Shearman &
Sterling in New York. At the meeting, representatives of
Shearman & Sterling again reviewed with the special
committee its fiduciary duties in connection with its
consideration of a possible proposal by the sponsors and all
alternatives thereto, and representatives of Credit Suisse
reported on the July 14 conversation with Merrill Lynch.
Messrs. Bovender, Bracken and Johnson, members of senior
management of the Company, then joined the meeting and provided
the special committee with a report on the Companys
financial results through June 30, 2006. McKinsey then
reviewed with the special committee its analyses of the
Companys growth prospects over the next three years, which
forecasted EBITDA growth through 2009 that was lower than
managements forecast for the same period (see
Important Information About HCA Projected
Financial Information).
At the July 17 meeting, representatives of Credit Suisse
and Morgan Stanley provided the special committee with an
assessment of various strategic alternatives available to the
Company and reviewed with the special committee their
preliminary financial analyses. In reviewing the strategic
alternatives available to the Company, representatives of Credit
Suisse and Morgan Stanley discussed recent operational and
financial initiatives of the Company; that there were a limited
number of opportunities to grow the Company through acquisitions
given the Companys size relative to possible targets; that
spin-offs or
divestitures of underperforming assets could create value but
that there may be potential for dissynergies upon separation of
assets; that a leveraged recapitalization could create an
immediate return of capital to shareholders but could reduce the
financial flexibility of the Company due to higher leverage
levels; and that there were a limited number of potential
strategic acquirers to which the Company could be sold or
merged, and that the Company could be subject to significant
risks if such a transaction did not close. After discussion, the
special committee instructed its advisors to inform
representatives of the sponsors that the special committee would
not be prepared to pursue a proposal unless it was at a
significantly higher price than the $48.75 per share price
proposed by the sponsors, that the price proposed by the
sponsors did not reflect the long term value of the Company or
provide sufficient value to shareholders as compared to other
alternatives and that, unless the sponsors were prepared to make
a proposal at a significantly higher
24
price, the special committee would terminate discussions with
the sponsors and instruct management to proceed with its plans
to announce the Companys second quarter earnings.
Immediately after the July 17 meeting, the special
committees advisors informed the sponsors
representatives of the special committees position.
On July 18, 2006, representatives of the sponsors contacted
representatives of Credit Suisse by telephone and informed them
that the sponsors would be willing to submit a proposal for a
sale of the Company at $50.50 per share, subject to the
same conditions as their prior indication. Credit Suisse
reported the sponsors increased price indication at a
meeting of the special committee held by telephone shortly
thereafter. Dr. Frist had asked for an opportunity to
present to the special committee his views of the proposed
transaction in light of his long history with, and knowledge of
the businesses of, the Company and in his capacity as a founder
of the Company. The special committee, in response to this
request, permitted Dr. Frist to join the meeting by
telephone. He joined the meeting briefly to review with the
special committee the reasons why he thought the Company should
be taken private at this time, assuming that the price to be
paid in such transaction was fair, including that the
Companys earnings before interest, taxes, depreciation and
amortization and the Companys stock price had both been
relatively flat for the past several years and that the proposed
transaction would offer shareholders an opportunity to
immediately realize the value of their common stock at a fair
price. Dr. Frist also noted his view of the disadvantages
of HCAs public company status, in particular, the emphasis
placed by public markets on short-term returns and the
complexity and expense of operating a public company.
Dr. Frist then left the meeting. The special committee
returned immediately to its previous discussion with its
advisors regarding the revised indication from the sponsors.
After this discussion, the special committee instructed its
advisors to inform the representatives of the sponsors that the
special committee would not pursue a proposal at $50.50 per
share, but would consider a proposal at $52.00 per share.
In the evening on July 18, representatives of Merrill Lynch
contacted the special committees advisors and informed
them that the sponsors would be prepared to submit their
best and final offer of $50.75 per share,
subject to the same conditions as their prior indication. The
special committee reconvened its meeting to discuss the revised
price indication. After discussion, the special committee
instructed its advisors to tell the sponsors
representatives that the special committee would only be
prepared to pursue a proposal at $51.00 per share. Later in
the evening on July 18, representatives of the sponsors
contacted the special committees advisors and informed
them that the sponsors would be willing to submit a proposal for
the Company at $51.00 per share, subject to the same
conditions as their prior indication.
A telephonic meeting of the special committee was held the
morning of July 19, 2006. At the meeting, the special
committees advisors updated the special committee
regarding the sponsors willingness to submit a proposal at
$51.00 per share. In light of this information, the special
committee authorized its legal and financial advisors to
continue discussions with the sponsors representatives to
determine whether a definitive agreement could be reached. The
sponsors were also authorized to commence discussions with
management and Dr. Frist regarding the specific terms of
their participation in a potential transaction.
On July 19, 2006, Simpson delivered an initial draft of a
merger agreement to Shearman & Sterling.
Shearman & Sterling delivered comments on the draft
merger agreement to Simpson on July 21, 2006.
During the period from July 21 through July 23, 2006, the
parties negotiated the terms of the draft merger agreement and
the separate guarantee agreements to be entered into by the
funds sponsored by Bain, KKR and Merrill Lynch Global Private
Equity and the Frist Entities, under which the funds and the
Frist Entities would guarantee the payment of the termination
fee payable by Parent and Merger Sub under the merger agreement
in certain circumstances. In addition, during the period from
July 20 through July 23, 2006, management, the sponsors and
legal counsel for management negotiated the terms on which
management would participate in the transaction, including
employment terms, severance, investment commitment, incentive
equity and continuing representation on the board of directors
of the surviving corporation. During these negotiations, the
sponsors indicated that it was critical to their willingness to
25
proceed with the proposed transaction that certain members of
the Senior Management Group (as defined on page 55 of this proxy
statement) reach preliminary agreement with the sponsors
regarding their participation in the transaction. During the
same period, the sponsors and legal counsel to Dr. Frist
negotiated the terms on which Dr. Frist would participate
in the transaction, including the Frist Entities rollover
equity commitment and representation on the board of directors
of Parent. As instructed by the special committee, the
management discussions were conditioned on managements
agreement that it would not commit to be exclusive to the
sponsors, and accordingly would be available to enter into
similar discussions and arrangements with any subsequent bidder
for the Company.
At a meeting of the special committee held at
Shearman & Sterlings offices in New York on
July 23, 2006, representatives of Shearman &
Sterling reviewed with the special committee its fiduciary
duties, the terms of the merger agreement and guarantees, and
the issues in the merger agreement that remained open. The
special committee gave guidance to Shearman & Sterling
as to how to respond to these issues, in particular with respect
to the length of the go-shop period, and related termination fee
provisions, including that the Company should be required to pay
a lower termination fee to the sponsors if it accepted an
alternative superior proposal that had been made during the
go-shop period, as opposed to the termination fee payable by the
Company and the sponsors under other circumstances. Also at the
July 23 meeting, representatives of Credit Suisse and Morgan
Stanley reviewed with the special committee their financial
analyses of the $51.00 per share merger consideration and
again reviewed with the special committee the strategic
alternatives for the Company that had been reviewed in detail
with the special committee at the July 17, 2006 meeting.
Following the financial advisors presentation, the special
committee adjourned its meeting until later in the day to allow
its legal advisors to negotiate with the sponsors
representatives regarding the outstanding merger agreement
issues.
Over the course of the day on July 23, 2006, the parties
and their respective advisors finalized the terms of the merger
agreement. At the reconvened meeting of the special committee on
July 23, Shearman & Sterling described how the
principal unresolved issues discussed earlier in the day had
been resolved, as well as the terms on which management and
Dr. Frist would participate in the transaction. Each of
Credit Suisse and Morgan Stanley rendered to the special
committee an oral opinion, which opinion was subsequently
confirmed in writing, to the effect that, as of that date and
based upon and subject to the assumptions, limitations,
qualifications and other matters described in its opinion, the
merger consideration was fair, from a financial point of view,
to the unaffiliated shareholders. After considering the proposed
terms of the merger agreement and other transaction agreements
and the various presentations of its legal and financial
advisors, the special committee unanimously resolved to
recommend that the board of directors approve and declare
advisable the merger agreement and the merger and that the board
of directors resolve to recommend that the Companys
shareholders adopt the merger agreement.
The Companys board of directors met thereafter and
received the same presentation from management as management had
made to the special committee on July 17, 2006. In
addition, McKinsey gave to the board of directors the same
presentation that it had given to the special committee on July
17. The board of directors (excluding Dr. Frist and
Messrs. Bovender, Bracken and Armstrong) then received
presentations from the special committees legal and
financial advisors, as well as the recommendation of the special
committee. Following these presentations and discussions among
the members of the board of directors and their advisors,
members of the board of directors determined to adjourn until
early in the morning of July 24.
The Companys board of directors (excluding Dr. Frist
and Messrs. Bovender, Bracken and Armstrong) met again
early in the morning of July 24, 2006. Following
discussions among and questions by the members of the board of
directors to the special committees financial and legal
advisors, the Companys board of directors, by unanimous
action of the directors present, approved and declared advisable
the merger agreement and the merger and resolved to recommend
that the Companys shareholders adopt the merger agreement.
After the July 24 meeting of the Companys board of
directors, the Company, Parent and Merger Sub executed the
merger agreement and issued a press release announcing the
merger and describing the go-shop period prior to the opening of
trading on the NYSE.
26
During the period from July 24, 2006 through
September 12, 2006, under the supervision of the special
committee, representatives of Credit Suisse and Morgan Stanley
contacted parties that they believed, based on size and business
interests, would be capable of, and might be interested in,
consummating an acquisition of the Company. During this period,
Credit Suisse and Morgan Stanley contacted or were contacted by
twenty-three parties. As of the date of this proxy statement, no
party has submitted a proposal to pursue a transaction involving
the Company.
Reasons for the Merger; Recommendation of the Special
Committee and of Our Board of Directors; Fairness of the
Merger
The special committee, acting with the advice and assistance of
its independent legal and financial advisors, evaluated and
negotiated the merger proposal, including the terms and
conditions of the merger agreement, with Parent and Merger Sub.
The special committee unanimously determined that the merger
agreement and the transactions contemplated thereby, including
the merger, are advisable, fair to and in the best interests of
the Company and our unaffiliated shareholders and recommended to
our board of directors that (i) the board of directors
approve and declare advisable the merger agreement and the
transactions contemplated thereby, including the merger and
(ii) the board of directors recommend the adoption by our
shareholders of the merger agreement.
In the course of reaching its determination, the special
committee considered the following substantive factors and
potential benefits of the merger, each of which the special
committee believed supported its decision:
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its belief that the merger was more favorable to unaffiliated
shareholders than the alternative of remaining a stand-alone,
independent company, because of the uncertain returns to such
shareholders if the Company remained independent in light of the
Companys business, operations, financial condition,
strategy and prospects (taking into account, in particular,
managements financial projections of the future financial
performance and earnings of the Company (see Important
Information About HCA Projected Financial
Information); recent industry trends, as discussed with
McKinsey, management and the special committees financial
advisors; McKinseys analyses, which forecasted earnings
before interest, taxes, depreciation and amortization growth
through 2009 that was lower than managements forecast for
the same period (see Important Information About
HCA Projected Financial Information); and the
analyses reviewed with the special committees financial
advisors on July 17, 2006), as well as the risks involved
in achieving those returns, the nature of the industry in which
the Company competes, and general industry, economic, market and
regulatory conditions, both on an historical and on a
prospective basis; |
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its belief that the merger was more favorable to unaffiliated
shareholders than the potential value that might result from
other alternatives available to the Company, including the
alternatives of pursuing other strategic initiatives such as
additional stock repurchases, spin-offs or divestitures of
selected assets, potential acquisitions or a leveraged
recapitalization, given the potential rewards, risks and
uncertainties associated with those alternatives, as reviewed
with the special committees financial advisors on
July 17, 2006 (see Special FactorsBackground of
the Merger beginning on page 19); |
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the special committees belief that $51.00 per share
was at the high end of the range that could be payable in a
leveraged buyout transaction involving the Company, as reviewed
by Credit Suisse and Morgan Stanley with the special committee
in connection with their financial analyses described in
Opinions of Financial Advisors Financial
Analyses; |
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the fact that the Companys performance during the second
quarter of 2006, and its prospects for the remainder of 2006 and
2007, could result in a decrease in the Companys stock
price, at least in the short to medium term; |
27
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McKinseys analysis that the Companys EBITDA growth
through 2009 would be lower than that currently being forecast
by management and that, while improvements in the Companys
operating performance could yield EBITDA results in excess of
those forecast by either McKinsey or management, the achievement
of such improvements was uncertain and would be subject to
execution risk (see Important Information About
HCA Projected Financial Information); |
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the current and historical market prices of the HCA Common
Stock, including the market price of the HCA Common Stock
relative to those of other industry participants and general
market indices, including the fact that the Company has
generally traded in-line with other industry participants and
that the stock price performance of the Company and other
industry participants had declined as compared to the S&P
500 Index since the second quarter of 2005; the fact that the
cash merger price of $51.00 per share represented a premium
of approximately 18% to the closing share price of the HCA
Common Stock on July 18, 2006, the last trading day prior
to press reports of rumors regarding a potential acquisition of
the Company, and the special committees belief that the
cash merger price of $51.00 per share would represent a
greater premium to the Companys stock price following the
announcement of the Companys second quarter earnings; |
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the information contained in the financial presentations of
Credit Suisse and Morgan Stanley, including the separate
opinions of Credit Suisse and Morgan Stanley as to the fairness,
from a financial point of view, to the unaffiliated
shareholders, of the merger consideration to be received by such
holders in the merger (see Special Factors
Opinions of Financial Advisors); |
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the efforts made by the special committee and its advisors to
negotiate and execute a merger agreement favorable to the
Company; |
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the financial and other terms and conditions of the merger
agreement as reviewed by the special committee, including the
fact that the merger would not be subject to a financing
condition, and the fact that they were the product of
negotiations between the parties; |
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the fact that the merger consideration is all cash, so that the
transaction allows the Companys unaffiliated shareholders
to immediately realize a fair value, in cash, for their
investment and provides such shareholders certainty of value for
their shares; |
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the fact that the terms of the merger agreement provided the
Company a 50-day
post-signing go-shop period during which the Company solicited
additional interest in transactions involving the Company and,
after such 50-day
period, permit the Company to respond to unsolicited proposals
under certain circumstances (for additional information
regarding the results of the Companys solicitations during
the go-shop period see page 27 of this proxy statement in
the section Background of the Merger); |
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the fact that, subject to compliance with the terms and
conditions of the merger agreement, the Company is permitted to
change its recommendation or terminate the merger agreement,
prior to the adoption of the merger agreement by our
shareholders, in order to approve an alternative transaction
proposed by a third party that is a superior
proposal as defined in the merger agreement, upon the
payment to Parent of: (i) a $300 million termination
fee (representing approximately 1.4% of the total equity value
of the transaction) in the event that such proposal was made
during the 50-day
go-shop period, or (ii) a $500 million termination fee
(representing approximately 2.4% of the total equity value of
the transaction) in the event that such proposal was made by a
third-party after the end of the go-shop period; |
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the fact that members of the Companys management who plan
to participate in the transaction did not commit to be exclusive
to the sponsors and are therefore available to enter into
discussions and arrangements with any subsequent bidder for the
Company, and the fact that Dr. Frist can, subject to
certain limitations, participate in due diligence discussions
with third parties who are contemplating making a proposal to
acquire the Company; |
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the availability of appraisal rights to holders of the HCA
Common Stock who comply with all of the required procedures
under Delaware law, which allows such holders to seek appraisal
of the fair value of their shares as determined by the Delaware
Court of Chancery; |
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the commitment made by Parent and Merger Sub to treat the
Companys employees in a fair and equitable manner,
including to provide (for one year from the effective date of
the merger) each employee of the Company with at least the same
level of salary or hourly wage rate, commission structure and
opportunities, and/or cash bonus opportunities under annual
programs (other than equity-based compensation or award
opportunities) that was provided to such employee immediately
prior to the merger and to provide employee severance, pension
and welfare benefits (other than equity-based benefits) to
employees that are no less favorable in the aggregate than those
provided to employees immediately prior to the merger; and |
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the fact that the Company would not have to establish damages in
the event of a failure of the merger to be consummated under
certain circumstances in light of the $500 million
termination fee payable by Parent. |
In addition, the special committee believed that sufficient
procedural safeguards were and are present to ensure the
fairness of the merger and to permit the special committee to
represent effectively the interests of the Companys
unaffiliated shareholders without retaining an unaffiliated
representative to act solely on behalf of the Companys
unaffiliated shareholders. The special committee considered a
number of factors relating to these procedural safeguards,
including those discussed below, each of which it believed
supported its decision and provided assurance of the fairness of
the merger to the unaffiliated shareholders of the Company:
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the fact that, other than for customary fees payable to members
of the special committee (that were not contingent on the
special committees recommendation of a transaction or the
consummation of a transaction), the directors (other than
Dr. Frist and Messrs. Bovender and Bracken) will not
receive any consideration in connection with the merger that is
different from that received by any other unaffiliated
shareholder of the Company; |
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the fact that negotiations were conducted under the oversight of
a special committee comprised solely of independent directors
who are not employees of the Company and who have no financial
interest in the merger that is different from that of the
unaffiliated shareholders of the Company; |
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the fact that the special committee retained and received advice
and assistance from its own independent financial and legal
advisors in evaluating, negotiating and recommending the terms
of the merger agreement; |
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the fact that the special committee had ultimate authority to
decide whether or not to proceed with a transaction or any
alternative thereto, subject to our board of directors
approval of the merger agreement; |
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the fact that the financial and other terms and conditions of
the merger agreement were the product of negotiations between
the special committee and its independent advisors, on the one
hand, and the sponsors and their advisors, on the other hand; |
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the fact that the opinions of Credit Suisse and Morgan Stanley
each address the fairness, from a financial point of view, to
the unaffiliated shareholders, of the merger consideration to be
received by such holders in the merger; |
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the fact that the Company is permitted under certain
circumstances to solicit and respond to inquiries regarding
acquisition proposals and, upon payment of a termination fee, to
terminate the merger agreement in order to complete a superior
transaction; and |
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the fact that under Delaware law, the shareholders of the
Company have the right to demand appraisal of their shares. |
In light of the procedural safeguards discussed above, the
special committee did not consider it necessary to explicitly
require adoption of the merger agreement by at least a majority
of the Companys unaffiliated shareholders. In that regard,
shareholders should note that as of October 6, 2006, the
record date, Dr. Frist, members of the Frist family and his
and their affiliates (including the Frist Entities), holders of
shares of HCA Common Stock who are affiliates of Parent and the
Management Rollover Holders held and are entitled to vote, in
the aggregate, less than
approximately % of the outstanding
HCA Common Stock.
29
The special committee also considered a variety of risks and
other potentially negative factors concerning the merger
agreement and the merger, including the following:
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the risks and costs to the Company if the merger does not close,
including the diversion of management and employee attention,
potential employee attrition and the potential effect on the
Companys business and its relationships with physicians
and patients; |
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the fact that the Companys unaffiliated shareholders will
not participate in any future earnings or growth of the Company
and will not benefit from any appreciation in value of the
Company, including any appreciation in value that could be
realized as a result of improvements to the Companys
operations; |
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the terms of Dr. Frists and managements
participation in the merger and the fact that Dr. Frist and
the Companys executive officers have interests in the
transaction that are different from, or in addition to, those of
the Companys other shareholders; |
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the restrictions on the conduct of the Companys business
prior to the completion of the merger, requiring the Company to
conduct its business only in the ordinary course, subject to
specific limitations, which may delay or prevent the Company
from undertaking business opportunities that may arise pending
completion of the merger; |
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the fact that an all cash transaction would be taxable to the
Companys shareholders that are U.S. persons for
U.S. federal income tax purposes; and |
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the fact that the Company is entering into a merger agreement
with a newly formed corporation with essentially no assets and,
accordingly, that its remedy in connection with a breach of the
merger agreement by Parent or Merger Sub, even a breach that is
deliberate or willful, is limited to $500 million. |
In the course of reaching its decision to approve the merger
agreement, the special committee did not consider the
liquidation value of the Companys assets because it
considers the Company to be a viable going concern business and
views the trading history of the HCA Common Stock as an
indication of its value as such. The special committee did
consider the disposition of particular assets of the Company and
determined, taking into account the analyses performed by Credit
Suisse and Morgan Stanley, that the divestiture of such assets
was unlikely to provide significant value to the Company or its
shareholders. Having considered the absence of significant
advantages to disposing of particular assets, the special
committee did not consider it necessary to pursue an analysis of
the Companys liquidation value. The special committee did
not consider net book value, which is an accounting concept, as
a factor because it believed that net book value is not a
material indicator of the value of the Company as a going
concern but rather is indicative of historical costs. The
Companys net book value per share as of June 30, 2006
was $11.79. This value is substantially below the
$51.00 per share cash merger consideration. The special
committees consideration of the factors described above
reflects its assessment of the fairness of the merger to the
Companys unaffiliated shareholders in relation to the
going concern value of the Company on a stand-alone basis. The
special committee considered the going concern value of the
Company in making its determination regarding fairness. To
measure the Companys going concern value, the special
committee considered the analyses of discounted cash flow with
respect to the Company (based on the projected financial
information provided to Credit Suisse and Morgan Stanley by the
management of the Company) as well as a comparison of certain
stock market data for selected publicly traded companies to
similar information for the Company, each contained in the
presentation provided by Credit Suisse and Morgan Stanley. The
special committee expressly adopted the analyses and the opinion
of each of Credit Suisse and Morgan Stanley, among other factors
considered, in reaching its determination as to the fairness of
the transactions contemplated by the merger agreement. A summary
of the Credit Suisse and Morgan Stanley presentation provided to
the special committee is set forth in Special
Factors Opinions of Financial Advisors
Financial Analyses. The foregoing discussion summarizes
the material factors considered by the special committee in its
consideration of the merger. After considering these factors,
the special committee concluded that the positive factors
relating to the merger agreement and the merger outweighed the
potential negative factors. In view of the wide variety of
factors considered by the special
30
committee, and the complexity of these matters, the special
committee did not find it practicable to quantify or otherwise
assign relative weights to the foregoing factors. In addition,
individual members of the special committee may have assigned
different weights to various factors. The special committee
approved and recommended the merger agreement and the merger
based upon the totality of the information presented to and
considered by it.
Our board of directors (other than Messrs. Bovender and Bracken,
Dr. Frist and Mr. C. Michael Armstrong), acting upon
the unanimous recommendation of the special committee, at a
meeting described above on July 24, 2006,
(i) determined that the merger agreement and the
transactions contemplated thereby, including the merger, are
advisable, fair to and in the best interests of the Company and
our unaffiliated shareholders; (ii) approved the merger
agreement and the transactions contemplated thereby, including
the merger and (iii) recommended the adoption by our
shareholders of the merger agreement. As Messrs. Bovender and
Bracken are the only directors who are employees of the Company,
this approval of the merger agreement and the merger by our
board of directors constitutes the approval by a majority of the
directors of the Company who are not employees of the Company.
In reaching these determinations, our board of directors
considered (i) the financial presentation of Credit Suisse
and Morgan Stanley that was prepared for the special committee
and which was delivered to the board of directors at the request
of the special committee, as well as the fact that the special
committee received opinions delivered by Credit Suisse and
Morgan Stanley as to the fairness, from a financial point of
view, to the Companys unaffiliated shareholders of the
merger consideration to be received by such holders in the
merger and (ii) the unanimous recommendation and analysis
of the special committee, as described above, and adopted such
recommendation and analysis in reaching its determinations.
The foregoing discussion summarizes the material factors
considered by our board of directors in its consideration of the
merger. In view of the wide variety of factors considered by our
board of directors, and the complexity of these matters, our
board of directors did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In
addition, individual members of our board of directors may have
assigned different weights to various factors. The board of
directors approved and recommends the merger agreement and the
merger based upon the totality of the information presented to
and considered by it.
Messrs. Bovender and Bracken, who have each agreed to
contribute a portion of the merger consideration that they
receive in the merger to Parent in exchange for an equity
interest in the surviving corporation after the merger, and
Dr. Frist, whose affiliated entities, the Frist Entities,
have each agreed to contribute a portion of their equity
securities in the Company to Parent in exchange for an equity
investment in Parent, recused themselves from the foregoing
determination and approval due to their involvement in the
transaction. Mr. C. Michael Armstrong also recused himself
from the foregoing determination and approval because of his
role as a member of the board of directors of Citigroup, which
is providing financing to the sponsors.
Our board of directors recommends that you vote
FOR the adoption of the merger agreement.
Purpose and Reasons for the Merger of Management Investors
Under the rules governing going private
transactions, Messrs. Bovender and Bracken (the
Management Investors) are deemed to be engaged in a
going private transaction and are required to
express their purpose and reasons for the merger to our
unaffiliated shareholders. The Management Investors are making
the statements included in this section solely for the purposes
of complying with the requirements of
Rule 13e-3 and
related rules under the Exchange Act.
For the Management Investors, the primary purpose of the merger
for HCA is to enable its unaffiliated shareholders to
immediately realize the value of their investment in HCA through
their receipt of the per share merger price of $51.00 in cash.
In addition, the merger will also allow the Management Investors
to immediately realize in cash the value of a portion of their
respective holdings in HCA and, through their commitment to make
an equity investment in the surviving corporation, to benefit
from any
31
future earnings and growth of HCA after its stock ceases to be
publicly traded. For a more complete description of the amounts
to be realized and/or reinvested by the Management Investors in
connection with the merger, see Interests of
the Companys Directors and Executive Officers in the
Merger New Arrangements with the Surviving
Corporation After Closing Equity Roll Over
Commitments and the table on page 56 of this proxy
statement. The Management Investors believe that public company
status imposes a number of limitations on HCA and its management
in conducting HCAs operations, including restraints
associated with meeting the expectations of market analysts.
Accordingly, one of the purposes of the merger for the
Management Investors is to afford greater operating flexibility
to the Company, allowing management to concentrate on long-term
growth and to reduce its focus on the quarter-to-quarter
performance often emphasized by the public markets.
Purpose and Reasons for the Merger of Dr. Frist, Thomas
F. Frist III and the Frist Entities
Under the rules governing going private
transactions, Dr. Frist is, and Thomas F. Frist III and the
Frist Entities could be, deemed to be engaged in a going
private transaction and are required to express their
reasons for the merger to our unaffiliated shareholders. The
aforementioned persons are making the statements included in
this section solely for the purposes of complying with the
requirements of
Rule 13e-3 and
related rules under the Exchange Act.
For Dr. Frist, Thomas F. Frist III and the Frist Entities,
the purpose of the merger is for Dr. Frist (together with
certain members of Dr. Frists family and other
entities related to him) to immediately realize in cash the
value of a portion of their holdings in HCA and, through the
Frist Entities roll over equity commitment, to benefit
from any future earnings and growth of HCA after its stock
ceases to be publicly traded. Dr. Frist, collectively with
the Frist Entities and the Frist permitted assignees anticipate
rolling over a portion of their shares of HCA Common Stock in
satisfaction of the Frist Entities roll over equity
commitment. Any shares of HCA Common Stock held by
Dr. Frist, the Frist Entities and the Frist permitted
assignees that are not rolled over will be entitled to receive
the merger consideration. Of the shares of HCA Common Stock over
which Dr. Frist holds sole voting and dispositive power as
of September 12, 2006, Dr. Frist anticipates that a
portion will not be rolled over and will be entitled to receive
the merger consideration. Thomas F. Frist III does not intend to
roll over any shares of HCA Common Stock owned directly or
indirectly by him apart from his interest in shares of HCA
Common Stock that will be rolled over by Frisco, Inc., one of
the Frist Entities. Thomas F. Frist III will receive the merger
consideration with respect to all other shares of HCA Common
Stock owned directly or indirectly by him. All of the shares of
HCA Common Stock held by the Frist Entities will be rolled over
in the merger except for 478,097 shares of HCA Common Stock
held by Frisco Partners, which will be converted into the right
to receive merger consideration aggregating $24,382,947.
Purpose and Reasons for the Merger of Parent, Merger Sub and
the Sponsors
The proposed merger is a going private transaction.
If the proposed merger is completed, HCA will become a
subsidiary of Parent. For Parent and Merger Sub, the purpose of
the merger is to effectuate the transactions contemplated by the
merger agreement. For the sponsors, the purpose of the merger is
to allow them to own equity interests in HCA and to bear the
rewards and risks of such ownership after shares of HCA Common
Stock cease to be publicly traded.
The sponsors believe that it is best for HCA to operate as a
privately held entity. As a privately held entity, HCA will have
the flexibility to focus on continuing improvements to its
business without the constraints and distractions caused by the
public equity markets valuation of HCA. Moreover, the
sponsors believe that HCAs future business prospects can
be improved through their active participation in the strategic
direction and operations of HCA. Although the sponsors believe
that there will be significant opportunities associated with
their investment in HCA, they realize that there are also
substantial risks (including the risks and uncertainties
relating to HCAs prospects, including the prospects
described in managements projections summarized under
Important Information About HCA Projected Financial
Information).
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The sponsors believe that structuring the transaction as a
going private merger transaction is preferable to
other transaction structures because (i) it will enable
Parent to acquire all of the outstanding shares of HCA at the
same time, (ii) it represents an opportunity for HCAs
unaffiliated shareholders to receive fair value for their shares
and (iii) it also allows the Management Investors and the
Frist Entities to maintain a significant portion of their
investment in HCA.
Opinions of Financial Advisors
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Opinion of Credit Suisse Securities (USA) LLC |
The special committee retained Credit Suisse to act as its
financial advisor in connection with the merger. In connection
with Credit Suisses engagement, the special committee
requested that Credit Suisse evaluate the fairness of the merger
consideration, from a financial point of view, to the
unaffiliated shareholders. On July 23, 2006, the special
committee met to review the proposed merger and the terms of the
proposed merger agreement. During this meeting, Credit Suisse
reviewed with the special committee certain financial analyses,
as described below, and rendered its oral opinion to the special
committee, which was subsequently confirmed in writing, that, as
of July 23, 2006, and based upon and subject to the various
considerations and assumptions described in the opinion, the
merger consideration was fair, from a financial point of view,
to the unaffiliated shareholders.
The full text of Credit Suisses opinion, dated
July 23, 2006, is attached as Annex B and is
incorporated into this proxy statement by reference. Holders of
HCA Common Stock are encouraged to read this opinion carefully
in its entirety. Credit Suisses opinion was provided to
the special committee in connection with its evaluation of the
merger consideration to the unaffiliated shareholders. It does
not address any other aspect of the proposed merger, relates
only to the fairness, from a financial point of view, of the
merger consideration and does not constitute a recommendation to
any shareholder as to how such shareholder should vote or act
with respect to any matters relating to the merger. The
following is a summary of the Credit Suisse opinion, including
the procedures followed, the assumptions made, the matters
considered and the limitations on review undertaken by Credit
Suisse in rendering its opinion, and is qualified by reference
to the full text of the opinion attached at Annex B, which
you are encouraged to read in its entirety.
In arriving at its opinion, Credit Suisse reviewed the proposed
merger agreement and certain related documents as well as
certain publicly available business and financial information
relating to HCA. Credit Suisse also reviewed certain other
information relating to HCA, including financial forecasts,
provided to or discussed with Credit Suisse by HCA, and met with
the management of HCA to discuss the business and prospects of
HCA. Credit Suisse also considered certain financial and stock
market data of HCA, and compared that data with similar data for
other publicly held companies in businesses Credit Suisse deemed
similar to that of HCA and considered, to the extent publicly
available, the financial terms of certain other business
combinations and other transactions which had been recently
effected or announced. Credit Suisse also considered such other
information, financial studies, analyses and investigations and
financial, economic and market criteria which it deemed
relevant. In connection with its review, Credit Suisse did not
assume any responsibility for independent verification of any of
the foregoing information and relied on such information being
complete and accurate in all material respects.
With respect to the financial forecasts for HCA which Credit
Suisse reviewed, Credit Suisse was advised by the management of
HCA, and assumed that such forecasts had been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of HCAs management as to the
future financial performance of HCA. Credit Suisse also assumed,
with the consent of the special committee, that in the course of
obtaining any regulatory or third party consents, approvals or
agreements in connection with the merger, no modification,
delay, limitation, restriction or condition will be imposed that
would have an adverse effect on HCA or the merger and that the
merger will be consummated in accordance with the terms of the
merger agreement without waiver, modification, amendment or
adjustment of any material term, condition or agreement therein,
including that Parent will obtain the financing necessary to
effect the merger in accordance with the terms of the draft debt
and equity financing commitments provided to or discussed with
Credit Suisse by Parent. In addition, Credit Suisse
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was not requested to make, and did not make, an independent
evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of HCA, nor was Credit Suisse furnished with any
such evaluations or appraisals. Credit Suisse understood that,
in accordance with HCAs restated certificate of
incorporation, filed with the Delaware Secretary of State on
February 3, 2004, the voting and nonvoting HCA Common Stock
will receive the same consideration in the proposed merger and,
for purposes of its opinion and related analyses, Credit Suisse
treated the voting and nonvoting HCA Common Stock as identical
in all material respects. Credit Suisses opinion addressed
only the fairness, from a financial point of view, to the
unaffiliated shareholders, of the merger consideration and does
not address any other aspect or implication of the merger or any
other agreement, arrangement or understanding entered into in
connection with the merger or otherwise. Credit Suisses
opinion was necessarily based upon information made available to
it as of the date thereof and upon financial, economic, market
and other conditions as they existed and could be evaluated on
the date thereof. Prior to the date of the opinion, Credit
Suisse was not asked to, and did not, solicit third party
indications of interest in acquiring the Company, but Credit
Suisse, at the direction of the special committee, was
authorized, in accordance with the merger agreement, to do so
for a prescribed time period following the execution of the
merger agreement. Credit Suisses opinion does not address
the relative merits of the merger as compared to alternative
transactions or strategies that might be available to HCA, nor
does it address the underlying business decision of HCA to
proceed with the merger.
The special committee retained Credit Suisse to act as its
financial advisor in connection with the merger. Credit Suisse
was selected by the special committee based on Credit
Suisses qualifications, expertise and reputation. Credit
Suisse is an internationally recognized investment banking firm
and is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and
other purposes. Credit Suisse and its affiliates have in the
past provided, are currently providing and in the future may
provide investment banking and other financial services to HCA
as well as the private investment firms whose affiliates are
shareholders of Parent, and their respective affiliates, for
which Credit Suisse has received, and would expect to receive,
compensation. During the past two years, Credit Suisse has not
provided financial advisory or financing services to HCA or its
affiliates other than with respect to the services it rendered
to the special committee in connection with the proposed merger.
Credit Suisse and certain of its affiliates and employees and
certain private investment funds affiliated or associated with
Credit Suisse have invested in private equity funds managed or
advised by the private investment firms whose affiliates are
shareholders of Parent. In the ordinary course of business,
Credit Suisse and its affiliates may acquire, hold or sell, for
their own accounts and the accounts of customers, equity, debt
and other securities and financial instruments (including bank
loans and other obligations) of HCA, Parent and affiliates of
the shareholders of Parent and, accordingly, may at any time
hold a long or short position in such securities.
Under the terms of its engagement letter, Credit Suisse provided
the special committee with financial advisory services and HCA
agreed to pay Credit Suisse a fee of $20.0 million,
$5.0 million of which became payable upon delivery of
Credit Suisses opinion, plus approximately
$4.4 million to be paid if the merger is consummated at the
current price. In addition, HCA has agreed to reimburse Credit
Suisse for
out-of-pocket fees and
expenses, including attorneys fees, incurred in connection
with its engagement and to indemnify Credit Suisse and related
parties against liabilities, including liabilities under the
federal securities laws, arising out of its engagement.
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Opinion of Morgan Stanley & Co.
Incorporated |
The special committee retained Morgan Stanley to provide it with
financial advisory services and a financial opinion in
connection with the evaluation of a potential sale or
recapitalization of all or substantially all of the economic
interests in HCA. The special committee selected Morgan Stanley
to act as its financial advisor based on Morgan Stanleys
qualifications, expertise and reputation as an advisor to
special committees in affiliate transactions. At the meeting of
the special committee on July 23, 2006, Morgan Stanley
rendered its oral opinion, subsequently confirmed in writing,
that as of July 23, 2006, and
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based upon and subject to the assumptions, qualifications and
limitations set forth in the opinion, the consideration to be
received by the unaffiliated shareholders pursuant to the merger
agreement was fair from a financial point of view to such
holders.
The full text of the written opinion of Morgan Stanley, dated
as of July 23, 2006, is attached, with Morgan
Stanleys consent, to this proxy statement as Annex C
and is incorporated into this proxy statement by reference. We
encourage you to read the entire opinion carefully. Morgan
Stanleys opinion is directed to the special committee of
HCAs board of directors and addresses only the fairness
from a financial point of view of the consideration to be
received by the unaffiliated shareholders pursuant to the merger
agreement as of the date of the opinion. It does not address any
other aspects of the merger. The opinion, and the other views
and analysis of Morgan Stanley referenced throughout this proxy
statement, do not constitute a recommendation to any holder of
HCA Common Stock as to how to vote at the shareholders
meeting to be held in connection with this transaction. None of
Morgan Stanleys opinion or other views or analysis
referenced throughout this proxy statement addresses the
fairness of the consideration to be received by Dr. Frist,
members of the Frist family and his and their affiliates
(including the Frist Entities), the Management Rollover Holders,
or shareholders who are affiliates of Parent. The summary of the
opinion of Morgan Stanley set forth in this proxy statement,
including, among other things, the assumptions made, procedures
followed, matters considered and limitations on the scope of
review undertaken by Morgan Stanley in rendering its opinion, is
qualified in its entirety by reference to the full text of the
opinion.
In connection with rendering its opinion, Morgan Stanley, among
other things:
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reviewed certain publicly available financial statements and
other information of HCA; |
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reviewed certain internal financial statements and other
financial and operating data concerning HCA prepared by the
management of HCA; |
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reviewed certain financial projections of HCA prepared by the
management of HCA; |
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discussed the past and current operations and financial
condition and the prospects of HCA with senior executives of HCA; |
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reviewed the reported prices and trading activity for HCA Common
Stock; |
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compared the financial performance of HCA and the prices and
trading activity of HCA Common Stock with that of certain other
comparable publicly traded companies and their securities; |
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reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions; |
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participated in discussions and negotiations among
representatives of the special committee and the Investor Group
and their financial and legal advisors; |
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reviewed the merger agreement, the debt and equity financing
commitments provided to Parent by certain lending institutions
and private equity funds, the commitments by the Frist Entities
to contribute shares of HCA Common Stock to Parent, each
substantially in the form of the drafts dated July 23,
2006, and certain related documents; and |
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performed such other analyses and considered other such factors
as Morgan Stanley deemed appropriate. |
In arriving at its opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and
completeness of the information reviewed by Morgan Stanley. With
respect to the financial projections, Morgan Stanley assumed
that they had been reasonably prepared on bases reflecting the
best available estimates and judgments of the future financial
performance of HCA. Morgan Stanley also assumed that the merger
would be consummated in accordance with the terms set forth in
the merger agreement without any waiver, amendment or delay of
any terms or conditions including, among other things, that
Parent would obtain financing for the merger in accordance with
the terms set forth in the financing agreements and that the
transactions contemplated by the commitment letters entered into
by the Frist Entities and the Management Rollover Holders would
be consummated in accordance with their terms. Morgan Stanley
also assumed that in connection with the receipt of all the
necessary governmental, regulatory or other approvals and
consents required for the merger, no delays, limitations,
conditions or
35
restrictions would be imposed that would have an adverse effect
on the contemplated benefits expected to be derived in the
merger. Morgan Stanley is not a legal, tax or regulatory advisor
and relied upon, without independent verification, the
assessment of HCA and its legal, tax or regulatory advisors with
respect to such matters.
Morgan Stanleys opinion did not address the fairness of
any consideration to be received by Dr. Frist, members of
the Frist family and his and their affiliates (including the
Frist Entities), the Management Rollover Holders or shareholders
who are affiliates of Parent, the relative merits of the merger
as compared to alternative transactions or strategies that might
be available to HCA, or the underlying business decision of HCA
to enter into the merger. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities
of HCA nor was Morgan Stanley furnished with any such
appraisals. Morgan Stanley understands that, in accordance with
the Companys restated certificate of incorporation, filed
with the Delaware Secretary of State on February 3, 2004,
the voting and nonvoting HCA Common Stock will receive the same
consideration in the proposed merger and, for purposes of its
opinion and related analyses, Morgan Stanley treated the voting
and nonvoting HCA Common Stock as identical in all material
respects. Morgan Stanleys opinion was necessarily based on
financial, economic, market and other conditions as in effect
on, and the information made available to Morgan Stanley as of,
July 23, 2006. Events occurring after such date may affect
Morgan Stanleys opinion and the assumptions used in
preparing it, and Morgan Stanley did not assume any obligation
to update, revise or reaffirm its opinion.
In arriving at its opinion, Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with
respect to the acquisition of HCA or any of its assets (but did
note that it has been so authorized for a period of time
following execution of the merger agreement, subject to the
terms, conditions and procedures set forth therein), nor did
Morgan Stanley negotiate with any parties other than Parent with
respect to a possible acquisition of HCA or certain of its
constituent businesses.
Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its
investment banking and financial advisory business, is
continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and valuations for corporate, estate and other
purposes. In the ordinary course of Morgan Stanleys
trading and brokerage activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, and may
trade or otherwise effect transactions, for its own account or
for the account of customers in the equity and other securities
of HCA, affiliates of Parent or any other parties, commodities
or currencies involved in the merger. In addition, Morgan
Stanley, its affiliates, directors or officers may have
committed and may commit in the future to invest in private
equity funds sponsored by Bain, KKR, and Merrill Lynch Global
Private Equity. Morgan Stanley and its affiliates have provided
financial advisory and financing services to Bain and KKR and
have previously received fees in connection with such services.
During the past two years, Morgan Stanley has not provided
financial advisory or financing services to HCA or its
affiliates other than with respect to the services it rendered
to the special committee in connection with the proposed merger.
Under the terms of its engagement letter, Morgan Stanley
provided the special committee financial advisory services and a
financial opinion in connection with the merger, and HCA has
agreed to pay Morgan Stanley a fee for its services comprised of
a $1.0 million advisory fee, which was payable upon Morgan
Stanleys engagement, and a $12.0 million transaction
fee, which will become payable upon the earliest to occur of
(i) the dissolution of the special committee,
(ii) July 11, 2007, (iii) any termination of the
merger agreement or (iv) the closing of the merger. In
addition, HCA may pay an additional discretionary fee to Morgan
Stanley of up to $4.0 million as determined by the special
committee, based upon the special committees view of
Morgan Stanleys overall performance on the transaction,
upon the earlier of the termination of Morgan Stanleys
engagement and the closing of the merger. The fee was not
contingent upon the outcome of Morgan Stanleys financial
opinion. HCA has also agreed to reimburse Morgan Stanley for
certain of its expenses, including attorneys fees,
incurred in connection with its engagement. In addition, HCA has
agreed to indemnify Morgan Stanley and any of its affiliates,
their
36
respective directors, officers, agents and employees and each
person, if any, controlling Morgan Stanley or any of its
affiliates against certain liabilities and expenses, including
certain liabilities under the federal securities laws, relating
to or arising out of its engagement and any related transactions.
In preparing their respective opinions to the special committee,
Credit Suisse and Morgan Stanley performed a variety of
financial and comparative analyses, including those described
below. The summary of the analyses described below is not a
complete description of the analyses underlying their opinions.
The preparation of a fairness opinion is a complex process
involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to partial analysis
or summary description. In arriving at their respective
opinions, each of Credit Suisse and Morgan Stanley made
qualitative judgments as to the significance and relevance of
each analysis and factor that it considered. Credit Suisse and
Morgan Stanley arrived at their ultimate opinions based on the
results of all analyses undertaken and assessed as a whole and
did not draw, in isolation, conclusions from or with regard to
any one factor or method of analysis. Accordingly, Credit Suisse
and Morgan Stanley believe that their analyses must be
considered as a whole and that selecting portions of their
analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying their
analyses and opinions.
In their analyses, Credit Suisse and Morgan Stanley considered
industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond
the control of HCA. No company, transaction or business used in
Credit Suisse and Morgan Stanleys analyses as a comparison
is identical to HCA, its business or the proposed merger, and an
evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the
acquisition, public trading or other values of the companies,
business segments or transactions analyzed. The estimates
contained in the analyses of Credit Suisse and Morgan Stanley
and the ranges of valuations resulting from any particular
analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be
significantly more or less favorable than those suggested by the
analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold. Accordingly, the estimates used in, and the results
derived from, Credit Suisse and Morgan Stanleys analyses
are inherently subject to substantial uncertainty.
The merger consideration was determined through negotiations
between the special committee and the sponsors and was
recommended by the special committee for approval by HCAs
board of directors and was approved by the board of directors.
Credit Suisse and Morgan Stanley provided advice to the special
committee. Credit Suisse and Morgan Stanley did not recommend
any specific merger consideration to the special committee or
that any specific merger consideration constituted the only
appropriate merger consideration for the merger. The opinions
and financial analyses of Credit Suisse and Morgan Stanley were
only one of many factors considered by the special committee in
its evaluation of the proposed merger and should not be viewed
as determinative of the views of the special committee, the
board of directors or management with respect to the merger or
the merger consideration.
The following is a summary of the material financial analyses
that underlie the opinions of both Credit Suisse and Morgan
Stanley and which were reviewed with the special committee on
July 23, 2006. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand Credit Suisse and Morgan Stanleys
financial analyses, the tables must be read together with the
text of each summary. The tables alone do not constitute a
complete description of the financial analyses. Considering the
data in the tables below without considering the full narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Credit Suisse and
Morgan Stanleys financial analyses.
37
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Discounted Cash Flow Analysis |
Credit Suisse and Morgan Stanley performed a discounted cash
flow analysis to calculate the estimated present value of the
unlevered, after-tax free cash flow of HCA. The financial
forecast was based on internal estimates of HCAs
management. Credit Suisse and Morgan Stanley calculated ranges
of estimated terminal values by multiplying calendar year 2011
estimated earnings before interest, taxes, depreciation and
amortization, commonly referred to as EBITDA, by selected
multiples ranging from 6.5x to 8.0x. The estimated after-tax
free cash flows and terminal values were then discounted to
present value at June 30, 2006 using discount rates of 7.0%
to 8.0%. The discount rate ranging from 7.0% to 8.0% was
selected based on a weighted average cost of capital calculation
which factored in the unlevered betas for similar companies
identified below under the caption Selected Companies
Analysis, as well as HCA, while the terminal EBITDA
multiples ranging from 6.5x to 8.0x were selected based on a
review of current and historical trading multiples reviewed in
connection with the companies identified under the caption
Selected Companies Analysis, as well as HCA. This
analysis indicated the following implied per share equity
reference range for HCA, as compared to the per share merger
consideration:
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Implied Per Share Equity |
|
Per Share |
Reference Range For HCA |
|
Merger Consideration |
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$43.16 - $58.01
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$ |
51.00 |
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Selected Companies Analysis |
Using publicly available information, Credit Suisse and Morgan
Stanley reviewed the market values and trading multiples of the
following three publicly traded urban hospital companies and
three publicly traded rural hospital companies:
Urban
Hospital Companies
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Tenet Healthcare Corporation |
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Triad Hospitals, Inc. |
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Universal Health Services, Inc. |
Rural
Hospital Companies
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Health Management Associates, Inc. |
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Community Health Systems, Inc. |
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LifePoint Hospitals, Inc. |
These companies were chosen because they are publicly traded
companies in the U.S. that operate in a similar industry to
HCA and have similar lines of business to HCA. Additionally,
each has a market value in excess of $1.0 billion and each
has general acute care hospital operations. However, none of the
companies selected is identical or directly comparable to HCA.
The companies were separated into urban and rural hospital
companies because of the different operating environments
between the two groups. Multiples for the selected companies
were based, in part, on closing stock prices as of July 18,
2006. Estimated data were based on publicly available equity
research analysts estimates. Estimated data for HCA were
based on internal estimates of HCAs management and
publicly available equity research analysts estimates.
Credit Suisse and Morgan Stanley compared enterprise values as
multiples of calendar years 2006 and 2007 estimated EBITDA. They
also compared equity values per share as multiples of calendar
years 2006 and 2007 estimated earnings per share, commonly
referred to as P/ E. The range of market trading multiples of
the selected companies, as well as the related means, are set
forth below:
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Selected |
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Selected |
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Selected |
|
Selected |
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Companies |
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Companies |
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Companies |
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Companies |
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(All) |
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(All) |
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(Urban) |
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(Rural) |
Metric |
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Low |
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High |
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Mean |
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Mean |
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Enterprise Value/2006E EBITDA
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6.4x |
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9.4x |
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7.8x |
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7.9x |
|
Enterprise Value/2007E EBITDA
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5.8x |
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8.4x |
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7.0x |
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6.9x |
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Price/2006E Earnings
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13.6x |
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19.2x |
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16.4x |
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15.1x |
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Price/2007E Earnings
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12.1x |
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16.9x |
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14.5x |
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13.2x |
|
Credit Suisse and Morgan Stanley then applied ranges of selected
multiples derived from those described above for the selected
companies to corresponding financial data based on internal
estimates of HCAs management. The Enterprise Value/2006E
EBITDA multiples ranged from 6.5x to 8.0x; the Enterprise
Value/2007E multiples ranged from 6.0x to 7.5x; the Price/2006E
Earnings multiples ranged from 13.5x to 16.5x; and the
Price/2007E Earnings multiples ranged from 12.0x to 15.0x. These
ranges of multiples
38
were then applied to the relevant EBITDA and EPS metrics in
order to derive implied per share equity values from which,
through the collective judgment of Credit Suisse and Morgan
Stanley, the implied per share equity value reference range of
$36.00 to $46.00 was derived. Credit Suisse and Morgan Stanley
then compared this implied per share equity reference range
against the per share merger consideration, indicating the
following implied per share equity reference range for HCA, as
compared to the per share merger consideration:
|
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Implied Per Share Equity |
|
Per Share |
Reference Range For HCA |
|
Merger Consideration |
|
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$36.00 - $46.00
|
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$ |
51.00 |
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|
Selected Transactions Analysis |
Using publicly available information, Credit Suisse and Morgan
Stanley reviewed the transaction value multiples in eight
selected transactions, which transactions involved companies
with businesses and holdings similar to those of HCAs:
Acquiror
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Welsh, Carson, Anderson & Stowe |
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LifePoint Hospitals, Inc. |
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The Blackstone Group (led by) |
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Texas Pacific Group (led by) |
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HCA Inc. |
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Triad Hospitals, Inc. |
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Tenet Healthcare Corporation |
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Forstmann Little & Co. (affiliates of) |
Target
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Select Medical Corporation |
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Province Healthcare Company |
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Vanguard Health Systems, Inc. |
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IASIS Healthcare Corporation |
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Health Midwest |
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Quorum Health Group, Inc. |
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OrNda HealthCorp |
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Community Health Systems, Inc. |
The precedent transactions were selected because they involved
transactions in U.S. companies whose operations and
principal lines of business (hospitals and related health care
services) are similar to that of HCA. Additionally, each
transaction involved companies with enterprise values in excess
of $1.0 billion and such transactions did not include
acquisitions of individual facilities. Each of these
transactions took place between 1996 and 2004. Multiples for the
selected transactions were based on publicly available financial
information. Estimated data for HCA was based on internal
estimates of HCAs management. Credit Suisse and Morgan
Stanley compared enterprise values in the selected transactions
as multiples of the latest 12 months revenue and EBITDA.
The range of multiples from the selected transactions, as well
as the related median and mean, are set forth below:
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Selected |
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Selected |
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Selected |
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Selected |
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Transactions |
|
Transactions |
|
Transactions |
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Transactions |
Metric |
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Low |
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High |
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Median |
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Mean |
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Enterprise Value/Last twelve months EBITDA
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8.1x |
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12.1x |
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9.4x |
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9.8x |
|
Enterprise Value/Last twelve months Revenue
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1.0x |
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2.4x |
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1.3x |
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1.5x |
|
Credit Suisse and Morgan Stanley then applied the ranges of
selected multiples derived from those described above for the
selected transactions, and based on the collective judgment of
Credit Suisse and Morgan Stanley, to the corresponding financial
data, based on internal estimates of HCAs management, in
order to derive an implied enterprise value reference range.
HCAs net debt as of June 30, 2006 (approximately
$10.9 billion) was then deducted and other adjustments were
made, as appropriate to reflect HCAs insurance
subsidiarys investments in equity securities (as of
March 30, 2006), in order to derive an implied equity
reference range for HCA from which an implied per share equity
reference range was derived. Credit Suisse and Morgan Stanley
then compared this implied per share equity reference range
against the per share merger consideration. This analysis
indicated the following implied per share equity reference range
for HCA, as compared to the per share merger consideration:
|
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|
|
Implied Per Share Equity |
|
Per Share |
Reference Range For HCA |
|
Merger Consideration |
|
|
|
$45.00 - $55.00
|
|
$ |
51.00 |
|
39
Other Factors
In rendering their opinions, Credit Suisse and Morgan Stanley
also reviewed and considered other factors, including:
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the median premiums paid in all-cash U.S. public company
transactions with a value greater than $50 million, as well
as all-cash U.S. public company transactions with a value
greater than $5 billion, both over the period from
December 31, 2000 to present, and leveraged buyout
transactions with a value greater than $3 billion worldwide
over the last ten years; |
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the low and high trading prices of HCA Common Stock during the
52-week period ended July 21, 2006; |
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publicly available research analysts price targets for
HCA; and |
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the theoretical purchase prices that could be paid by a
hypothetical financial buyer in a leveraged buyout of HCA. |
A copy of Credit Suisse and Morgan Stanleys written
presentation to the special committee of the board of directors
of HCA has been attached as an exhibit to the
Schedule 13E-3 filed with the SEC in connection with the
merger. The written presentation will be available for any
interested HCA shareholder (or any representative of the
shareholder who has been so designated in writing) to inspect
and copy at our principal executive offices during regular
business hours. Alternatively, you may inspect and copy the
presentation at the office of, or obtain them by mail from, the
SEC.
Position of Management Investors as to Fairness
Under the rules governing going private
transactions, the Management Investors are deemed to be engaged
in a going private transaction and are required to
express their beliefs as to the fairness of the merger to our
unaffiliated shareholders. The Management Investors are making
the statements included in this section solely for the purposes
of complying with the requirements of
Rule 13e-3 and
related rules under the Exchange Act.
The views of the Management Investors as to the fairness of the
merger should not be construed as a recommendation to any
shareholder as to how that shareholder should vote on the
proposal to adopt the merger agreement. The Management Investors
have interests in the merger different from, and in addition to,
those of the other shareholders of HCA. These interests are
described under Interests of the
Companys Directors and Executive Officers in the
Merger.
The Management Investors did not undertake a formal evaluation
of the merger or engage a financial advisor for such purpose.
The unaffiliated shareholders, however, were represented by the
Companys special committee, which negotiated the terms and
conditions of the merger agreement on their behalf, with the
assistance of its independent financial and legal advisors. The
Management Investors believe that the merger agreement and the
merger are substantively and procedurally fair to the
unaffiliated shareholders and agree with the analyses and
conclusions of the special committee and the board of directors
based upon the reasonableness of those analyses and conclusions,
which they adopt, and their knowledge of HCA, as well as the
factors considered by, and the findings of, the special
committee and the board of directors with respect to the
fairness of the merger to such unaffiliated shareholders (see
Reasons for the Merger; Recommendation of the
Special Committee and of Our Board of Directors; Fairness of the
Merger). In addition, the Management Investors considered
the fact that the special committee received opinions from
Credit Suisse and Morgan Stanley to the effect that, as of the
date of the fairness opinions, and based upon and subject to the
various factors, assumptions and limitations set out in the
fairness opinions, the $51.00 price per share to be
received by the unaffiliated shareholders was fair to such
shareholders from a financial point of view (see
Reasons for the Merger; Recommendation of the
Special Committee and of Our Board of Directors; Fairness of the
Merger).
While the Management Investors are directors of HCA, because of
their differing interests in the merger they did not participate
in the negotiation of the merger agreement or the evaluation or
approval of
40
the merger agreement and the merger. For these reasons, the
Management Investors do not believe that their interests in the
merger influenced the decision of the special committee or the
board of directors with respect to the merger agreement or the
merger.
The foregoing discussion of the information and factors
considered and given weight by the Management Investors in
connection with the fairness of the merger agreement and the
merger is not intended to be exhaustive but is believed to
include all material factors considered by the Management
Investors. The Management Investors did not find it practicable
to, and did not, quantify or otherwise attach relative weights
to the foregoing factors in reaching their position as to the
fairness of the merger agreement and the merger. The Management
Investors believe that these factors provide a reasonable basis
for their belief that the merger is fair to the unaffiliated
shareholders.
Position of Dr. Frist, Thomas F. Frist III and the Frist
Entities as to Fairness
Under the rules governing going private
transactions, Dr. Frist is, and Thomas F. Frist III and the
Frist Entities could be, deemed to be engaged in a going
private transaction and therefore required to express
their beliefs as to the fairness of the merger to our
unaffiliated shareholders. The aforementioned persons are making
the statements included in this section solely for the purposes
of complying with the requirements of
Rule 13e-3 and
related rules under the Exchange Act.
The views of Dr. Frist, Thomas F. Frist III and the Frist
Entities as to the fairness of the merger should not be
construed as a recommendation to any shareholder as to how that
shareholder should vote on the proposal to approve the merger
agreement. Dr. Frist, Thomas F. Frist III and the Frist
Entities have interests in the merger different from, and in
addition to, those of the other shareholders of HCA. These
interests are described under Interests of the
Companys Directors and Executive Officers in the
Merger.
Dr. Frist, Thomas F. Frist III and the Frist Entities did
not undertake a formal evaluation of the merger or engage a
financial advisor for such purposes, nor did they participate
directly in the negotiation of the merger agreement with the
Company or the special committee. The unaffiliated shareholders,
however, were represented by the Companys special
committee, which negotiated the terms and conditions of the
merger agreement on their behalf, with the assistance of its
independent financial and legal advisors. Dr. Frist, Thomas
F. Frist III and the Frist Entities believe that the merger
agreement and the merger are substantively and procedurally fair
to the unaffiliated shareholders and agree with the analyses and
conclusions of the special committee and the board of directors
based upon the reasonableness of those analyses and conclusions,
which they adopt, and Dr. Frists knowledge of HCA, as well
as the factors considered by, and the findings of, the special
committee and the board of directors with respect to the
fairness of the merger to such unaffiliated shareholders (see
Reasons for the Merger; Recommendation of the
Special Committee and of Our Board of Directors; Fairness of the
Merger).
In addition, Dr. Frist, Thomas F. Frist III and the Frist
Entities considered the fact that the special committee received
opinions from Credit Suisse and Morgan Stanley to the effect
that, as of the date of the fairness opinions, and based upon
and subject to the various factors, assumptions and limitations
set out in the fairness opinions, the $51.00 price per share to
be received by the unaffiliated shareholders was fair to such
shareholders from a financial point of view (see
Reasons for the Merger; Recommendation of the
Special Committee and of Our Board of Directors; Fairness of the
Merger).
While Dr. Frist is a director of HCA, because of his
differing interests in the merger, he did not serve on the
special committee and consequently did not participate in the
negotiation of the merger agreement or the special
committees evaluation or approval of the merger agreement
and the merger or the board of directors evaluation of the
special committees recommendation of the approval of the
merger agreement and the merger. For these reasons,
Dr. Frist, Thomas F. Frist III and the Frist Entities do
not believe that Dr. Frists interests in the merger
influenced the decision of the special committee or the board of
directors with respect to the merger agreement or the merger.
41
The foregoing discussion of the information and factors
considered and given weight by Dr. Frist, Thomas F. Frist
III and the Frist Entities in connection with the fairness of
the merger agreement and the merger is not intended to be
exhaustive but is believed to include all material factors
considered by Dr. Frist, Thomas F. Frist III and the Frist
Entities. Dr. Frist, Thomas F. Frist III and the Frist
Entities did not find it practicable to, and did not, quantify
or otherwise attach relative weights to the foregoing factors in
reaching their position as to the fairness of the merger
agreement and the merger. Dr. Frist, Thomas F. Frist III
and the Frist Entities believe that these factors provide a
reasonable basis for their belief that the merger is fair to the
unaffiliated shareholders.
Position of Parent, Merger Sub and the Sponsors as to
Fairness
Under a potential interpretation of the rules governing
going private transactions, Parent, Merger Sub and
the sponsors may be required to express their beliefs as to the
fairness of the merger to our unaffiliated shareholders. Parent,
Merger Sub and the sponsors are making the statements included
in this section solely for the purposes of complying with the
requirements of Rule 13e-3 and related rules under the
Exchange Act. The views of Parent, Merger Sub and the sponsors
should not be construed as a recommendation to any shareholder
as to how that shareholder should vote on the proposal to adopt
the merger agreement.
Parent, Merger Sub and the sponsors attempted to negotiate the
terms of a transaction that would be most favorable to them, and
not to the shareholders of HCA, and, accordingly, did not
negotiate the merger agreement with a goal of obtaining terms
that were fair to such shareholders. None of Parent, Merger Sub
or the sponsors believes that it has or had any fiduciary duty
to HCA or its shareholders, including with respect to the merger
and its terms. The shareholders of HCA were, as described
elsewhere in this proxy statement, represented by the special
committee that negotiated with the sponsors on their behalf,
with the assistance of independent legal and financial advisors.
None of Parent, Merger Sub or the sponsors participated in the
deliberation process of the special committee and none of them
participated in the conclusions of the special committee or the
board of directors of HCA that the merger was fair to the
unaffiliated shareholders of HCA, nor did they undertake any
independent evaluation of the fairness of the merger. However,
based upon the same factors considered by, and the findings of,
the special committee and the board of directors with respect to
the fairness of the merger to such unaffiliated shareholders
(see Reasons for the Merger; Recommendation
of the Special Committee and of Our Board of Directors; Fairness
of the Merger), Parent, Merger Sub and the sponsors
believe that the merger agreement and the merger are
substantively and procedurally fair to the unaffiliated
shareholders. In addition, Parent, Merger Sub and the sponsors
considered the fact that the special committee received opinions
from Credit Suisse and Morgan Stanley to the effect that, as of
the date of the fairness opinions, and based upon and subject to
the various factors, assumptions and limitations set out in the
fairness opinions, the $51.00 price per share to be received by
the unaffiliated shareholders was fair to such shareholders from
a financial point of view (see Reasons for the
Merger; Recommendation of the Special Committee and of Our Board
of Directors; Fairness of the Merger).
The foregoing discussion of the information and factors
considered and given weight by Parent, Merger Sub and the
sponsors in connection with the fairness of the merger agreement
and the merger is not intended to be exhaustive but is believed
to include all material factors considered by Parent, Merger Sub
and the sponsors. Parent, Merger Sub and the sponsors did not
find it practicable to, and did not, quantify or otherwise
attach relative weights to the foregoing factors in reaching
their position as to the fairness of the merger agreement and
the merger. Parent, Merger Sub and the sponsors believe that
these factors provide a reasonable basis for their position that
they believe that the merger is fair to the unaffiliated
shareholders.
42
Purposes, Reasons and Plans for HCA after the Merger
The purpose of the merger for HCA is to enable its unaffiliated
shareholders to immediately realize the value of their
investment in HCA through their receipt of the per share merger
price of $51.00 in cash. Another purpose of the merger is to
create greater operating flexibility, allowing management to
concentrate on long-term growth rather than the short-term
expectations of the financial markets. In light of the
foregoing, and given our stock price and the economic and market
conditions affecting us and our industry sector as a whole, we
believe our long-term objectives can best be pursued as a
private company.
The reason for structuring the transaction as a merger is to
effect the transaction following the approval of the holders of
a majority of the shares of the voting HCA Common Stock. The
reasons for undertaking the transaction at this time are
described above under Background of the
Merger.
It is expected that, upon consummation of the merger (and
excluding the transactions contemplated in connection with the
merger as described in this proxy statement), the operations of
HCA will be conducted substantially as they currently are being
conducted. The Investor Group has advised HCA that it does not
have any current intentions, plans or proposals to cause us to
engage in any of the following:
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an extraordinary corporate transaction following consummation of
the merger involving HCAs corporate structure, business or
management, such as a merger, reorganization or liquidation, |
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the relocation of any material operations or sale or transfer of
a material amount of assets, or |
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any other material changes in its business. |
Nevertheless, following consummation of the merger, the
management and/or board of directors of the surviving
corporation may initiate a review of the surviving corporation
and its assets, corporate and capital structure, capitalization,
operations, business, properties and personnel to determine what
changes, if any, would be desirable following the merger to
enhance the business and operations of the surviving corporation
and may cause the surviving corporation to engage in the types
of transactions set forth above if the management and/or board
of directors of the surviving corporation decides that such
transactions are in the best interest of the surviving
corporation upon such review. The surviving corporation
expressly reserves the right to make any changes it deems
appropriate in light of such evaluation and review or in light
of future developments.
Certain Effects of the Merger
If the merger agreement is adopted by the Companys
shareholders, certain other conditions to the closing of the
merger are either satisfied or waived and the marketing period
that Parent is entitled to use to complete the financing for the
merger has expired, Merger Sub will be merged with and into HCA,
with HCA being the surviving corporation.
Upon the consummation of the merger, unless otherwise agreed
between a holder and Parent, each share of HCA Common Stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares held in the treasury of the
Company, certain unrestricted shares held by certain of the
Management Rollover Holders, owned by Parent immediately prior
to the effective time of the merger or held by shareholders who
are entitled to and who properly exercise appraisal rights under
Delaware law) will be converted into the right to receive $51.00
in cash, without interest and less any applicable withholding
taxes. Upon the consummation of the merger, unless otherwise
agreed between a holder and Parent, all outstanding options to
acquire HCA Common Stock will become fully vested and
immediately exercisable and all such options (other than certain
options held by certain of the Management Rollover Holders) not
exercised prior to the merger will be cancelled and converted
into a right to receive a cash payment equal to the number of
shares of HCA Common Stock underlying the options multiplied by
the amount (if any) by which $51.00 exceeds the option exercise
price, without interest and less any applicable withholding
taxes. Unless otherwise agreed between a holder and Parent, all
shares of restricted stock (other than certain unrestricted
shares held by certain of the Management Rollover Holders) and
restricted share units will vest and be cancelled and converted
into the right to receive a cash payment equal to the number of
outstanding restricted shares and restricted share units
43
multiplied by $51.00 (together with the value of any deemed
dividend equivalents accrued but unpaid with respect to
restricted share units), without interest and less any
applicable withholding taxes.
Following the merger, the entire equity in the surviving
corporation will ultimately be owned through Parent by the
members of the Investor Group, the Frist permitted assignees,
and any additional investors that the members of the Investor
Group permit to invest in Parent, and directly by the Management
Rollover Holders. If the merger is completed, the members of the
Investor Group, the Frist permitted assignees, any additional
investors that the members of the Investor Group permit to
invest in Parent and the Management Rollover Holders will be the
sole beneficiaries of our future earnings and growth, if any,
and will be entitled to vote on corporate matters affecting HCA
following the merger. Similarly, the members of the Investor
Group, any investors that the members of the Investor Group
permit to invest in Parent, and the Management Rollover Holders
will also bear the risks of ongoing operations, including the
risks of any decrease in our value after the merger and the
operational and other risks related to the incurrence by the
surviving corporation of significant additional debt as
described below under Financing of the
Merger.
If the merger is completed, HCAs unaffiliated shareholders
will have no interest in HCAs net book value or net
earnings. The table below sets forth the direct and indirect
interests in HCAs net book value and net earnings of each
of Dr. Frist, Thomas F. Frist III, the Frist Entities,
Jack O. Bovender, Jr., Richard M. Bracken and each of
the sponsors prior to and immediately after the merger, based
upon the net book value of HCA at June 30, 2006 and net
income of HCA for the six months ended June 30, 2006.
Following the merger, the entire interest in HCAs net book
value and net income that is not ultimately held by the Frist
Entities, the Frist permitted assignees, Jack O. Bovender,
Jr., Richard M. Bracken, the Management Rollover Holders or
the other members of the Investor Group will be held through
Parent by any additional investors that the members of the
Investor Group permit to invest in Parent or the surviving
corporation.
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Ownership Prior to the Merger(1) | |
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Ownership After the Merger(2) | |
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Net Book Value | |
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Earnings | |
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Net Book Value | |
|
Earnings | |
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| |
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| |
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| |
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$ in | |
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$ in | |
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$ in | |
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$ in | |
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|
Name |
|
thousands | |
|
% | |
|
thousands | |
|
% | |
|
thousands | |
|
% | |
|
thousands | |
|
% | |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
Thomas F. Frist, Jr., M.D.(3)
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$ |
198,833 |
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4.12% |
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$ |
27,759 |
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|
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4.12% |
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$ |
656,824 |
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13.61% |
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$ |
91,699 |
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13.61% |
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Thomas F. Frist III(4)
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$ |
116,790 |
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2.42% |
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$ |
16,305 |
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2.42% |
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$ |
375,949 |
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7.79% |
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$ |
52,486 |
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7.79% |
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Frisco, Inc.(5)
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$ |
96,038 |
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1.99% |
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$ |
13,408 |
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1.99% |
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$ |
375,949 |
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7.79% |
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$ |
52,486 |
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7.79% |
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Frisco Partners(5)
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$ |
17,856 |
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0.37% |
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$ |
2,493 |
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0.37% |
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$ |
48,743 |
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1.01% |
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$ |
6,805 |
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1.01% |
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Jack O. Bovender, Jr.
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$ |
3,861 |
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0.08% |
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$ |
539 |
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0.08% |
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$ |
22,682 |
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0.47% |
|
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$ |
3,167 |
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0.47% |
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Richard M. Bracken
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$ |
1,930 |
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|
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0.04% |
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$ |
270 |
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0.08% |
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$ |
11,100 |
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0.23% |
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$ |
1,550 |
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0.23% |
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Private equity funds advised by Bain(6)
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N/A |
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N/A |
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N/A |
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N/A |
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$ |
1,282,279 |
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26.57% |
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$ |
179,019 |
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26.57% |
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Private equity funds advised by KKR(6)
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N/A |
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N/A |
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|
N/A |
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|
|
N/A |
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$ |
1,282,279 |
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|
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26.57% |
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$ |
179,019 |
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26.57% |
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Private equity funds advised by Merrill Lynch Global Private
Equity(6)
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N/A |
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|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
1,282,279 |
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|
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26.57% |
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$ |
179,019 |
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26.57% |
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(1) |
Based upon beneficial ownership as of August 31, 2006,
excluding any options (whether or not exercisable), and
HCAs net book value at June 30, 2006 and net income
for the six months ended June 30, 2006. |
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(2) |
Based upon the agreed upon equity investments and HCAs net
book value at June 30, 2006 and net income for the six
months ended June 30, 2006, and without giving effect to
any additional indebtedness to be incurred in connection with
the merger or the assignment by the Frist Entities of any
portion of their equity commitment to the Frist permitted
assignees. |
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(3) |
Includes beneficial ownership of the shares of HCA Common Stock
held by the Frist Entities. |
44
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(4) |
The figures used to calculate Thomas F. Frist IIIs
ownership prior to the merger include his beneficial ownership
of the shares of HCA Common Stock held by the Frist Entities and
the figures used to calculate his ownership after the merger
consist solely of his beneficial ownership of shares to be held
by Frisco, Inc., one of the Frist Entities. |
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(5) |
The figures used to calculate the ownership of Dr. Frist,
Thomas F. Frist III and the Frist Entities after the merger
represent the Frist Entities expected roll over equity
commitment as of October 5, 2006 and are subject to change
in accordance with the Frist Entities roll over equity
commitment letter and to the extent the sponsors assign any of
their equity commitments to the Frist Entities as described in
Financing of the Merger Equity
Financing. |
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(6) |
Based upon current equity commitments. Subject to change in the
event the sponsors assign any of the equity commitments to the
Frist Entities. See Financing of the Merger
Equity Financing. |
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In connection with the merger, the Management Rollover Holders
will receive benefits and be subject to obligations in
connection with the merger that are different from, or in
addition to, the benefits and obligations of HCA shareholders
generally, as described in more detail under
Interests of the Companys Directors and
Executive Officers in the Merger. The incremental benefits
include the right and commitment of the Management Rollover
Holders to make an agreed upon minimum equity investment in the
surviving corporation in cash and/or by exchanging a portion of
their HCA options, and/or unrestricted shares of HCA Common
Stock for equity interests in, and options to acquire equity
interests in, the surviving corporation, as well as the option,
prior to the consummation of the merger, to make additional
equity investments (up to an amount and at a time to be
determined) on substantially the same terms and conditions as
the agreed upon equity investments. A detriment to the
Management Rollover Holders is that their new options may not be
exercisable for shares registered under the federal securities
laws and their new shares of common stock in the surviving
corporation will not initially be and may not be registered
under the federal securities laws and such shares will be
relatively illiquid without an active public trading market for
such securities. The equity interests received upon exercise of
these options and the shares received in exchange for such
unrestricted shares of HCA Common Stock will also be subject to
a shareholders agreement restricting the ability of the
Management Rollover Holders to sell such equity. Additional
incremental benefits to the Senior Management Group (as defined
below under Interests of the Companys
Directors and Executive Officers in the Merger) include,
among others, continuing as executive officers of the surviving
corporation and executing employment and related agreements with
the surviving corporation. Furthermore, it is contemplated that
Mr. Bovender will continue as the chairman of the board of
directors and chief executive officer of the surviving
corporation, and that Mr. Bracken will continue as the
president and a director of the surviving corporation. A
potential detriment to the Management Rollover Holders is that
the Investor Group will own a majority of Parents shares,
will control the board of directors of Parent and the
surviving corporation and will be able to exert substantial
influence over the governance and operations of Parent and the
surviving corporation following the merger.
Additional incremental benefits to the Frist Entities include
having the right to appoint two directors to Parents board
of directors after the completion of the merger, having the
right to designate certain third parties to participate in the
Frist Sell-Down and receiving tax-free treatment (other than
with respect to any cash received by the Frist Entities in the
merger) with respect to the contribution of shares of HCA Common
Stock to Parent pursuant to the roll over commitment letter
discussed under Interests of the
Companys Directors and Executive Officers in the
Merger.
HCAs Common Stock is currently registered under the
Exchange Act and is quoted on the NYSE under the symbol
HCA. As a result of the merger, HCA will be a
privately held corporation, and there will be no public market
for its common stock. After the merger, the HCA Common Stock
will cease to be quoted on the NYSE, and price quotations with
respect to sales of shares of common stock in the public market
will no longer be available. In addition, registration of the
HCA Common Stock under the Exchange Act will be terminated.
45
At the effective time of the merger, the directors of Merger Sub
will become the directors of the surviving corporation and the
current officers of HCA will become the officers of the
surviving corporation. The certificate of incorporation of HCA
will be amended to be the same as the certificate of
incorporation of Merger Sub as in effect immediately prior to
the effective time of the merger, except that the name of the
surviving corporation shall continue to be HCA Inc.
The bylaws of Merger Sub in effect immediately prior to the
effective time of the merger will become the bylaws of the
surviving corporation.
Effects on the Company if the Merger is Not Completed
If the merger agreement is not adopted by HCAs
shareholders or if the merger is not completed for any other
reason, shareholders will not receive any payment for their
shares in connection with the merger. Instead, HCA will remain
an independent public company and the HCA Common Stock will
continue to be listed and traded on the NYSE. In addition, if
the merger is not completed, we expect that management will
operate the business in a manner similar to that in which it is
being operated today and that HCA shareholders will continue to
be subject to the same risks and opportunities as they currently
are, including, among other things, the nature of the health
care services industry on which HCAs business largely
depends, and general industry, economic, regulatory and market
conditions. Accordingly, if the merger is not consummated, there
can be no assurance as to the effect of these risks and
opportunities on the future value of your HCA shares. From time
to time, HCAs board of directors will evaluate and review,
among other things, the business operations, properties,
dividend policy and capitalization of HCA and make such changes
as are deemed appropriate and continue to seek to identify
strategic alternatives to enhance shareholder value. If the
merger agreement is not adopted by HCAs shareholders or if
the merger is not consummated for any other reason, there can be
no assurance that any other transaction acceptable to HCA will
be offered, or that the business, prospects or results of
operations of HCA will not be adversely impacted.
Delisting and Deregistration of HCA Common Stock
If the merger is completed, the HCA Common Stock will be
delisted from the NYSE and deregistered under the Exchange Act.
Accounting
For financial reporting purposes, the merger will be accounted
for as a recapitalization, pursuant to which the historical
bases of HCAs assets and liabilities will be preserved
following the merger.
Regulatory Approvals
Under the HSR Act and the rules promulgated thereunder by the
FTC, the merger cannot be completed until HCA and Parent file a
notification and report form under the HSR Act and the
applicable waiting period has expired or been terminated. HCA
and Parent filed notification and report forms under the HSR Act
with the FTC and the Antitrust Division of the DOJ on
August 7, 2006. The waiting period was terminated on
August 18, 2006. At any time before or after consummation
of the merger, notwithstanding the early termination of the
waiting period under the HSR Act, the Antitrust Division or the
FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking
to enjoin the consummation of the merger or seeking divestiture
of substantial assets of HCA or Parent. At any time before or
after the consummation of the merger, and notwithstanding the
early termination of the waiting period under the HSR Act, any
state could take such action under the antitrust laws as it
deems necessary or desirable in the public interest. Such action
could include seeking to enjoin the consummation of the merger
or seeking divestiture of substantial assets of HCA or Parent.
Private parties may also seek to take legal action under the
antitrust laws under certain circumstances.
While there can be no assurance that the merger will not be
challenged by a governmental authority or private party on
antitrust grounds, HCA, based on a review of information
provided by Parent relating to the businesses in which it and
its affiliates are engaged, believes that the merger can be
effected in compliance with federal and state antitrust laws.
The term antitrust laws means the Sherman Act, as
46
amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other Federal and
state statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of
trade.
Though not a condition to the consummation of the merger, United
States federal and state laws and regulations, as well as the
laws and regulations of the United Kingdom and Switzerland, may
require that HCA or Parent obtain approvals or certificates of
need from, file new license and/or permit applications with,
and/or provide notice to, applicable governmental authorities in
connection with the merger.
Financing of the Merger
Parent estimates that the total amount of funds necessary to
complete the proposed merger and the related transactions is
approximately $26 billion, which includes approximately
$21 billion to be paid to HCAs shareholders and
holders of other equity-based interests in HCA, with the
remaining funds to be used to refinance certain existing
indebtedness, including HCAs bank debt, HCAs 8.850%
Medium Term Notes due 2007, 7.000% Notes due 2007,
7.250% Notes due 2008, 5.250% Notes due 2008 and
5.500% Notes due 2009 (or an equivalent amount of
HCAs other existing notes), and to pay customary fees and
expenses in connection with the proposed merger, the financing
arrangements and the related transactions.
Pursuant to the merger agreement, Parent and Merger Sub are
obligated to use their reasonable best efforts to obtain the
debt financing described below as promptly as practicable taking
into account the expected timing of the marketing period and the
December 19, 2006 (or if the marketing period is not
completed by then, January 31, 2007) termination date. In
the event that any portion of the debt financing becomes
unavailable on the terms contemplated in the agreements in
respect thereof, Parent is obligated to use its reasonable best
efforts to arrange alternative financing from alternative
sources on terms no less favorable to Parent (as determined in
the reasonable judgment of Parent).
The following arrangements are intended to provide the necessary
financing for the merger:
Parent has received equity commitment letters from private
equity funds sponsored by Bain, KKR and Merrill Lynch Global
Private Equity, pursuant to which these funds have each
committed to contribute $1.5 billion in cash to Parent in
connection with the proposed merger. The parties to the
commitment letters have the right to assign up to 50% of their
committed amounts to other investors, including the Frist
Entities. In that regard, Parent has received equity commitment
letters from Citigroup and Banc of America Securities pursuant
to which such entities have committed to contribute
$400 million and $200 million, respectively, to Parent
in connection with the proposed merger. Parent, in its sole
discretion, may however reduce the committed amounts from
Citigroup and Banc of America Securities, provided in the case
of Citigroup, the committed amount may not be reduced below
$150 million. In addition, Bain, KKR and Merrill Lynch
Global Private Equity intend to assign, in the aggregate, up to
$180 million to the Frist Entities. To the extent that
Citigroup, Banc of America Securities or other assignees make
equity commitments, or the aforementioned assignment of equity
commitments is made to the Frist Entities, the amounts funded by
the private equity funds sponsored by each of Bain, KKR and
Merrill Lynch Global Private Equity will be reduced on a pro
rata basis. In addition, to the extent of certain cash on hand
of the Company, which is currently estimated to be approximately
$365 million, including cash that may be available as a
result of dividends paid to HCA from its wholly-owned
subsidiaries, the amount of equity required to be funded by the
private equity funds sponsored by each of Bain, KKR and Merrill
Lynch Global Private Equity will be reduced on a pro rata basis.
There is no assurance that such cash will actually be available,
or, if available, will be available prior to the consummation of
the merger. The obligation to fund commitments under the equity
commitment letters is subject to the satisfaction or waiver by
Parent of the conditions precedent to Parents and Merger
Subs obligation to complete the merger.
47
In addition, the Frist Entities have committed to contribute
15,686,275 shares of HCA Common Stock to Parent in exchange
for equity interests in Parent. Furthermore, as noted above,
Bain, KKR and Merrill Lynch Global Private Equity intend to
assign up to $180 million of their equity commitments to the
Frist Entities. The Frist Entities may assign portions of their
commitment to the Frist permitted assignees, who will be
(1) members of the Frist family or heirs, legatees,
beneficiaries, devisees or estates of such family members,
(2) foundations, trusts or other entities used for estate
planning purposes provided that a member of the Frist family or
other person described in clause (1) retains control over
such shares at all times, (3) transferees approved by the
Investor Group and/or (4) participants in the Frist Sell-Down.
The shares contributed by or on behalf of the Frist Entities
will be cancelled and retired, and will not be entitled to
receive any merger consideration upon completion of the merger.
The Frist Entities, Parent and the sponsors agreed to cooperate
to structure the contribution of the HCA Common Stock held by
the Frist Entities to Parent as a tax-free exchange (other than
with respect to any cash received by the Frist Entities in the
merger) to the extent permitted by law, and agreed that none of
Parent or any member of the Investor Group may amend, modify or
waive any provision of the merger agreement that would result in
an adverse change in the ability of the Frist Entities to
contribute the equity held by them to Parent in a tax-free
exchange (other than with respect to any cash received by the
Frist Entities in the merger). The obligation to contribute the
shares is subject to the satisfaction or waiver by Parent of the
conditions precedent to Parents and Merger Subs
obligation to complete the merger and will occur
contemporaneously with the consummation of the merger.
Parent has received a debt commitment letter, dated as of
July 24, 2006, from Bank of America, N.A. (Bank of
America), Banc of America Bridge LLC (Banc of
America Bridge), Banc of America Securities, JPMorgan
Chase Bank, N.A. (JPMCB), J.P. Morgan
Securities Inc. (JPMSI), Citigroup Global Markets
Inc. (CGMI), Merrill Lynch Capital Corporation
(MLCC) and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (MLPF&S and, together with
Bank of America, Banc of America Bridge, Banc of America
Securities, JPMCB, JPMSI, CGMI, and MLCC, the Debt
Financing Sources) pursuant to which, subject to the
conditions set forth therein:
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Bank of America, JPMCB, CGMI and MLCC have each severally and
not jointly committed to provide (each committing to 25%) to HCA
and, in the case of the European Term Facility (as defined
below), one or more of its European subsidiaries, up to
$16.80 billion of senior secured credit facilities, for the
purpose of financing the merger, repaying or refinancing certain
existing indebtedness of HCA and its subsidiaries, paying fees
and expenses incurred in connection with the merger and
providing ongoing working capital and for other general
corporate purposes of the surviving corporation and its
subsidiaries; and |
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CGMI, Banc of America Bridge, JPMCB and MLCC have each severally
and not jointly committed to provide (each committing to 25%) to
HCA, up to $5.70 billion of senior secured second lien
loans under a bridge facility, for the purpose of financing the
merger, repaying or refinancing certain existing indebtedness of
HCA and its subsidiaries and paying fees and expenses incurred
in connection with the merger. |
The debt commitments expire on January 31, 2007. The
documentation governing the senior secured credit facilities and
the bridge facility has not been finalized and, accordingly, the
actual terms of such facilities may differ from those described
in this proxy statement.
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Conditions Precedent to the Debt Commitments |
The availability of the senior secured credit facilities and the
bridge facilities is subject to, among other things, there not
having occurred since December 31, 2005 any change or
condition that would constitute a material adverse effect
on the company as defined in the merger agreement (see
The Merger Agreement Representations and
Warranties), consummation of the merger in accordance with
the merger agreement (and no provision thereof being waived or
amended in a manner materially adverse to the lenders without
the consent of the Debt Financing Sources) and the negotiation,
execution and delivery of definitive documentation.
48
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Senior Secured Credit Facilities |
General. The borrower under the senior secured credit
facilities will be, in the case of the senior secured credit
facilities other than the European Term Facility, HCA, and, in
the case of the European Term Facility, one or more of its
European subsidiaries. The senior secured credit facilities will
be comprised of a $2.25 billion senior secured
tranche A term loan facility with a term of six years, a
$9.30 billion senior secured tranche B term loan
facility (increased to the extent the amount funded under the
asset-based revolving credit facility referred to below is less
than $1.75 billion at the closing of the merger) with a
term of seven years, a $1.25 billion (U.S. equivalent)
senior secured European term loan facility (the European
Term Facility) with a term of seven years, available in
Euros, U.S. dollars and other currencies to be mutually
agreed, a $2.00 billion senior secured asset-based
revolving credit facility with a term of six years and a
$2.00 billion senior secured revolving credit facility with
a term of six years. Each revolving credit facility will include
sublimits for the issuance of letters of credit and swingline
loans and a portion of the letter of credit availability under
the asset-based revolving credit facility will be available in
Euros and other currencies to be agreed upon. No alternative
financing arrangements or alternative financing plans have been
made in the event that the senior secured credit facilities are
not available as anticipated.
Banc of America Securities, JPMSI, CGMI and MLPF&S have been
appointed as joint lead arrangers and joint bookrunners for the
senior secured credit facilities. Bank of America will be the
sole administrative agent, each of JPMCB and an affiliate of
CGMI will be co-syndication agents and MLCC will be
documentation agent for the senior secured credit facilities. In
addition, additional agents or co-agents for the senior secured
credit facilities may be appointed prior to consummation of the
merger.
Interest Rate and Fees. Loans under the senior secured
credit facilities are expected to bear interest, at the
borrowers option, at (1) a rate equal to LIBOR
(London Interbank Offered Rate) plus an applicable margin or
(2) a rate equal to the higher of (a) the prime rate
of Bank of America and (b) the federal funds effective rate
plus 0.50%, plus (in either case) an applicable margin. After
the effective date of the merger, the applicable margins will be
subject to decrease pursuant to a leverage-based pricing grid.
In addition, the surviving corporation will pay customary
commitment fees (subject to decreases based on leverage) and
letter of credit fees under the revolving credit facilities.
Upon the initial funding of the senior secured credit
facilities, Parent has also agreed to pay an underwriting fee to
the Debt Financing Sources.
Prepayments and Amortization. The borrower will be
permitted to make voluntary prepayments at any time, without
premium or penalty (other than LIBOR breakage costs, if
applicable), and required to make mandatory prepayments of term
loans with (1) net cash proceeds of non-ordinary course
asset sales (subject to reinvestment rights, the right to apply
such proceeds to repay existing debt of HCA scheduled to mature
prior to the earliest final maturity of the senior secured
credit facilities then outstanding and other exceptions),
(2) issuances of debt (other than permitted debt) and
(3) a percentage of the surviving corporations excess
cash flow (to be defined). The term loans will also have
required interim amortization payments, payable quarterly, with
the balance payable at the final maturity date of such term
loans.
Guarantors. All obligations under the senior secured
credit facilities will be guaranteed by each existing and future
direct and indirect, wholly-owned material domestic subsidiary
of the surviving corporation that is an Unrestricted
Subsidiary under HCAs existing Indenture dated as of
December 16, 1993 (the Existing Indenture), and
the obligations of the borrower under the European Term Facility
will also be guaranteed by each existing and future wholly-owned
material European subsidiary of the surviving corporation, in
each case only to the extent permitted by applicable law and
contract and to the extent such guarantee would not result in
adverse tax or accounting consequences. If any guarantee (other
than a domestic guarantee) is not provided at closing despite
the use of commercially reasonable efforts to do so, the
delivery of the guarantee will not be a condition precedent to
the availability of the senior secured credit facilities on the
closing date, but instead will be required to be delivered
following the closing date pursuant to arrangements to be agreed
upon.
49
Security. The obligations of the borrower and the
guarantors under the asset-based revolving credit facility will
be secured, subject to permitted liens and other agreed upon
exceptions, by a first-priority lien on all present and future
accounts receivable of the surviving corporation and certain
subsidiaries of the surviving corporation to be agreed and all
proceeds thereof (the Receivables Collateral), in
each case to the extent otherwise permitted by applicable law
and contract. The obligations of the borrower and the guarantors
under the senior secured credit facilities (other than the
asset-based revolving credit facility) will be secured, subject
to permitted liens and other agreed-upon exceptions, by
(i) a second-priority lien on certain of the Receivables
Collateral, (ii) a first-priority lien on capital stock
expected to consist of the capital stock of the surviving
corporation owned by Hercules Holding II, LLC and of the capital
stock of the first-tier subsidiaries owned by the surviving
corporation and each guarantor of such facilities (limited, in
the case of foreign subsidiaries, to 65% of the voting stock of
such subsidiaries) and (iii) by substantially all present
and future assets of the surviving corporation and each such
guarantor (other than Principal Properties (as defined in the
Existing Indenture) except for certain Principal Properties not
to exceed a portion to be agreed of the 15% Consolidated Net
Tangible Assets basket under the Existing Indenture)
(collectively, the Non-Receivables Collateral), in
each case to the extent otherwise permitted by applicable law
and contract. The obligations of the borrower and the guarantors
under the European Term Facility will also be secured, subject
to permitted liens and other agreed upon exceptions (including
an exception for Receivables Collateral) by substantially all
present and future assets of such borrower and each such
guarantor, in each case only to the extent permitted by
applicable law and contract and to the extent such guarantee
would not result in adverse tax or accounting consequences. If
the security (other than any domestic stock pledge and any
security interest capable of perfection by the filing of a
Uniform Commercial Code financing statement) is not provided at
closing despite the use of commercially reasonable efforts to do
so, the delivery of the security will not be a condition
precedent to the availability of the senior secured credit
facilities on the closing date, but instead will be required to
be delivered following the closing date pursuant to arrangements
to be agreed upon.
Other Terms. The senior secured credit facilities will
contain customary representations and warranties and customary
affirmative and negative covenants, including, among other
things, restrictions on indebtedness, liens, investments, sales
of assets, mergers and consolidations, dividends and other
distributions, redemptions, prepayments of certain subordinated
indebtedness and certain existing indebtedness, and a minimum
interest coverage ratio (applicable only to the asset-based
revolving credit facility, and only when availability under such
facility is less than 10% of the borrowing base thereunder) and
a maximum total leverage ratio (applicable only to the other
senior secured credit facilities). The senior secured facilities
will also include customary events of defaults, including a
change of control to be defined.
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High-Yield Debt Financing |
HCA is expected to issue $5.70 billion aggregate principal
amount of senior secured second lien notes. The notes will not
be registered under the Securities Act and may not be offered in
the United States absent registration or an applicable exemption
from registration requirements. HCA is expected to offer the
notes to qualified institutional buyers, as defined
in Rule 144A under the United States Securities Act of
1933, as amended (the Securities Act), and to
non-U.S. persons
outside the United States in compliance with Regulation S
under the Securities Act.
If the offering of notes by HCA is not completed substantially
concurrently with the merger, the Debt Financing Sources have
committed to provide up to $5.70 billion in loans under a
senior secured second lien bridge facility to HCA. HCA will be
the borrower under the senior secured second lien bridge
facility. The obligations of the borrower and the guarantors
under the senior secured second lien bridge facility will be
secured, subject to permitted liens and other agreed-upon
exceptions, by a second-priority lien on the Non-Receivables
Collateral and by a third-priority lien on certain of the
Receivables Collateral.
If the bridge loans are not paid in full on or before the first
anniversary of the merger, the bridge loans will convert into
extended term loans maturing on the tenth anniversary of the
merger. Holders of
50
any such term loans may choose to exchange such loans for
exchange notes maturing on the tenth anniversary of the merger
and also may, if necessary for the sale of such exchange notes
to an unaffiliated third party, fix the interest rate on any
such exchange notes. The borrower would be required to register
any exchange notes for public sale under a registration
statement in compliance with applicable securities laws.
The bridge loans will bear interest at a floating rate equal to
LIBOR plus a spread that increases over time, and will contain
covenants customary for financings of this type, including
covenants restricting the ability of the borrower, among other
things and subject to exceptions, to incur or repay certain
debt, to make dividends, distributions or redemptions and to
incur liens. The borrower will be able to pay interest from time
to time on up to $1.5 billion of the bridge loans by issuing
additional loans or exchange notes in an amount equal to the
interest then due.
The borrower will be required to prepay the bridge loans, to
prepay or offer to prepay the extended loans and to redeem or
offer to purchase the exchange notes under certain
circumstances, including upon asset sales or certain incurrences
of debt (in each case, with certain exceptions) and upon a
change of control of the Company.
CGMI, Banc of America Securities, JPMSI and MLPF&S have been
appointed as joint lead arrangers and joint bookrunners for the
bridge facility, and an affiliate of CGMI will act as the sole
administrative agent for the bridge facility. In addition,
additional agents or co-agents for the bridge facility may be
appointed prior to consummation of the merger.
Guarantees; Remedies
In connection with the merger agreement, the members of the
Investor Group, including the Frist Entities but not including
Dr. Frist, have agreed to guarantee the due and punctual
performance and discharge of certain of the payment obligations
of Parent and Merger Sub under the merger agreement, up to a
maximum amount equal to their respective pro rata share of a
termination fee of $500 million. Each guarantee will remain
in full force and effect until the earlier of (i) the
effective time of the merger, (ii) the termination of the
merger agreement under circumstances in which Parent and Merger
Sub would not be obligated to pay the termination fee and
(iii) the first anniversary of the date of the termination
of such guarantee if the merger agreement is terminated under
circumstances giving rise to a payment obligation of Parent or
Merger Sub, provided the Company has not made a claim under the
guarantee related to such obligation prior to such one year
anniversary date.
We cannot seek specific performance to require Parent and Merger
Sub to complete the merger, and our exclusive remedy for the
failure of Parent and Merger Sub to complete the merger is the
termination fee described above payable to us in the
circumstances described under The Merger
Agreement Termination Fees.
Interests of the Companys Directors and Executive
Officers in the Merger
In considering the recommendations of the board of directors,
HCAs shareholders should be aware that certain of
HCAs directors and executive officers have interests in
the transaction that are different from, and/or in addition to,
the interests of HCAs shareholders generally. The special
committee and our board of directors were aware of these
potential conflicts of interest and considered them, among other
matters, in reaching their decisions to approve the merger
agreement and to recommend that our shareholders vote in favor
of adopting the merger agreement.
Interests of Dr. Frist and
the Frist Entities
Frisco, Inc. is a Delaware corporation and Frisco Partners is a
Tennessee general partnership. Frisco, Inc. is wholly owned by
members of Dr. Frists immediate family and Frisco Partners
is wholly owned by Dr. Frist and members of his immediate
family. Each of the Frist Entities was formed for the purpose of
personal investing by Dr. Frist and his family.
51
In connection with the merger agreement, Parent and the Frist
Entities entered into a letter agreement (the Rollover
Commitment Letter) pursuant to which the Frist Entities
agreed to contribute 15,686,275 shares of HCA Common Stock
to Parent immediately before the consummation of the merger in
exchange for an ownership interest in Parent that is calculated
on a pro rata basis, based on commitments by the Investor Group,
including the Frist Entities (but not including Dr. Frist), with
each share contributed by or on behalf of the Frist Entities
being valued at $51.00. In addition, as noted under
Financing of the Merger Equity
Financing, the sponsors intend to assign, in the
aggregate, up to $180 million of their equity commitments to the
Frist Entities. Dr. Frist serves as a director of Frisco,
Inc. and is a partner in Frisco Partners. Members of
Dr. Frists immediate family comprise all of the
shareholders of Frisco, Inc. and the remaining partners in
Frisco Partners. Dr. Frist and the Frist permitted
assignees may contribute a portion of the shares of HCA Common
Stock required to be contributed by the Frist Entities pursuant
to the Rollover Commitment Letter.
The Frist Entities also entered into an interim investors
agreement with Parent and the other members of the Investor
Group (but not including Dr. Frist) and certain other
equity investors. The interim investors agreement, among other
things, sets forth certain terms and conditions governing the
relationship among the members of the Investor Group (other than
Dr. Frist) and Parent.
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Frist Sell-Down. Under the interim investors agreement,
prior to the consummation of the merger, the Frist Entities may
decrease the amount of HCA Common Stock that they have agreed to
contribute to Parent by up to $100 million (with each share
being valued at $51.00) by assigning a portion of their
commitment to one or more third parties, so long as the Frist
Entities control the equity interests of Parent received by the
third parties in all respects (including voting and
disposition). To the extent the sponsors assign a portion of
their equity commitments as described above, this amount may be
increased by an amount to be determined. |
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Voting Agreement. In the interim investors agreement, the
Frist Entities have agreed to vote all of the shares of HCA
Common Stock that are beneficially owned by them in favor of the
adoption of the merger agreement. |
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Governance of Parent Prior to the Merger. Pending
consummation of the merger, the members of the Investor Group
(but not including Dr. Frist) agreed that any three out of four
of the private equity funds sponsored by KKR, Bain, and Merrill
Lynch Global Private Equity and the Frist Entities (the
Requisite Investors) may cause Parent to act or
refrain from acting in order to comply with its obligations,
satisfy its closing conditions or exercise its rights under the
merger agreement. The approval of the Requisite Investors is
also required for Parent to enforce its rights under any of the
equity commitment letters executed by members of the Investor
Group (other than Dr. Frist). The consent of all members of
the Investor Group (other than Dr. Frist) is required to
approve any of the following actions: |
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any amendment to the merger agreement that has an impact on any
member of the Investor Group (other than Dr. Frist) that is
different from the impact on the other members of the Investor
Group (other than Dr. Frist) in a manner that is materially
adverse to such member; |
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any modification or amendment to the merger agreement so as to
increase or modify the form of the merger consideration or
increase in any way the obligations of any member of the
Investor Group (other than Dr. Frist) under the limited
guarantees of the members of the Investor Group (other than
Dr. Frist); and |
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any modification or waiver, in a manner adverse to Parent or the
members of the Investor Group (other than Dr. Frist), of
any provisions in the merger agreement relating to the
termination fee or any financing contingency or condition. |
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If the Requisite Investors are willing to agree to proceed with
or take any action with respect to the matters described in the
second and third clauses above and any member of the Investor
Group (other than Dr. Frist) declines to agree to such action,
the Requisite Investors may nevertheless |
52
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proceed with such matter if they first terminate the declining
members participation in the transaction without any
further liability under its equity commitment letter or
guarantee. |
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Standstill Provision. Under the interim investors
agreement, until the earlier of the closing and the termination
of the merger agreement, the Frist Entities and the other
members of the Investor Group (other than Dr. Frist) may
not enter into any agreement, arrangement or understanding or
have discussions with any other potential investor(s) or
acquirer(s) of the Company or any of its representatives with
respect to an alternative transaction involving the Company
without the prior approval of the Requisite Investors. If the
Frist Entities do not consent to a modification or amendment to
the merger agreement so as to increase or modify the form of the
merger consideration or to increase the obligations under the
several limited guarantees of the members of the Investor Group
(other than Dr. Frist), or if the Frist Entities fail to
contribute the roll over shares to Parent, and in either case
the merger agreement is subsequently terminated, the foregoing
standstill agreement will continue to apply to the Frist
Entities for a period of one year following the earlier of the
closing and the termination of the merger agreement. |
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Right to Designate Directors of Parent. Under the interim
investors agreement, if the merger is consummated, the Frist
Entities will have the right to designate two directors on
Parents board of directors. The ability of the Frist
Entities and other members of the Investor Group (other than
Dr. Frist) to designate directors will be adjusted to
reflect changes in the ownership of Parent by the members of the
Investor Group (other than Dr. Frist). |
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Termination Fee. Pursuant to the interim investors
agreement, the Frist Entities are entitled to receive a pro rata
share of any termination fee paid by the Company or any of its
affiliates as directed by Parent pursuant to the merger
agreement, net of any expenses of Parent and the Investor Group
(other than Dr. Frist) that are required to be shared by
all members of the Investor Group (other than Dr. Frist).
See The Merger Agreement Termination
Fees. |
The foregoing summary of the interim investors agreement is
qualified in its entirety by reference to the copy of such
agreement attached as an exhibit to the Schedule 13E-3
filed with the SEC in connection with the merger and
incorporated herein by reference.
The Frist Entities also entered into a limited guarantee
agreement with the Company pursuant to which, among other
things, the Frist Entities agreed to pay 15.1% of any
termination fee payable by Parent to the Company under the
merger agreement, up to a maximum amount of $75.5 million.
Dr. Frist and certain members of his family also have
relationships with certain other members of the Investor Group.
Specifically, Dr. Frist and his wife, certain entities
affiliated with the Frist family and The Frist Foundation have
committed an aggregate of $45.5 million to investment funds
advised by, or formerly advised by, Bain. One or more of the
Bain funds in which entities affiliated with Dr. Frist have
invested is expected to invest in Parent in connection with the
merger. Dr. Frist and Dr. Frists wife, as joint
tenants, committed $4.3 million to Bain Capital
Fund VI, L.P., $6.0 million to Bain Capital
Fund VII, L.P., $10.0 million to Bain Capital
Fund VII-E, L.P.,
$2.0 million to Bain Capital Fund VIII, L.P. and
$4.0 million to Bain Capital VII Coinvestment Fund,
L.P. The Frist Foundation, an entity affiliated with
Dr. Frist, committed $1.0 million to Bain Capital IX
Coinvestment Fund, L.P. and $1.0 million to Bain Capital
Fund VIII, L.P. and $4.0 million to Bain
Capital VII Coinvestment Fund, L.P. Frist Investment
Company, an entity affiliated with Dr. Frist, committed
$6.0 million to Bain Capital Fund Fund IX, L.P. Frisco
Partners, an entity affiliated with Dr. Frist, committed
$3.6 million to each of Bain Capital Fund V, L.P. and
Bain Capital Fund IV, L.P. Dr. Frist also has a line
of credit from an affiliate of Merrill Lynch.
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HCA Equity Compensation and Bonus Plans |
Except as described below under New
Arrangements with the Surviving Corporation After
Closing Equity Roll Over Commitments,
upon the consummation of the merger, all of our equity
53
compensation awards (including our awards held by executive
officers) will be subject to the following treatment, except as
otherwise agreed by a holder or participant and Parent,
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all unvested stock options will vest and all stock options will
be cancelled and converted into the right to receive a cash
payment equal to the number of outstanding options multiplied by
the amount (if any) by which $51.00 exceeds the option exercise
price, |
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all shares of restricted stock and restricted share units will
vest and be cancelled and converted into the right to receive a
cash payment equal to the number of outstanding restricted
shares multiplied by $51.00 (and, with respect to restricted
share units, the value of any deemed dividend equivalents
accrued but unpaid with respect to such restricted share
units), and |
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all salary amounts withheld on behalf of the participants in the
Employee Stock Purchase Plan and Management Stock Purchase Plan
through the closing date of the merger will be deemed to have
been used to purchase HCA Common Stock under the terms of these
plans, using the closing date of the merger as the last date of
the applicable offering period under these plans, and converted
into the right to receive, effectively, a cash payment equal to
the number of shares deemed purchased under these plans
multiplied by $51.00. |
See The Merger Agreement Treatment of Options
and Other Awards and The Merger
Agreement Employee Benefits for a more
complete discussion of the treatment of these plans.
In addition, the executives who are covered officers
under the 2006 Senior Officer Performance Excellence Program
(our annual bonus program for these executives) will be paid
their target bonus amount under the program in cash upon
consummation of the merger.
All of the preceding cash payments will be subject to applicable
withholding taxes.
The table below sets forth, as of August 31, 2006 (for each
of our named executive officers, our other executive
officers, Dr. Frist, and our executive officers and
Dr. Frist as a group): (a) the number of stock options
held by such person, including unvested stock options that will
vest upon the consummation of the merger, (b) the cash
payment that may be made in respect of the foregoing employee
stock options upon the consummation of the merger, (c) the
aggregate number of restricted shares that will vest upon
consummation of the merger, (d) the aggregate cash payment
that will be made in respect of the foregoing restricted shares
upon the consummation of the merger, (e) the estimated
aggregate cash payment under the Employee Stock Purchase Plan
and Management Stock Purchase Plan which is expected to exceed
their salary deferrals assuming a November 30, 2006 closing
date, (f) the cash payment under the 2006 Senior Officer
Performance Excellence Program (the PEP) upon the
consummation of the merger, (g) the cash payment that will
be made in respect of all other shares owned by such person (as
reflected in the table on page 88 of this proxy statement,
including shares owned through employee benefit plans, but
excluding stock options and restricted shares) upon consummation
of the merger, and (h) the total cash payment such person
will receive in respect of all payments described in this table
if the merger is consummated (in all cases before applicable
withholding taxes).
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Other | |
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Vested and Unvested | |
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Cash Payment | |
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Stock Options | |
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Restricted Shares | |
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Stock | |
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for Other | |
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Purchase | |
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PEP Bonus | |
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Beneficially | |
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Total Cash | |
Name |
|
Number(1) | |
|
Cash Payment | |
|
Number | |
|
Cash Payment | |
|
Payment(2) | |
|
Payment | |
|
Owned Shares | |
|
Payment(1) | |
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Jack O. Bovender, Jr.
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2,266,410 |
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$ |
27,998,743 |
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165,075 |
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$ |
8,418,825 |
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$ |
28,929 |
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$ |
1,944,300 |
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$ |
7,378,323 |
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$ |
45,769,120 |
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Richard M. Bracken
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1,112,812 |
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$ |
10,497,804 |
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85,239 |
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$ |
4,347,189 |
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$ |
37,873 |
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$ |
954,800 |
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$ |
4,441,845 |
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$ |
20,279,511 |
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R. Milton Johnson
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501,739 |
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$ |
6,322,243 |
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|
|
52,203 |
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$ |
2,662,353 |
|
|
$ |
33,485 |
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$ |
450,200 |
|
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$ |
1,253,325 |
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$ |
10,721,606 |
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Samuel N. Hazen
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663,641 |
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$ |
6,955,770 |
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56,394 |
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|
$ |
2,876,094 |
|
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$ |
35,182 |
|
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$ |
473,200 |
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$ |
2,324,070 |
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$ |
12,664,316 |
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Robert A. Waterman
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406,624 |
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$ |
6,937,589 |
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|
|
42,695 |
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$ |
2,177,445 |
|
|
$ |
35,182 |
|
|
$ |
394,300 |
|
|
$ |
2,705,754 |
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$ |
12,250,270 |
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Other 17 senior executive officers
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4,003,577 |
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$ |
48,213,199 |
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455,300 |
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$ |
23,220,300 |
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$ |
239,937 |
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$ |
1,529,700 |
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$ |
29,321,277 |
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$ |
102,524,413 |
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Dr. Thomas F. Frist, Jr.
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29,898 |
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$ |
177,389 |
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9,088 |
(3) |
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$ |
463,488 |
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|
|
|
$ |
134,782,188 |
(4) |
|
$ |
135,423,065 |
|
Total of all executive officers and
Dr. Frist
|
|
|
8,984,701 |
|
|
$ |
107,102,738 |
|
|
|
865,994 |
|
|
$ |
44,165,694 |
|
|
$ |
421,303 |
|
|
$ |
5,746,500 |
|
|
$ |
182,206,782 |
|
|
$ |
339,692,051 |
|
54
|
|
|
(1) |
With respect to Messrs. Bovender, Bracken, Johnson, Hazen,
Waterman and other executive officers, amounts reflect the
payments that would be received if such officers were to receive
the merger consideration for all equity held by such officers
and do not exclude amounts such officers may reinvest and/or
roll over pursuant to the equity roll over commitments described
on page 56 of this proxy statement. |
|
|
(2) |
Based on estimated payroll deductions through November 30,
2006 and stock prices as of August 31, 2006. |
|
(3) |
Includes restricted share units. |
|
|
(4) |
Amounts exclude 14,217,119 shares which Dr. Frist and
the Frist Entities currently intend to contribute to Parent in
connection with the merger in exchange for a portion of the
equity securities of Parent as described on page 52 of this
proxy statement and are subject to change in the event the
sponsors assign any of their equity commitments to the Frist
Entities. See Financing of the Merger
Equity Financing. |
|
|
|
|
HCA Supplemental Executive Retirement Plan |
Upon the consummation of the merger, all benefits under the SERP
will vest and the normal retirement age pursuant to the SERP
will be reduced from age 62 to age 60. In the event a
participant is terminated without cause or resigns for good
reason (as such terms are defined in the SERP) within six months
before or after the consummation of the merger, such participant
will receive an additional three years of service credit under
the SERP (not to exceed 25, in total) and the non-compete
provisions contained in the SERP will be waived. In addition,
the merger agreement provides that the Company will amend the
SERP prior to the consummation of the merger so that it cannot
be terminated, or amended in a manner that would adversely
affect any of the participants in the SERP as of July 24,
2006, until each current participant has become fully vested in
the maximum benefit available under the SERP.
|
|
|
New Arrangements with the Surviving Corporation After
Closing |
The sponsors indicated in their discussions with management
regarding the acquisition that it was critical in their
willingness to proceed with the acquisition that seven senior
executive officers, including Jack O. Bovender, Jr.,
Richard M. Bracken, R. Milton Johnson, Samuel N. Hazen, W. Paul
Rutledge, Beverly B. Wallace and Charles J. Hall who will serve
as President of our Eastern Group effective October 1, 2006
(the Senior Management Group), commit to make
significant investments in the surviving corporation.
Accordingly, in connection with entering into the merger
agreement and in contemplation of the acquisition, each member
of the Senior Management Group agreed with the Investor Group on
certain general employment and equity compensation terms,
although it is not expected that definitive agreements will be
entered into until a later date prior to the consummation of the
merger.
|
|
|
Equity Roll Over Commitments |
Each member of the Senior Management Group committed to invest a
certain amount into the surviving corporation, although each is
permitted to invest more than this amount. This investment could
be in the form of a cash investment, a roll over of HCA employee
stock options or a rollover of unrestricted shares of HCA Common
Stock. Any HCA stock options rolled over would not be cancelled
and cashed out upon consummation of the merger as described
above, and instead would become stock options exercisable for
the stock of the surviving corporation. Any unrestricted shares
of HCA Common Stock rolled over would not be cancelled and
cashed out upon consummation of the merger as described
55
above, but would be exchanged for shares of common stock of the
surviving corporation. The currently committed investments are
as follows:
|
|
|
|
|
Name |
|
Equity Commitment | |
|
|
| |
Jack O. Bovender, Jr.
|
|
|
$20.0 million |
|
Richard M. Bracken
|
|
|
$10.0 million |
|
R. Milton Johnson
|
|
|
$ 6.0 million |
|
Samuel N. Hazen
|
|
|
$ 5.5 million |
|
W. Paul Rutledge
|
|
|
$ 3.0 million |
|
Beverly B. Wallace
|
|
|
$ 2.0 million |
|
Charles J. Hall
|
|
|
$ 1.0 million |
|
It is expected that some of our other employees will also be
permitted to (but not required to) invest cash, roll over HCA
employee stock options and/or rollover unrestricted shares of
HCA Common Stock into equity of the surviving corporation.
In connection with the consummation of the merger, the surviving
corporation will adopt a new stock option plan under which it is
contemplated that approximately 1,600 employees (including the
executive officers) will be eligible to receive options to
acquire the stock of the surviving corporation. The new option
plan will permit the grant of options covering 10% of the fully
diluted equity of the surviving corporation immediately after
consummation of the merger. It is expected that substantially
all of the options under the new option plan will be granted at
the closing of the merger. A portion of the options will vest
solely based upon continued employment over a specific period of
time and a portion of the options will vest based both upon
continued employment over a specific period of time and upon the
achievement of predetermined performance targets over time. A
substantial majority of the options will have an exercise price
which is the equivalent of $51.00 per share, but some of
the options will have an exercise price in excess of the
equivalent of $51.00 per share. On the consummation of the
merger, Jack O. Bovender, Jr. will receive an option grant
covering at least 4.2% of the total number of options that can
be granted under the new option plan. The size of the option
grants to the other members of the Senior Management Group,
including the Management Rollover Holders, and to the other
executive officers have not yet been determined.
In connection with the consummation of the merger, the
Companys top eight executive officers (including each
member of the Senior Management Group and Robert A. Waterman)
(each an Executive) will enter into substantially
similar employment agreements with the surviving corporation,
which agreements will govern the terms of each executives
employment after the closing of the acquisition. The offices
held by existing members of the Senior Management Group and
Robert A. Waterman will not change as a result of execution of
these employment agreements, although Jack O. Bovender, Jr. and
Richard M. Bracken will be members of the board of directors of
the surviving corporation so long as they remain officers of the
surviving corporation, with Mr. Bovender continuing to serve as
the chairman of the board of directors. The term of employment
under each of these agreements shall be indefinite and will be
terminable by either party at any time; provided that an
Executive must give no less than 90 days notice prior to a
resignation.
Each employment agreement will set forth the Executives
annual base salary, which will be subject to discretionary
annual increases upon review by the Companys Board of
Directors, and will state that the Executive will be eligible to
earn an annual bonus as a percentage of salary with respect to
each fiscal year, based upon the extent to which annual
performance targets established by the Companys Board of
Directors are achieved. With respect to the 2007 fiscal year,
each Executive is expected to be eligible to earn (i) a
target bonus, if 2007 performance targets are met, (ii) a
specified percentage of the target bonus, if
threshold levels of performance are achieved but
performance targets are not met, or (iii) a multiple of the
target bonus if maximum performance goals are
achieved, with the annual bonus amount being interpolated, in
the sole discretion of the board, for performance results that
exceed threshold
56
levels but do not meet or exceed maximum levels. The
employment agreements also will commit the Company to provide
each Executive with annual bonus opportunities in 2008 that are
consistent with those applicable to the 2007 fiscal year, unless
doing so would be adverse to the interests of the Company and
its shareholders.
Pursuant to each employment agreement, if an Executives
employment terminates due to death or disability, the Executive
would be entitled to receive (i) any base salary and any
bonus that is earned and unpaid through the date of termination,
(ii) reimbursement of any unreimbursed business expenses
properly incurred by the Executive, (iii) such employee
benefits, if any, as to which the Executive may be entitled
under the Companys employee benefit plans (the payments
and benefits described in (i) through (iii) being
accrued rights), and (iv) a pro rata portion of
any annual bonus that the Executive would have been entitled to
receive pursuant to the employment agreement based upon the
Companys actual results for the year of termination (with
such proration based on the percentage of the fiscal year that
shall have elapsed through the date of termination of
employment, payable to the Executive when the annual bonus would
have been otherwise payable (the pro rata bonus)).
If an Executives employment is terminated by the Company
without cause (as defined in the employment
agreement) or by the Executive for good reason (as
defined in the employment agreement) (each a qualifying
termination), the Executive would be entitled to
(i) the accrued rights, (ii) subject to compliance
with certain confidentiality, non-competition and
non-solicitation covenants contained in his or her employment
agreement and execution of a general release of claims on behalf
of the Company, an amount equal to the product of (x) two
(three in the case of Jack O. Bovender, Jr., Richard M. Bracken
and R. Milton Johnson) and (y) the sum of (A) the
Executives base salary and (B) annual bonus paid or
payable in respect of the fiscal year immediately preceding the
fiscal year in which termination occurs, payable over a two-year
period, (iii) the pro rata bonus (as defined above), and
(iv) continued coverage under the Companys group
health plans during the period over which the cash severance
described in clause (ii) is paid. However, in lieu of
receiving the payments and benefits described in (ii),
(iii) and (iv) immediately above, the Executive may
instead elect to have his or her covenants not to compete waived
by the Company.
In the event of an Executives termination of employment
that is not a qualified termination or a termination due to
death or disability, he or she will only be entitled to the
accrued rights (as defined above).
Additionally, pursuant to the employment agreement, the Company
will agree to indemnify each Executive against any adverse tax
consequences (including, without limitation, under
Section 409A and 4999 of the Internal Revenue Code), if
any, that result from the adjustment by the Company of stock
options held by the Executive in connection with the merger or
the future payment of any extraordinary cash dividends.
The employment agreement with Jack O. Bovender Jr. will also
provide that in the event of (i) any termination of
Mr. Bovenders employment after Mr. Bovender has
attained 62 years of age (other than a termination by the
Company for cause) or (ii) a termination of
Mr. Bovenders employment by the Company without
cause, then (A) neither Mr. Bovender nor the Company
will have any put or call rights with respect to
Mr. Bovenders new options granted
pursuant to the Companys new option plan (as discussed in
the section above) or stock acquired upon exercise of such
options, (B) the unvested new options held by
Mr. Bovender that vest solely based on the passage of time
will vest as if Mr. Bovenders employment had
continued through the next three anniversaries of their date of
grant, (C) the unvested new options held by
Mr. Bovender that are performance options will remain
outstanding and will vest, if at all, on the next three dates
that they would have otherwise vested had
Mr. Bovenders employment continued, based upon the
extent to which performance goals are met, and (D) Mr.
Bovenders new options will remain exercisable until the
second anniversary of the last date on which his
performance-based new options are eligible to vest, except that
Mr. Bovenders new options that are granted with a
strike price equal to two times that of his performance-based
new options will remain exercisable until the fifth anniversary
of the last date on which his performance-based new options are
eligible to vest.
57
|
|
|
Board of Directors Representation |
Jack O. Bovender, Jr. and Richard M. Bracken will be
members of the board of directors of the surviving corporation
so long as they remain officers of the surviving corporation,
with Mr. Bovender continuing to serve as the chairman of
the board of directors.
|
|
|
HCA Director Compensation Arrangements and Other
Interests |
As of August 31, 2006, our directors, other than
Dr. Frist and Messrs. Bovender and Bracken, held
options to purchase an aggregate of 426,420 shares of HCA
Common Stock at a weighted average exercise price of
$38.58 per share, and an aggregate of 132,153 shares
of restricted stock or restricted share units. As with our other
employees generally, the vesting of these awards will be
accelerated in connection with the merger and these awards will
be cancelled and converted into the right to receive the merger
consideration or otherwise be cashed out as described elsewhere
in this proxy statement. The aggregate cash payment that will be
made to these directors in respect of unvested restricted
shares, restricted share units or options upon the consummation
of the merger is anticipated to be approximately $12,265,490,
based on a cash merger consideration of $51.00 per share.
The chairman of the special committee will receive remuneration
in the amount of $100,000, plus expenses, in consideration of
his acting in such capacity, and each other member of the
special committee will receive remuneration in the amount of
$60,000, plus expenses, in consideration of his or her acting in
such capacity. The members of the board of directors (excluding
Dr. Frist and Messrs. Bovender and Bracken) are
independent of and have no economic interest or expectancy of an
economic interest in Parent or its affiliates, and will not
retain an economic interest in the surviving corporation or
Parent following the merger.
|
|
|
Indemnification and Insurance |
The surviving corporation has agreed to indemnify, to the
greatest extent permitted by law, each of our present and former
directors and executive officers against all expenses, losses
and liabilities (and to comply with all of our obligations to
advance funds for expenses) incurred in connection with any
claim, proceeding or investigation arising out of any act or
omission in their capacity as an officer or director occurring
on or before the closing date of the acquisition.
The merger agreement requires that we purchase, and that
following the closing date of the acquisition the surviving
corporation maintain, tail coverage directors
and officers liability insurance policies in an amount and
scope at least as favorable as the Companys existing
policies and with a claims period of at least six years from the
closing date of the acquisition for claims arising from facts or
events that occurred on or prior to the closing date. If the
annual premiums of insurance coverage exceed 300% of our current
annual premium, the surviving corporation must obtain a policy
with the greatest coverage available for a cost not exceeding
300% of the current annual premium paid by us.
Material U.S. Federal Income Tax Consequences of the
Merger to Our Shareholders
The following is a summary of the material U.S. federal
income tax consequences of the merger to holders of HCA Common
Stock whose shares of HCA Common Stock are converted into the
right to receive cash in the merger. This summary does not
purport to consider all aspects of U.S. federal income taxation
that might be relevant to our shareholders. For purposes of this
discussion, we use the term U.S. holder to mean
a beneficial owner of shares of HCA Common Stock that is,
for U.S. federal income tax purposes:
|
|
|
|
|
a citizen or resident of the United States; |
|
|
|
a corporation created or organized under the laws of the United
States or any of its political subdivisions; |
|
|
|
a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person; or |
|
|
|
an estate that is subject to U.S. federal income tax on its
income regardless of its source. |
58
A non-U.S. holder is a person (other than a
partnership) that is not a U.S. holder.
If a partnership holds HCA Common Stock, the tax treatment of a
partner will generally depend on the status of the partner and
the activities of the partnership. A partner of a partnership
holding HCA Common Stock should consult its tax advisor.
This discussion is based on current law, which is subject to
change, possibly with retroactive effect. It applies only to
beneficial owners who hold shares of HCA Common Stock as capital
assets, and may not apply to shares of HCA Common Stock received
in connection with the exercise of employee stock options or
otherwise as compensation, shareholders who hold an equity
interest, directly or indirectly, in Parent or the surviving
corporation after the merger, or certain types of beneficial
owners who may be subject to special rules (such as insurance
companies, banks, tax-exempt organizations, financial
institutions, broker-dealers, partnerships, S corporations
or other pass-through entities, mutual funds, traders in
securities who elect the
mark-to-market method
of accounting, shareholders subject to the alternative minimum
tax, shareholders that have a functional currency other than the
U.S. dollar, or shareholders who hold HCA Common Stock as
part of a hedge, straddle or a constructive sale or conversion
transaction). This discussion does not address the receipt of
cash in connection with the cancellation of shares of restricted
stock, restricted share units or options to purchase shares of
HCA Common Stock, or any other matters relating to equity
compensation or benefit plans. This discussion also does not
address any aspect of state, local or foreign tax laws.
The exchange of shares of HCA Common Stock for cash in the
merger will be a taxable transaction to U.S. holders for
U.S. federal income tax purposes. In general, a
U.S. holder whose shares of HCA Common Stock are converted
into the right to receive cash in the merger will recognize
capital gain or loss for U.S. federal income tax purposes
equal to the difference, if any, between the amount of cash
received with respect to such shares (determined before the
deduction of any applicable withholding taxes) and the
shareholders adjusted tax basis in such shares. Gain or
loss will be determined separately for each block of shares
(i.e., shares acquired at the same cost in a single
transaction). Such gain or loss will be long-term capital gain
or loss provided that a shareholders holding period for
such shares is more than 12 months at the time of the
consummation of the merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. There
are limitations on the deductibility of capital losses.
Backup withholding of tax may apply to cash payments received by
a non-corporate shareholder in the merger, unless the
shareholder or other payee provides a taxpayer identification
number (social security number, in the case of individuals, or
employer identification number, in the case of other
shareholders), certifies that such number is correct, and
otherwise complies with the backup withholding rules. Each of
our shareholders should complete and sign the Substitute
Form W-9 included
as part of the letter of transmittal and return it to the paying
agent, in order to provide the information and certification
necessary to avoid backup withholding, unless an exemption
applies and is established in a manner satisfactory to the
paying agent.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowable as
a refund or a credit against a U.S. holders federal
income tax liability provided the required information is timely
furnished to the Internal Revenue Service.
Cash received in the merger will also be subject to information
reporting unless an exemption applies.
Non-U.S. Holders
Any gain realized on the receipt of cash in the merger by a
non-U.S. holder
generally will not be subject to United States federal
income tax unless:
|
|
|
|
|
the gain is effectively connected with a trade or business of
the non-U.S.
holder in the United States (and, if required by an
applicable income tax treaty, is attributable to a
United States permanent establishment of the
non-U.S. holder); |
59
|
|
|
|
|
the
non-U.S. holder is
an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met; or |
|
|
|
HCA is or has been a United States real property
holding corporation for U.S. federal income tax
purposes and the
non-U.S. holder
owned more than 5% of HCAs Common Stock at any time during
the five years preceding the merger. |
An individual
non-U.S. holder
described in the first bullet point immediately above will be
subject to tax on the net gain derived from the merger under
regular graduated U.S. federal income tax rates. If a
non-U.S. holder
that is a foreign corporation falls under the first bullet point
immediately above, it will be subject to tax on its net gain in
the same manner as if it were a U.S. person as defined under the
Code and, in addition, may be subject to the branch profits tax
equal to 30% of its effectively connected earnings and profits
or at such lower rate as may be specified by an applicable
income tax treaty. An individual
non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the merger,
which may be offset by U.S. source capital losses, even
though the individual is not considered a resident of the
United States.
HCA believes that it is not and has not been a
United States real property holding corporation
for U.S. federal income tax purposes.
Backup withholding of tax may apply to the cash received by a
non-corporate shareholder in the merger, unless the shareholder
or other payee certifies under penalty of perjury that it is a
non-U.S. holder in
the manner described in the letter of transmittal (and the payor
does not have actual knowledge or reason to know that the
beneficial owner is a U.S. person as defined under the Code) or
otherwise establishes an exemption in a manner satisfactory to
the paying agent. Backup withholding is not an additional tax
and any amounts withheld under the backup withholding rules may
be refunded or credited against a
non-U.S. holders
U.S. federal income tax liability, if any, provided that
such
non-U.S. holder
furnishes the required information to the Internal Revenue
Service in a timely manner. Cash received in the merger will
also be subject to information reporting, unless an exemption
applies.
The U.S. federal income tax consequences set forth above
are not intended to constitute a complete description of all tax
consequences relating to the merger. Because individual
circumstances may differ, each shareholder should consult the
shareholders tax advisor regarding the applicability of
the rules discussed above to the shareholder and the particular
tax effects to the shareholder of the merger in light of such
shareholders particular circumstances, the application of
state, local and foreign tax laws, and, if applicable, the tax
consequences of the receipt of cash in connection with the
cancellation of restricted shares, restricted share units or
options to purchase shares of HCA Common Stock, including the
transactions described in this proxy statement relating to our
other equity compensation and benefit plans.
Certain Relationships Between Parent and HCA
There are no material relationships between Parent and Merger
Sub or any of their respective affiliates, on the one hand, and
HCA or any of its affiliates, on the other hand, other than in
respect of the merger agreement and those arrangements described
above under Background of the Merger and
Interests of the Companys Directors and
Executive Officers in the Merger.
Litigation Related to the Merger
HCA is aware of six purported class action lawsuits related to
the merger filed against some or all of the following: HCA, Jack
O. Bovender, Jr., Richard M. Bracken, each of the
Companys directors, and the Investor Group in the Chancery
Court for Davidson County, Tennessee. The lawsuits and dates of
filing are as follows: Pirelli Armstrong Tire Corporation
Retiree Medical Benefits Trust, on behalf of itself and all
others similarly situated v. HCA, Inc., et al.,
Davidson County Chancery Court, No. 06-1816-III (filed
July 24, 2006); William Cedar, on behalf of itself and
all others similarly situated v. HCA, Inc.,
et al., Davidson County Chancery Court,
No. 06-1820-I (filed July 24, 2006); C.A. Corry, on
behalf of itself and all others similarly situated v. HCA,
Inc., et al., Davidson County Chancery Court,
No. 06-1819-I (filed July 24, 2006); Henry F.
Ewert, Jr., on behalf of himself and all others similarly
situated v. HCA, Inc.,
60
et al., Davidson County Chancery Court,
No. 06-1821-III (filed July 24, 2006); Robert Kemp,
on behalf of himself and all others similarly situated v.
C. Michael Armstrong, et al., Davidson County Chancery
Court, No. 06-1831-II (filed July 26, 2006); and
Malky Lerner v. C. Michael Armstrong, et al.,
Davidson County Chancery Court, No. 06-1832-II (filed
July 26, 2006). These Tennessee cases have been transferred
to and consolidated before the same Chancellor, which will allow
these cases to be litigated as a single matter. The consolidated
action is entitled In re HCA Inc. Shareholder
Litigation, Davidson County Chancery Court,
No. 06-1816-III.
HCA is also aware of two purported class action lawsuits filed
against the following: HCA, Jack O. Bovender, Jr., Richard M.
Bracken, each of the Companys directors, Thomas F. Frist,
Jr., M.D., Hercules Holding II, LLC and Hercules Acquisition
Corporation in the Chancery Court for the State of Delaware, New
Castle County. The lawsuits and filing dates are as follows:
Momentum Partners, on behalf of its itself and all others
similarly situated v. C. Michael Armstrong, et al.,
Delaware Chancery Court, No.
2307-N (filed
July 28, 2006) and Robert Garfield v. C. Michael
Armstrong, et al., Delaware Chancery Court,
No. 2373-N (filed
August 25, 2006). These Delaware cases have been
consolidated before the same Chancellor, which will allow these
cases to be litigated as a single matter. The consolidated
action is entitled In re HCA, Inc. Shareholders Litigation,
Delaware Chancery Court, No. 2307-N. The complaints in all
these lawsuits are substantially similar and allege, among other
things, that the merger is the product of a flawed process and
that the consideration to be paid to the HCA shareholders in the
merger is unfair and inadequate. The complaints further allege,
among other things, that the officers and directors of HCA
breached their fiduciary duties by, among other things, taking
actions designed to deter higher offers from other potential
acquirers, failing to maximize the value of HCA to its
shareholders, avoiding competitive bidding, capping the price of
HCAs stock, failing to properly value HCA, ignoring or not
protecting against numerous conflicts of interest, and failing
to disclose all material information that would permit
HCAs shareholders to cast a fully informed vote on the
merger. The complaints further allege that the Investor Group
aided and abetted the actions of the HCA officers and directors
in breaching their fiduciary duties to the shareholders of HCA.
The complaints seek, among other relief, some or all of the
following: class certification of the respective lawsuits, an
injunction preventing consummation of the merger, a declaration
that the merger agreement was entered into in breach of the
fiduciary duties of defendants, an order directing defendants to
exercise their fiduciary duties to obtain a transaction which is
in the best interests of HCA shareholders until the process for
a sale or auction of HCA is completed and the highest price is
obtained, an order rescinding the merger or any of the terms of
the merger to the extent already implemented, an award of money
damages, an accounting of any benefits resulting from unlawful
conduct, pre-judgment and post-judgment interest,
attorneys fees and expenses, and such other relief as the
courts might find just and proper. HCA believes these lawsuits
are without merit and plans to defend them vigorously.
Additional lawsuits pertaining to the merger could be filed in
the future.
Fees and Expenses of the Merger
We estimate that we will incur, and will be responsible for
paying, transaction-related fees and expenses, consisting
primarily of financial, legal, accounting and tax advisory fees,
SEC filing fees and other related charges, totaling
approximately
$ million.
This amount includes the following estimated fees and expenses:
|
|
|
|
|
|
|
Amount to | |
Description |
|
be Paid | |
|
|
| |
SEC filing fee
|
|
$ |
2,276,863 |
|
Printing, proxy solicitation and mailing expenses
|
|
|
|
|
Financial, legal, accounting and tax advisory fees and expenses
|
|
|
|
|
Miscellaneous expenses
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
|
|
|
|
|
|
61
THE MERGER AGREEMENT
(PROPOSAL NO. 1)
This section of the proxy statement describes the material
provisions of the merger agreement but does not purport to
describe all of the terms of the merger agreement. The following
summary is qualified in its entirety by reference to the
complete text of the merger agreement, which is attached as
Annex A to this proxy statement and incorporated into this
proxy statement by reference. We urge you to read the full text
of the merger agreement because it is the legal document that
governs the merger. It is not intended to provide you with any
other factual information about us. Such information can be
found elsewhere in this proxy statement and in the public
filings we make with the SEC, as described in the section
entitled Where You Can Find More Information
below.
The Merger
The merger agreement provides for the merger of Merger Sub with
and into HCA upon the terms, and subject to the conditions, of
the merger agreement. The merger will be effective at the time
the certificate of merger is filed with the Secretary of State
of the State of Delaware (or at a later time, if agreed upon by
the parties and specified in the certificate of merger). We
expect to complete the merger as promptly as practicable after
our shareholders adopt the merger agreement and, if necessary,
the expiration of the marketing period described below.
As the surviving corporation, HCA will continue to exist
following the merger. Upon consummation of the merger, the
directors of Merger Sub will be the initial directors of the
surviving corporation and the officers of HCA will be the
initial officers of the surviving corporation. All surviving
corporation officers will hold their positions until their
successors are duly elected and qualified or until the earlier
of their resignation or removal.
We, Parent or Merger Sub may terminate the merger agreement
prior to the consummation of the merger in some circumstances,
whether before or after the approval of the merger agreement by
shareholders. Additional details on termination of the merger
agreement are described in Termination of the
Merger Agreement.
Merger Consideration
Each share of HCA Common Stock issued and outstanding
immediately before the merger will automatically be cancelled
and will cease to exist and will be converted into the right to
receive $51.00 in cash, without interest and less any applicable
withholding taxes, other than:
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shares held in treasury or owned by Parent, including shares
that are contributed to Parent in exchange for shares of
Parents capital stock and shares (including restricted
shares) otherwise acquired by Parent pursuant to agreements with
shareholders of the Company, that will be cancelled, |
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shares held by subsidiaries of Parent or HCA, which will remain
outstanding after consummation of the merger, and |
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shares held by holders who have properly demanded and perfected
their appraisal rights. |
After the merger is effective, each holder of a certificate
representing any shares of HCA Common Stock (other than shares
for which appraisal rights have been properly demanded and
perfected) will no longer have any rights with respect to the
shares, except for the right to receive the merger
consideration. See Dissenters Rights of
Appraisal.
Treatment of Options and Other Awards
Upon the consummation of the merger, except as otherwise agreed
by the holder and Parent, all outstanding options to acquire HCA
Common Stock under the Companys equity incentive plans
will become fully vested and immediately exercisable and all
such options (other than certain such options
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held by certain Management Rollover Holders) not exercised prior
to the merger will be cancelled and converted into the right to
receive a cash payment equal to the number of shares of HCA
Common Stock underlying the option multiplied by the amount by
which $51.00 exceeds the exercise price for each share of HCA
Common Stock underlying the options, without interest and less
any applicable withholding taxes. Additionally, except as
otherwise agreed by the holder and Parent, all shares of
restricted stock and restricted share units will, upon the
consummation of the merger, vest and be cancelled and converted
into the right to receive a cash payment equal to the number of
outstanding restricted shares and restricted share units
multiplied by $51.00 (together, with respect to restricted share
units, the value of any deemed dividend equivalents accrued but
unpaid with respect to such restricted share units), without
interest and less any applicable withholding taxes. Certain
options held by certain of the Management Rollover Holders that
are not exercised prior to consummation of the merger will be
converted into options for shares of common stock of the
surviving corporation. In addition, certain of the Management
Rollover Holders may elect to exchange certain unrestricted
shares of HCA Common Stock for shares of common stock of the
surviving corporation.
The effect of the merger upon our stock purchase and certain
other employee benefit plans is described below under
Employee Benefits.
Payment for the Shares
Before the merger, we will designate a paying agent reasonably
satisfactory to Parent to make payment of the merger
consideration as described above. Immediately after the
effective time of the merger, the surviving corporation will
deposit, or Parent shall cause the surviving corporation to
deposit, in trust with the paying agent the funds appropriate to
pay the merger consideration to the shareholders.
Upon the consummation of the merger and the settlement of
transfers that occurred prior to the effective time, we will
close our stock ledger. After that time, there will be no
further transfer of shares of HCA Common Stock.
As promptly as practicable after the consummation of the merger,
the surviving corporation will send, or cause the paying agent
to send, you a letter of transmittal and instructions advising
you how to surrender your certificates in exchange for the
merger consideration. The paying agent will pay you your merger
consideration after you have (1) surrendered your
certificates to the paying agent and (2) provided to the
paying agent your signed letter of transmittal and any other
items specified by the letter of transmittal. Interest will not
be paid or accrue in respect of the merger consideration. The
surviving corporation will reduce the amount of any merger
consideration paid to you by any applicable withholding taxes.
YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING
AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN
YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
If any cash deposited with the paying agent is not claimed
within twelve (12) months following the effective time of
the merger, such cash will be returned to the surviving
corporation upon demand subject to any applicable unclaimed
property laws. Any unclaimed amounts remaining immediately prior
to when such amounts would escheat to or become property of any
governmental authority will be returned to the surviving
corporation free and clear of any prior claims or interest
thereto.
If the paying agent is to pay some or all of your merger
consideration to a person other than you, as the registered
owner of a stock certificate, you must have your certificates
properly endorsed or otherwise in proper form for transfer, and
you must pay any transfer or other taxes payable by reason of
the transfer or establish to the paying agents reasonable
satisfaction that the taxes have been paid or are not required
to be paid.
The transmittal instructions will tell you what to do if you
have lost your certificate, or if it has been stolen or
destroyed. You will have to provide an affidavit to that fact
and, if required by the paying agent or surviving corporation,
post a bond in an amount that the surviving corporation or the
paying agent reasonably directs as indemnity against any claim
that may be made against it in respect of the certificate.
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Representations and Warranties
The merger agreement contains representations and warranties
made by us to Parent and Merger Sub and representations and
warranties made by Parent and Merger Sub to us. The assertions
embodied in those representations and warranties were made
solely for purposes of the merger agreement and may be subject
to important qualifications and limitations agreed by the
parties in connection with negotiating its terms. Moreover, some
of those representations and warranties may not be accurate or
complete as of any particular date because they are subject to a
contractual standard of materiality or material adverse effect
different from that generally applicable to public disclosures
to shareholders or used for the purpose of allocating risk
between the parties to the merger agreement rather than
establishing matters of fact. For the foregoing reasons, you
should not rely on the representations and warranties contained
in the merger agreement as statements of factual information.
In the merger agreement, HCA, Parent and Merger Sub each made
representations and warranties relating to, among other things:
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corporate organization and existence; |
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corporate power and authority to enter into and perform its
obligations under, and enforceability of, the merger agreement; |
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required regulatory filings and consents and approvals of
governmental entities; |
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the absence of conflicts with or defaults under organizational
documents, other contracts and applicable laws and judgments; |
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finders fees; and |
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information supplied for inclusion in this proxy statement. |
In the merger agreement, Parent and Merger Sub also each made
representations and warranties relating to the availability of
the funds necessary to perform its obligations under the merger
agreement, equity roll over commitments, guarantees, and
operations of Parent and Merger Sub.
HCA also made representations and warranties relating to, among
other things:
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capital structure; |
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documents filed with the SEC; |
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undisclosed liabilities; |
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absence of certain changes or events since December 31,
2005; |
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litigation; |
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tax matters; |
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compliance with the Employee Retirement Income Securities Act of
1974, as amended, and other employee benefit matters; |
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compliance with applicable laws; |
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contracts with affiliates; and |
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state takeover statutes and the absence of a rights plan. |
Many of HCAs representations and warranties are qualified
by a material adverse effect standard. For purposes of the
merger agreement, material adverse effect for HCA is
defined to mean any event, state of facts, circumstance,
development, change, effect or occurrence (an
Effect) that is materially adverse to the business,
financial condition or results of operations of the Company and
its subsidiaries, taken as a whole, other than (i) any
Effect resulting from (A) changes in general economic or
political conditions or the securities, credit or financial
markets in general, (B) general changes or developments in
the industries
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in which the Company and its subsidiaries operate, including
general changes in law or regulation across such industries,
(C) the announcement of the merger agreement or the
pendency or consummation of the merger, including any labor
union activities related thereto, (D) the identity of
Parent or any of its affiliates as the acquiror of the Company,
(E) compliance with the terms of, or the taking of any
action required by, the merger agreement or consented to by
Parent, (F) any acts of terrorism or war (other than any of
the foregoing that causes any damage or destruction to or
renders unusable any facility or property of the Company or any
of its subsidiaries), (G) changes in generally accepted
accounting principles or the interpretation thereof, or
(H) any weather related event, except, in the case of the
foregoing clauses (A) and (B), to the extent such
changes or developments referred to therein would reasonably be
expected to have a materially disproportionate impact on the
Company and its subsidiaries, taken as a whole, relative to
other for profit participants in the industries and in the
geographic markets in which the Company conducts its businesses
after taking into account the size of the Company relative to
such other for profit participants, or (ii) any failure to
meet internal or published projections, forecasts or revenue or
earnings predictions for any period (provided that the
underlying causes of such failure shall be considered in
determining whether there is a material adverse effect on the
Company).
Conduct of Business Pending the Merger
We have agreed in the merger agreement that, until the
consummation of the merger, except as expressly consented to in
writing by Parent and Merger Sub (which consent shall not be
unreasonably withheld) we will use our reasonable best efforts
to, and to cause each of our subsidiaries to:
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conduct our business in the ordinary course consistent with past
practice and comply with all applicable laws in all material
respects; and |
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preserve substantially intact our business organizations and
capital structures, maintain in effect all material permits that
are required to carry on our business, keep available the
services of our present officers and key employees and maintain
our relationships with providers, suppliers and others with
which we have significant business relationships. |
We have also agreed that, until the consummation of the merger,
except as expressly contemplated or permitted by the merger
agreement or consented to in writing by Parent and Merger Sub
(which consent will not be unreasonably withheld), we will not,
and will not permit any of our subsidiaries to:
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adopt any change in our organizational or governing documents; |
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merge or consolidate with any person (other than the merger and
other than such transactions solely among us and/or our
wholly-owned domestic subsidiaries that would not result in a
material increase in our tax liability); |
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sell, lease or otherwise dispose of a material amount of assets
or securities, including by merger, consolidation, asset sale or
other business combination (including by formation of a material
joint venture), other than such transactions solely among us
and/or our wholly-owned domestic subsidiaries that would not
result in a material increase in our tax liability; |
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(i) make any material acquisition, by purchase or other
acquisition of stock or other equity interests, by merger,
consolidation or other business combination (including by
formation of a material joint venture); or (ii) make any
material property transfers or material purchases of any
property or assets, in or from any person, in each case, other
than such transactions solely among us and/or our wholly-owned
subsidiaries; |
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other than in connection with drawdowns or repayments with
respect to existing credit facilities in the ordinary course of
business consistent with past practice, redeem, repurchase,
prepay, defease, cancel, incur or otherwise acquire, or modify
in any material respect the terms of, indebtedness for borrowed
money or assume, guarantee or endorse or otherwise become
responsible for, whether directly, contingently or otherwise,
the obligations of any person, other than the incurrence, |
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assumption or guarantee of indebtedness (i) between us, on
the one hand, and any of our subsidiaries, on the other hand, or
(ii) not in excess of $10,000,000 in the aggregate; |
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offer, place or arrange any issue of debt securities or
commercial bank or other credit facilities that would reasonably
be expected to compete with or impede the debt financing or
cause the breach of any provisions of the debt financing
commitments or cause any condition set forth in the debt
financing commitments not to be satisfied; |
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make any material loans, advances or capital contributions to,
or investments in, any other person in excess of $20,000,000 in
the aggregate for all such loans, advances, contributions and
investments, except for (i) transactions solely among us
and/or our wholly-owned subsidiaries, or (ii) as required
by our existing contracts; |
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authorize any capital expenditures in excess of $20,000,000 in
the aggregate, other than expenditures provided for in our
budget for the remaining portion of fiscal year 2006 and for any
portion of fiscal year 2007 prior to the closing date of the
merger; |
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pledge or otherwise encumber shares of our or our
subsidiaries capital stock or other voting securities; |
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mortgage or pledge any of our material assets, tangible or
intangible, or create, assume or suffer to exist any lien
thereupon, other than certain liens permitted under the merger
agreement; |
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enter into or amend any contract with any of our or our
subsidiaries executive officers, directors or other
affiliates or any person beneficially owning 1% or more of our
capital stock or the voting power of the capital stock; |
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enter into, renew, extend, amend or terminate any contract that
is or would be material to us and our subsidiaries, taken as a
whole, other than in the ordinary course of business consistent
with past practice; |
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(i) split, combine or reclassify any of our securities or
amend the terms of any of our securities, (ii) declare,
establish a record date for, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of our securities other than
(x) a dividend or distribution by a wholly-owned subsidiary
to its parent corporation in the ordinary course of business,
(y) payment on September 1, 2006 of the previously
declared regularly quarterly dividend of $0.17 per share,
and (z) payment of a regular quarterly dividend not to
exceed $0.17 per share for the fourth quarter of 2006;
provided, that the record date for such dividend shall be no
earlier than December 1, 2006 and that no such dividend
shall be payable if the effective time of the merger occurs on
or prior to the record date; (iii) issue or offer to issue
any of our securities, or redeem, repurchase or otherwise
acquire or offer to redeem, repurchase, or otherwise acquire,
any of our securities, other than in connection with
(A) the exercise of our options outstanding on the date of
the merger agreement in accordance with their original terms,
(B) the withholding of our securities to satisfy tax
obligations with respect to our options or restricted shares,
(C) the acquisition by us of our securities in connection
with the net exercise of options in accordance with the terms
thereof and (D) acquisitions by or issuances to our benefit
plans in the ordinary course of business consistent with past
practice; |
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except as required pursuant to existing written agreements or
benefit plans in effect on the date of the merger agreement or
as required by applicable law, (i) adopt, amend in any
material respect or terminate any benefit plan, (ii) take
any action to accelerate the vesting or payment, or fund or in
any other way secure the payment, of compensation or benefits
under any benefit plan, (iii) except in connection with
promotions or new hires made in the ordinary course of business
consistent with past practice, increase in any manner the cash
compensation or welfare or pension benefits of employees, or
(iv) change any actuarial or other assumption used to
calculate funding obligations with respect to any benefit plan
or change the manner in which contributions to any benefit plan
are made or determined; |
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settle or compromise any litigation, or release, dismiss or
otherwise dispose of any claim or arbitration, other than
settlements or compromises of litigation, claims or arbitration
that do not exceed $10,000,000 in the aggregate (net of
insurance recoveries) and do not impose any material
restrictions on our or any of our subsidiaries business or
operations or any of our joint ventures; |
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other than in the ordinary course of business consistent with
past practice or except to the extent required by law, make or
change any material tax election, settle or compromise any
material tax liability of ours or any of our subsidiaries, agree
to an extension of the statute of limitations with respect to
the assessment or determination of our or our subsidiaries
material taxes, file any amended tax return with respect to any
material tax, enter into any closing agreement with respect to
any material tax or surrender any right to claim a material tax
refund; |
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make any change in financial accounting methods or method of tax
accounting, principles or practices materially affecting our or
our material subsidiaries reported consolidated assets,
liabilities or results of operations, except insofar as may have
been required by a change in U.S. generally accepted
accounting principles or law; |
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adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of us or
any of our material subsidiaries, or enter into a letter of
intent or agreement in principle with respect thereto, (other
than the merger and other than such transactions solely among us
and/or our wholly-owned domestic subsidiaries that would not
result in a material increase in our or our subsidiaries
tax liability); |
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take any action or fail to take any action that is intended to,
or would reasonably be expected to, individually or in the
aggregate, prevent, materially delay or materially impede our
ability to consummate the merger or the other transactions
contemplated by the merger agreement; or |
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authorize, agree or commit to do any of the foregoing. |
Efforts to Complete the Merger
Subject to the terms and conditions set forth in the merger
agreement, each of the parties to the merger agreement has
agreed to use its reasonable best efforts to take, or cause to
be taken, all actions, to file, or cause to be filed, all
documents, and to do or cause to be done all things necessary,
proper or advisable to consummate the merger, including
preparing and filing as promptly as practicable all
documentation to effect all necessary filings, consents,
waivers, approvals, authorizations, permits or orders from all
governmental authorities or other persons. The parties have also
agreed to take no action to cause any state takeover statute or
regulation to become applicable to the merger agreement or
merger and if any such statute or regulation does become
applicable to take all action necessary to ensure that the
merger may be consummated as promptly as practicable on the
terms contemplated by the merger agreement and otherwise
minimize the effect of such statute or regulation on the merger
agreement or merger.
In no event, however, will any party to the merger agreement be
required to take any actions to resolve any objections or suits
of governmental authorities (including the FTC) which would
reasonably be expected to have a material adverse effect on the
Company.
Parent has agreed to use its reasonable best efforts to arrange
the debt financing to fund the proposed merger and related
transactions contemplated by the debt financing commitments
executed in connection with the merger agreement and to cause
its financing sources to fund the financing required to
consummate the proposed merger. HCA has agreed to cooperate in
connection with the financing. See Special
Factors Financing of the Merger for a
description of the financing arranged by Parent to fund the
proposed merger and related transactions.
Parent has also agreed to use its reasonable best efforts to
arrange alternative debt financing on terms not less favorable
to Parent (as determined in Parents reasonable judgment)
than those contemplated by the financing commitments in the
event any portion of such debt financing becomes unavailable.
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HCA has also agreed, if so requested by Parent, to commence
offers to purchase or to redeem or discharge its
5.250% Notes due 2008, 5.500% Notes due 2009,
7.000% Notes due 2007, 7.250% Notes due 2008 and
8.850% Medium Term Notes due 2007, on terms and conditions
as proposed by Parent or as required by the terms of the
indenture governing such notes. The completion of such offers is
contingent upon the completion of the proposed merger. Parent
has also generally agreed to reimburse HCA for its reasonable
out-of-pocket expenses
in relation to such offers, purchases, redemptions or
discharges, and to indemnify HCA, its subsidiaries and its
officers and directors in connection with any damages incurred
in connection therewith if the merger agreement is terminated or
the merger is not completed.
Marketing Period
Unless otherwise agreed by the parties to the merger agreement,
the parties are required to close the merger on the third
business day after the satisfaction or waiver of the conditions
described under Conditions to the Merger
below, provided that if the marketing period has not ended at
such time, the parties are obligated to close the merger on the
date following the satisfaction or waiver of such conditions
that is the earliest to occur of (i) a date during the
marketing period specified by Merger Sub, (ii) the final
day of the marketing period and (iii) the end date as
described in Termination of the Merger
Agreement.
For purposes of the merger agreement, marketing
period means the first period of twenty
(20) consecutive business days throughout which:
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Parent has certain financial information required to be provided
by the Company under the merger agreement in connection with
Parents financing of the merger; and |
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both the mutual closing conditions and the conditions to the
obligations of Parent and Merger Sub (other than delivery of an
officers certificate by the Company) to complete the
merger are satisfied. |
If the marketing period would not end on or prior to
December 19, 2006, the marketing period will be deemed to
commence no earlier than January 2, 2007. In addition, the
marketing period will not be deemed to have commenced if, prior
to the completion of the marketing period, Ernst &
Young LLP shall have withdrawn its audit opinion with respect to
any financial statements contained in our reports filed with the
SEC since January 1, 2003.
The purpose of the marketing period is to provide the Investor
Group a reasonable and appropriate period of time during which
they can market and place the permanent debt financing
contemplated by the debt financing commitments for the purposes
of financing the merger. Parent has agreed:
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to use reasonable best efforts to arrange the debt financing as
promptly as practicable and to satisfy on a timely basis all
conditions applicable to Parent in any definitive agreements
entered into relating to the debt financing; and |
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in the event that any portion of the debt financing becomes
unavailable on the terms and conditions contemplated in the debt
financing commitments, to use its reasonable best efforts to
arrange alternative financing on terms no less favorable to
Parent (as determined in its reasonable judgment) as promptly as
practicable but no later than the last day of the marketing
period, or if earlier, the end date described in
Termination of the Merger Agreement. |
In addition, in the event that any portion of the debt financing
structured as high yield financing has not been consummated,
then, subject to certain exceptions, Parent must use the
proceeds of the bridge financing to replace the high yield
financing no later than the last day of the marketing period (or
if earlier, the end date).
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Conditions to the Merger
Conditions to Each Partys Obligations. Each
partys obligation to complete the merger is subject to the
satisfaction or waiver of the following conditions:
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of all outstanding shares of
voting HCA Common Stock; |
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any applicable waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated; and |
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no temporary restraining order, preliminary or permanent
injunction or other judgment or order issued by any court or
agency of competent jurisdiction or other statute, law, rule,
legal restraint or prohibition shall be in effect preventing the
merger. |
Conditions to Parents and Merger Subs
Obligations. The obligation of Parent and Merger Sub to
complete the merger is subject to the satisfaction or waiver of
the following additional conditions:
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our representations and warranties with respect to (i) our
capitalization and our compliance with a Corporate Integrity
Agreement between us and the Office of Inspector General of the
United States must each be true in all material respects as of
the effective time of the merger as if made at and as of the
effective time; and (ii) the identification of our
unrestricted subsidiaries under the indenture
governing our outstanding public notes must be true and correct
in all respects as of the effective time of the merger as if
made at and as of the effective time, except where the failure
to be so true and correct has not had a material adverse effect
on Parents ability to obtain debt financing for the merger
on the terms and conditions set forth in the debt financing
commitments described under Special Factors
Financing of the Merger; |
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all other representations and warranties made by us in the
merger agreement, with the exception of those listed above, must
be true and correct as of the effective time of the merger as if
made at and as of such time (without giving effect to any
qualification as to Material Adverse Effect set
forth in such representations and warranties), except where the
failure to be so true and correct, individually and in the
aggregate, has not had, and would not reasonably be expected to
have, a material adverse effect on us; provided that any
representations made by us as of a specific date need only be so
true and correct (subject to such qualifications) as of the date
made; |
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we must have performed in all material respects all obligations,
and complied in all material respects with the agreements and
covenants, we are required to perform under the merger agreement
at or prior to the closing date; and |
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we must deliver to Parent and Merger Sub at closing a
certificate with respect to the satisfaction of the foregoing
conditions relating to representations, warranties, obligations,
covenants and agreements. |
Conditions to HCAs Obligations. Our obligation to
complete the merger is subject to the satisfaction or waiver of
the following further conditions:
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the representations and warranties made by Parent and Merger Sub
in the merger agreement that are qualified as to materiality
must be true and correct as of the effective time of the merger
as if made at and as of such time and those which are not so
qualified must be true and correct in all material respects as
of the effective time of the merger as if made at and as of such
time, except where the failure of such representations and
warranties to be so true would not prevent consummation of the
merger; provided that any representations made by Parent and
Merger Sub as of a specific date need only be so true and
correct as of the date made; |
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Parent and Merger Sub must have performed in all material
respects all obligations, and complied in all material respects
with the agreements and covenants, required to be performed by
them under the merger agreement at or prior to the closing
date; and |
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Parents and Merger Subs delivery to us at closing of
a certificate with respect to the satisfaction of the foregoing
conditions relating to representations, warranties, obligations,
covenants and agreements. |
If a failure to satisfy one of these conditions to the merger is
not considered by our board of directors to be material to our
shareholders, the board of directors (acting through the special
committee if such committee still exists) could waive compliance
with that condition. Our board of directors is not aware of any
condition to the merger that cannot be satisfied. Under Delaware
law, after the merger agreement has been adopted by our
shareholders, the merger consideration cannot be changed and the
merger agreement cannot be altered in a manner adverse to our
shareholders without re-submitting the revisions to our
shareholders for their approval.
Restrictions on Solicitations of Other Offers
The merger agreement provides that, until 11:59 p.m., New
York time, on September 12, 2006, we were permitted to:
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initiate, solicit and encourage any acquisition proposal for us
(including by way of providing information), provided that we
shall promptly provide to Parent any material non-public
information concerning us or our subsidiaries that is provided
to any person given such access which was not previously
provided to Parent; and |
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enter into and maintain discussions or negotiations concerning
an acquisition proposal for us or otherwise cooperate with or
assist or participate in, or facilitate any such inquiries,
proposals, discussions or negotiations. |
From and after 11:59 p.m., New York time, on
September 12, 2006, we have agreed not to:
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initiate, solicit or knowingly encourage (including by way of
providing information) the submission of any inquiries,
proposals or offers or any other efforts or attempts that
constitute or may reasonably be expected to lead to, any
acquisition proposal for us or engage in any discussions or
negotiations with respect thereto or otherwise knowingly
cooperate with or knowingly assist or participate in, or
knowingly facilitate any such inquiries, proposals, discussions
or negotiations; or |
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approve or recommend, or publicly propose to approve or
recommend, any acquisition proposal for us or enter into any
merger agreement, letter of intent, agreement in principle,
share purchase agreement, asset purchase agreement or share
exchange agreement, option agreement or other similar agreement
providing for or relating to any acquisition proposal for us or
enter into any agreement or agreement in principle requiring us
to abandon, terminate or fail to consummate the transactions
contemplated by the merger agreement or breach our obligations
under the merger agreement or propose or agree to do any of the
foregoing. |
In addition, as of 11:59 p.m., New York time, on
September 12, 2006, we agreed to cease and terminate with
all persons any solicitation, encouragement, discussion or
negotiations existing at such time, unless the acquisition
proposal offered by such person met the requirements in the
following paragraph. We did not receive an acquisition proposal
that met such requirements during the aforementioned go-shop
period.
Notwithstanding the aforementioned restrictions, at any time
prior to the approval of the merger agreement by our
shareholders, we are permitted to engage in discussions or
negotiations with, or provide any non-public information to any
party to the extent that:
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we receive from such party an acquisition proposal not solicited
in violation of the prohibitions described above and which the
board of directors (acting through the special committee if such
committee still exists) concludes in good faith to be bona fide; |
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our board of directors (acting through the special committee if
such committee still exists) concludes in good faith, after
consultation with legal counsel and financial advisors, that the
acquisition proposal constitutes or could reasonably be expected
to result in a superior proposal; and |
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after consultation with its outside counsel, our board of
directors (acting through the special committee if such
committee still exists) determines in good faith that the
failure to take such action could violate its fiduciary duties
under applicable law. |
In such cases, we (i) will not, and will not allow our
representatives to, disclose any non-public information to such
person without entering into a confidentiality and standstill
agreement that contains provisions that are no less favorable in
the aggregate to us than those contained in the confidentiality
agreements entered into with members of the Investor Group, and
(ii) will promptly provide to Parent any non-public
information concerning us or our subsidiaries provided to such
other person which was not previously provided to Parent.
From and after 11:59 p.m., New York time, on
September 12, 2006, we are required to promptly (within one
business day) notify Parent in the event we receive an
acquisition proposal from a person or group of related persons,
including the material terms and conditions thereof, and are
required to keep Parent apprised as to the status and any
material developments, discussions and negotiations concerning
the same on a current basis (and in any event no later than
48 hours after the occurrence of such developments,
discussions or negotiations). Without limiting the foregoing, we
will promptly (within one business day) notify Parent orally and
in writing if we determine to begin providing information or to
engage in negotiations concerning an acquisition proposal from a
person or group of related persons. Within 24 hours of
11:59 p.m., New York time, on September 12, 2006, we
were required to notify Parent of the number of parties who have
submitted an acquisition proposal as of such date that met the
requirements for permitted discussions and negotiations as set
forth in the preceding paragraph and provide Parent a written
summary of the material terms and conditions of each such
acquisition proposal received from such parties.
An acquisition proposal means any inquiry, proposal
or offer from any person or group of persons other than Parent,
Merger Sub or their respective affiliates relating to any direct
or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or
assets of us and our subsidiaries, taken as a whole, or 15% or
more of any class or series of our securities, any tender offer
or exchange offer that if consummated would result in any person
or group of persons beneficially owning 15% or more of any class
or series of our capital stock, or any merger, reorganization,
consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving us (or any of our subsidiaries whose
business constitutes 15% or more of our and our
subsidiaries net revenues, net income or assets, taken as
a whole).
A superior proposal means an acquisition proposal
for us which our board of directors (acting through the special
committee if such committee still exists), in good faith
determines would, if consummated, result in a transaction that
is more favorable from a financial point of view to the
shareholders than the merger, after (i) receiving the
advice of a financial advisor, (ii) taking into account the
likelihood of consummation of such transaction on the terms set
forth therein and (iii) taking into account all appropriate
legal (with the advice of outside counsel), financial (including
the financing terms of any such proposal), regulatory or other
aspects of such proposal and any other relevant factors
permitted by applicable law. For purposes of the definition of
superior proposal all references in the definition
of acquisition proposal above to 15% or
more shall be deemed to be references to a
majority.
Recommendation Withdrawal/Termination in Connection with a
Superior Proposal
Our board of directors (acting through the special committee if
such committee still exists) may also, at any time prior to the
approval of the merger agreement by our shareholders, withdraw
(or modify or qualify in a manner adverse to Parent or Merger
Sub), or publicly propose to withdraw (or modify or qualify in a
manner adverse to Parent or Merger Sub), its recommendation that
the shareholders of the Company adopt the merger agreement or
take any other action or make any other public statement in
connection with the special meeting inconsistent with such
recommendation or terminate the merger agreement and enter into
a definitive agreement with respect to a superior proposal if it
concludes in good faith (after consultation with its legal
advisors) that failure to do so could violate its obligations to
comply
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with its fiduciary duties under applicable law, and only after
(i) giving written notice to Parent and Merger Sub at least
five calendar days in advance of its intention to do so,
(ii) prior to effecting such action or terminating the
merger agreement to enter into a definitive agreement with
respect to such superior proposal, we (and cause our financial
and legal advisors to), during such five-day period, negotiate
with Parent and Merger Sub in good faith (to the extent Parent
and Merger Sub desire to negotiate) to make such adjustments in
the terms and conditions of the merger agreement so that such
acquisition proposal ceases to constitute a superior proposal,
and (iii) we pay to Parent the $500 million or
$300 million termination fee as described in further detail
below in Termination Fees.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the
consummation of the merger, whether before or after shareholder
approval has been obtained:
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by mutual written consent of HCA, on the one hand, and Parent
and Merger Sub, on the other hand; |
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by either HCA, on the one hand, or Parent or Merger Sub, on the
other hand, if: |
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the merger is not consummated on or before December 19,
2006 (the end date), or if the marketing period has
not ended on or before December 19, 2006, the end date
shall be extended to January 31, 2007 (and in such event,
the term end date shall mean January 31, 2007),
unless the failure of the merger to be completed by such date is
the result of, or caused by, the failure of the party seeking to
exercise such termination right to perform or observe any of the
covenants or agreements of such party set forth in the merger
agreement; |
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there is any final and nonappealable law that makes consummation
of the merger illegal or otherwise prohibited; or |
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our shareholders, at the special meeting or at any adjournment
thereof, fail to adopt the merger agreement; |
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by Parent or Merger Sub if: |
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we have breached any of our representations, warranties,
covenants or agreements under the merger agreement which would
give rise to the failure of certain conditions to closing and
where that breach is incapable of being cured, or is not cured,
on or before December 19, 2006, or, if the marketing period
has not ended on or before December 19, 2006, by
January 31, 2007; provided that neither Parent nor Merger
Sub is then in material breach of the merger agreement so as to
cause certain conditions to closing to not be satisfied; or |
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our board of directors or any committee of our board of
directors (i) withdraws (or modifies or qualifies in a
manner adverse to Parent or Merger Sub), or publicly proposes to
withdraw (or modify or qualify in a manner adverse to Parent or
Merger Sub), its recommendation that the shareholders of the
Company adopt the merger agreement or takes any other action or
makes any other public statement in connection with the special
meeting inconsistent with such recommendation; (ii) shall
have approved or recommended to our shareholders an acquisition
proposal for us other than the merger contemplated by the merger
agreement, or shall have resolved to effect the foregoing; or
(iii) we fail to include the recommendation in our proxy
statement in connection with the merger; |
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Parent or Merger Sub has breached any of its representations,
warranties, covenants or agreements under the merger agreement
which would give rise to the failure of certain conditions to
closing and where that breach is incapable of being cured, or is
not cured, on or before December 19, 2006, or, if the
marketing period has not ended on or before December 19,
2006, by January 31, 2007, provided that HCA is not in
material breach of the |
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merger agreement so as to cause the closing conditions relating
to Parent and Merger Subs obligations to consummate the
merger not to be satisfied; |
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prior to obtaining shareholder approval, we terminate the merger
agreement in order to enter into an agreement with respect to a
superior proposal and provided that we concurrently with doing
so pay to Parent and Merger Sub the termination fee as described
below; or |
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if all conditions to the obligations of Parent and Merger Sub
(other than delivery of an officers certificate) have been
satisfied and Parent fails to consummate the merger no later
than five calendar days after the final day of the marketing
period. |
Termination Fees
We have agreed to reimburse Parents
out-of-pocket fees and
expenses, up to a limit of $50 million, if either the
Company or Parent or Merger Sub terminates the merger agreement
because of the failure to receive Company shareholder approval
at the special meeting or any adjournment thereof or Parent or
Merger Sub terminates the merger agreement due to a material
breach of our representations, warranties, covenants or
agreements such that the closing conditions would not be
satisfied and such breach has not been cured within the
specified time (or we terminate the merger agreement in
accordance with its terms after the agreement was terminable
because of such a breach).
If we terminate the merger agreement, or the merger agreement is
terminated by Parent or Merger Sub under the conditions
described in further detail below, we must pay a termination fee
at the direction of Parent. The termination fee is
$500 million unless such termination arises as a result of
a superior proposal submitted by a party with whom we began
negotiations or who submitted such a proposal prior to
11:59 p.m., New York time, on September 12, 2006, in
which case we must pay a fee of $300 million. Since we did
not receive any proposals prior to such time, any termination
fee payable under the merger agreement would be in the amount of
$500 million.
We must pay a termination fee at the direction of Parent if:
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we terminate the merger agreement, prior to the shareholders
meeting, because we receive an acquisition proposal which we
determine to be a superior proposal, but only after we have
provided notice to Parent regarding the superior proposal and
provided Parent with at least a five calendar day period, during
which time we must negotiate in good faith with Parent, to
enable Parent to make an offer that results in the other
acquisition proposal no longer being a superior proposal; |
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Parent or Merger Sub terminates the merger agreement because
(i) our board of directors or any committee of our board of
directors withdraws (or modifies or qualifies in a manner
adverse to Parent or Merger Sub), or publicly proposes to
withdraw (or modify or qualify in a manner adverse to Parent or
Merger Sub), its recommendation that our shareholders adopt the
merger agreement or takes any other action or makes any other
public statement in connection with the special meeting
inconsistent with such recommendation; (ii) our board of
directors or any committee of our board of directors shall have
approved or recommended to our shareholders an acquisition
proposal for us other than the merger contemplated by the merger
agreement, or shall have resolved to effect the foregoing; or
(iii) we fail to include in our proxy statement the
recommendation of our board of directors that our shareholders
adopt the merger agreement; or |
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we, on the one hand, or Parent or Merger Sub, on the other hand,
terminate the merger agreement because our shareholders, at the
special meeting or at any adjournment thereof at which the
merger agreement is voted on, fail to adopt the merger agreement
or we terminate the merger agreement in accordance with its
terms after our shareholders have failed to adopt the merger
agreement; and |
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prior to the shareholders meeting, an acquisition proposal
involving the purchase of not less than a majority of our
outstanding voting securities has been publicly announced or
publicly |
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made known and not publicly withdrawn at least two business days
prior to the shareholder meeting; and |
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within twelve months after such termination, we or any of our
subsidiaries enter into an agreement with respect to, or
consummate, any acquisition proposal involving the purchase of
not less than a majority of our outstanding voting securities
(whether or not the same as that originally announced or
consummated). |
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Parent or Merger Sub terminates the merger agreement due to a
material breach of our representations, warranties, covenants or
agreements such that the closing conditions would not be
satisfied and such breach has not been cured within the
specified time (or we terminate the merger agreement in
accordance with its terms after the agreement was terminable
because of such a breach); and |
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prior to the event giving rise to such breach, an acquisition
proposal involving the purchase of not less than a majority of
our outstanding voting securities has been publicly announced or
publicly made known; and |
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within twelve months after such termination, we or any of our
subsidiaries enter into an agreement with respect to, or
consummate, any acquisition proposal involving the purchase of
not less than a majority of our outstanding voting securities
(whether or not the same as that originally announced or
consummated). |
If we are obligated to pay a termination fee under the latter
two scenarios described above, any amounts previously paid to
Parent as expense reimbursement will be credited toward the
termination fee amount payable by us.
Parent has agreed to pay us a termination fee of
$500 million if:
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we terminate the merger agreement because the merger is not
completed on or before December 19, 2006, or, if the
marketing period has not ended on or before December 19,
2006, January 31, 2007, unless the failure of the merger to
be completed by such date is the result of, or caused by, our
failure to perform or observe any of our covenants or agreements
set forth in the merger agreement and at the time of termination
the mutual closing conditions and closing conditions required by
Parent and Merger Sub have been satisfied; |
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we terminate the merger agreement because Parent or Merger Sub
has breached any of its representations, warranties, covenants
or agreements under the merger agreement which would give rise
to the failure of certain of the Companys conditions to
closing and where that breach is incapable of cure, or is not
cured, within the specified time and at the time of termination
no facts exist which would cause the closing conditions to the
obligations of Parent and Merger Sub not to be satisfied; or |
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we terminate the merger agreement because certain conditions to
the obligations of Parent and Merger Sub have been satisfied and
Parent fails to consummate the merger no later than five
calendar days after the final day of the marketing period. |
Employee Benefits
The surviving corporation, on behalf of itself and each of its
subsidiaries, has agreed to maintain, for a period commencing at
the effective time of the merger and ending on the first
anniversary thereof, for each employee employed at the effective
time, compensation and employee benefits that in the aggregate
are no less favorable than those provided prior to the effective
time. The surviving corporation has agreed to recognize the
service of such employees with HCA prior to the consummation of
the merger for purposes of eligibility and vesting with respect
to any benefit plan, program or arrangement, with the exception
of benefit accruals under any newly established defined benefit
pension plans (except for
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vacation and severance, if applicable), and to waive all
limitations as to pre-existing conditions or eligibility
limitations and give effect, for the applicable plan year in
which the closing occurs, in determining any deductible and
maximum out-of-pocket
limitations, to claims incurred and amounts paid by, and amounts
reimbursed to, employees under similar plans maintained by us
and our subsidiaries immediately prior to the effective time of
the merger.
At the effective time of the merger, except as otherwise agreed
by a participant and Parent, all salary amounts withheld on
behalf of the participants in the HCA stock purchase plans
through the closing date of the merger will be deemed to have
been used to purchase HCA Common Stock under the terms of these
plans, using the closing date of the merger as the last date of
the applicable offering period under these plans, and converted
into the right to receive, effectively, a cash payment equal to
the number of shares deemed purchased under these plans
multiplied by $51.00.
The Company has also agreed, prior to the effective time of the
merger, to take all actions necessary (1) to eliminate any
obligation of the Company or any of its subsidiaries to make any
contributions to any grantor trust maintained for the benefit of
participants with respect to obligations under the SERP or any
other non-qualified retirement plan, and (2) to provide
that the SERP shall, except as may be required by applicable
law, in no event be terminated, or amended in a manner that
would adversely affect any of the participants in the SERP as of
the date of the merger agreement, at least until such time as
each such participant has become fully vested in the maximum
benefit available to each such participant under the SERP
(including achieving the maximum years of service under the
SERP).
If the merger is consummated, the HCA Stock Fund under the HCA
401(k) Plan will no longer be an investment option in the 401(k)
Plan and share equivalents will be converted to cash as with
other shares of HCA Common Stock. The cash will then be invested
in another 401(k) Plan investment option and participants will
receive information on how to transfer their money to a
different option, should they so desire. The Company has
appointed an independent fiduciary to vote the shares of the HCA
Stock Fund in connection with the merger and has also provided
for pass-through voting rights for those participants who wish
to vote their equivalent shares.
Indemnification and Insurance
From and after the effective time of the merger, the surviving
corporation shall to the greatest extent permitted by law
indemnify and hold harmless (and comply with all of the
Companys and its subsidiaries existing obligations
to advance funds for expenses) (i) the present and former
officers and directors thereof against any and all costs or
expenses (including reasonable attorneys fees and
expenses), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with
any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative (Damages), arising out of, relating to
or in connection with any acts or omissions occurring or alleged
to occur prior to or at the effective time, including, without
limitation, the approval of the merger agreement, the merger or
the other transactions contemplated by the merger agreement or
arising out of or pertaining to the transactions contemplated by
the merger agreement; and (ii) such persons against any and
all Damages arising out of acts or omissions in connection with
such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the
benefit of the Company or any of its subsidiaries.
As of the effective time of the merger, the Company shall have
purchased, and, following the effective time, the surviving
corporation shall maintain, a tail policy to the current policy
of directors and officers liability insurance
maintained on the date hereof by the Company (the Current
Policy) which tail policy shall be effective for a period
from the effective time through and including the date six years
after the closing date with respect to claims arising from facts
or events that existed or occurred prior to or at the effective
time, and which tail policy shall contain substantially the same
coverage and amount as, and contain terms and conditions no less
advantageous, in the aggregate, than the coverage currently
provided by the Current Policy; provided, however, that in no
event shall the surviving corporation be required to expend
annually in excess of 300% of the annual premium currently paid
by the Company
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under the Current Policy (the Insurance Amount);
provided, however, that if the premium of such insurance
coverage exceeds the Insurance Amount, the Company shall be
obligated to obtain, and the surviving corporation shall be
obligated to maintain, a policy with the greatest coverage
available for a cost not exceeding the Insurance Amount.
Amendment, Extension and Waiver
The parties may amend the merger agreement at any time;
provided, however, that after we have obtained our
shareholders approval of the merger, there shall be no
amendment that by law requires further approval by our
shareholders without such approval having been obtained. All
amendments to the merger agreement must be in writing signed by
us, Parent and Merger Sub.
At any time before the consummation of the merger, each of the
parties to the merger agreement may, by written instrument:
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extend the time for the performance of any of the obligations or
other acts of the other parties; |
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waive any inaccuracies in the representations and warranties of
the other parties contained in the merger agreement or in any
document delivered pursuant to the merger agreement; or |
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subject to the requirements of applicable law, waive compliance
with any of the agreements or conditions contained in the merger
agreement. |
DISSENTERS RIGHTS OF APPRAISAL
Under the General Corporation Law of the State of Delaware (the
DGCL), you have the right to dissent from the merger
and to receive payment in cash for the fair value of your HCA
Common Stock as determined by the Delaware Court of Chancery,
together with a fair rate of interest, if any, as determined by
the court, in lieu of the consideration you would otherwise be
entitled to pursuant to the merger agreement. These rights are
known as appraisal rights. The Companys shareholders
electing to exercise appraisal rights must comply with the
provisions of Section 262 of the DGCL in order to perfect
their rights. The Company will require strict compliance with
the statutory procedures.
The following is intended as a brief summary of the material
provisions of the Delaware statutory procedures required to be
followed by a shareholder in order to dissent from the merger
and perfect appraisal rights.
This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by
reference to Section 262 of the DGCL, the full text of
which appears in Annex D to this proxy statement. Failure
to precisely follow any of the statutory procedures set forth in
Section 262 of the DGCL may result in a termination or
waiver of your appraisal rights.
Section 262 requires that shareholders be notified that
appraisal rights will be available not less than 20 days
before the shareholders meeting to vote on the merger. A
copy of Section 262 must be included with such notice. This
proxy statement constitutes the Companys notice to its
shareholders of the availability of appraisal rights in
connection with the merger in compliance with the requirements
of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of
Section 262 contained in Annex D since failure to
timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal
rights under the DGCL.
If you elect to demand appraisal of your shares, you must
satisfy each of the following conditions:
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You must deliver to the Company a written demand for appraisal
of your shares before the vote with respect to the merger is
taken. This written demand for appraisal must be in addition to
and separate from any proxy or vote abstaining from or voting
against the adoption of the merger agreement. Voting against or
failing to vote for the adoption of the merger agreement by
itself does not constitute a demand for appraisal within the
meaning of Section 262. |
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You must not vote in favor of the adoption of the merger
agreement. A vote in favor of the adoption of the merger
agreement, by proxy, over the Internet, by telephone or in
person, will constitute a waiver of your appraisal rights in
respect of the shares so voted and will nullify any previously
filed written demands for appraisal. If you fail to comply with
either of these conditions and the merger is completed, you will
be entitled to receive the cash payment for your shares of HCA
Common Stock as provided for in the merger agreement, but you
will have no appraisal rights with respect to your shares of HCA
Common Stock. |
All demands for appraisal should be addressed to HCA Inc., One
Park Plaza, Nashville, Tennessee 37203, Attention: Corporate
Secretary, and must be delivered before the vote on the merger
agreement is taken at the special meeting, and should be
executed by, or on behalf of, the record holder of the shares of
HCA Common Stock. The demand must reasonably inform the Company
of the identity of the shareholder and the intention of the
shareholder to demand appraisal of his, her or its shares.
To be effective, a demand for appraisal by a holder of HCA
Common Stock must be made by, or in the name of, such registered
shareholder, fully and correctly, as the shareholders name
appears on his or her stock certificate(s). Beneficial owners
who do not also hold the shares of record may not directly make
appraisal demands to the Company. The beneficial holder must, in
such cases, have the registered owner, such as a broker or other
nominee, submit the required demand in respect of those
shares. If shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution
of a demand for appraisal should be made by or for the
fiduciary; and if the shares are owned of record by more than
one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An
authorized agent, including an authorized agent for two or more
joint owners, may execute the demand for appraisal for a
shareholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in
executing the demand, he or she is acting as agent for the
record owner. A record owner, such as a broker, who holds shares
as a nominee for others, may exercise his or her right of
appraisal with respect to the shares held for one or more
beneficial owners, while not exercising this right for other
beneficial owners. In that case, the written demand should state
the number of shares as to which appraisal is sought. Where no
number of shares is expressly mentioned, the demand will be
presumed to cover all shares held in the name of the record
owner.
If you hold your shares of HCA Common Stock in a brokerage
account or in other nominee form and you wish to exercise
appraisal rights, you should consult with your broker or the
other nominee to determine the appropriate procedures for the
making of a demand for appraisal by the nominee.
Within 10 days after the effective time of the merger, the
surviving corporation must give written notice that the merger
has become effective to each Company shareholder who has
properly filed a written demand for appraisal and who did not
vote in favor of the merger agreement. At any time within
60 days after the effective time, any shareholder who has
demanded an appraisal has the right to withdraw the demand and
to accept the cash payment specified by the merger agreement for
his or her shares of HCA Common Stock. Within 120 days
after the effective date of the merger, any shareholder who has
complied with Section 262 shall, upon written request to
the surviving corporation, be entitled to receive a written
statement setting forth the aggregate number of shares not voted
in favor of the merger agreement and with respect to which
demands for appraisal rights have been received and the
aggregate number of holders of such shares. Such written
statement will be mailed to the requesting shareholder within 10
days after such written request is received by the surviving
corporation or within 10 days after expiration of the period for
delivery of demands for appraisal, whichever is later. Within
120 days after the effective time, either the surviving
corporation or any shareholder who has complied with the
requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair
value of the shares held by all shareholders entitled to
appraisal. Upon the filing of the petition by a shareholder,
service of a copy of such petition shall be made upon the
surviving corporation. The surviving corporation has no
obligation to file such a petition in the event there are
dissenting shareholders. Accordingly, the failure of a
shareholder to file such a petition within the period specified
could nullify the shareholders previously written demand
for appraisal.
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If a petition for appraisal is duly filed by a shareholder and a
copy of the petition is delivered to the surviving corporation,
the surviving corporation will then be obligated, within
20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list
containing the names and addresses of all shareholders who have
demanded an appraisal of their shares and with whom agreements
as to the value of their shares have not been reached by the
surviving corporation. After notice to dissenting shareholders
who demanded appraisal of their shares, the Chancery Court is
empowered to conduct a hearing upon the petition, and to
determine those shareholders who have complied with
Section 262 and who have become entitled to the appraisal
rights provided thereby. The Chancery Court may require the
shareholders who have demanded payment for their shares to
submit their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings;
and if any shareholder fails to comply with that direction, the
Chancery Court may dismiss the proceedings as to that
shareholder.
After determination of the shareholders entitled to appraisal of
their shares of the Companys common stock, the Chancery
Court will appraise the shares, determining their fair value
exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a
fair rate of interest, if any. When the value is determined, the
Chancery Court will direct the payment of such value, with
interest thereon accrued during the pendency of the proceeding,
if the Chancery Court so determines, to the shareholders
entitled to receive the same, upon surrender by such holders of
the certificates representing those shares.
In determining fair value, the Chancery Court is required to
take into account all relevant factors. You should be aware
that the fair value of your shares as determined under
Section 262 could be more than, the same as, or less than
the value that you are entitled to receive under the terms of
the merger agreement.
Costs of the appraisal proceeding may be imposed upon the
surviving corporation and the shareholders participating in the
appraisal proceeding by the Chancery Court as the Chancery Court
deems equitable in the circumstances. Upon the application of a
shareholder, the Chancery Court may order all or a portion of
the expenses incurred by any shareholder in connection with the
appraisal proceeding, including, without limitation, reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal. Any shareholder who had demanded appraisal rights
will not, after the effective time of the merger, be entitled to
vote shares subject to that demand for any purpose or to receive
payments of dividends or any other distribution with respect to
those shares, other than with respect to payment as of a record
date prior to the effective time; however, if no petition for
appraisal is filed within 120 days after the effective time
of the merger, or if the shareholder delivers a written
withdrawal of his or her demand for appraisal and an acceptance
of the terms of the merger within 60 days after the
effective time of the merger, then the right of that shareholder
to appraisal will cease and that shareholder will be entitled to
receive the cash payment for shares of his, her or its HCA
Common Stock pursuant to the merger agreement. Any withdrawal of
a demand for appraisal made more than 60 days after the
effective time of the merger may only be made with the written
approval of the surviving corporation and must, to be effective,
be made within 120 days after the effective time.
In view of the complexity of Section 262, the
Companys shareholders who may wish to dissent from the
merger and pursue appraisal rights should consult their legal
advisors.
78
IMPORTANT INFORMATION ABOUT HCA
HCA is a Delaware corporation and is headquartered in Nashville,
Tennessee. We are one of the leading health care services
companies in the United States. HCA is a holding company whose
affiliates own and operate hospitals and related health care
entities. The term affiliates includes direct and
indirect subsidiaries of HCA and partnerships and joint ventures
in which such subsidiaries are partners. As of June 30,
2006, we operated 176 hospitals, 92 freestanding surgery centers
and facilities which provided extensive outpatient and ancillary
services. Affiliates of HCA are also partners in joint ventures
that own and operate seven hospitals and nine freestanding
surgery centers which are accounted for using the equity method.
Our facilities are located in 21 states, England and
Switzerland.
HCAs primary objective is to provide the communities we
serve a comprehensive array of quality health care services in
the most cost-effective manner possible. Our general, acute care
hospitals typically provide a full range of services to
accommodate such medical specialties as internal medicine,
general surgery, cardiology, oncology, neurosurgery, orthopedics
and obstetrics, as well as diagnostic and emergency services.
Outpatient and ancillary health care services are provided by
our general, acute care hospitals, freestanding surgery centers,
diagnostic centers and rehabilitation facilities. Our
psychiatric hospitals provide a full range of mental health care
services through inpatient, partial hospitalization and
outpatient settings.
For more information about HCA, please visit our website at
www.hcahealthcare.com. HCAs website is provided as an
inactive textual reference only. Information contained on our
website is not incorporated by reference into, and does not
constitute any part of, this proxy statement. HCA is publicly
traded on the NYSE under the symbol HCA.
Historical Selected Financial Data
The following table sets forth our historical selected financial
data as of and for the years ended December 31, 2005, 2004,
2003, 2002 and 2001 and as of and for the six months ended
June 30, 2006 and 2005. This financial data has been
derived from, and should be read in conjunction with, our
audited consolidated financial statements and the related notes
filed as part of our Annual Report on
Form 10-K for the
year ended December 31, 2005 and the unaudited condensed
consolidated financial statements and the related notes filed as
part of our Quarterly Report on
Form 10-Q for the
quarter ended June 30, 2006. Financial data as of and for
the six-month periods ended June 30, 2006 and 2005, and the
selected ratios are unaudited and, in the opinion of our
management, include all adjustments necessary for a fair
presentation of the data. The results of operations for the
interim periods are not necessarily indicative of the results to
be expected for the entire year.
HCA INC.
SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the | |
|
|
|
|
Six Months Ended | |
|
|
As of and for the Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2006 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) | |
|
|
(Dollars in millions, except per share amounts) | |
Summary of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
24,455 |
|
|
$ |
23,502 |
|
|
$ |
21,808 |
|
|
$ |
19,729 |
|
|
$ |
17,953 |
|
|
$ |
12,775 |
|
|
$ |
12,252 |
|
Salaries and benefits
|
|
|
9,928 |
|
|
|
9,419 |
|
|
|
8,682 |
|
|
|
7,952 |
|
|
|
7,279 |
|
|
|
5,216 |
|
|
|
4,906 |
|
Supplies
|
|
|
4,126 |
|
|
|
3,901 |
|
|
|
3,522 |
|
|
|
3,158 |
|
|
|
2,860 |
|
|
|
2,205 |
|
|
|
2,093 |
|
Other operating expenses
|
|
|
4,039 |
|
|
|
3,797 |
|
|
|
3,676 |
|
|
|
3,341 |
|
|
|
3,238 |
|
|
|
2,032 |
|
|
|
1,953 |
|
Provision for doubtful accounts
|
|
|
2,358 |
|
|
|
2,669 |
|
|
|
2,207 |
|
|
|
1,581 |
|
|
|
1,376 |
|
|
|
1,273 |
|
|
|
1,115 |
|
(Gains) losses on investments
|
|
|
(53 |
) |
|
|
(56 |
) |
|
|
(1 |
) |
|
|
2 |
|
|
|
(63 |
) |
|
|
(100 |
) |
|
|
(31 |
) |
Equity in earnings of affiliates
|
|
|
(221 |
) |
|
|
(194 |
) |
|
|
(199 |
) |
|
|
(206 |
) |
|
|
(158 |
) |
|
|
(108 |
) |
|
|
(106 |
) |
Depreciation and amortization
|
|
|
1,374 |
|
|
|
1,250 |
|
|
|
1,112 |
|
|
|
1,010 |
|
|
|
1,048 |
|
|
|
697 |
|
|
|
701 |
|
Interest expense
|
|
|
655 |
|
|
|
563 |
|
|
|
491 |
|
|
|
446 |
|
|
|
536 |
|
|
|
382 |
|
|
|
329 |
|
79
HCA INC.
SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the | |
|
|
|
|
Six Months Ended | |
|
|
As of and for the Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2006 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) | |
|
|
(Dollars in millions, except per share amounts) | |
Gains on sales of facilities
|
|
|
(78 |
) |
|
|
|
|
|
|
(85 |
) |
|
|
(6 |
) |
|
|
(131 |
) |
|
|
(5 |
) |
|
|
(29 |
) |
Impairment of long-lived assets
|
|
|
|
|
|
|
12 |
|
|
|
130 |
|
|
|
19 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
Government settlement and investigation related costs
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
|
|
661 |
|
|
|
327 |
|
|
|
|
|
|
|
|
|
Impairment of investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on retirement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,128 |
|
|
|
21,361 |
|
|
|
19,502 |
|
|
|
18,126 |
|
|
|
16,357 |
|
|
|
11,592 |
|
|
|
10,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and income taxes
|
|
|
2,327 |
|
|
|
2,141 |
|
|
|
2,306 |
|
|
|
1,603 |
|
|
|
1,596 |
|
|
|
1,183 |
|
|
|
1,321 |
|
Minority interests in earnings of consolidated entities
|
|
|
178 |
|
|
|
168 |
|
|
|
150 |
|
|
|
148 |
|
|
|
119 |
|
|
|
101 |
|
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,149 |
|
|
|
1,973 |
|
|
|
2,156 |
|
|
|
1,455 |
|
|
|
1,477 |
|
|
|
1,082 |
|
|
|
1,232 |
|
Provision for income taxes
|
|
|
725 |
|
|
|
727 |
|
|
|
824 |
|
|
|
622 |
|
|
|
591 |
|
|
|
408 |
|
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
|
1,424 |
|
|
|
1,246 |
|
|
|
1,332 |
|
|
|
833 |
|
|
|
886 |
|
|
|
674 |
|
|
|
819 |
|
Goodwill amortization, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
$ |
1,424 |
|
|
$ |
1,246 |
|
|
$ |
1,332 |
|
|
$ |
833 |
|
|
$ |
955 |
|
|
$ |
674 |
|
|
$ |
819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
$ |
3.25 |
|
|
$ |
2.62 |
|
|
$ |
2.66 |
|
|
$ |
1.63 |
|
|
$ |
1.69 |
|
|
$ |
1.67 |
|
|
$ |
1.88 |
|
Goodwill amortization, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
$ |
3.25 |
|
|
$ |
2.62 |
|
|
$ |
2.66 |
|
|
$ |
1.63 |
|
|
$ |
1.82 |
|
|
$ |
1.67 |
|
|
$ |
1.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic earnings
per share (in thousands)
|
|
|
438,619 |
|
|
|
475,620 |
|
|
|
501,799 |
|
|
|
511,824 |
|
|
|
524,112 |
|
|
|
403,366 |
|
|
|
435,626 |
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
$ |
3.19 |
|
|
$ |
2.58 |
|
|
$ |
2.61 |
|
|
$ |
1.59 |
|
|
$ |
1.65 |
|
|
$ |
1.64 |
|
|
$ |
1.84 |
|
Goodwill amortization, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
$ |
3.19 |
|
|
$ |
2.58 |
|
|
$ |
2.61 |
|
|
$ |
1.59 |
|
|
$ |
1.78 |
|
|
$ |
1.64 |
|
|
$ |
1.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted earnings per share (in
thousands)
|
|
|
445,785 |
|
|
|
483,663 |
|
|
|
510,874 |
|
|
|
525,219 |
|
|
|
538,177 |
|
|
|
409,731 |
|
|
|
443,739 |
|
Cash dividends declared per common share
|
|
$ |
0.60 |
|
|
$ |
0.52 |
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
$ |
0.34 |
|
|
$ |
0.30 |
|
Financial Position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$ |
22,225 |
|
|
$ |
21,840 |
|
|
$ |
21,400 |
|
|
$ |
19,059 |
|
|
$ |
18,073 |
|
|
$ |
23,120 |
|
|
$ |
21,718 |
|
Working capital
|
|
|
1,320 |
|
|
|
1,509 |
|
|
|
1,654 |
|
|
|
766 |
|
|
|
957 |
|
|
|
1,874 |
|
|
|
1,866 |
|
Long-term debt, including amounts due within one year
|
|
|
10,475 |
|
|
|
10,530 |
|
|
|
8,707 |
|
|
|
6,943 |
|
|
|
7,360 |
|
|
|
11,664 |
|
|
|
9,360 |
|
Minority interests in equity of consolidated entities
|
|
|
828 |
|
|
|
809 |
|
|
|
680 |
|
|
|
611 |
|
|
|
563 |
|
|
|
901 |
|
|
|
801 |
|
Company-obligated mandatorily redeemable securities of affiliate
holding solely Company securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
4,863 |
|
|
|
4,407 |
|
|
|
6,209 |
|
|
|
5,702 |
|
|
|
4,762 |
|
|
|
4,826 |
|
|
|
6,117 |
|
80
HCA INC.
SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the | |
|
|
|
|
Six Months Ended | |
|
|
As of and for the Years Ended December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2006 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) | |
|
|
(Dollars in millions, except per share amounts) | |
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
$ |
3,159 |
|
|
$ |
2,954 |
|
|
$ |
2,292 |
|
|
$ |
2,648 |
|
|
$ |
1,352 |
|
|
$ |
771 |
|
|
$ |
1,691 |
|
Cash used in investing activities
|
|
|
(1,681 |
) |
|
|
(1,688 |
) |
|
|
(2,862 |
) |
|
|
(1,740 |
) |
|
|
(1,300 |
) |
|
|
(795 |
) |
|
|
(758 |
) |
Cash (used in) provided by financing activities
|
|
|
(1,400 |
) |
|
|
(1,347 |
) |
|
|
650 |
|
|
|
(934 |
) |
|
|
(342 |
) |
|
|
424 |
|
|
|
(494 |
) |
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of hospitals at end of period(a)
|
|
|
175 |
|
|
|
182 |
|
|
|
184 |
|
|
|
173 |
|
|
|
178 |
|
|
|
176 |
|
|
|
183 |
|
Number of freestanding outpatient surgical centers at end of
period(b)
|
|
|
87 |
|
|
|
84 |
|
|
|
79 |
|
|
|
74 |
|
|
|
76 |
|
|
|
92 |
|
|
|
84 |
|
Number of licensed beds at end of period(c)
|
|
|
41,265 |
|
|
|
41,852 |
|
|
|
42,108 |
|
|
|
39,932 |
|
|
|
40,112 |
|
|
|
41,300 |
|
|
|
42,013 |
|
Weighted average licensed beds(d)
|
|
|
41,902 |
|
|
|
41,997 |
|
|
|
41,568 |
|
|
|
39,985 |
|
|
|
40,645 |
|
|
|
41,259 |
|
|
|
41,903 |
|
Admissions(e)
|
|
|
1,647,800 |
|
|
|
1,659,200 |
|
|
|
1,635,200 |
|
|
|
1,582,800 |
|
|
|
1,564,100 |
|
|
|
823,900 |
|
|
|
840,200 |
|
Equivalent admissions(f)
|
|
|
2,476,600 |
|
|
|
2,454,000 |
|
|
|
2,405,400 |
|
|
|
2,339,400 |
|
|
|
2,311,700 |
|
|
|
1,235,900 |
|
|
|
1,256,100 |
|
Average length of stay (days)(g)
|
|
|
4.9 |
|
|
|
5.0 |
|
|
|
5.0 |
|
|
|
5.0 |
|
|
|
4.9 |
|
|
|
4.9 |
|
|
|
5.0 |
|
Average daily census(h)
|
|
|
22,225 |
|
|
|
22,493 |
|
|
|
22,234 |
|
|
|
21,509 |
|
|
|
21,160 |
|
|
|
22,451 |
|
|
|
23,029 |
|
Occupancy(i)
|
|
|
53 |
% |
|
|
54 |
% |
|
|
54 |
% |
|
|
54 |
% |
|
|
52 |
% |
|
|
54 |
% |
|
|
55 |
% |
Emergency room visits(j)
|
|
|
5,415,200 |
|
|
|
5,219,500 |
|
|
|
5,160,200 |
|
|
|
4,802,800 |
|
|
|
4,676,800 |
|
|
|
2,658,100 |
|
|
|
2,737,400 |
|
Outpatient surgeries(k)
|
|
|
836,600 |
|
|
|
834,800 |
|
|
|
814,300 |
|
|
|
809,900 |
|
|
|
804,300 |
|
|
|
423,600 |
|
|
|
427,200 |
|
Inpatient surgeries(l)
|
|
|
541,400 |
|
|
|
541,000 |
|
|
|
528,600 |
|
|
|
518,100 |
|
|
|
507,800 |
|
|
|
269,300 |
|
|
|
271,900 |
|
Days revenues in accounts receivable(m)
|
|
|
50 |
|
|
|
48 |
|
|
|
52 |
|
|
|
52 |
|
|
|
49 |
|
|
|
48 |
|
|
|
47 |
|
Gross patient revenues(n)
|
|
$ |
78,662 |
|
|
$ |
71,279 |
|
|
$ |
62,626 |
|
|
$ |
53,542 |
|
|
$ |
44,947 |
|
|
$ |
42,438 |
|
|
$ |
39,441 |
|
Outpatient revenues as a % of patient revenues(o)
|
|
|
36 |
% |
|
|
37 |
% |
|
|
37 |
% |
|
|
37 |
% |
|
|
37 |
% |
|
|
36 |
% |
|
|
37 |
% |
|
|
|
(a) |
|
Excludes seven facilities in 2006, 2005, 2004, and 2003; and six
facilities in 2002 and 2001 that are not consolidated (accounted
for using the equity method) for financial reporting purposes.
Three hospitals located on the same campus were consolidated and
counted as one hospital in 2005. |
|
(b) |
|
Excludes facilities that are not consolidated (accounted for
using the equity method) for financial reporting purposes. |
|
(c) |
|
Licensed beds are those beds for which a facility has been
granted approval to operate from the applicable state licensing
agency. |
|
(d) |
|
Weighted average licensed beds represents the average number of
licensed beds, weighted based on periods owned. |
|
(e) |
|
Represents the total number of patients admitted to our
hospitals and is used by management and certain investors as a
general measure of inpatient volume. |
|
(f) |
|
Equivalent admissions are used by management and certain
investors as a general measure of combined inpatient and
outpatient volume. Equivalent admissions are computed by
multiplying admissions (inpatient volume) by the sum of gross
inpatient revenue and gross outpatient revenue and then dividing
the resulting amount by gross inpatient revenue. The equivalent
admissions computation equates outpatient revenue to
the volume measure (admissions) used to measure inpatient
volume, resulting in a general measure of combined inpatient and
outpatient volume. Equivalent admissions for 2004 were
reclassified to conform to the 2005 presentation. |
|
(g) |
|
Represents the average number of days admitted patients stay in
our hospitals. |
|
(h) |
|
Represents the average number of patients in our hospital beds
each day. |
81
|
|
|
(i) |
|
Represents the percentage of hospital licensed beds occupied by
patients. Both average daily census and occupancy rate provide
measures of the utilization of inpatient rooms. |
|
(j) |
|
Represents the number of patients treated in our emergency rooms. |
|
(k) |
|
Represents the number of surgeries performed on patients who
were not admitted to our hospitals. Pain management and
endoscopy procedures are not included in outpatient surgeries. |
|
(l) |
|
Represents the number of surgeries performed on patients who
have been admitted to our hospitals. Pain management and
endoscopy procedures are not included in inpatient surgeries. |
|
(m) |
|
Revenues per day is calculated by dividing the revenues for the
period by the days in the period. Days revenues in accounts
receivable is then calculated as accounts receivable, net of the
allowance for doubtful accounts, at the end of the period
divided by revenues per day. |
|
(n) |
|
Gross patient revenues are based upon our standard charge
listing. Gross charges/ revenues typically do not reflect what
our hospital facilities are paid. Gross charges/ revenues are
reduced by contractual adjustments, discounts and charity care
to determine reported revenues. |
|
(o) |
|
Represents the percentage of patient revenues related to
patients who are not admitted to our hospitals. Patient revenues
for 2004 were reclassified to conform to the 2005 presentation. |
Ratio of Earnings to Fixed Charges
The following presents our ratio of earnings to fixed charges
for the years ended December 31, 2005 and 2004 and for the
six months ended June 30, 2006 and 2005, which should be
read in conjunction with our consolidated financial statements
included in our Annual Report on
Form 10-K for the
year ended December 31, 2005 and our Quarterly Report on
Form 10-Q for the
quarter ended June 30, 2006, which are incorporated herein
by reference.
Computation of Ratio of Earnings to Fixed Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended | |
|
Six Months Ended | |
|
|
December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2006 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(Dollars in millions) | |
EARNINGS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and income taxes
|
|
$ |
2,327 |
|
|
$ |
2,141 |
|
|
$ |
1,183 |
|
|
$ |
1,321 |
|
Fixed charges, exclusive of capitalized interest
|
|
|
785 |
|
|
|
686 |
|
|
|
449 |
|
|
|
394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,112 |
|
|
$ |
2,827 |
|
|
$ |
1,632 |
|
|
$ |
1,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest charged to expense
|
|
$ |
655 |
|
|
$ |
563 |
|
|
$ |
382 |
|
|
$ |
329 |
|
Interest portion of rental expense
|
|
|
130 |
|
|
|
123 |
|
|
|
67 |
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed charges, exclusive of capitalized interest
|
|
|
785 |
|
|
|
686 |
|
|
|
449 |
|
|
|
394 |
|
Capitalized interest
|
|
|
25 |
|
|
|
28 |
|
|
|
19 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
810 |
|
|
$ |
714 |
|
|
$ |
468 |
|
|
$ |
406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
|
|
|
3.84 |
|
|
|
3.96 |
|
|
|
3.49 |
|
|
|
4.22 |
|
Book Value Per Share
Our net book value per share as of June 30, 2006 was
$11.79, which is substantially below the $51.00 per share
cash merger consideration.
82
Projected Financial Information
HCAs senior management does not as a matter of course make
public projections as to future performance or earnings beyond
the current fiscal year and is especially wary of making
projections for extended earnings periods due to the
unpredictability of the underlying assumptions and estimates.
However, senior management did provide financial forecasts to
the board of directors, Merrill Lynch, the Investor Group and
the special committee and its financial advisors in connection
with their consideration of a possible leveraged buyout of the
Company. We have included a subset of these projections to give
our shareholders access to certain nonpublic information deemed
material by our special committee and board of directors for
purposes of considering and evaluating the merger. The
projections and related assumptions included below also
constitute all projected financial information deemed material
to Credit Suisse and Morgan Stanley in rendering their opinions
described under Special Factors Opinions of
Financial Advisors beginning on page 33. The
inclusion of this information should not be regarded as an
indication that the Investor Group, our special committee or
board of directors, Credit Suisse, Morgan Stanley or any other
recipient of this information considered, or now considers, it
to be a reliable prediction of future results.
HCA advised the recipients of the projections that its internal
financial forecasts, upon which the projections were based, are
subjective in many respects. The projections reflect numerous
assumptions with respect to industry performance, general
business, economic, market and financial conditions and other
matters, all of which are difficult to predict and beyond
HCAs control. The projections also reflect numerous
estimates and assumptions related to the business of HCA that
are inherently subject to significant economic, political, and
competitive uncertainties, all of which are difficult to predict
and many of which are beyond HCAs control. As a result,
there can be no assurance that the projected results will be
realized or that actual results will not be significantly higher
or lower than projected.
The financial projections were prepared for internal use and to
assist the Investor Group and the financial advisors to the
special committee with their respective due diligence
investigations of HCA and not with a view toward public
disclosure or toward complying with U.S. generally accepted
accounting principles, the published guidelines of the SEC
regarding projections or the guidelines established by the
American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. HCAs independent registered public accounting
firm has not examined or compiled any of the financial
projections, expressed any conclusion or provided any form of
assurance with respect to the financial projections and,
accordingly, assumes no responsibility for them. The financial
projections do not take into account any circumstances or events
occurring after the date they were prepared. Projections of this
type are based on estimates and assumptions that are inherently
subject to factors such as industry performance, general
business, economic, regulatory, market and financial conditions,
as well as changes to the business, financial condition or
results of operation of the Company, including the factors
described under Special Note Regarding
Forward-Looking Statements beginning on page 14,
which factors may cause the financial projections or the
underlying assumptions to be inaccurate. Since the projections
cover multiple years, such information by its nature becomes
less reliable with each successive year.
Since the date of the projections described below, the Company
has made publicly available its actual results of operations for
the quarter and six months ended June 30, 2006. You should
review the Companys Quarterly Report on
Form 10-Q for the
quarter ended June 30, 2006 to obtain this information.
Readers of this proxy statement are cautioned not to place undue
reliance on the specific portions of the financial projections
set forth below. No one has made or makes any representation to
any shareholder regarding the information included in these
projections. HCA does not intend to update or otherwise revise
the projections to reflect circumstances existing after the date
when made or to reflect the occurrence of future events, even in
the event that any or all of the assumptions underlying the
projections are shown to be in error.
For the foregoing reasons, as well as the bases and assumptions
on which the financial projections were compiled, the inclusion
of specific portions of the financial projections in this proxy
statement should
83
not be regarded as an indication that such projections will be
an accurate prediction of future events, and they should not be
relied on as such. Except as required by applicable securities
laws, HCA does not intend to update, or otherwise revise the
financial projections or the specific portions presented to
reflect circumstances existing after the date when made or to
reflect the occurrence of future events, even in the event that
any or all of the assumptions are shown to be in error.
Initial Projections. On January 26, 2006, senior
management presented its forecast to the finance and investments
committee of the Companys board of directors (the
Initial Management Projections). Management also
furnished the Initial Management Projections to Merrill Lynch
which were used by Merrill Lynch in connection with its April
2006 presentation to management of an analysis of a leveraged
buyout transaction. A summary of the Initial Management
Projections is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Management Projections | |
|
|
| |
|
|
2006 | |
|
2007 | |
|
2008 | |
|
|
| |
|
| |
|
| |
|
|
(In millions) | |
Revenues
|
|
$ |
25,645 |
|
|
$ |
27,464 |
|
|
$ |
29,370 |
|
EBITDA(1)
|
|
|
4,446 |
|
|
|
4,740 |
|
|
|
5,068 |
|
|
|
(1) |
Represents net income before gains on sales of facilities,
depreciation and amortization, interest expense, minority
interests in earnings of consolidated entities and provision for
income taxes. |
The material assumptions made by the Company in developing the
Initial Management Projections were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 | |
|
2007 | |
|
2008 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Revenue growth(1)
|
|
|
4.9 |
% |
|
|
7.1 |
% |
|
|
6.9 |
% |
Salaries and benefits(2)
|
|
|
40.5 |
% |
|
|
40.6 |
% |
|
|
40.7 |
% |
Supplies(2)
|
|
|
16.9 |
% |
|
|
17.0 |
% |
|
|
17.1 |
% |
Provision for doubtful accounts(2)
|
|
|
10.4 |
% |
|
|
10.5 |
% |
|
|
10.6 |
% |
Investment gains(3)
|
|
$ |
50 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Share-based compensation costs(4)
|
|
$ |
105 |
|
|
|
N/A |
|
|
|
N/A |
|
Reduction of malpractice reserve(5)
|
|
$ |
75 |
|
|
|
N/A |
|
|
|
N/A |
|
Capital expenditures
|
|
$ |
1,800 |
|
|
$ |
1,800 |
|
|
$ |
1,800 |
|
|
|
(1) |
Expressed as a percentage change over the prior year. |
|
(2) |
Expressed as a percentage of projected revenues. |
|
(3) |
Represents estimated gains on sales of investments by the
Companys insurance subsidiary. |
|
(4) |
Represents the estimated noncash share-based compensation costs
related to stock options, restricted stock and stock purchase
plans. No explicit assumption was used for 2007 or 2008. |
|
(5) |
A substantial portion of the Companys professional
liability risks are insured through a wholly-owned insurance
subsidiary. The assumption represents the estimated malpractice
reserve reductions. No explicit assumption was used for 2007 or
2008. |
Revised Projections. Following the end of the first
quarter of 2006, senior management reviewed the Initial
Management Projections in light of the most recent operating
results available to management. Senior management revised the
Initial Management Projections based on an analysis of low
case and high case growth assumptions and an
analysis prepared by the presidents of each of its hospital
operating groups. The revisions reflected, among other
considerations, that the trends with respect to patient volumes
and the provision for bad debt were less favorable for the first
quarter of 2006 than those assumed in the Initial Management
Projections. These negative trends were partially offset by an
assumed $74 million increase in the 2006 estimated gains on
sales of investments by the Companys insurance subsidiary.
Based on this information and analysis, revised projections (the
Revised Management
84
Projections) were prepared and presented by management to
Merrill Lynch in late April 2006, the Investor Group at a
meeting on April 24, 2006, and to the board of directors at
its meeting on May 25, 2006. A summary of the Revised
Management Projections is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revised Management Projections | |
|
|
| |
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In millions) | |
Revenues
|
|
$ |
25,554 |
|
|
$ |
27,299 |
|
|
$ |
29,231 |
|
|
$ |
31,261 |
|
EBITDA
|
|
|
4,399 |
|
|
|
4,471 |
|
|
|
4,666 |
|
|
|
4,876 |
|
Final Projections. Following the May 25, 2006
meeting of the board of directors, senior management continued
to refine its projections based on the latest operating results
available to management for the second quarter of 2006 and to
reflect for 2006 an additional $15 million increase in the
estimated gains on sales of investments by the Companys
insurance subsidiary and an additional $60 million
reduction in the malpractice reserve as compared to the Revised
Management Projections. Management also provided its projections
for 2010 and 2011. The Company provided these projections (the
Final Management Projections), a summary of which is
set forth below, to the special committee, Credit Suisse, Morgan
Stanley and Parent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Management Projections | |
|
|
| |
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
2011 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In millions) | |
Revenues
|
|
$ |
25,403 |
|
|
$ |
27,071 |
|
|
$ |
28,995 |
|
|
$ |
31,027 |
|
|
$ |
33,215 |
|
|
$ |
35,602 |
|
EBITDA
|
|
|
4,327 |
|
|
|
4,330 |
|
|
|
4,517 |
|
|
|
4,716 |
|
|
|
4,965 |
|
|
|
5,223 |
|
The material assumptions made by the Company in developing the
Final Management Projections are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
2011 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Equivalent admissions growth(1)(2)
|
|
|
0.6 |
% |
|
|
1.3 |
% |
|
|
1.4 |
% |
|
|
1.2 |
% |
|
|
1.4 |
% |
|
|
1.4 |
% |
Revenue per equivalent admission growth(1)
|
|
|
5.5 |
% |
|
|
5.6 |
% |
|
|
5.6 |
% |
|
|
5.8 |
% |
|
|
5.7 |
% |
|
|
5.8 |
% |
Salaries and benefits(3)
|
|
|
41.1 |
% |
|
|
41.0 |
% |
|
|
40.7 |
% |
|
|
40.3 |
% |
|
|
39.9 |
% |
|
|
39.4 |
% |
Supplies(3)
|
|
|
16.9 |
% |
|
|
17.2 |
% |
|
|
17.5 |
% |
|
|
17.8 |
% |
|
|
18.1 |
% |
|
|
18.4 |
% |
Provision for doubtful accounts(3)
|
|
|
10.4 |
% |
|
|
10.9 |
% |
|
|
11.4 |
% |
|
|
12.0 |
% |
|
|
12.6 |
% |
|
|
13.4 |
% |
Investment gains(4)
|
|
$ |
139 |
|
|
$ |
50 |
|
|
$ |
50 |
|
|
$ |
50 |
|
|
$ |
50 |
|
|
$ |
50 |
|
Share-based compensation costs(5)
|
|
$ |
105 |
|
|
$ |
140 |
|
|
$ |
175 |
|
|
$ |
210 |
|
|
$ |
210 |
|
|
$ |
210 |
|
Reduction of malpractice reserve(6)
|
|
$ |
135 |
|
|
$ |
25 |
|
|
$ |
25 |
|
|
$ |
25 |
|
|
$ |
25 |
|
|
$ |
25 |
|
Capital expenditures
|
|
$ |
1,779 |
|
|
$ |
1,800 |
|
|
$ |
1,500 |
|
|
$ |
1,500 |
|
|
$ |
1,500 |
|
|
$ |
1,500 |
|
|
|
(1) |
Expressed as a percentage change over the prior year. Equivalent
admissions growth is presented on a same facility basis. |
|
(2) |
Equivalent admissions are used by management and certain
investors as a general measure of combined inpatient and
outpatient volume. Equivalent admissions are computed by
multiplying admissions (inpatient volume) by the sum of gross
inpatient revenue and gross outpatient revenue and then dividing
the resulting amount by gross inpatient revenue. The equivalent
admissions computation equates outpatient revenue to
the volume measure (admission) used to measure inpatient
volume, resulting in a general measure of combined inpatient and
outpatient volume. |
|
(3) |
Expressed as a percentage of projected revenues. |
|
(4) |
Represents estimated gains on sales of investments by the
Companys insurance subsidiary. |
|
(5) |
Represents the estimated noncash share-based compensation costs
related to stock options, restricted stock and stock purchase
plans. |
85
|
|
(6) |
A substantial portion of the Companys professional
liability risks are insured through a wholly-owned insurance
subsidiary. The assumption represents the estimated malpractice
reserve reductions. |
In connection with its review of the strategic alternatives
available to the Company, the board of directors authorized
management to retain McKinsey on behalf of the Company to
analyze managements projections in light of
McKinseys previous work for the Company and its expertise
in the health care industry generally. McKinsey assessed five
fundamental drivers of overall profitability for the
Company net revenue per adjusted admission, volume,
provision for bad debt, labor cost and supplier cost
based on a combination of historical company data, management
projections, and external market data to develop a perspective
on future company performance. Such assessment resulted in a
base case forecast of annual EBITDA growth of 1.4% over the next
three years, or 160 basis points below managements
projection of 3.0% EBITDA growth, both starting with a
management EBITDA projection for 2006 of $4,312 million
(which excludes an estimated $15 million included in the
Final Management Projections attributed to the operations of the
four hospitals sold to LifePoint Hospitals, Inc. on July 1,
2006). This difference resulted in forecasted EBITDA for 2009 of
$4,498 million, or approximately $220 million lower
than managements projection of EBITDA for 2009. Of the
$220 million difference, (i) $187 million was due
to a lower projected incremental collections improvement on bad
debt accounts than that projected by management,
(ii) $71 million was due to lower projected growth in
the net revenue per adjusted admission for commercial payors and
Medicare, and (iii) $39 million was due to lower
assumptions with respect to volume growth, such amounts offset
by $79 million representing lower assumptions with respect
to increases in labor costs. McKinsey noted, however, that
EBITDA in each individual year could be as much as $150 to
$200 million higher or lower than forecasted (at 1.4%
annual growth) due to factors such as (i) a mild or severe
flu season affecting volume, (ii) the Companys
ability to negotiate better than expected prices from insurers,
affecting revenues, or additional state reimbursement for
uninsured patients, affecting reserves for doubtful accounts,
and (iii) the success of the Companys on-going
initiative to reduce supply costs, which factors do not
necessarily recur from year to year.
The materials presented by McKinsey to the special committee and
the board of directors at their meetings on July 17, 2006
and July 23, 2006, respectively, are attached as exhibits
to the
Schedule 13E-3
filed with the SEC in connection with the merger, and the
foregoing description is qualified in its entirety by reference
to the full text of such materials, which are incorporated
herein by reference. McKinsey prepared such materials to assist
the Company, the special committee and the board of directors
and not with the view toward public disclosure or toward
complying with U.S. generally accepted accounting
principles, the published guidelines of the SEC regarding
projections or guidelines established by the American Institute
of Certified Public accountants for preparation of prospective
financial information. McKinsey assumed and relied, without
independent verification, upon the accuracy and completeness of
the information provided by the Company or obtained through
public sources for the purposes of its analysis. With respect to
managements financial forecasts for the Company which
McKinsey reviewed, McKinsey assumed that they were reasonably
prepared on bases reflecting managements best currently
available estimates and judgments of the future financial
performance of the Company. McKinsey was not asked to conduct,
and did not conduct, any valuation or appraisal of the Company,
or its assets or liabilities, and the materials provided by
McKinsey to the special committee and the board of directors do
not constitute any such valuation or appraisal of the Company,
or a recommendation or support for a fair or appropriate price
for the shares of the Company held by its unaffiliated
shareholders, or a recommendation as to how such shareholders
should vote with respect to the merger.
A management consulting fee of $1.7 million is payable to
McKinsey in connection with its work to date. The Company also
agreed to reimburse McKinsey for its expenses and to indemnify
McKinsey against certain liabilities and expenses relating to or
arising out of its engagement. The Company chose to retain
McKinsey based on McKinseys reputation and expertise in
the field of management consulting generally and its experience
in consulting for companies in the healthcare industry. During
the past two years McKinsey has performed, and may in the future
perform, other consulting services for the Company.
86
Market Price and Dividend Data
HCA Common Stock is listed for trading on the NYSE under the
symbol HCA. The following table sets forth, for the
fiscal quarters indicated, the high and low sales prices per
share as reported on the NYSE composite tape and dividends
declared for HCA Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash | |
|
|
|
|
|
|
Dividend | |
|
|
High | |
|
Low | |
|
Declared | |
|
|
| |
|
| |
|
| |
FISCAL YEAR ENDED DECEMBER 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
46.60 |
|
|
$ |
38.98 |
|
|
$ |
0.13 |
|
|
Second Quarter
|
|
$ |
43.24 |
|
|
$ |
38.00 |
|
|
$ |
0.13 |
|
|
Third Quarter
|
|
$ |
42.30 |
|
|
$ |
36.44 |
|
|
$ |
0.13 |
|
|
Fourth Quarter
|
|
$ |
41.64 |
|
|
$ |
34.70 |
|
|
$ |
0.13 |
|
FISCAL YEAR ENDED DECEMBER 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
54.10 |
|
|
$ |
38.97 |
|
|
$ |
0.15 |
|
|
Second Quarter
|
|
$ |
58.60 |
|
|
$ |
52.14 |
|
|
$ |
0.15 |
|
|
Third Quarter
|
|
$ |
57.17 |
|
|
$ |
45.59 |
|
|
$ |
0.15 |
|
|
Fourth Quarter
|
|
$ |
52.74 |
|
|
$ |
45.30 |
|
|
$ |
0.15 |
|
FISCAL YEAR ENDED DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
51.92 |
|
|
$ |
45.56 |
|
|
$ |
0.17 |
|
|
Second Quarter
|
|
$ |
46.50 |
|
|
$ |
41.80 |
|
|
$ |
0.17 |
|
|
Third Quarter
|
|
$ |
50.25 |
|
|
$ |
42.46 |
|
|
$ |
0.17 |
|
The closing sale price of HCA Common Stock on the NYSE on
July 18, 2006, the last trading day prior to press reports
of rumors regarding a potential acquisition of HCA, was
$43.29 per share. The $51.00 per share to be paid for
each share of HCA Common Stock in the merger represents a
premium of 18% to the closing price on July 18, 2006, a
premium of 17% to the average closing price for the 30 trading
days ended July 18, 2006, a premium of 15% to the average
closing price for the 90 trading days ended July 18, 2006,
and a premium of 21% to the
52-week low closing
price for the 12-month
period ended July 18, 2006.
On 2006,
the most recent practicable date before this proxy statement was
printed, the closing price for the HCA Common Stock on the NYSE
was
$ per
share. You are encouraged to obtain current market quotations
for HCA Common Stock in connection with voting your shares.
In January 2006, our board of directors approved an increase in
our quarterly dividend from $0.15 per share to
$0.17 per share. The board of directors declared the
initial $0.17 per share dividend that was paid on
June 1, 2006 to shareholders of record at May 1, 2006,
and has declared another dividend of $0.17 per share
dividend payable on September 1, 2006 to shareholders of
record at August 1, 2006. The declaration and payment of
future dividends will depend upon many factors, including
earnings, financial position, business needs, capital and
surplus and regulatory considerations. We are also limited in
our ability to declare and pay dividends by the merger agreement
which provides that our regular fourth quarter dividend may not
be declared with a record date prior to December 1, 2006
and in no event paid if the effective time of the merger occurs
on or prior to the record date.
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information regarding the
beneficial ownership of our HCA Common Stock as of
August 31, 2006 (unless otherwise noted), for:
|
|
|
|
|
each person who is known by us to own beneficially more than 5%
of the outstanding shares of our common stock; |
87
|
|
|
|
|
each of our current directors and executive officers; |
|
|
|
|
all of our directors and executive officers as a group; |
|
|
|
|
|
Thomas F. Frist III; and |
|
|
|
|
each of the private equity funds sponsored by Bain, KKR and
Merrill Lynch Global Private Equity and each person controlling
such funds, together with each associate and majority-owned
subsidiary thereof, in each case who beneficially owns
outstanding shares of HCA Common Stock. |
The percentages of shares outstanding provided in the tables are
based on 388,602,268 voting shares outstanding as of
August 31, 2006. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Unless
otherwise indicated, each person or entity named in the table
has sole voting and investment power, or shares voting and
investment power with his or her spouse, with respect to all
shares of stock listed as owned by that person. The number of
shares shown does not include the interest of certain persons in
shares held by family members in their own right. Shares
issuable upon the exercise of options that are exercisable
within 60 days of August 31, 2006 are considered
outstanding for the purpose of calculating the percentage of
outstanding shares of HCA Common Stock held by the individual,
but not for the purpose of calculating the percentage of
outstanding shares held by any other individual. The address of
each of our directors, executive officers and the HCA Benefit
Plans listed below is c/o HCA Inc., One Park Plaza,
Nashville, Tennessee 37203.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of Option | |
|
|
Name of Beneficial Owner |
|
Number of Shares | |
|
Shares(1) | |
|
Percent | |
|
|
| |
|
| |
|
| |
Dodge & Cox
|
|
|
38,875,471 |
(2) |
|
|
|
|
|
|
10.0 |
|
C. Michael Armstrong
|
|
|
12,163 |
|
|
|
8,453 |
|
|
|
* |
|
Magdalena H. Averhoff, M.D
|
|
|
9,607 |
|
|
|
29,129 |
|
|
|
* |
|
Jack O. Bovender, Jr.
|
|
|
309,748 |
(3) |
|
|
1,825,784 |
|
|
|
* |
|
Richard M. Bracken
|
|
|
172,334 |
(4) |
|
|
917,960 |
|
|
|
* |
|
Martin Feldstein
|
|
|
10,709 |
|
|
|
15,902 |
|
|
|
* |
|
Thomas F. Frist, Jr., M.D
|
|
|
16,868,955 |
(5) |
|
|
22,612 |
|
|
|
4.4 |
|
Frederick W. Gluck
|
|
|
22,647 |
|
|
|
48,415 |
|
|
|
* |
|
Glenda A. Hatchett
|
|
|
15,755 |
|
|
|
29,328 |
|
|
|
* |
|
Samuel N. Hazen
|
|
|
101,964 |
(6) |
|
|
546,190 |
|
|
|
* |
|
Charles O. Holliday, Jr.
|
|
|
8,791 |
|
|
|
21,650 |
|
|
|
* |
|
R. Milton Johnson
|
|
|
77,778 |
(7) |
|
|
384,288 |
|
|
|
* |
|
T. Michael Long
|
|
|
16,282 |
|
|
|
33,415 |
|
|
|
* |
|
John H. McArthur
|
|
|
10,094 |
|
|
|
14,975 |
|
|
|
* |
|
Kent C. Nelson
|
|
|
14,504 |
|
|
|
48,415 |
|
|
|
* |
|
Frank S. Royal, M.D
|
|
|
100,817 |
|
|
|
33,415 |
|
|
|
* |
|
Harold T. Shapiro
|
|
|
13,677 |
|
|
|
35,712 |
|
|
|
* |
|
Robert A. Waterman
|
|
|
95,749 |
(8) |
|
|
330,273 |
|
|
|
* |
|
HCA Benefit Plans
|
|
|
16,512,171 |
(9) |
|
|
|
|
|
|
4.3 |
|
All directors and executive officers as a group (34 persons)
|
|
|
18,867,976 |
(10) |
|
|
7,326,725 |
|
|
|
6.6 |
|
Thomas F. Frist III
|
|
|
9,917,719 |
(11) |
|
|
|
|
|
|
2.5 |
|
Merrill Lynch & Co., Inc.
|
|
|
3,411,132 |
(12) |
|
|
234,300 |
|
|
|
* |
|
Brian Renaud
|
|
|
4,181 |
(13) |
|
|
|
|
|
|
* |
|
88
|
|
|
|
(1) |
Includes shares issuable upon exercise of options within
60 days of August 31, 2006. |
|
|
(2) |
Information based on a Schedule 13G filed by
Dodge & Cox with the SEC on April 10, 2006.
Dodge & Cox is an investment advisor registered under
section 203 of the Investment Advisers Act of 1940 and
reports sole voting power as to 36,399,371 shares of HCA
Common Stock, shared voting power as to 405,100 shares of
HCA Common Stock and sole dispositive power as to
38,875,471 shares of HCA Common Stock. Dodge & Cox
reports its address as 555 California Street, 40th Floor,
San Francisco, California 94104. |
|
|
(3) |
Includes 111 shares beneficially owned in employee plans. |
|
|
(4) |
Includes 6,812 shares beneficially owned in employee plans. |
|
|
(5) |
Includes 20,766 shares beneficially owned in employee
plans. Also includes 5,558,602 shares with respect to which
Dr. Frist has sole voting and investment power and
11,244,129 shares with respect to which Dr. Frist has
shared voting and investment power. Also includes
45,498 shares as to which Dr. Frist may be deemed the
beneficial owner which are owned of record by
Dr. Frists wife. Does not include approximately
6.9 million shares held by Dr. Frists adult
children and certain entities related to the Frist family, which
shares may be deemed to be beneficially owned by the Frist
family as a group within the meaning of Section 13(d) under
the Exchange Act as a result of the transactions contemplated by
the merger agreement and the interim investors agreement. |
|
|
(6) |
Includes 1,943 shares beneficially owned in employee plans. |
|
|
(7) |
Includes 1,001 shares beneficially owned in employee plans. |
|
|
(8) |
Includes 111 shares beneficially owned in employee plans. |
|
|
(9) |
As of August 31, 2006, represents shares beneficially owned
by employees and former employees participating in the HCA
401(k) Plan. |
|
|
(10) |
Includes 70,654 shares beneficially owned in employee plans. |
|
|
(11) |
Includes 250,500 shares as to which Mr. Frist has sole
voting and investment power and 9,664,200 shares held by the
Frist Entities as to which Mr. Frist has shared voting and
investment power. Also includes 3,019 shares as to which
Mr. Frist may be deemed the beneficial owner which are
owned of record by Mr. Frists wife and minor children. |
|
|
|
(12) |
As of September 11, 2006, Merrill Lynch & Co., Inc.,
through its subsidiaries, is the beneficial owner of an
aggregate of 3,411,132 shares of which 234,300 shares are
issuable upon exercise, exchange or conversion of other
securities. Neither Merrill Lynch Global Private Equity, ML
Global Private Equity Fund, L.P., its investment vehicle, nor
the general partner or limited partner of ML Global Private
Equity Fund, L.P. hold any shares. One or more of Merrill Lynch
& Co., Inc. and its subsidiaries (the Merrill
Entities) may directly or indirectly beneficially own 10%
or more of the equity securities of other entities. The Merrill
Entities generally do not have unfettered access to information
about associates in which they have a minority position. Each
such Merrill Entity has disclosed, to the extent known after
reasonable inquiry, the beneficial ownership of the securities
of HCA by each such Merrill Entitys associates as required
under Item 1008 of Regulation M-A. |
|
|
|
(13) |
Brian Renaud is a director and managing director of MLGPE LTD
and holds 4,181 shares in Consults accounts for
which he is the beneficial owner, but over which he does not
exercise investment discretion. |
|
Prior Stock Purchases
In October 2004, we announced the authorization of a modified
Dutch auction tender offer to purchase up to
$2.5 billion of HCA Common Stock. In November 2004, we
closed the tender offer and repurchased 62 million shares
of HCA Common Stock for an aggregate price of
$2.466 billion ($39.75 per share). The shares
repurchased represented approximately 13% of our outstanding
shares at the time of the
89
tender offer. We also repurchased 0.9 million shares of HCA
Common Stock for $35 million through open market purchases
which completed the $2.501 billion share repurchase
authorization.
On October 14, 2005, we commenced a modified
Dutch auction tender offer to purchase up to
$2.5 billion of HCA Common Stock. In November 2005, we
closed the tender offer and repurchased 28.7 million shares
of HCA Common Stock for an aggregate price of
$1.437 billion ($50.00 per share). The shares
repurchased represented approximately 6% of our outstanding
shares at the time of the tender offer. We also repurchased
8.0 million shares of HCA Common Stock for
$412 million through open market purchases during the
fourth quarter of 2005. During the first six months of 2006, we
repurchased 13.0 million shares of HCA Common Stock for
$651 million, through open market purchases, which
completed our authorization.
The following tables set forth information regarding purchases
of HCA Common Stock by the Management Investors and
Dr. Frist, showing the number of shares of HCA Common Stock
purchased by each, the range of prices paid for those shares and
the average price paid per quarter for the past two years. The
purchases were pursuant to option exercises or other purchases
under the Companys equity and/or stock purchase plans.
Neither the Frist Entities nor Thomas F. Frist III made any
purchases of HCA Common Stock during the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended | |
|
|
| |
|
|
9/30/04 | |
|
12/31/04 | |
|
|
| |
|
| |
|
|
|
|
Number of | |
|
|
|
Number of | |
|
|
Range of Price($) | |
|
Average Price($) | |
|
Shares | |
|
Range of Price($) | |
|
Average Price($) | |
|
Shares | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Jack O. Bovender, Jr.
|
|
|
31.24 |
|
|
|
31.24 |
|
|
|
2,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard M. Bracken
|
|
|
31.24-38.49 |
|
|
|
31.24 |
|
|
|
3,963 |
|
|
|
25.44-39.90 |
|
|
|
25.44 |
|
|
|
22,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Frist, Jr., M.D.
|
|
|
38.49 |
|
|
|
38.49 |
|
|
|
10 |
|
|
|
39.90 |
|
|
|
39.90 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended | |
|
|
| |
|
|
3/31/05 | |
|
6/30/05 | |
|
|
| |
|
| |
|
|
|
|
Number of | |
|
|
|
Number of | |
|
|
Range of Price($) | |
|
Average Price($) | |
|
Shares | |
|
Range of Price($) | |
|
Average Price($) | |
|
Shares | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Jack O. Bovender, Jr.
|
|
|
26.80-29.08 |
|
|
|
26.81 |
|
|
|
502,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard M. Bracken
|
|
|
29.08-54.16 |
|
|
|
29.09 |
|
|
|
4,257 |
|
|
|
26.80-54.16 |
|
|
|
29.09 |
|
|
|
327,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Frist, Jr., M.D.
|
|
|
48.94 |
|
|
|
48.94 |
|
|
|
8 |
|
|
|
54.16 |
|
|
|
54.16 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended | |
|
|
| |
|
|
9/30/05 | |
|
12/31/05 | |
|
|
| |
|
| |
|
|
|
|
Number of | |
|
|
|
Number of | |
|
|
Range of Price ($) | |
|
Average Price ($) | |
|
Shares | |
|
Range of Price ($) | |
|
Average Price ($) | |
|
Shares | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Jack O. Bovender, Jr.
|
|
|
38.14 |
|
|
|
38.14 |
|
|
|
2,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard M. Bracken
|
|
|
38.14-49.55 |
|
|
|
38.16 |
|
|
|
2,676 |
|
|
|
52.13 |
|
|
|
52.13 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Frist, Jr., M.D.
|
|
|
49.55 |
|
|
|
49.55 |
|
|
|
9 |
|
|
|
52.13 |
|
|
|
52.13 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended | |
|
|
| |
|
|
3/31/06 | |
|
6/30/06 | |
|
|
| |
|
| |
|
|
|
|
Number of | |
|
|
|
Number of | |
|
|
Range of Price ($) | |
|
Average Price ($) | |
|
Shares | |
|
Range of Price ($) | |
|
Average Price ($) | |
|
Shares | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Jack O. Bovender, Jr.
|
|
|
37.41 |
|
|
|
37.41 |
|
|
|
2,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard M. Bracken
|
|
|
37.41-47.90 |
|
|
|
37.43 |
|
|
|
2,744 |
|
|
|
37.78-45.10 |
|
|
|
37.84 |
|
|
|
567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Frist, Jr., M.D.
|
|
|
47.90 |
|
|
|
47.90 |
|
|
|
9 |
|
|
|
45.10 |
|
|
|
45.10 |
|
|
|
11 |
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
9/30/06 | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
|
|
Range of Price ($) | |
|
Average Price ($) | |
|
Shares | |
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
|
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
34.02 |
|
|
|
34.02 |
|
|
|
2,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard M. Bracken
|
|
|
34.02 |
|
|
|
34.02 |
|
|
|
3,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Frist, Jr., M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Registered Public Accounting Firm
The consolidated financial statements of the Company and Company
managements assessment of the effectiveness of internal
control over financial reporting included in the Annual Report
on Form 10-K for
the year ended December 31, 2005, incorporated by reference
in this proxy statement, have been audited by Ernst &
Young LLP, an independent registered public accounting firm, as
stated in their reports appearing in such Annual Report on
Form 10-K.
ADJOURNMENT OF THE SPECIAL MEETING
(PROPOSAL NO. 2)
HCA may ask its shareholders to vote on a proposal to adjourn
the special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the meeting to adopt the merger agreement. We currently do
not intend to propose adjournment at our special meeting if
there are sufficient votes to adopt the merger agreement. If the
proposal to adjourn our special meeting for the purpose of
soliciting additional proxies is submitted to our shareholders
for approval, such approval requires the affirmative vote of the
holders of a majority of the shares of HCA Common Stock
present or represented by proxy and entitled to vote on the
matter.
The board of directors recommends that you vote
FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies.
OTHER MATTERS
Other Matters for Action at the Special Meeting
As of the date of this proxy statement, our board of directors
knows of no matters that will be presented for consideration at
the special meeting other than as described in this proxy
statement.
Future Shareholder Proposals
If the merger is consummated, we will not have public
shareholders and there will be no public participation in any
future meeting of shareholders. However, if the merger is not
completed, we expect to hold a 2007 annual meeting of
shareholders. Any shareholder proposals to be considered timely
for inclusion in next years proxy statement must be
submitted in writing to John M. Franck II, Vice President
and Corporate Secretary, HCA Inc., One Park Plaza, Nashville,
Tennessee 37203, and must be received prior to the close of
business on December 14, 2006. Such proposals must also
comply with the SECs rules concerning the inclusion of
shareholder proposals in company-sponsored proxy materials as
set forth in
Rule 14a-8
promulgated under the Exchange Act and our bylaws. For other
shareholder proposals (outside of
Rule 14a-8), the
Companys certificate of incorporation contains an advance
notice provision which requires that a shareholders notice
of a proposal to be brought before an annual meeting must be
timely. In order to be timely, the notice must be
addressed to our Corporate Secretary and delivered or mailed and
received at our principal executive offices not less than
60 days, nor more than 90 days, before the scheduled
date of the meeting (or, if less than 70 days notice or
prior public disclosure of the date of
91
the meeting is given, the tenth day following the earlier of the
day the notice was mailed or the day the public disclosure was
made).
Householding of Special Meeting Materials
Some banks, brokers, and other nominee record holders may be
participating in the practice of householding proxy
statements and annual reports. This means that only one copy of
this notice and proxy statement may have been sent to multiple
shareholders in your household. If you would prefer to receive
separate copies of a proxy statement or annual report either now
or in the future, please contact your bank, broker or other
nominee. Upon written or oral request to the Office of Investor
Relations at One Park Plaza, Nashville, Tennessee 37203,
(615) 344-9551, we will provide a separate copy of the
annual reports and proxy statements. In addition, security
holders sharing an address can request delivery of a single copy
of annual reports or proxy statements if you are receiving
multiple copies upon written or oral request to the Office of
Investor Relations at the address and telephone number stated
above.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SECs public reference room located
at 100 F Street, N.E., Room 1580, Washington, D.C.
20549. Please call the SEC at
1-800-SEC-0330 for
further information on the public reference room. Our SEC
filings are also available to the public at the SECs
website at http://www.sec.gov. You also may obtain free copies
of the documents HCA files with the SEC by going to the
Investors Relations Section of our website at
www.hcahealthcare.com. Our website address is provided as an
inactive textual reference only. The information provided on our
website is not part of this proxy statement, and therefore is
not incorporated by reference.
Statements contained in this proxy statement, or in any document
incorporated in this proxy statement by reference regarding the
contents of any contract or other document, are not necessarily
complete and each such statement is qualified in its entirety by
reference to that contract or other document filed as an exhibit
with the SEC. The SEC allows us to incorporate by
reference, into this proxy statement documents we file
with the SEC. This means that we can disclose important
information to you by referring you to those documents. The
information incorporated by reference is considered to be a part
of this proxy statement, and later information that we file with
the SEC will update and supersede that information. We
incorporate by reference the documents listed below and any
documents filed by us pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this proxy
statement and before the date of the special meeting:
|
|
|
HCA Filings: |
|
Periods |
|
|
|
Annual Report on Form 10-K
|
|
Year ended December 31, 2005 |
Proxy Statement on Form 14A
|
|
Filed April 13, 2006 |
Quarterly Reports on Form 10-Q
|
|
Quarters ended March 31, 2006 and June 30, 2006 |
Current Reports on Form 8-K
|
|
Filed January 13, 2006, February 1, 2006,
February 7, 2006, February 8, 2006, April 17,
2006, April 25, 2006, June 1, 2006, July 25, 2006
and August 21, 2006 |
Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including the related exhibits, is not incorporated by reference
in this proxy statement.
You may request a copy of the documents incorporated by
reference into this proxy statement, excluding certain exhibits,
by writing to or telephoning us. Requests for documents should
be directed to the Office of Investor Relations, HCA Inc., One
Park Plaza, Nashville, Tennessee 37203; (615)344-9551. If you
would like to request documents from us, please do so at least
five business days before the date of the special meeting in
order to receive timely delivery of those documents prior to the
special meeting.
92
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE
YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT
IS
DATED ,
2006. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS
DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
93
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HCA INC.,
HERCULES HOLDING II, LLC
AND
HERCULES ACQUISITION CORPORATION
JULY 24, 2006
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page | |
|
|
| |
ARTICLE I DEFINITIONS
|
|
|
1 |
|
Section 1.1. Definitions
|
|
|
1 |
|
Section 1.2. Terms
Generally
|
|
|
6 |
|
|
ARTICLE II THE MERGER |
|
|
7 |
|
Section 2.1. The
Merger
|
|
|
7 |
|
Section 2.2. Closing
|
|
|
7 |
|
Section 2.3. Effective
Time
|
|
|
7 |
|
Section 2.4. Effects
of the Merger
|
|
|
7 |
|
Section 2.5. Organizational
Documents
|
|
|
7 |
|
Section 2.6. Directors
and Officers of Surviving Corporation
|
|
|
7 |
|
|
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
|
|
|
8 |
|
Section 3.1. Conversion
of Securities
|
|
|
8 |
|
Section 3.2. Payment
of Cash for Merger Shares
|
|
|
9 |
|
Section 3.3. Treatment
of Options and Other Awards
|
|
|
10 |
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
|
12 |
|
Section 4.1. Corporate
Existence and Power
|
|
|
12 |
|
Section 4.2. Corporate
Authorization
|
|
|
12 |
|
Section 4.3. Governmental
Authorization
|
|
|
13 |
|
Section 4.4. Non-Contravention
|
|
|
13 |
|
Section 4.5. Capitalization
|
|
|
13 |
|
Section 4.6. Company
Subsidiaries and Joint Ventures
|
|
|
14 |
|
Section 4.7. Reports
and Financial Statements
|
|
|
14 |
|
Section 4.8. Undisclosed
Liabilities
|
|
|
15 |
|
Section 4.9. Disclosure
Documents
|
|
|
15 |
|
Section 4.10.
Absence of Certain Changes or Events
|
|
|
16 |
|
Section 4.11.
Litigation
|
|
|
16 |
|
Section 4.12.
Taxes
|
|
|
16 |
|
Section 4.13.
ERISA
|
|
|
17 |
|
Section 4.14.
Compliance With Laws
|
|
|
18 |
|
Section 4.15.
Finders Fees
|
|
|
18 |
|
Section 4.16.
Opinion of Financial Advisors
|
|
|
18 |
|
Section 4.17.
Affiliate Transactions
|
|
|
18 |
|
Section 4.18.
Rights Agreement; Anti-Takeover Provisions
|
|
|
18 |
|
i
|
|
|
|
|
|
|
Page | |
|
|
| |
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
|
|
|
19 |
|
Section 5.1. Corporate
Existence and Power
|
|
|
19 |
|
Section 5.2. Corporate
Authorization
|
|
|
19 |
|
Section 5.3. Governmental
Authorization
|
|
|
19 |
|
Section 5.4. Non-Contravention
|
|
|
19 |
|
Section 5.5. Disclosure
Documents
|
|
|
19 |
|
Section 5.6. Finders
Fees
|
|
|
20 |
|
Section 5.7. Financing
|
|
|
20 |
|
Section 5.8. Equity
Rollover Commitment
|
|
|
20 |
|
Section 5.9. Guarantees
|
|
|
21 |
|
Section 5.10.
Operations of Parent and Merger Sub
|
|
|
21 |
|
|
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER
|
|
|
21 |
|
Section 6.1. Conduct
of the Company and Subsidiaries
|
|
|
21 |
|
Section 6.2. Conduct
of Parent and Merger Sub
|
|
|
23 |
|
Section 6.3. No
Control of Other Partys Business
|
|
|
23 |
|
|
ARTICLE VII ADDITIONAL AGREEMENTS
|
|
|
24 |
|
Section 7.1. Stockholder
Meeting; Proxy Material
|
|
|
24 |
|
Section 7.2. Reasonable
Best Efforts
|
|
|
25 |
|
Section 7.3. Access
to Information
|
|
|
26 |
|
Section 7.4. Solicitation
|
|
|
26 |
|
Section 7.5. Director
and Officer Liability
|
|
|
30 |
|
Section 7.6. Takeover
Statutes
|
|
|
30 |
|
Section 7.7. Public
Announcements
|
|
|
31 |
|
Section 7.8. Notice
of Current Events
|
|
|
31 |
|
Section 7.9. Employee
Matters
|
|
|
31 |
|
Section 7.10.
Financing
|
|
|
32 |
|
Section 7.11.
Actions with Respect to Existing Debt
|
|
|
34 |
|
Section 7.12.
Actions with Respect to Foundation Options and HTI Warrant
|
|
|
35 |
|
Section 7.13.
Insurance Matters
|
|
|
35 |
|
Section 7.14.
Section 16(b)
|
|
|
35 |
|
Section 7.15.
Resignation of Directors
|
|
|
35 |
|
|
ARTICLE VIII CONDITIONS TO THE MERGER
|
|
|
35 |
|
Section 8.1. Conditions
to the Obligations of Each Party
|
|
|
35 |
|
Section 8.2. Conditions
to the Obligations of Parent and Merger Sub
|
|
|
35 |
|
Section 8.3. Conditions
of the Obligations of the Company
|
|
|
36 |
|
|
ARTICLE IX TERMINATION |
|
|
36 |
|
Section 9.1. Termination
|
|
|
36 |
|
Section 9.2. Termination
Fee
|
|
|
37 |
|
Section 9.3. Effect
of Termination
|
|
|
39 |
|
ii
|
|
|
|
|
|
|
Page | |
|
|
| |
|
ARTICLE X MISCELLANEOUS |
|
|
39 |
|
Section 10.1. Notices
|
|
|
39 |
|
Section 10.2. Representations
and Warranties
|
|
|
40 |
|
Section 10.3. Expenses
|
|
|
41 |
|
Section 10.4. Amendment
|
|
|
41 |
|
Section 10.5. Waiver
|
|
|
41 |
|
Section 10.6. Successors
and Assigns
|
|
|
41 |
|
Section 10.7. Governing
Law
|
|
|
41 |
|
Section 10.8. Counterparts;
Effectiveness; Third Party Beneficiaries
|
|
|
41 |
|
Section 10.9. Severability
|
|
|
41 |
|
Section 10.10.
Entire Agreement
|
|
|
42 |
|
Section 10.11.
Remedies
|
|
|
42 |
|
Section 10.12.
Jurisdiction
|
|
|
42 |
|
Section 10.13.
Authorship
|
|
|
43 |
|
iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement) is made and entered into as of
this 24th day of July, 2006 by and among HCA Inc., a
Delaware corporation (the Company), Hercules
Holding II, LLC, a Delaware limited liability company
(Parent) and Hercules Acquisition
Corporation, a Delaware corporation and a direct wholly owned
subsidiary of Parent (Merger Sub).
RECITALS
WHEREAS, the parties intend that Merger Sub be merged with and
into the Company (the Merger), with the
Company surviving the Merger as a wholly owned subsidiary of
Parent.
WHEREAS, the Board of Directors of the Company, acting upon the
unanimous recommendation of the Special Committee, has
(i) determined that it is in the best interests of the
Company and its stockholders, and declared it advisable, to
enter into this Agreement, (ii) approved the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, including the Merger
and (iii) resolved to recommend adoption of this Agreement
by the stockholders of the Company.
WHEREAS, the Boards of Directors of Parent and Merger Sub have
unanimously approved this Agreement and declared it advisable
for Parent and Merger Sub, respectively, to enter into this
Agreement.
WHEREAS, certain existing stockholders of the Company desire to
contribute Shares to Parent immediately prior to the Effective
Time in exchange for shares of capital stock of Parent.
WHEREAS, the Company, Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe certain
conditions to the Merger, as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained
herein, intending to be legally bound, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.
For purposes of this Agreement, the following terms have the
respective meanings set forth below:
|
|
|
Acceptable Confidentiality Agreement has the
meaning set forth in Section 7.4(f)(i). |
|
|
Affiliate means, with respect to any Person,
any other Person, directly or indirectly, controlling,
controlled by, or under common control with, such Person. For
purposes of this definition, the term control
(including the correlative terms controlling,
controlled by and under common control
with) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. |
|
|
Agreement has the meaning set forth in the
Preamble. |
|
|
Business Day means any day other than the
days on which banks in New York, New York are not required or
authorized to close. |
|
|
Certificate has the meaning set forth in
Section 3.1(c). |
|
|
Certificate of Merger has the meaning set
forth in Section 2.3. |
|
|
|
CIA has the meaning set forth in
Section 4.14(b). |
|
|
Closing has the meaning set forth in
Section 2.2. |
|
|
Closing Date has the meaning set forth in
Section 2.2. |
|
|
Code means the Internal Revenue Code of 1986,
as amended. |
|
|
Common Stock has the meaning set forth in
Section 3.1(a). |
|
|
Company has the meaning set forth in the
Preamble. |
|
|
Company Acquisition Proposal has the meaning
set forth in Section 7.4(f)(ii). |
|
|
Company Benefit Plans has the meaning set
forth in Section 4.13(a). |
|
|
Company Disclosure Letter has the meaning set
forth in the preamble to Article IV. |
|
|
Company Employees means any current, former
or retired employee, officer, consultant, independent contractor
or director of the Company or any of its Subsidiaries. |
|
|
Company Joint Venture means the Persons or
other joint venture arrangements set forth in
Section 4.6(b) of the Company Disclosure Letter. |
|
|
Company Options means outstanding options to
acquire Shares from the Company granted under the Company Stock
Plans. |
|
|
Company Proxy Statement has the meaning set
forth in Section 4.9. |
|
|
Company SEC Reports has the meaning set forth
in Section 4.7(a). |
|
|
Company Securities has the meaning set forth
in Section 4.5(b). |
|
|
Company Stockholder Meeting has the meaning
set forth in Section 7.1(a). |
|
|
Company Stock Plans means the Companys
2005 Equity Incentive Plan, the Columbia/ HCA Healthcare
Corporation Outside Directors Stock and Incentive Compensation
Plan, as amended, the Amended and Restated Columbia/ HCA
Healthcare Corporation 1992 Stock and Incentive Plan, the
Colombia/ HCA Healthcare Corporation 2000 Equity Incentive Plan,
the HCA-Hospital Corporation of America Nonqualified Initial
Option Plan and the Value Health, Inc. 1991 Stock Plan, as
amended. |
|
|
Compensation has the meaning set forth in
Section 7.9(a). |
|
|
Confidentiality Agreements means the
Confidentiality Agreement with each of (i) Bain Capital
Partners, LLC, dated April 22, 2006, as supplemented by the
addendum dated May 26, 2006, (ii) Kohlberg Kravis
Roberts & Co. L.P., dated April 22, 2006, as
supplemented by the addendum dated May 26, 2006 and
(iii) Merrill Lynch Global Partners, Inc., dated
April 23, 2006, as supplemented by the addendum dated
May 26, 2006. |
|
|
Contract has the meaning set forth in
Section 4.4. |
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Current Employee has the meaning set forth in
Section 7.9(a). |
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Current Policy has the meaning set forth in
Section 7.5(b). |
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Damages has the meaning set forth in
Section 7.5(a). |
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Debt Financing has the meaning set forth in
Section 5.7. |
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Debt Financing Commitments has the meaning
set forth in Section 5.7. |
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Debt Tender Offers has the meaning set forth
in Section 7.11. |
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DGCL has the meaning set forth in
Section 2.1. |
2
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Dissenting Shares has the meaning set forth
in Section 3.1(d). |
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DOJ has the meaning set forth in
Section 7.2(b). |
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Effective Time has the meaning set forth in
Section 2.3. |
|
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Employee Benefit Plan has the meaning set
forth in Section 3(3) of ERISA. |
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End Date has the meaning set forth in
Section 9.1(b)(i). |
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Equity Financing has the meaning set forth in
Section 5.7. |
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Equity Financing Commitments has the meaning
set forth in Section 5.7. |
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Equity Rollover Commitment has the meaning
set forth in Section 5.8. |
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ERISA means the Employee Retirement Income
Security Act of 1974, as amended. |
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Exchange Act means the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder. |
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Excluded Party has the meaning set forth in
Section 7.4(b). |
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Financing has the meaning set forth in
Section 5.7. |
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Financing Commitments has the meaning set
forth in Section 5.7. |
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Foundation Options means outstanding options
to purchase Shares from the Company granted pursuant to Stock
Pledge Agreements, dated as of October 9, 1997 and
February 25, 1999, between Columbia/ HCA Healthcare Inc.
and Columbia/ HCA Healthcare Foundation, Inc. |
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FTC has the meaning set forth in
Section 7.2(b). |
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GAAP means United States generally accepted
accounting principles. |
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Go Shop Termination Fee means $300,000,000. |
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Governmental Authority means any nation or
government or any agency, public or regulatory authority,
instrumentality, department, commission, court, arbitrator,
ministry, tribunal or board of any nation or government or
political subdivision thereof, in each case, whether foreign or
domestic and whether national, supranational, federal,
provincial, state, regional, local or municipal. |
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Guarantees has the meaning set forth in
Section 5.9. |
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Guarantors has the meaning set forth in
Section 5.9. |
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HSR Act means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. |
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HTI Warrant means the warrant to
purchase 16,910 Shares for an exercise price of
$2.29 per Share exercisable until September 17, 2007. |
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Indenture means the Indenture, dated as of
December 15, 1993, by and between Columbia Healthcare
Corporation and The First National Bank of Chicago, as
supplemented by (i) the First Supplemental Indenture dated
as of May 25, 2000, by and between HCA The
Healthcare Company
(successor-in-interest
to Columbia Healthcare Corporation) and Bank One Trust Company,
N.A.
(successor-in-interest
to The First National Bank of Chicago), (ii) the Second
Supplemental Indenture, dated as of July 1, 2001, by and
between HCA Inc.
(successor-in-interest
to HCA The Healthcare Company) and Bank One Trust
Company, N.A. and (iii) the Third Supplemental Indenture,
dated as of December 5, 2001, by and between HCA Inc. and
The Bank of New York (successor trustee to Bank One Trust
Company, N.A). |
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Insurance Amount has the meaning set forth in
Section 7.5(b). |
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Intercompany Debt means any loan, advance or
other obligation solely among the Company and/or any of its
wholly-owned Subsidiaries. |
3
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Knowledge means the actual knowledge of the
Persons set forth in Section 1.1 of the Company Disclosure
Letter. |
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Law means applicable, statutes, common laws,
rules, ordinances, regulations, codes, orders, judgments,
injunctions, writs, decrees, governmental guidelines or
interpretations having the force of law or bylaws, in each case,
of a Governmental Authority. |
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Liens means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset. |
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Marketing Period has the meaning set forth in
Section 7.10(b). |
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Material Adverse Effect on the Company means
any event, state of facts, circumstance, development, change,
effect or occurrence (an Effect) that is materially
adverse to the business, financial condition or results of
operations of the Company and its Subsidiaries, taken as a
whole, other than (i) any Effect resulting from
(A) changes in general economic or political conditions or
the securities, credit or financial markets in general,
(B) general changes or developments in the industries in
which the Company and its Subsidiaries operate, including
general changes in law or regulation across such industries,
(C) the announcement of this Agreement or the pendency or
consummation of the Merger, including any labor union activities
related thereto, (D) the identity of Parent or any of its
Affiliates as the acquiror of the Company, (E) compliance
with the terms of, or the taking of any action required by, this
Agreement or consented to by Parent, (F) any acts of
terrorism or war (other than any of the foregoing that causes
any damage or destruction to or renders unusable any facility or
property of the Company or any of its Subsidiaries),
(G) changes in generally accepted accounting principles or
the interpretation thereof, or (H) any weather related
event, except, in the case of the foregoing
clauses (A) and (B), to the extent such changes or
developments referred to therein would reasonably be expected to
have a materially disproportionate impact on the Company and its
Subsidiaries, taken as a whole, relative to other for profit
participants in the industries and in the geographic markets in
which the Company conducts its businesses after taking into
account the size of the Company relative to such other for
profit participants, or (ii) any failure to meet internal
or published projections, forecasts or revenue or earning
predictions for any period (provided that the underlying causes
of such failure shall be considered in determining whether there
is a Material Adverse Effect on the Company). |
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Material Subsidiaries means the Subsidiaries
of the Company set forth in Section 4.1 of the Company
Disclosure Letter. |
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Merger has the meaning set forth in the
Recitals. |
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Merger Consideration has the meaning set
forth in Section 3.1(c). |
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Merger Shares has the meaning set forth in
Section 3.1(c). |
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Merger Sub has the meaning set forth in the
Preamble. |
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New Financing Commitments has the meaning set
forth in Section 5.7. |
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Notice Period has the meaning set forth in
Section 7.4(d)(ii). |
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Nonvoting Common Stock has the meaning set
forth in Section 3.1(a). |
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No-Shop Period Start Date has the meaning set
forth in Section 7.4(a). |
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OIG has the meaning set forth in
Section 4.14(b). |
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Other Antitrust Laws means any Law, other
than the HSR Act, enacted by any Governmental Authority relating
to antitrust matters or regulating competition. |
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Parent has the meaning set forth in the
Preamble. |
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Parent Expenses has the meaning set forth in
Section 9.2(c). |
4
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Paying Agent has the meaning set forth in
Section 3.2(a). |
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Permits means any licenses, franchises,
permits, certificates, consents, approvals or other similar
authorizations of, from or by a Governmental Authority possessed
by or granted to or necessary for the ownership of the material
assets or conduct of the business of, the Company or its
Subsidiaries. |
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Permitted Liens means (i) Liens for
Taxes, assessments and governmental charges or levies not yet
due and payable or that are being contested in good faith and by
appropriate proceedings; (ii) mechanics, carriers,
workmens, repairmens, materialmens or other
Liens or security interests that secure a liquidated amount that
are being contested in good faith and by appropriate
proceedings; or (iii) leases, subleases and licenses (other
than capital leases and leases underlying sale and leaseback
transactions); (iv) Liens imposed by applicable Law;
(v) pledges or deposits to secure obligations under
workers compensation Laws or similar legislation or to
secure public or statutory obligations; (vi) pledges and
deposits to secure the performance of bids, trade contracts,
leases, surety and appeal bonds, performance bonds and other
obligations of a similar nature, in each case in the ordinary
course of business; (vii) easements, covenants and rights
of way (unrecorded and of record) and other similar restrictions
of record, and zoning, building and other similar restrictions,
in each case that do not adversely affect in any material
respect the current use of the applicable property owned,
leased, used or held for use by the Company or any of its
Subsidiaries; (viii) Liens the existence of which are
specifically disclosed in the notes to the consolidated
financial statements of the Company included in any Company SEC
Report filed prior to the date of this Agreement; and
(x) any other Liens that do not secure a liquidated amount,
that have been incurred or suffered in the ordinary course of
business and that would not, individually or in the aggregate,
have a material effect on the Company or the ability of Parent
to obtain the Debt Financing. |
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Person means any individual, corporation,
company, limited liability company, partnership, association,
trust, joint venture or any other entity or organization,
including any government or political subdivision or any agency
or instrumentality thereof. |
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Preferred Stock has the meaning set forth in
Section 4.5(a). |
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Proceeding has the meaning set forth in
Section 4.11. |
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Recommendation has the meaning set forth in
Section 7.1(a). |
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Recommendation Withdrawal has the meaning set
forth in Section 7.1(a). |
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Representatives has the meaning set forth in
Section 7.4(a). |
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Required Financial Information has the
meaning set forth in Section 7.10(a). |
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Requisite Stockholder Vote has the meaning
set forth in Section 4.2(a). |
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Restricted Share has the meaning set forth in
Section 3.3(b). |
|
|
RSU has the meaning set forth in
Section 3.3(c). |
|
|
Schedule 13E-3 has the meaning set forth
in Section 4.9. |
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|
SERP has the meaning set forth in
Section 7.9(c). |
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|
SEC means the United States Securities and
Exchange Commission. |
|
|
Securities Act means the Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder. |
|
|
Shares has the meaning set forth in
Section 3.1(a). |
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Short-Dated Notes has the meaning set forth
in Section 7.11. |
5
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Special Committee means a committee of the
Companys Board of Directors, the members of which are not
affiliated with Parent or Merger Sub and are not members of the
Companys management, formed for the purpose of, among
other things, evaluating, and making a recommendation to the
full Board of Directors of the Company with respect to, this
Agreement and the Merger. |
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Stock Purchase has the meaning set forth in
Section 3.3(d). |
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Subsidiary, with respect to any Person, means
any other Person of which the first Person owns, directly or
indirectly, securities or other ownership interests having
voting power to elect a majority of the board of directors or
other persons performing similar functions (or, if there are no
such voting interests, more than 50% of the equity interests of
the second Person). With respect to the Company, Subsidiary
shall not include any Company Joint Venture. |
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Superior Proposal has the meaning set forth
in Section 7.4(f)(iii). |
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|
Surviving Corporation has the meaning set
forth in Section 2.1. |
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|
Surviving Corporation Plan has the meaning
set forth in Section 7.9(b). |
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|
Takeover Statute has the meaning set forth in
Section 4.18. |
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Tax means (i) all federal, state, local,
foreign and other taxes (including withholding taxes), customs,
duties, imposts and other similar governmental charges of any
kind or nature whatsoever, together with any interest and any
penalties, additions or additional amounts with respect thereto,
(ii) any liability for payment of amounts described in
clause (i) whether as a result of transferee liability,
joint and several liability for being a member of an affiliated,
consolidated, combined, unitary or other group for any period,
or otherwise by operation of law, and (iii) any liability
for the payment of amounts described in clause (i) or
(ii) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement
to pay or indemnify any other Person. |
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Tax Return means any return, declaration,
report, statement, information statement or other document filed
or required to be filed with respect to Taxes, including any
claims for refunds of Taxes, any information returns and any
amendments or supplements of any of the foregoing. |
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Termination Fee means $500,000,000, except
(i) in the event that this Agreement is terminated by the
Company pursuant to Section 9.1(c)(ii) in order to enter
into a definitive agreement with respect to a Company
Acquisition Proposal with an Excluded Party, or (ii) in the
event that this Agreement is terminated by Parent or Merger Sub
pursuant to Section 9.1(d)(ii) in a circumstance in which
the event giving rise to the right of termination is based on
the submission to the Company of a Company Acquisition Proposal
by an Excluded Party, in which cases the Termination Fee shall
mean the Go Shop Termination Fee. |
Section 1.2. Terms
Generally. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
The words include, includes and
including shall be deemed to be followed by the
phrase without limitation, unless the context
expressly provides otherwise. All references herein to Sections,
paragraphs, subparagraphs, clauses, Exhibits or Schedules shall
be deemed references to Sections, paragraphs, subparagraphs or
clauses of, or Exhibits or Schedules to this Agreement, unless
the context requires otherwise. Unless otherwise expressly
defined, terms defined in this Agreement have the same meanings
when used in any Exhibit or Schedule hereto, including the
Company Disclosure Letter. Unless otherwise specified, the words
this Agreement, herein,
hereof, hereto and hereunder
and other words of similar import refer to this Agreement as a
whole (including the Schedules, Exhibits and the Company
Disclosure Letter) and not to any particular provision of this
Agreement. The term or is not exclusive. The word
extent in the phrase to the extent shall
mean the degree to which a subject or other thing extends, and
such phrase shall not mean simply if. Any Contract,
instrument or Law defined or referred to herein or in any
Contract or instrument that is referred to herein means such
Contract, instrument or Law as from time to time
6
amended, modified or supplemented, including (in the case of
Contracts or instruments) by waiver or consent and (in the case
of Laws) by succession of comparable successor Laws and
references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its
permitted successors and assigns.
ARTICLE II
THE MERGER
Section 2.1. The
Merger. On the terms and subject to the conditions set forth
in this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the
DGCL), at the Effective Time, Merger Sub will
merge with and into the Company (the Merger),
the separate corporate existence of Merger Sub will cease and
the Company will continue its corporate existence under Delaware
law as the surviving corporation in the Merger (the
Surviving Corporation).
Section 2.2. Closing.
Unless otherwise mutually agreed in writing by the Company and
Merger Sub, the closing of the Merger (the
Closing) will take place at the offices of
Simpson Thacher & Bartlett LLP, 425 Lexington Avenue,
New York, New York, at 10:00 a.m. on the third Business Day
after the satisfaction or waiver of the conditions set forth in
Article VIII (excluding conditions that, by their terms,
cannot be satisfied until the Closing but subject to the
satisfaction or waiver of such conditions at the Closing);
provided, however, that if the Marketing Period has not
ended at the time of the satisfaction or waiver of the
conditions set forth in Article VIII (excluding conditions
that, by their terms, cannot be satisfied until the Closing but
subject to the satisfaction or waiver of such conditions at the
Closing), the Closing shall occur on the date following the
satisfaction or waiver of such conditions that is the earliest
to occur of (a) a date during the Marketing Period to be
specified by Merger Sub on no less than three Business
Days notice to the Company, (b) the final day of the
Marketing Period, and (c) the End Date. The date on which
the Closing actually occurs is hereinafter referred to as the
Closing Date.
Section 2.3. Effective
Time. Subject to the provisions of this Agreement, at the
Closing, the Company will cause a certificate of merger (the
Certificate of Merger) to be executed,
acknowledged and filed with the Secretary of State of the State
of Delaware in accordance with Section 251 of the DGCL. The
Merger will become effective at such time as the Certificate of
Merger has been duly filed with the Secretary of State of the
State of Delaware or at such later date or time as may be agreed
by the Company and Merger Sub in writing and specified in the
Certificate of Merger in accordance with the DGCL (the effective
time of the Merger being hereinafter referred to as the
Effective Time).
Section 2.4. Effects
of the Merger. The Merger shall have the effects set forth
in this Agreement and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject
thereto, from and after the Effective Time, all property,
rights, privileges, immunities, powers, franchises, licenses and
authority of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities, obligations,
restrictions and duties of each of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions
and duties of the Surviving Corporation.
Section 2.5. Organizational
Documents. At the Effective Time, (a) the Certificate
of Incorporation of the Surviving Corporation shall be amended
to read in its entirety as the Certificate of Incorporation of
Merger Sub read immediately prior to the Effective Time, except
that the name of the Surviving Corporation shall be HCA Inc. and
the provision in the Certificate of Incorporation of Merger Sub
naming its incorporator shall be omitted and (b) the bylaws
of the Surviving Corporation shall be amended so as to read in
their entirety as the bylaws of Merger Sub as in effect
immediately prior to the Effective Time, until thereafter
amended in accordance with applicable law, except the references
to Merger Subs name shall be replaced by references to HCA
Inc.
Section 2.6. Directors
and Officers of Surviving Corporation. The directors of
Merger Sub and the officers of the Company (other than those who
Merger Sub determines shall not remain as officers of the
Surviving Corporation), in each case, as of the Effective Time
shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their
successors have
7
been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
certificate of incorporation or bylaws of the Surviving
Corporation.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
Section 3.1. Conversion
of Securities. At the Effective Time, pursuant to this
Agreement and by virtue of the Merger and without any action on
the part of the Company, Merger Sub or the holders of the Shares:
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(a) Each share of Common Stock, par value $.01 per
share, of the Company (the Common Stock) and
each share of Nonvoting Common Stock, par value $.01 per
share, of the Company (the Nonvoting Common Stock
and, together with the shares of Common Stock, the
Shares) held by the Company as treasury stock
or otherwise owned by Parent immediately prior to the Effective
Time (including any Shares acquired by Parent immediately prior
to the Effective Time pursuant to the Equity Rollover Commitment
or other agreements with holders of Shares (including Restricted
Shares)) shall be canceled and retired and shall cease to exist,
and no payment or distribution shall be made or delivered with
respect thereto. Each Share owned by any wholly-owned Subsidiary
of Parent or any wholly-owned Subsidiary of the Company shall
remain outstanding after the Effective Time. |
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(b) Each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one newly
issued, fully paid and non-assessable share of common stock of
the Surviving Corporation. |
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(c) Each Share (including any Restricted Shares) issued and
outstanding immediately prior to the Effective Time (other than
Shares to be canceled or to remain outstanding pursuant to
Section 3.1(a) and Dissenting Shares), automatically shall
be canceled and converted into the right to receive $51.00 in
cash, without interest (the Merger
Consideration), payable to the holder thereof upon
surrender of the stock certificate formerly representing such
Share (a Certificate) in the manner provided
in Section 3.2. Such Shares, other than those canceled or
that remain outstanding pursuant to Section 3.1(a) and
Dissenting Shares, sometimes are referred to herein as the
Merger Shares. |
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(d) Notwithstanding any provision of this Agreement to the
contrary, if required by the DGCL (but only to the extent
required thereby), Shares that are issued and outstanding
immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 3.1(a)) and that are held by
holders of such Shares who have not voted in favor of the
adoption of this Agreement or consented thereto in writing and
who have properly exercised appraisal rights with respect
thereto in accordance with, and who have complied with,
Section 262 of the DGCL (the Dissenting
Shares) will not be convertible into the right to
receive the Merger Consideration, and holders of such Dissenting
Shares will be entitled to receive payment of the fair value of
such Dissenting Shares in accordance with the provisions of such
Section 262 unless and until any such holder fails to
perfect or effectively withdraws or loses its rights to
appraisal and payment under the DGCL. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws
or loses such right, such Dissenting Shares will thereupon be
treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive
the Merger Consideration, without any interest thereon, and the
Surviving Corporation shall remain liable for payment of the
Merger Consideration for such Shares. At the Effective Time, any
holder of Dissenting Shares shall cease to have any rights with
respect thereto, except the rights provided in Section 262
of the DGCL and as provided in the previous sentence. The
Company will give Parent (i) notice of any demands received
by the Company for appraisals of Shares and (ii) the
opportunity to participate in and direct all negotiations and
proceedings with respect to such notices and demands. The
Company shall not, except with the |
8
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prior written consent of Parent, make any payment with respect
to any demands for appraisal or settle any such demands. |
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(e) If between the date of this Agreement and the Effective
Time the number of outstanding Shares is changed into a
different number of shares or a different class (other than the
conversion of any shares of Nonvoting Common Stock to shares of
Common Stock), by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination,
exchange of shares or the like, other than pursuant to the
Merger, the amount of Merger Consideration payable per Share
shall be correspondingly adjusted. |
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(f) For the avoidance of doubt, the parties acknowledge and
agree that the contribution of Shares (including Restricted
Shares) to Parent pursuant to the Equity Rollover Commitment or
other agreements with holders of Shares (including Restricted
Shares) shall be deemed to occur immediately prior to the
Effective Time and prior to any other above-described event. |
Section 3.2. Payment
of Cash for Merger Shares. (a) Prior to the Closing
Date, the Company shall (i) designate a bank or trust
company that is reasonably satisfactory to Parent (the
Paying Agent) and (ii) enter into a paying
agent agreement, in form and substance reasonably satisfactory
to Parent, with such Paying Agent, to serve as the Paying Agent
for the Merger Consideration and payments in respect of the
Company Options and RSUs, unless another agent is designated as
provided in Section 3.3(a). Immediately following the
Effective Time, the Surviving Corporation will deposit, or
Parent shall cause the Surviving Corporation to deposit, with
the Paying Agent cash in the aggregate amount sufficient to pay
the Merger Consideration in respect of all Merger Shares
outstanding immediately prior to the Effective Time plus any
cash necessary to pay for Company Options and RSUs outstanding
immediately prior to the Effective Time pursuant to
Section 3.3(a). Pending distribution of the cash deposited
with the Paying Agent, such cash shall be held in trust for the
benefit of the holders of Merger Shares, RSUs and Company
Options outstanding immediately prior to the Effective Time and
shall not be used for any other purposes; provided, however,
that the Surviving Corporation may direct the Paying Agent
to invest such cash in (i) obligations of or guaranteed by
the United States of America or any agency or instrumentality
thereof, (ii) money market accounts, certificates of
deposit, bank repurchase agreement or bankers acceptances
of, or demand deposits with, commercial banks having a combined
capital and surplus of at least $1,000,000,000 (based on the
most recent financial statements of such bank which are publicly
available), or (iii) commercial paper obligations rated P-1
or A-1 or better by Standard & Poors Corporation
or Moodys Investor Services, Inc. Any profit or loss
resulting from, or interest and other income produced by, such
investments shall be for the account of the Surviving
Corporation.
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(b) As promptly as practicable after the Effective Time,
the Surviving Corporation shall send, or cause the Paying Agent
to send, to each record holder of Merger Shares entitled to
receive the Merger Consideration a letter of transmittal and
instructions for exchanging their Merger Shares for the Merger
Consideration payable therefor. The letter of transmittal will
be in customary form and will specify that delivery of
Certificates (or effective affidavits of loss in lieu thereof)
will be effected, and risk of loss and title will pass, only
upon delivery of the Certificates (or effective affidavits of
loss in lieu thereof) to the Paying Agent. Upon surrender of
Certificate or Certificates (or effective affidavits of loss in
lieu thereof) to the Paying Agent together with a properly
completed and duly executed letter of transmittal and any other
documentation that the Paying Agent may reasonably require, the
record holder thereof shall be entitled to receive the Merger
Consideration payable in exchange therefor, less any amounts
required to be withheld for Tax. Until so surrendered and
exchanged, each such Certificate shall, after the Effective
Time, be deemed to represent only the right to receive the
Merger Consideration, and until such surrender and exchange, no
cash shall be paid to the holder of such outstanding Certificate
in respect thereof. |
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(c) If payment is to be made to a Person other than the
registered holder of the Merger Shares formerly represented by
the Certificate or Certificates surrendered in exchange
therefor, it shall be a condition to such payment that the
Certificate or Certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment |
9
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shall pay to the Paying Agent any applicable stock transfer
taxes required as a result of such payment to a Person other
than the registered holder of such Merger Shares or establish to
the reasonable satisfaction of the Paying Agent that such stock
transfer taxes have been paid or are not payable. |
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(d) After the Effective Time, there shall be no further
transfers on the stock transfer books of the Company of the
Shares that were outstanding immediately prior to the Effective
Time other than to settle transfers of Shares that occurred
prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the
Paying Agent, such shares shall be canceled and exchanged for
the consideration provided for, and in accordance with the
procedures set forth, in this Article III. |
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(d) If any cash deposited with the Paying Agent remains
unclaimed twelve months after the Effective Time, such cash
shall be returned to the Surviving Corporation upon demand, and
any holder who has not surrendered such holders
Certificates for the Merger Consideration prior to that time
shall thereafter look only to the Surviving Corporation for
payment of the Merger Consideration. Notwithstanding the
foregoing, none of Merger Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any holder of
Certificates for any amount paid to a public official pursuant
to any applicable unclaimed property laws. Any amounts remaining
unclaimed by holders of Certificates as of a date immediately
prior to such time that such amounts would otherwise escheat to
or become property of any Governmental Authority shall, to the
extent permitted by applicable Law, become the property of the
Surviving Corporation on such date, free and clear of any claims
or interest of any Person previously entitled thereto. |
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(f) No dividends or other distributions with respect to
capital stock of the Surviving Corporation with a record date
after the Effective Time shall be paid to the holder of any
unsurrendered Certificate, including Dissenting Shares. |
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(g) From and after the Effective Time, the holders of
Shares (other than Dissenting Shares) outstanding immediately
prior to the Effective Time shall cease to have any rights with
respect to such Shares, other than the right to receive the
Merger Consideration as provided in this Agreement. |
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(h) In the event that any Certificate has been lost, stolen
or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or
destroyed, in addition to the posting by such holder of any bond
in such reasonable amount as the Surviving Corporation or the
Paying Agent may direct as indemnity against any claim that may
be made against the Surviving Corporation with respect to such
Certificate, the Paying Agent will issue in exchange for such
lost, stolen or destroyed Certificate the proper amount of the
Merger Consideration in respect thereof entitled to be received
pursuant to this Agreement. |
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(i) Parent, the Surviving Corporation and the Paying Agent
shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable hereunder and any amounts to be
paid hereunder in respect of Company Options or RSUs any amounts
required to be deducted and withheld under any applicable Tax
Law. To the extent any amounts are so withheld, such withheld
amounts shall be timely paid to the applicable Tax authority and
shall be treated for all purposes as having been paid to the
holder from whose Merger Consideration (or amounts payable
hereunder with respect to Company Options or RSUs) the amounts
were so deducted and withheld. |
Section 3.3. Treatment
of Options and Other Awards. (a) As of the Effective
Time, except as otherwise agreed by Parent and a holder of
Company Options with respect to such holders Company
Options, each Company Option will be cancelled and extinguished,
and the holder thereof will be entitled to receive an amount in
cash equal to the excess (if any) of (A) the product of
(i) the number of Shares subject to such Company Option and
(ii) the Merger Consideration over (B) the aggregate
exercise price of such Company Option, without interest and less
any amounts required to be deducted and withheld under any
applicable Law. All payments with respect to canceled Company
Options shall be made by the Paying Agent (or such other agent
reasonably acceptable to Parent as the Company shall designate
prior to the Effective Time) as promptly as reasonably
practicable after the Effective Time from funds
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deposited by or at the direction of the Surviving Corporation to
pay such amounts in accordance with Section 3.2(a).
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(b) As of the Effective Time, except as otherwise agreed by
Parent and a holder of Restricted Shares with respect to such
holders Restricted Shares, each Share outstanding
immediately prior to the Effective Time subject to vesting or
other lapse restrictions pursuant to any Company Stock Plan or
any applicable restricted stock award agreement (each a
Restricted Share) which is outstanding
immediately prior to the Effective Time shall vest and become
free of such restrictions as of the Effective Time and shall, as
of the Effective Time, be canceled and converted into the right
to receive the Merger Consideration in accordance with
Section 3.1(c). |
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(c) The Company shall use reasonable best efforts to ensure
that except as otherwise agreed by Parent and a holder of RSUs
with respect to such holders RSUs, (i) immediately
prior to the Effective Time, each award of a right under any
Company Stock Plan entitling the holder thereof to Restricted
Shares, shares of Common Stock or cash equal to or based on the
value of Common Stock (collectively, RSUs)
which, in each case, is outstanding as of the Effective Time,
shall vest and become free of any lapse restriction (without
regard to whether the RSUs are then vested or the applicable
restrictions have lapsed) and, as of the Effective Time be
canceled, and (ii) at the Effective Time, the holder
thereof shall be entitled to receive an amount in cash equal to
the (1) product of (A) the number of shares previously
subject to such RSU and (B) the Merger Consideration, and
the (2) the value of any deemed dividend equivalents
accrued but unpaid with respect to such RSUs, less any amounts
required to be withheld under any applicable Law. All payments
with respect to canceled RSUs shall be made by the Paying Agent
(or such other agent reasonably acceptable to Parent as the
Company shall designate prior to the Effective Time) as promptly
as reasonably practicable after the Effective Time from funds
deposited by or at the direction of the Surviving Corporation to
pay such amounts in accordance with Section 3.2(a). |
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(d) At the Effective Time, except as otherwise agreed by
Parent and a participant, all amounts withheld by the Company on
behalf of the participants in the HCA Employee Stock Purchase
Plan and the HCA Inc. Amended and Restated Management Stock
Purchase Plan (the Stock Purchase Plans, and
such participants, the Participants)) from
the beginning of the applicable existing salary deferral periods
through the Effective Time will be deemed to have been used to
purchase Common Stock pursuant to the terms of the Stock
Purchase Plans, using the Effective Time as the last date of the
applicable offering period under the Stock Purchase Plans (the
Deemed Purchase) and each such share of
Common Stock will be deemed to have been cancelled and converted
into the right to receive the Merger Consideration, such that,
as of the Effective Time, on a net basis, each Participant shall
be entitled to receive, without interest and less any amounts
required to be deducted and withheld under any applicable Law,
(i) refund by the Company of all deferrals made to the
Stock Purchase Plans by the Participant during the applicable
existing salary deferral periods and (ii) an amount in cash
equal to the excess (if any) of (A) the product of
(1) the number of Shares that the Participant is deemed to
have acquired pursuant to the terms of the applicable Stock
Purchase Plan pursuant to the applicable Deemed Purchase and
(2) the Merger Consideration, over (B) the aggregate
amount of the Participants purchase price deemed to have
been paid in the Deemed Purchase (such cash amount described in
(ii) being the Net SPP Payment). All Net
SPP Payments shall be paid by the Paying Agent (or such other
agent reasonably acceptable to Parent as the Company shall
designate prior to the Effective Time) as promptly as reasonably
practicable after the Effective Time from funds deposited by or
at the direction of the Surviving Corporation to pay such
amounts in accordance with Section 3.2(a). However, in
connection with the foregoing, if and to the extent permitted by
the applicable Stock Purchase Plan, on or after the date of this
Agreement, in no event (i) shall any person who is not
currently participating in any Stock Purchase Plan be permitted
to begin participating in any Stock Purchase Plan, and
(ii) shall any person who is currently participating in any
Stock Purchase Plan be permitted to increase the amount of
salary that may otherwise be deferred and deemed used to
purchase shares of Common Stock under any Stock Purchase Plan
from that level of salary deferral amount in effect as of the
date of this Agreement; |
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and provided, further, that in no event may any new salary
deferral period commence after the date hereof and prior to the
Effective Time. |
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(e) Prior to the Effective Time, the Company will adopt
such resolutions and will take such other actions as may be
reasonably required to effectuate the actions contemplated by
this Section 3.3, without paying any consideration or
incurring any debts or obligations on behalf of the Company or
the Surviving Corporation. |
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections
of the disclosure letter delivered to Parent and Merger Sub by
the Company concurrently with entering into this Agreement (the
Company Disclosure Letter) or as may be
disclosed in reasonable detail in the Company SEC Reports filed
prior to the date of this Agreement, the Company hereby
represents and warrants to Merger Sub that:
Section 4.1. Corporate
Existence and Power. Each of the Company and each Material
Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction (with respect to
jurisdictions that recognize the concept of good standing),
except in the case of the Material Subsidiaries, where the
failure to be so organized, existing and in good standing has
not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company. Each of the Company, each Material Subsidiary and,
to the Knowledge of the Company, each Company Joint Venture has
all corporate or similar powers and authority required to own,
lease and operate its respective properties and to carry on its
business as now conducted, except in the case of the Material
Subsidiaries and the Company Joint Ventures, where the failure
to have such power and authority has not had, and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Each of the
Company and each Material Subsidiary is duly licensed or
qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such qualification necessary, except where the failure to
be so licensed or qualified has not had, and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Neither the
Company nor any Material Subsidiary nor, to the Companys
knowledge, any Company Joint Venture, is in violation of its
organizational or governing documents in any material respect.
Section 4.2. Corporate
Authorization. (a) The Company has the corporate power
and authority to execute and deliver this Agreement and, subject
to the adoption of this Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock
(the Requisite Stockholder Vote), to
consummate the Merger and the other transactions contemplated
hereby and to perform each of its obligations hereunder. The
execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the Merger and
the other transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company.
Except for the adoption of this Agreement by the Requisite
Stockholder Vote, no other corporate proceedings on the part of
the Company are necessary to approve this Agreement or to
consummate the Merger or the other transactions contemplated
hereby. The Board of Directors of the Company has taken all
actions necessary to ensure that the supermajority voting
provisions of Article Fourteenth of the Companys
Restated Certificate of Incorporation are not applicable to the
Merger or the adoption of the Merger Agreement by the
stockholders of the Company. The Board of Directors of the
Company, acting upon the unanimous recommendation of the Special
Committee, at a duly held meeting has (i) determined that
it is in the best interests of the Company and its stockholders
(other than holders of Shares that are Affiliates of Parent or
holders of Shares being contributed to Parent in connection with
the Merger), and declared it advisable, to enter into this
Agreement, (ii) approved the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby, including the Merger, and
(iii) resolved to recommend that the stockholders of the
Company approve the adoption of this Agreement
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and directed that such matter be submitted for consideration of
the stockholders of the Company at the Company Stockholder
Meeting.
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(b) This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due and valid
execution and delivery of this Agreement by Parent and Merger
Sub, constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
Laws affecting the enforcement of creditors rights
generally and general equitable principles. |
Section 4.3. Governmental
Authorization. The execution, delivery and performance by
the Company of this Agreement and the consummation of the Merger
by the Company do not and will not require any consent,
approval, authorization or permit of, action by, filing with or
notification to any Governmental Authority, other than
(i) the filing of the Certificate of Merger;
(ii) compliance with the applicable requirements of the HSR
Act; (iii) the applicable requirements of the Exchange Act
including the filing of the Company Proxy Statement and the
Schedule 13E-3; (iv) compliance with the rules and
regulations of the New York Stock Exchange; (v) compliance
with any applicable foreign or state securities or blue sky
laws; (vi) the consents and/or notices listed in
Section 4.3 of the Company Disclosure Letter; and
(vii) any such consent, approval, authorization, permit,
action, filing or notification the failure of which to make or
obtain would not (A) individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company or (B) reasonably be expected to prevent or
materially delay the consummation of the Merger.
Section 4.4. Non-Contravention.
The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the Merger and
the other transactions contemplated hereby do not and will not
(i) contravene or conflict with the organizational or
governing documents of (A) the Company or (B) any of
its Subsidiaries or, to the Companys Knowledge, Company
Joint Ventures; (ii) assuming compliance with the matters
referenced in Section 4.3 and the receipt of the Requisite
Stockholder Vote, contravene or conflict with or constitute a
violation of any provision of any Law binding upon or applicable
to the Company or any of its Subsidiaries or Company Joint
Ventures or any of their respective properties or assets;
(iii) require the consent, approval or authorization of, or
notice to or filing with any third party with respect to, result
in any breach or violation of or constitute a default (or an
event which with notice or lapse of time or both would become a
default) or result in the loss of benefit under, or give rise to
any right of termination, cancellation, amendment or
acceleration of any right or obligation of the Company or any of
its Subsidiaries, or result in the creation of any Lien on any
of the properties or assets of the Company or its Subsidiaries
under any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, permit or other
instrument or obligation (each, a Contract)
to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or its or any of
their respective properties or assets are bound, except in the
case of clauses (i)(B), (ii) and (iii) above,
which would not (A) individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company or (B) reasonably be expected to prevent or
materially delay the consummation of the Merger.
Section 4.5. Capitalization.
(a) The authorized share capital of the Company consists of
1,600,000,000 shares of Common Stock,
50,000,000 shares of Nonvoting Common Stock and
25,000,000 shares of Preferred Stock (the
Preferred Stock). As of June 30, 2006,
there were (i) (A) 388,237,497 shares of Common
Stock issued and outstanding (including 6,158,958 Restricted
Shares), (B) 21,000,000 shares of Nonvoting Common
Stock issued and outstanding and (C) no shares of Preferred
Stock issued and outstanding, (ii) Company Options to
purchase an aggregate of 24,764,222 shares of Common Stock,
with a weighted average exercise price of $39.08 per share,
issued and outstanding, (iii) Foundation Options to
purchase an aggregate of 3,104,006 shares of Common Stock,
with a weighted average exercise price of $20.34 per share,
issued and outstanding and (iv) 5,685,444 shares of
Common Stock available for issuance under the Stock Purchase
Plans. All outstanding Shares are duly authorized, validly
issued, fully paid and non-assessable, and are not subject to
and were not issued in violation of any preemptive or similar
right, purchase option, call or right of first
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refusal or similar right. No Subsidiaries of the Company own any
Shares or any other equity securities of the Company.
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(b) Except as set forth in this Section 4.5, except
with respect to the Stock Purchase Plans and except for the
21,000,000 shares of Common Stock which have been reserved
for issuance upon the conversion of the shares of Nonvoting
Common Stock, there have not been reserved for issuance, and
there are no outstanding (i) shares of capital stock or
other voting securities of the Company; (ii) securities of
the Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of
the Company or its Subsidiaries, other than Company Options,
Foundation Options and HTI Warrants; (iii) Company Options
or other rights or options to acquire from the Company or its
Subsidiaries, or obligations of the Company or its Subsidiaries
to issue, any shares of capital stock, voting securities or
securities convertible into or exchangeable for shares of
capital stock or voting securities of the Company or such
Subsidiary, as the case may be; or (iv) equity equivalent
interests in the ownership or earnings of the Company or its
Subsidiaries or other similar rights (the items in
clauses (i) through (iv) collectively,
Company Securities). There are no outstanding
obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any Company Securities. There are no
preemptive rights of any kind which obligate the Company or any
of its Subsidiaries to issue or deliver any Company Securities.
There are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company or any of its
Subsidiaries is a party or by which it is bound relating to the
voting or registration of any shares of capital stock of the
Company or any of its Subsidiaries or preemptive rights with
respect thereto. |
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(c) Other than the issuance of Shares upon exercise of
Company Options, since June 30, 2006 to the date of this
Agreement, the Company has not declared or paid any dividend or
distribution in respect of any Company Securities, and neither
the Company nor any of its Subsidiaries has issued, sold,
repurchased, redeemed or otherwise acquired any Company
Securities, and their respective Boards of Directors have not
authorized any of the foregoing. |
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(d) Neither the Company nor any of its Subsidiaries has
entered into any commitment, arrangement or agreement, or are
otherwise obligated, to contribute capital, loan money or
otherwise provide funds or make additional investments in any
Company Joint Venture or any other Person, other than
Intercompany Debt and any such commitment, arrangement or
agreement in the ordinary course of business consistent with
past practice. |
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(e) No bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which stockholders of
the Company may vote are outstanding. |
Section 4.6. Company
Subsidiaries and Joint Ventures.
(a) Section 4.6(a) of the Company Disclosure Letter
sets forth a list of all Unrestricted Subsidiaries (as such term
is defined in the Indenture).
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(b) Section 4.6(b) of the Company Disclosure Letter
sets forth a list of all Company Joint Ventures. All equity
interests of any Subsidiary of the Company and the Company Joint
Ventures held by the Company or any other Subsidiary of the
Company are validly issued, fully paid and non-assessable and
were not issued in violation of any preemptive or similar
rights, purchase option, call, or right of first refusal or
similar rights. All such equity interests are free and clear of
any Liens or any other limitations or restrictions on such
equity interests (including any limitation or restriction on the
right to vote, pledge or sell or otherwise dispose of such
equity interests) other than Permitted Liens. |
Section 4.7. Reports
and Financial Statements. (a) The Company has filed all
forms, reports, statements, certifications and other documents
(including all exhibits, amendments and supplements thereto)
required to be filed by it with the SEC pursuant to the Exchange
Act or other applicable United States federal securities Laws
since January 1, 2003 (all such forms, reports, statements,
certificates and other documents filed since January 1,
2003, with any amendments thereto, collectively, the
Company
14
SEC Reports), each of which, including any
financial statements or schedules included therein, as finally
amended prior to the date of this Agreement, has complied as to
form in all material respects with the applicable requirements
of the Securities Act and Exchange Act as of the date filed with
the SEC. None of the Companys Subsidiaries is required to
file periodic reports with the SEC. None of the Company SEC
Reports contained, when filed with the SEC and, if amended, as
of the date of such amendment, any untrue statement of a
material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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(b) Each of the consolidated financial statements of the
Company and its Subsidiaries included (or incorporated by
reference) in the Company SEC Reports (including the related
notes and schedules, where applicable) fairly presents (subject,
in the case of the unaudited statements, to the absence of notes
and normal year-end audit adjustments as permitted by the rules
related to Quarterly Reports on
Form 10-Q
promulgated under the Exchange Act), in all material respects,
the results of the consolidated operations and changes in
stockholders equity and cash flows and consolidated
financial position of the Company and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein
set forth. Each of such consolidated financial statements
(including the related notes and schedules, where applicable)
complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the
SEC with respect thereto and each of such financial statements
(including the related notes and schedules, where applicable)
were prepared in accordance with GAAP consistently applied
during the periods involved, except in each case as indicated in
such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by the rules related to
Quarterly Reports on
Form 10-Q
promulgated under the Exchange Act. |
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(c) Except as has not had, and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, the management of the Company
(i) has implemented and maintains disclosure controls and
procedures (as defined in
Rule 13a-15(e) of
the Exchange Act) to ensure that material information relating
to the Company, including its consolidated Subsidiaries, is made
known to the chief executive officer and the chief financial
officer of the Company by others within those entities and
(ii) has disclosed, based on its most recent evaluation
prior to the date of this Agreement, to the Companys
outside auditors and the audit committee of the Board of
Directors of the Company (x) any significant deficiencies
and material weaknesses in the design or operation of internal
controls over financial reporting (as defined in
Rule 13a-15(f) of
the Exchange Act) which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information and (y) any fraud, known
to the Company, whether or not material, that involves
management or other employees who have a significant role in the
Companys internal controls over financial reporting. |
Section 4.8. Undisclosed
Liabilities. Except (i) for those liabilities that are
reflected or reserved against on the consolidated balance sheet
of the Company (including the notes thereto) included in the
Companys Annual Report on
Form 10-K for the
year ended December 31, 2005, (ii) for liabilities
incurred in the ordinary course of business consistent with past
practice since December 31, 2005, (iii) for
liabilities that have been discharged or paid in full prior to
the date of this Agreement in the ordinary course of business
consistent with past practice, (iv) for liabilities
incurred in connection with the transactions contemplated
hereby, or (v) for liabilities that would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, neither the Company nor any of
its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued or contingent or otherwise
and whether due or to become due).
Section 4.9. Disclosure
Documents. The proxy statement (the Company Proxy
Statement) and the
Rule 13e-3
Transaction Statement on Schedule 13E-3 (the
Schedule 13E-3) relating to the Merger
and the other transactions contemplated hereby, to be filed by
the Company with the SEC in connection with seeking the adoption
of this Agreement by the stockholders of the Company will not,
at the time it is filed with the SEC, or, in the case of the
Company Proxy Statement, at the time it is first mailed to the
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stockholders of the Company or at the time of the Company
Stockholder Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading. The Company will cause the Company Proxy Statement,
the Schedule 13E-3 and all related SEC filings to comply as
to form in all material respects with the requirements of the
Exchange Act applicable thereto as of the date of such filing.
No representation is made by the Company with respect to
statements made in the Company Proxy Statement or the
Schedule 13E-3 based on information supplied, or required
to be supplied, by Parent, Merger Sub or any of their Affiliates
specifically for inclusion or incorporation by reference therein.
Section 4.10. Absence
of Certain Changes or Events. Since December 31, 2005,
(i) no Effect has occurred which has had or would
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company and
(ii) to the date of this Agreement, the Company and its
Subsidiaries, and, to the Companys Knowledge, the Company
Joint Ventures, have carried on their respective businesses in
all material respects in the ordinary course of business.
Section 4.11. Litigation.
Neither the Company, any of its Subsidiaries nor, to the
Companys Knowledge, any Company Joint Venture is a party
to any, and there are no pending or, to the Companys
Knowledge, threatened, legal, administrative, arbitral or other
material proceedings, claims, actions or governmental or
regulatory investigations (a Proceeding) of any
nature against the Company or any of its Subsidiaries or any
Company Joint Ventures, except for any Proceeding which has not
had, or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
Neither the Company, any of its Subsidiaries, to the Knowledge
of the Company, any Company Joint Venture nor any of their
businesses or properties are subject to or bound by any
injunction, order, judgment, decree or regulatory restriction of
any Governmental Authority specifically imposed upon the
Company, any of its Subsidiaries, any Company Joint Venture or
their respective properties or assets, except for any
injunction, order, judgment, decree or regulatory restriction
which has not had, or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company.
Section 4.12. Taxes.
The representations and warranties contained in
Section 4.7(b), Section 4.12 and Section 4.13 are
(i) the only representations and warranties being made by
the Company with respect to Taxes related to the Company, any of
its Subsidiaries, or any Company Joint Venture or this Agreement
or its subject matter, and no other representation and warranty
contained in any other section of this Agreement shall apply to
any such Tax matters and no other representation or warranty,
express or implied, is being made with respect thereto, and
(ii) limited to the Companys Knowledge to the extent
such representations and warranties relate to any Company Joint
Venture:
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(a) All Tax Returns required to be filed by or with respect
to the Company, any of its Subsidiaries, or any Company Joint
Venture have been properly prepared and timely filed, and all
such Tax Returns (including information provided therewith or
with respect thereto) are true, correct and complete, except for
Tax Returns as to which the failure to so file or be true,
complete and correct would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect on the Company. |
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(b) The Company, its Subsidiaries and the Company Joint
Ventures have fully and timely paid all Taxes (whether or not
shown to be due on the Tax Returns referred to in
Section 4.12(a)), except for Taxes being contested in good
faith and for which adequate reserves have been established in
accordance with GAAP and for Taxes as to which the failure to
pay would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, and
have made adequate provision in the applicable financial
statements in accordance with GAAP for any material Tax that is
not yet due and payable for all taxable periods, or portions
thereof, ending on or before the date of this Agreement. |
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(c) No audit or other proceeding by any Governmental
Authority is pending or threatened in writing with respect to
any Taxes due from or with respect to the Company or any of its
Subsidiaries |
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or any Company Joint Venture, except for such audits and
proceedings that would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect
on the Company. |
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(d) There are no Tax sharing agreements (or similar
agreements) under which the Company, any of its Subsidiaries or,
to the Companys Knowledge, any Company Joint Venture could
be liable for the Tax liability of an entity that is neither the
Company nor any or its Subsidiaries, nor, to the Companys
Knowledge, any Company Joint Venture, except for such agreements
that would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the Company. |
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(e) Neither the Company nor any of its Subsidiaries has
constituted either a distributing corporation or a
controlled corporation in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code in the two years prior to the date of this Agreement. |
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(f) None of the Company or any of its Subsidiaries has
entered into a listed transaction that has given
rise to a disclosure obligation under Section 6011 of the
Code and the Treasury Regulations promulgated thereunder and
that has not been disclosed in the relevant Tax Return of the
Company or relevant Subsidiary. |
Section 4.13. ERISA.
(a) With respect to each Employee Benefit Plan, including
multiemployer plans within the meaning of ERISA
Section 3(37) and all stock purchase, stock option,
severance, employment,
change-in-control,
fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and other material employee benefit plans,
agreements, programs, policies or other arrangements, whether or
not subject to ERISA, whether formal or informal, under which
any Company Employee has any present or future right to
benefits, maintained or contributed to by the Company or any of
its Subsidiaries or under which the Company or any of its
Subsidiaries has any present or future liability (the
Company Benefit Plans), individually and in
the aggregate, no event has occurred and, to the Knowledge of
the Company, there exists no condition or set of circumstances,
in connection with which the Company or any of its Subsidiaries
could be subject to any liability that would reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company under ERISA, the Code or any other
applicable Law and no nonexempt prohibited
transaction (as such term is defined in Section 406
of ERISA and Section 4975 of the Code) or accumulated
funding deficiency (as such term is defined in
Section 302 of ERISA and Section 412 of the Code
(whether or not waived)) has occurred with respect to any
Company Benefit Plan which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company.
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(b) There has been no amendment to, announcement by the
Company or any of its Subsidiaries relating to, or change in
employee participation or coverage under, any Company Benefit
Plan that would increase materially the annual expense of
maintaining such plan above the level of the expense incurred
therefor for the most recent fiscal year. No Company Benefit
Plan or Company Stock Plan exists that could (i) result in
the payment to any Company Employee of any money or other
property, (ii) accelerate or provide any other rights or
benefits (including funding of compensation or benefits through
a trust or otherwise) to any Company Employee, or
(iii) limit or restrict the ability of the Company or its
Subsidiaries to merge, amend or terminate any Company Benefit
Plan, in each case, as a result of the execution of this
Agreement or otherwise related in any way to the transactions
contemplated by this Agreement; and no such payment would
reasonably be expected to constitute a material parachute
payment within the meaning of Code Section 280G. |
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(c) Schedule 4.13(c) of the Company Disclosure Letter
sets forth a list of all material Company Benefit Plans. The
Company has made available to Parent true and complete copies of
all material Company Benefit Plans. |
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(d) All Company Options have been granted in accordance
with the terms of the applicable Company Stock Plan and
applicable Law (including, without limitation, Section 409A
of the Code), with an exercise price at least equal to the fair
market value of the underlying Common Stock on the |
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date of any such grant, except for such failures, if any, to be
so granted which would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect
on the Company. |
Section 4.14. Compliance
With Laws. (a) The Company, each of its Subsidiaries
and, to the Knowledge of the Company, each of the Company Joint
Ventures is, and at all times since December 31, 2003 has
been, in compliance with all Laws applicable to the Company, its
Subsidiaries, the Company Joint Ventures and their respective
businesses and activities, except for such noncompliance that
has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company.
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(b) The Company is, and at all times since
December 14, 2000 has been, in compliance in all material
respects with the requirements of the Corporate Integrity
Agreement (the CIA), dated as of
December 14, 2000, between the Company and the Office of
Inspector General of the United States Department of Health and
Human Services (the OIG). |
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(c) The Company has not received any written, or to the
Companys Knowledge, oral notice from the OIG that the
Company is not in compliance in all material respects with the
terms of the CIA. |
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(d) The Company and each Subsidiary of the Company has and
maintains in full force and effect, and is in compliance with,
all Permits and all orders from Governmental Authorities
necessary for the Company and each Subsidiary to carry on their
respective businesses as currently conducted, except as has not
had, and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company. |
Section 4.15. Finders
Fees. No agent, broker, investment banker, financial advisor
or other firm or person except Credit Suisse Securities
(USA) LLC and Morgan Stanley & Co, Incorporated is
or will be entitled to any brokers or finders fee or
any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement. The Company has
disclosed to Parent all material terms of the engagement of
Credit Suisse Securities (USA) LLC and Morgan
Stanley & Co., Incorporated, including the amount of
such fees and any right of first offer or other tail
provisions.
Section 4.16. Opinion
of Financial Advisors. Credit Suisse Securities
(USA) LLC and Morgan Stanley & Co, Incorporated
have each delivered to the Special Committee, an opinion to the
effect that, as of the date of this Agreement, the consideration
to be received by holders of Shares (other than holders of
Shares that are Affiliates of Parent or holders of Shares being
contributed to Parent in connection with the Merger) in the
Merger is fair, from a financial point of view, to such holders.
Section 4.17. Affiliate
Transactions. Except for this Agreement and the Merger,
there are no transactions, or series of related transactions,
agreements, arrangements or understandings, nor are there any
currently proposed transactions, or series of related
transactions, between the Company or any of its Subsidiaries, on
the one hand, and the Companys Affiliates (other than
Company Subsidiaries or the Company Joint Ventures), on the
other hand, that would be required to be disclosed under
Item 404 of
Regulation S-K
promulgated under the Securities Act.
Section 4.18. Rights
Agreement; Anti-Takeover Provisions. The Company does not
have any stockholder rights plans in effect. The Board of
Directors of the Company has taken all necessary action so that
the provisions of Section 203 of the DGCL and any takeover,
anti-takeover, moratorium, fair price, control
share or other similar Law enacted under any Law
applicable to the Company (each, a Takeover
Statute) do not, and will not, apply to this
Agreement, the Merger or the other transactions contemplated
hereby.
18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the
Company that:
Section 5.1. Corporate
Existence and Power. Each of Parent and Merger Sub is duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has all corporate or limited
liability company, as applicable, power and authority required
to execute and deliver this Agreement and to consummate the
Merger and the other transactions contemplated hereby and to
perform each of its obligations hereunder.
Section 5.2. Corporate
Authorization. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Parent and Merger Sub. Except for the
adoption of this Agreement by Parent as the sole stockholder of
Merger Sub (which shall have occurred prior to the Effective
Time), no other corporate proceedings other than those
previously taken or conducted on the part of Parent and Merger
Sub are necessary to approve this Agreement or to consummate the
Merger or the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming the due and valid execution
and delivery of the Agreement by the Company, constitutes a
legal, valid and binding agreement of Parent and Merger Sub,
respectively, enforceable against Parent and Merger Sub in
accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or
similar Laws affecting the enforcement of creditors rights
generally and general equitable principles.
Section 5.3. Governmental
Authorization. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the Merger and the other transactions
contemplated by this Agreement do not and will not require any
consent, approval, authorization or permit of, action by, filing
with or notification to any Governmental Authority, other than
(i) the filing of the Certificate of Merger;
(ii) compliance with the applicable requirements of the HSR
Act; (iii) compliance with the applicable requirements of
the Exchange Act including the filing of the
Schedule 13E-3; (iv) compliance with any applicable
foreign or state securities or blue sky laws; (v) the
consents and/or notices listed in Section 4.3 of the
Company Disclosure Letter; and (vi) any such consent,
approval, authorization, permit, action, filing or notification
the failure of which to make or obtain would not reasonably be
expected to adversely affect in any material respect, or prevent
or materially delay the consummation of the Merger or
Parents or Merger Subs ability to observe and
perform its obligations hereunder.
Section 5.4. Non-Contravention.
The execution, delivery and performance by Parent and Merger Sub
of this Agreement and the consummation by Parent and Merger Sub
of the Merger and the transactions contemplated hereby do not
and will not (i) contravene or conflict with the
organizational or governing documents of Parent or Merger Sub,
(ii) assuming compliance with the items specified in
Section 5.3, contravene, conflict with or constitute a
violation of any provision of any Law binding upon or applicable
to Parent or Merger Sub, or any of their respective properties
or assets, or (iii) require the consent, approval, or
authorization of, or notice to or filing with any third party
with respect to, result in any breach or violation of or
constitute a default (or any event which with notice or lapse of
time or both would become a default), or give rise to any right
of termination, cancellation or acceleration of any right or
obligation of Merger Sub or to a loss of any material benefit to
which Merger Sub is entitled under any Contract.
Section 5.5. Disclosure
Documents. None of the information supplied or to be
supplied by Parent or Merger Sub or any of their respective
Affiliates specifically for inclusion in the Company Proxy
Statement or Schedule 13E-3 will, at the time it is filed
with the SEC, or, in the case of the Company Proxy Statement, at
the time it is first mailed to the stockholders of the Company
or at the time of the Company Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any
19
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 5.6. Finders
Fees. No agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any
brokers or finders fee or any other similar
commission or fee from the Company in connection with any of the
transactions contemplated by this Agreement in the event that
the Merger is not consummated.
Section 5.7. Financing.
Parent has delivered to the Company true and complete copies of
(i) the commitment letter, dated as of the date of this
Agreement, among Parent and Bank of America, N.A., Banc of
America Bridge LLC, Banc of America Securities LLC, JPMorgan
Chase Bank, N.A., J.P. Morgan Securities Inc., Citigroup
Global Markets Inc., Merrill Lynch Capital Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
Debt Financing Commitments), pursuant to
which the lenders party thereto have committed, subject to the
terms thereof, to lend the amounts set forth therein (the
Debt Financing), and (ii) the equity
commitment letters, dated as of the date of this Agreement, from
(i) Bain Capital Fund IX, L.P., (ii) KKR
Millennium Fund, L.P. and KKR PEI Investments, L.P., and
(iii) ML Global Private Equity Fund, L.P. (the
Equity Financing Commitments and together
with the Debt Financing Commitments, the Financing
Commitments), pursuant to which such parties have
committed, subject to the terms thereof, to invest the cash
amounts set forth therein (the Equity Financing
and together with the Debt Financing, the
Financing). Prior to the date of this
Agreement, (i) none of the Financing Commitments has been
amended or modified, and (ii) the respective commitments
contained in the Financing Commitments have not been withdrawn
or rescinded in any respect. Each of the Equity Financing
Commitments, in the form so delivered, is in full force and
effect and is a legal, valid and binding obligation of Parent
and the other parties thereto. Each of the Debt Financing
Commitments, in the form so delivered, is in full force and
effect as of the date of this Agreement and is a legal, valid
and binding obligation of Parent and, to the knowledge of
Parent, the other parties thereto for so long as it remains in
full force and effect. Notwithstanding anything in this
Agreement to the contrary, one or more Debt Financing
Commitments may be superseded at the option of Parent after the
date of this Agreement but prior to the Effective Time by
instruments (the New Financing Commitments)
which replace existing Debt Financing Commitments and/or
contemplate co-investment by or financing from one or more other
or additional parties; provided, that the terms of the
New Financing Commitments shall not (a) expand upon the
conditions precedent to the Financing as set forth in the Debt
Financing Commitments in any material respect or
(b) reasonably be expected to delay the Closing. In such
event, the term Financing Commitments as used
herein shall be deemed to include the Financing Commitments that
are not so superseded at the time in question and the New
Financing Commitments to the extent then in effect. As of the
date of this Agreement, no event has occurred which, with or
without notice, lapse of time or both, would constitute a
default or breach on the part of Parent under any term or
condition of the Financing Commitments. As of the date of this
Agreement, Parent has no reason to believe that it will be
unable to satisfy on a timely basis any term or condition of
closing to be satisfied by it contained in the Financing
Commitments. Parent has fully paid any and all commitment fees
incurred in connection with the Financing Commitments. Assuming
the satisfaction of the conditions set forth in
Sections 8.2(a) and 8.2(b), the Financing Commitments, when
funded, will provide the Surviving Corporation with financing
immediately after the Effective Time sufficient to consummate
the Merger upon the terms contemplated by this Agreement and to
pay all related fees and expenses associated therewith,
including payment of all amounts under Article III of this
Agreement.
Section 5.8. Equity
Rollover Commitment. Parent has delivered to the Company a
true and complete copy of the equity rollover letter, dated as
of the date hereof, from Frisco Inc. and Frisco Partners (the
Equity Rollover Commitment), pursuant to
which such party has committed to contribute to Parent that
number of Shares set forth in such letter in exchange for shares
of capital stock of Parent immediately prior to the Effective
Time (which Shares shall be cancelled in the Merger, as provided
in Section 3.1(a)). As of the date of this Agreement, the
Equity Rollover Commitment is in full force and effect.
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Section 5.9. Guarantees.
Concurrently with the execution of this Agreement, Parent has
delivered to the Company the guarantees of each of (i) Bain
Capital Fund IX, L.P., (ii) KKR Millennium Fund, L.P.,
(iii) ML Global Private Equity Fund, L.P. and
(iv) Frisco Inc. and Frisco Partners (the
Guarantors) with respect to certain matters
on the terms specified therein (the
Guarantees) and prior to the close of
business on the third Business Day after the date of this
Agreement, Parent will cause to be delivered an opinion of
counsel for each Guarantor set forth in Section 5.9 of the
Company Disclosure Letter, and Parent will use reasonable best
efforts to cause to be delivered an opinion of counsel for each
other Guarantor, in each case, in form and substance reasonably
satisfactory to the Company, as to the enforceability of the
Guarantee of such Guarantor and such other matters reasonably
requested by the Company, which opinion has not been withdrawn
or modified.
Section 5.10. Operations
of Parent and Merger Sub. Each of Parent and Merger Sub has
been formed solely for the purpose of engaging in the
transactions contemplated hereby and prior to the Effective Time
will have engaged in no other business activities and will have
incurred no liabilities or obligations other than as
contemplated herein, including in connection with arranging the
Financing.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct
of the Company and Subsidiaries. Except for matters set
forth in Section 6.1 of the Company Disclosure Letter or as
otherwise contemplated by or specifically provided in this
Agreement, or as subsequently consented to in writing by Parent
(which consent shall not be unreasonably withheld), from the
date of this Agreement until the Effective Time, the Company
shall use its reasonable best efforts to, and shall use its
reasonable best efforts to cause its Subsidiaries to, conduct
their respective businesses in the ordinary and usual course
consistent with past practice, and shall use its reasonable best
efforts to (i) preserve substantially intact its and its
Subsidiaries present business organization and capital
structure; (ii) maintain in effect all material Permits
that are required for the Company or its Subsidiaries to carry
on their respective businesses; (iii) keep available the
services of present officers and key employees; and
(iv) maintain the current relationships with its providers,
suppliers and other Persons with which the Company or its
Subsidiaries have significant business relationships. Without
limiting the generality of the foregoing, and except for matters
set forth in Section 6.1 of the Company Disclosure Letter
or as expressly contemplated or permitted by this Agreement,
without the prior written consent of Parent and Merger Sub
(which consent shall not be unreasonably withheld), the Company
shall not, and shall not permit its Subsidiaries to:
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(a) adopt any change in its organizational or governing
documents; |
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(b) merge or consolidate the Company or any of its
Subsidiaries with any Person (other than the Merger and other
than such transactions solely among the Company and/or its
wholly-owned domestic Subsidiaries that would not result in a
material increase in the Tax liability of the Company or its
Subsidiaries; |
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(c) sell, lease or otherwise dispose of a material amount
of assets or securities, including by merger, consolidation,
asset sale or other business combination (including by formation
of a material Company joint venture), other than such
transactions solely among the Company and/or its wholly-owned
domestic Subsidiaries that would not result in a material
increase in the Tax liability of the Company or its Subsidiaries; |
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(d) (i) make any material acquisition, by purchase or
other acquisition of stock or other equity interests, by merger,
consolidation or other business combination (including by
formation of a material Company joint venture); or
(ii) make any material property transfers or material
purchases of any property or assets, in or from any Person, in
each case, other than such transactions solely among the Company
and/or wholly-owned Subsidiaries of the Company; |
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(e) other than in connection with drawdowns or repayments
with respect to existing credit facilities in the ordinary
course of business consistent with past practice, redeem,
repurchase, prepay, defease, cancel, incur or otherwise acquire,
or modify in any material respect the terms of, indebtedness for
borrowed money or assume, guarantee or endorse or otherwise
become responsible for, whether directly, contingently or
otherwise, the obligations of any Person, other than the
incurrence, assumption or guarantee of indebtedness
(i) between the Company, on the one hand, and any of its
Subsidiaries, on the other hand, or (ii) not in excess of
$10,000,000 in the aggregate; |
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(f) offer, place or arrange any issue of debt securities or
commercial bank or other credit facilities that would reasonably
be expected to compete with or impede the Debt Financing or
cause the breach of any provisions of the Debt Financing
Commitments or cause any condition set forth in the Debt
Financing Commitments not to be satisfied; |
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(g) make any material loans, advances or capital
contributions to, or investments in, any other Person in excess
of $20,000,000 in the aggregate for all such loans, advances,
contributions and investments, except for (i) transactions
solely among the Company and/or wholly-owned Subsidiaries of the
Company, or (ii) as required by existing contracts set
forth in Section 6.1(g) of the Company Disclosure Letter; |
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(h) authorize any capital expenditures in excess of
$20,000,000 in the aggregate, other than expenditures provided
for in the Companys budget for the remaining portion of
fiscal year 2006 (a copy of which 2006 budget has been provided
to Parent) and for any portion of fiscal year 2007 prior to the
Closing Date (a copy of which budget has been provided to
Parent); |
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(i) pledge or otherwise encumber shares of capital stock or
other voting securities of the Company or any of its
Subsidiaries; |
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(j) mortgage or pledge any of its material assets, tangible
or intangible, or create, assume or suffer to exist any Lien
thereupon (other than Permitted Liens); |
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(k) enter into or amend any Contract with any executive
officer, director or other Affiliate of the Company or any of
its Subsidiaries or any Person beneficially owning 1% or more of
the Shares or the voting power of the Shares; |
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(l) enter into, renew, extend, amend or terminate any
Contract that is or would be material to the Company and its
Subsidiaries, taken as a whole, other than in the ordinary
course of business consistent with past practice; |
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(m) (i) split, combine or reclassify any Company
Securities or amend the terms of any Company Securities,
(ii) declare, establish a record date for, set aside or pay
any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of Company
Securities other than (x) a dividend or distribution by a
wholly-owned Subsidiary of the Company to its parent corporation
in the ordinary course of business, (y) payment on
September 1, 2006 of the previously declared regularly
quarterly dividend of $0.17 per Share, and (z) payment
of a regular quarterly dividend not to exceed $0.17 per
share for the fourth quarter of 2006; provided, that the
record date for such dividend shall be no earlier than
December 1, 2006 and that no such dividend shall be payable
if the Effective Time occurs on or prior to the record date;
(iii) issue or offer to issue any Company Securities, or
redeem, repurchase or otherwise acquire or offer to redeem,
repurchase, or otherwise acquire, any Company Securities, other
than in connection with (A) the exercise of Company Options
outstanding on the date of this Agreement in accordance with
their original terms, (B) the withholding of Company
Securities to satisfy Tax obligations with respect to Company
Options or Restricted Shares, (C) the acquisition by the
Company of Company Securities in connection with the net
exercise of Company Options in accordance with the terms thereof
and (D) acquisitions by or issuances to Company Benefit Plans
identified in Section 6.1(m) of the Company Disclosure
Letter in the ordinary course of business consistent with past
practice; |
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(n) except as required pursuant to existing written
agreements or Company Benefit Plans in effect on the date of
this Agreement or as required by applicable Law, (i) adopt,
amend in any material respect or terminate any Company Benefit
Plan, (ii) take any action to accelerate the vesting or
payment, or fund or in any other way secure the payment, of
compensation or benefits under any Company Benefit Plan,
(iii) except in connection with promotions or new hires
made in the ordinary course of business consistent with past
practice, increase in any manner the cash compensation or
welfare or pension benefits of Company Employees, or
(iv) change any actuarial or other assumption used to
calculate funding obligations with respect to any Company
Benefit Plan or change the manner in which contributions to any
Company Benefit Plan are made or determined; |
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(o) settle or compromise any litigation, or release,
dismiss or otherwise dispose of any claim or arbitration, other
than settlements or compromises of litigation, claims or
arbitration that do not exceed $10,000,000 in the aggregate (net
of insurance recoveries) and do not impose any material
restrictions on the business or operations of the Company or any
of its Subsidiaries or any Company Joint Venture; |
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(p) other than in the ordinary course of business
consistent with past practice or except to the extent required
by Law, make or change any material Tax election, settle or
compromise any material Tax liability of the Company or any of
its Subsidiaries, agree to an extension of the statute of
limitations with respect to the assessment or determination of
material Taxes of the Company or any of its Subsidiaries, file
any amended Tax Return with respect to any material Tax, enter
into any closing agreement with respect to any material Tax or
surrender any right to claim a material Tax refund; |
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(q) make any change in financial accounting methods or
method of Tax accounting, principles or practices materially
affecting the reported consolidated assets, liabilities or
results of operations of the Company and its Material
Subsidiaries, except insofar as may have been required by a
change in GAAP or Law; |
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(r) adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other
reorganization of the Company or any of its Material
Subsidiaries, or enter into a letter of intent or agreement in
principle with respect thereto, (other than the Merger and other
than such transactions solely among the Company and/or its
wholly-owned domestic Subsidiaries that would not result in a
material increase in the Tax liability of the Company or its
Subsidiaries); |
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(s) take any action or fail to take any action that is
intended to, or would reasonably be expected to, individually or
in the aggregate, prevent, materially delay or materially impede
the ability of the Company to consummate the Merger or the other
transactions contemplated by this Agreement; or |
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(t) authorize, agree or commit to do any of the foregoing. |
Section 6.2. Conduct
of Parent and Merger Sub. Each of Parent and Merger Sub
agrees that, from the date of this Agreement to the Effective
Time, it shall not take any action or fail to take any action
that is intended to, or would reasonably be expected to,
individually or in the aggregate, prevent, materially delay or
materially impede the ability of Parent and Merger Sub to
consummate the Merger or the other transactions contemplated by
this Agreement.
Section 6.3. No
Control of Other Partys Business. Nothing contained in
this Agreement is intended to give Parent, directly or
indirectly, the right to control or direct the Companys or
its Subsidiaries operations prior to the Effective Time,
and nothing contained in this Agreement is intended to give the
Company, directly or indirectly, the right to control or direct
Parents or its Subsidiaries operations. Prior to the
Effective Time, each of Parent and the Company shall exercise,
consistent with the terms and conditions of this Agreement,
complete control and supervision over its and its
Subsidiaries respective operations.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. Stockholder
Meeting; Proxy Material. (a) The Company shall
(i) take all action necessary to duly call, give notice of,
convene and hold a meeting of its stockholders (the
Company Stockholder Meeting) for the purpose
of having this Agreement adopted by the stockholders of the
Company in accordance with applicable Law as promptly as
reasonably practicable after the SEC clears the Company Proxy
Statement and the Schedule 13E-3, (ii) use reasonable
best efforts to solicit the adoption of this Agreement by the
stockholders of the Company, and (iii) subject to the
immediately succeeding sentence, include in the Company Proxy
Statement the recommendation of the Board of Directors of the
Company that the stockholders of the Company adopt this
Agreement (the Recommendation). Neither the
Board of Directors of the Company nor any committee thereof
shall directly or indirectly (x) withdraw (or modify or
qualify in a manner adverse to Parent or Merger Sub), or
publicly propose to withdraw (or modify or qualify in a manner
adverse to Parent or Merger Sub), the Recommendation or
(y) take any other action or make any other public
statement in connection with the Company Stockholder Meeting
inconsistent with such Recommendation (any action described in
this clause (x) or (y) being referred to as a
Recommendation Withdrawal); provided,
that at any time prior to obtaining the Requisite
Stockholder Vote, the Board of Directors of the Company (acting
through the Special Committee if such committee still exists)
may effect a Recommendation Withdrawal (subject to the Company
having complied with its obligations under Section 7.4) if
such Board of Directors (or the Special Committee, as
applicable) determines in good faith (after consultation with
outside counsel) that failure to take such action could violate
its fiduciary duties under applicable Law. Notwithstanding any
Recommendation Withdrawal, unless this Agreement is terminated
pursuant to, and in accordance with, Section 9.1, this
Agreement shall be submitted to the stockholders of the Company
at the Company Stockholders Meeting for the purpose of adopting
this Agreement. If, at any time prior to the Effective Time, any
information relating to the Company, Parent or Merger Sub or any
of their respective Affiliates should be discovered by the
Company, Parent or Merger Sub which should be set forth in an
amendment or supplement to the Company Proxy Statement or
Schedule 13E-3, as applicable, so that the Company Proxy
Statement or Schedule 13E-3, as applicable, shall not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the
party that discovers such information shall promptly notify the
other parties and, to the extent required by applicable Law, the
Company shall disseminate an appropriate amendment thereof or
supplement thereto describing such information to the
Companys stockholders.
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(b) In connection with the Company Stockholder Meeting, the
Company will (i) as promptly as reasonably practicable
(and, with respect to filing with the SEC, in any event within
15 Business Days from the date of this Agreement) prepare and
file with the SEC the Company Proxy Statement, (ii) respond
as promptly as reasonably practicable to any comments received
from the SEC with respect to such filings and will provide
copies of such comments to Merger Sub promptly upon receipt,
(iii) as promptly as reasonably practicable prepare and
file (after Parent and Merger Sub have had a reasonable
opportunity to review and comment on) any amendments or
supplements necessary to be filed in response to any SEC
comments or as required by Law, (iv) use its reasonable
best efforts to have cleared by the SEC and will thereafter mail
to its stockholders as promptly as reasonably practicable, the
Company Proxy Statement and all other customary proxy or other
materials for meetings such as the Company Stockholder Meeting,
(v) to the extent required by applicable Law, as promptly
as reasonably practicable prepare, file and distribute to the
stockholders of the Company any supplement or amendment to the
Company Proxy Statement if any event shall occur which requires
such action at any time prior to the Company Stockholder
Meeting, and (vi) otherwise use commercially reasonable
efforts to comply with all requirements of Law applicable to the
Company Stockholder Meeting and the Merger. Parent and Merger
Sub shall cooperate with the Company in connection with the
preparation and filing of the Company Proxy Statement, including
furnishing the Company upon request with any and all information
as may be required to be |
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set forth in the Company Proxy Statement under the Exchange Act.
The Company will provide Parent and Merger Sub a reasonable
opportunity to review and comment upon the Company Proxy
Statement, or any amendments or supplements thereto, prior to
filing the same with the SEC. In connection with the filing of
the Company Proxy Statement, the Company and Merger Sub will
cooperate to (i) concurrently with the preparation and
filing of the Company Proxy Statement, jointly prepare and file
with the SEC the Schedule 13E-3 relating to the Merger and
the other transactions contemplated hereby and furnish to each
other all information concerning such party as may be reasonably
requested in connection with the preparation of the Schedule
13E-3, (ii) respond as promptly as reasonably practicable
to any comments received from the SEC with respect to such
filings and will consult with each other prior to providing such
response, (iii) as promptly as reasonably practicable after
consulting with each other, prepare and file any amendments or
supplements necessary to be filed in response to any SEC
comments or as required by Law, (iv) have cleared by the
SEC the Schedule 13E-3 and (v) to the extent required by
applicable Law, as promptly as reasonably practicable prepare,
file and distribute to the stockholders of the Company any
supplement or amendment to the Schedule 13E-3 if any event
shall occur which requires such action at any time prior to the
Company Stockholders Meeting. |
Section 7.2. Reasonable
Best Efforts. (a) Subject to the terms and conditions
of this Agreement, each party will use its reasonable best
efforts to take, or cause to be taken, all actions, to file, or
cause to be filed, all documents and to do, or cause to be done,
all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including preparing
and filing as promptly as practicable all documentation to
effect all necessary filings, consents, waivers, approvals,
authorizations, Permits or orders from all Governmental
Authorities or other Persons. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make an
appropriate filing of a Notification and Report Form pursuant to
the HSR Act with respect to the transactions contemplated by
this Agreement as promptly as practicable after the date hereof
(and in any event within 15 Business Days) and to make, or cause
to be made, the filings and authorizations, if any, required
under the Other Antitrust Laws of jurisdictions other than the
United States as promptly as reasonably practicable after the
date hereof and to supply as promptly as reasonably practicable
any additional information and documentary material that may be
requested pursuant to the HSR Act or the Other Antitrust Laws of
jurisdictions other than the United States and use its
reasonable best efforts to take or cause to be taken all other
actions necessary, proper or advisable consistent with this
Section 7.2 to cause the expiration or termination of the
applicable waiting periods, or receipt of required
authorizations, as applicable, under the HSR Act or the Other
Antitrust Laws of jurisdictions other than the United States as
soon as practicable. Without limiting the foregoing, the parties
shall request and shall use reasonable best efforts to obtain
early termination of the waiting period under the HSR Act.
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(b) Each of Parent and Merger Sub, on the one hand, and the
Company, on the other hand, shall, in connection with the
efforts referenced in Section 7.2(a) to obtain all
requisite approvals and authorizations for the transactions
contemplated by this Agreement, use its reasonable best efforts
to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with
any investigation or other inquiry, including any proceeding
initiated by a private party; (ii) keep the other party
reasonably informed of any communication received by such party
from, or given by such party to, the Federal Trade Commission
(the FTC), the Antitrust Division of the
Department of Justice (the DOJ) or any other
Governmental Authority and of any communication received or
given in connection with any proceeding by a private party, in
each case regarding any of the transactions contemplated hereby;
and (iii) permit the other party to review any
communication given by it to, and consult with each other in
advance of any meeting or conference with, the FTC, the DOJ or
any other Governmental Authority or, in connection with any
proceeding by a private party, with any other person, and to the
extent permitted by the FTC, the DOJ or such other applicable
Governmental Authority or other Person, give the other party the
opportunity to attend and participate in such meetings and
conferences. |
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(c) In furtherance and not in limitation of the covenants
of the parties contained in Sections 7.2(a) and (b), if any
objections are asserted with respect to the transactions
contemplated hereby under any Law or if any suit is instituted
(or threatened to be instituted) by the FTC, the DOJ or any
other applicable Governmental Authority or any private party
challenging any of the transactions contemplated hereby as
violative of any Law or which would otherwise prevent,
materially impede or materially delay the consummation of the
transactions contemplated hereby, each of Merger Sub and the
Company shall use its reasonable best efforts to resolve any
such objections or suits so as to permit consummation of the
transactions contemplated by this Agreement, including in order
to resolve such objections or suits which, in any case if not
resolved, would reasonably be expected to prevent, materially
impede or materially delay the consummation of the Merger or the
other transactions contemplated hereby; provided, however,
that no party shall be required to, and the Company may not
(without the prior written consent of Merger Sub) take any such
actions to resolve any such objections or suits which actions
would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on the Company. |
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(d) Subject to the obligations under Section 7.2(c),
in the event that any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) by a
Governmental Authority or private party challenging the Merger
or any other transaction contemplated by this Agreement, or any
other agreement contemplated hereby, each of Merger Sub and the
Company shall cooperate in all respects with each other and use
its respective reasonable best efforts to contest and resist any
such action or proceeding and to have vacated, lifted, reversed
or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the
transactions contemplated by this Agreement. |
Section 7.3. Access
to Information. (a) Subject to applicable Law, the
Company will provide and will cause its Subsidiaries and its and
their respective Representatives to provide Parent and Merger
Sub and their respective authorized Representatives, during
normal business hours and upon reasonable advance notice
(i) such access to the offices, properties, books and
records of the Company and such Subsidiaries (so long as such
access does not unreasonably interfere with the operations of
the Company) as Parent or Merger Sub reasonably may request and
(ii) all documents that Merger Sub reasonably may request.
Notwithstanding the foregoing, Parent, Merger Sub and their
respective Representatives shall not have access to any books,
records and other information the disclosure of which would, in
the Companys good faith opinion after consultation with
legal counsel, result in the loss of attorney-client privilege
with respect to such books, records and other information. The
parties will use their reasonable best efforts to make
appropriate substitute arrangements under circumstances in which
the restrictions of the preceding sentence apply.
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(b) No investigation by any of the parties or their
respective Representatives shall affect the representations,
warranties, covenants or agreements of the other parties set
forth herein. |
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(c) All information obtained pursuant to this
Section 7.3 shall be kept confidential in accordance with
the applicable Confidentiality Agreement. |
Section 7.4. Solicitation.
(a) Notwithstanding any other provision of this Agreement
to the contrary, during the period beginning on the date of this
Agreement and continuing until 11:59 p.m. (EST) on
September 12, 2006 (the No-Shop Period Start
Date), the Company and its Subsidiaries and their
respective officers, directors, employees, consultants, agents,
advisors, affiliates and other representatives
(Representatives) shall have the right
(acting under the direction of the Special Committee) to
directly or indirectly: (i) initiate, solicit and encourage
Company Acquisition Proposals (as hereinafter defined),
including by way of providing access to non-public information
pursuant to (but only pursuant to) one or more Acceptable
Confidentiality Agreements (as hereinafter defined); provided
that the Company shall promptly provide to Parent any
material non-public information concerning the Company or its
Subsidiaries that is provided to any Person given such access
which was not previously provided to Parent; and (ii) enter
into and maintain discussions or negotiations with respect to
Company
26
Acquisition Proposals or otherwise cooperate with or assist or
participate in, or facilitate any such inquiries, proposals,
discussions or negotiations.
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(b) Subject to Section 7.4(c), from the No-Shop Period
Start Date until the Effective Time or, if earlier, the
termination of this Agreement in accordance with
Article IX, none of the Company, the Companys
Subsidiaries nor any of their respective Representatives shall,
directly or indirectly, (A) initiate, solicit or knowingly
encourage (including by way of providing information) the
submission of any inquiries, proposals or offers or any other
efforts or attempts that constitute or may reasonably be
expected to lead to, any Company Acquisition Proposal or engage
in any discussions or negotiations with respect thereto or
otherwise knowingly cooperate with or knowingly assist or
participate in, or knowingly facilitate any such inquiries,
proposals, discussions or negotiations, or (B) approve or
recommend, or publicly propose to approve or recommend, a
Company Acquisition Proposal or enter into any merger agreement,
letter of intent, agreement in principle, share purchase
agreement, asset purchase agreement or share exchange agreement,
option agreement or other similar agreement providing for or
relating to a Company Acquisition Proposal or enter into any
agreement or agreement in principle requiring the Company to
abandon, terminate or fail to consummate the transactions
contemplated hereby or breach its obligations hereunder or
propose or agree to do any of the foregoing. Subject to
Section 7.4(c) and except with respect to any Company
Acquisition Proposal received prior to the No-Shop Period Start
Date with respect to which the requirements of
Sections 7.4(c)(i), (ii) and (iii) have been
satisfied as of the No-Shop Period Start Date (any such Person
so submitting a Company Acquisition Proposal, an
Excluded Party), as determined, with respect
to any Excluded Party, by the Special Committee no later than
the later of (i) the No-Shop Period Start Date and
(ii) the Business Day following the date on which the
Company received such Excluded Partys written Company
Acquisition Proposal (it being understood, that following the
No-Shop Period Start Date until such time as the Special
Committee determines that a Person is an Excluded Party, the
Company shall not be permitted to take any action with respect
to such Person that it would be prohibited from taking with
respect to a non-Excluded Party pursuant to
Section 7.4(c)), on the No-Shop Period Start Date the
Company shall immediately cease and cause to be terminated any
solicitation, encouragement, discussion or negotiation with any
Persons conducted theretofore by the Company, its Subsidiaries
or any Representatives with respect to any Company Acquisition
Proposal. Notwithstanding anything contained in Section 7.4
to the contrary, any Excluded Party shall cease to be an
Excluded Party for all purposes under this Agreement at such
time as the Company Acquisition Proposal made by such party
fails, in the reasonable judgment of the Special Committee, to
satisfy the requirements of Section 7.4(c). |
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(c) Notwithstanding anything to the contrary contained in
Section 7.4(b), if at any time following the date of this
Agreement and prior to obtaining the Requisite Stockholder Vote,
(i) the Company has received a written Company Acquisition
Proposal from a third party that the Board of Directors of the
Company (acting through the Special Committee if such committee
still exists) believes in good faith to be bona fide,
(ii) the Board of Directors of the Company (acting through
the Special Committee if such committee still exists) determines
in good faith, after consultation with its independent financial
advisors and outside counsel, that such Company Acquisition
Proposal constitutes or could reasonably be expected to result
in a Superior Proposal and (iii) after consultation with
its outside counsel, the Board of Directors of the Company
(acting through the Special Committee if such committee still
exists) determines in good faith that the failure to take such
action could violate its fiduciary duties under applicable Law,
then the Company may (A) furnish information with respect
to the Company and its Subsidiaries to the Person making such
Company Acquisition Proposal and (B) participate in
discussions or negotiations with the Person making such Company
Acquisition Proposal regarding such Company Acquisition
Proposal; provided, that the Company (x) will not,
and will not allow Company Representatives to, disclose any
non-public information to such Person without entering into an
Acceptable Confidentiality Agreement, and (y) will promptly
provide to Parent any non-public information concerning the
Company or its Subsidiaries provided to such other Person which
was not previously provided to Parent. Notwithstanding anything
to the contrary contained in Section 7.4(b) or this
Section 7.4(c), prior to |
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obtaining the obtaining the Requisite Stockholder Vote, the
Company shall be permitted to take the actions described in
clauses (A) and (B) above with respect to any
Excluded Party. From and after the No-Shop Period Start Date,
the Company shall promptly (within one Business Day) notify
Parent in the event it receives a Company Acquisition Proposal
from a Person or group of related Persons, including the
material terms and conditions thereof, and shall keep Parent
apprised as to the status and any material developments,
discussions and negotiations concerning the same on a current
basis (and in any event no later than 48 hours after the
occurrence of such developments, discussions or negotiations).
Without limiting the foregoing, the Company shall promptly
(within one Business Day) notify Parent orally and in writing if
it determines to begin providing information or to engage in
negotiations concerning a Company Acquisition Proposal from a
Person or group of related Persons pursuant to this
Section 7.4(c). Within 24 hours of the No-Shop Period
Start Date, the Company shall notify Parent of the number of
Excluded Parties and provide Parent a written summary of the
material terms and conditions of each Company Acquisition
Proposal received from any Excluded Party. |
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(d) Notwithstanding anything in this Agreement to the
contrary, if, at any time prior to obtaining the Requisite
Stockholder Vote, the Company receives a Company Acquisition
Proposal which the Board of Directors of the Company (acting
through the Special Committee, if such committee still exists)
concludes in good faith constitutes a Superior Proposal after
giving effect to all of the adjustments which may be offered by
Parent pursuant to clause (ii) below, the Board of
Directors of the Company (acting through the Special Committee,
if such committee still exists) may (x) effect a
Recommendation Withdrawal and/or (y) terminate this
Agreement to enter into a definitive agreement with respect to
such Superior Proposal if the Board of Directors of the Company
(acting through the Special Committee, if such committee still
exists) determines in good faith, after consultation with
outside counsel, that failure to take such action could violate
its fiduciary duties under applicable Law; provided,
however that the Company shall not terminate this Agreement
pursuant to the foregoing clause (y), and any purported
termination pursuant to the foregoing clause (y) shall
be void and of no force or effect, unless concurrently with such
termination the Company pays the Termination Fee payable
pursuant to Section 9.2(a); and provided, further,
that the Board of Directors may not effect a Recommendation
Withdrawal pursuant to the foregoing clause (x) or
terminate this Agreement pursuant to the foregoing
clause (y) unless: |
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(i) the Company shall have provided prior written notice to
Parent and Merger Sub, at least five calendar days in advance
(the Notice Period), of its intention to
effect a Recommendation Withdrawal in response to such Superior
Proposal or terminate this Agreement to enter into a definitive
agreement with respect to such Superior Proposal, which notice
shall specify the material terms and conditions of any such
Superior Proposal (including the identity of the party making
such Superior Proposal), and shall have contemporaneously
provided a copy of the relevant proposed transaction agreements
with the party making such Superior Proposal and other material
documents; and |
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(ii) prior to effecting such Recommendation Withdrawal or
terminating this Agreement to enter into a definitive agreement
with respect to such Superior Proposal, the Company shall, and
shall cause its financial and legal advisors to, during the
Notice Period, negotiate with Parent and Merger Sub in good
faith (to the extent Parent and Merger Sub desire to negotiate)
to make such adjustments in the terms and conditions of this
Agreement so that such Company Acquisition Proposal ceases to
constitute a Superior Proposal. |
In the event of any material revisions to the Superior Proposal,
the Company shall be required to deliver a new written notice to
Parent and Merger Sub and to comply with the requirements of
this Section 7.4(d) with respect to such new written
notice, except that the Notice Period shall be reduced to three
Business Days.
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(e) The Company agrees that any violations of the
restrictions set forth in this Section 7.4 by any
Representative of the Company or any of its Subsidiaries, shall
be deemed to be a breach of this Section 7.4 by the Company. |
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(f) As used in this Agreement, the term: |
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(i) Acceptable Confidentiality Agreement
means a confidentiality and standstill agreement that
contains provisions that are no less favorable in the aggregate
to the Company than those contained in the Confidentiality
Agreements; |
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(ii) Company Acquisition Proposal means
any inquiry, proposal or offer from any Person or group of
Persons other than Parent, Merger Sub or their respective
Affiliates relating to any direct or indirect acquisition or
purchase of a business that constitutes 15% or more of the net
revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole, or 15% or more of any class or
series of Company Securities, any tender offer or exchange offer
that if consummated would result in any Person or group of
Persons beneficially owning 15% or more of any class or series
of capital stock of the Company, or any merger, reorganization,
consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving the Company (or any Subsidiary or
Subsidiaries of the Company whose business constitutes 15% or
more of the net revenues, net income or assets of the Company
and its Subsidiaries, taken as a whole); |
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(iii) Superior Proposal means a Company
Acquisition Proposal that the Board of Directors of the Company
(acting through the Special Committee, if such committee still
exists) in good faith determines, would, if consummated, result
in a transaction that is more favorable from a financial point
of view to the stockholders of the Company than the transactions
contemplated hereby (x) after receiving the advice of a
financial advisor (who shall be a nationally recognized
investment banking firm), (y) after taking into account the
likelihood of consummation of such transaction on the terms set
forth therein (as compared to the terms herein) and
(z) after taking into account all appropriate legal (with
the advice of outside counsel), financial (including the
financing terms of any such proposal), regulatory or other
aspects of such proposal and any other relevant factors
permitted by applicable Law; provided that for purposes
of the definition of Superior Proposal, the
references to 15% or more in the definition of
Company Acquisition Proposal shall be deemed to be references to
a majority. |
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(g) Nothing contained in this Section 7.4 or elsewhere
in this Agreement shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by
Rule 14d-9 and
14e-2(a) promulgated
under the Exchange Act; provided, any such disclosure
(other than a stop, look and listen letter or
similar communication of the type contemplated by
Rule 14d-9(f)
under the Exchange Act) shall be deemed to be a Recommendation
Withdrawal unless the Board of Directors of the Company (acting
through the Special Committee if such committee still exists)
expressly publicly reaffirms at least two Business Days prior to
the Company Stockholder Meeting its recommendation in favor of
the adoption of this Agreement. |
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(h) The parties hereby agree that, in order to facilitate
any due diligence process that one or more third parties, who
have been provided with and have agreed in writing to comply
with the subject matter limitations of this section, may
undertake in connection with a Company Acquisition Proposal,
Dr. Thomas F. Frist, Jr.
(Dr. Frist) shall not be prevented from
engaging in a due diligence discussion with each such third
party regarding the Company if specifically requested to do so
by the Special Committee or Credit Suisse Securities
(USA) LLC; provided, however,that the parties
acknowledge and agree that except for public disclosure
obligations required by applicable law, (i) Dr. Frist
shall not be permitted to disclose to such third party any
information regarding the transactions contemplated by this
Agreement, or any agreements, understandings or arrangements in
connection therewith or any assumptions, information,
evaluations or views of Parent and its Affiliates and
(ii) Dr. Frist shall not be permitted to have any
discussions, agreements, understandings or arrangements with any
third party regarding any participation, investment, involvement
or interest of |
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any nature whatsoever in any form of transaction similar to, or
in the alternative to, the transactions contemplated by this
Agreement, including the Merger. |
Section 7.5. Director
and Officer Liability.
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(a) From and after the Effective Time, the Surviving
Corporation shall to the greatest extent permitted by Law to
indemnify and hold harmless (and comply with all of the
Companys and its Subsidiaries existing obligations
to advance funds for expenses) (i) the present and former
officers and directors thereof against any and all costs or
expenses (including reasonable attorneys fees and
expenses), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with
any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative (Damages), arising out of,
relating to or in connection with any acts or omissions
occurring or alleged to occur prior to or at the Effective Time,
including, without limitation, the approval of this Agreement,
the Merger or the other transactions contemplated by this
Agreement or arising out of or pertaining to the transactions
contemplated by this Agreement; and (ii) such persons
against any and all Damages arising out of acts or omissions in
connection with such persons serving as an officer, director or
other fiduciary in any entity if such service was at the request
or for the benefit of the Company or any of its Subsidiaries. |
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(b) As of the Effective Time, the Company shall have
purchased, and, following the Effective Time, the Surviving
Corporation shall maintain, a tail policy to the current policy
of directors and officers liability insurance
maintained on the date hereof by the Company (the
Current Policy) which tail policy shall be
effective for a period from the Effective Time through and
including the date six years after the Closing Date with respect
to claims arising from facts or events that existed or occurred
prior to or at the Effective Time, and which tail policy shall
contain substantially the same coverage and amount as, and
contain terms and conditions no less advantageous, in the
aggregate, than the coverage currently provided by the Current
Policy; provided, however, that in no event shall the
Surviving Corporation be required to expend annually in excess
of 300% of the annual premium currently paid by the Company
under the Current Policy (the Insurance
Amount); provided, however, that if the premium
of such insurance coverage exceeds the Insurance Amount, the
Company shall be obligated to obtain, and the Surviving
Corporation shall be obligated to maintain, a policy with the
greatest coverage available for a cost not exceeding the
Insurance Amount. |
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(c) This Section 7.5 shall survive the consummation of
the Merger and is intended to be for the benefit of, and shall
be enforceable by, present or former directors or officers of
the Company or its Subsidiaries, their respective heirs and
personal representatives and shall be binding on the Surviving
Corporation and its successors and assigns. In the event that
the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person
(including by dissolution), then, and in each such case, Parent
shall cause proper provision to be made so that the successors
and assigns of the Surviving Corporation assume and honor the
obligations set forth in this Section 7.5. The agreements
and covenants contained herein shall not be deemed to be
exclusive of any other rights to which any such present or
former director or officer is entitled, whether pursuant to Law,
contract or otherwise. Nothing in this Agreement is intended to,
shall be construed to or shall release, waive or impair any
rights to directors and officers insurance claims
under any policy that is or has been in existence with respect
to the Company or any of its Subsidiaries or their respective
officers, directors and employees, it being understood and
agreed that the indemnification provided for in this
Section 7.5 is not prior to or in substitution for any such
claims under any such policies. |
Section 7.6. Takeover
Statutes. The parties shall use their respective reasonable
best efforts (i) to take all action necessary so that no
Takeover Statute is or becomes applicable to the Merger or any
of the other transactions contemplated by this Agreement and
(ii) if any such Takeover Statute is or becomes applicable
to any of the foregoing, to take all action necessary so that
the Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the
30
terms contemplated by this Agreement and otherwise to minimize
the effect of such Takeover Statute on the Merger and the other
transactions contemplated by this Agreement.
Section 7.7. Public
Announcements. Except with respect to any Recommendation
Withdrawal or any action taken pursuant to, and in accordance
with, Section 7.4 or Article IX, so long as this
Agreement is in effect, the parties will consult with each other
before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated
hereby and, except for any press release or public statement as
may be required by applicable Law or any listing agreement with
the New York Stock Exchange, will not issue any such press
release or make any such public statement without the consent of
the other parties (not to be unreasonably withheld or delayed).
Section 7.8. Notice
of Current Events. From and after the date of this Agreement
until the Effective Time, the Company and Parent shall promptly
notify each other orally and in writing of (i) the
occurrence, or non-occurrence, of any event that, individually
or in the aggregate, would reasonably be expected to cause any
condition to the obligations of any party to effect the Merger
and the other transactions contemplated by this Agreement not to
be satisfied or (ii) the failure of such party to comply
with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it pursuant to this Agreement
which, individually or in the aggregate, would reasonably be
expected to result in any condition to the obligations of any
party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; provided,
however, that the delivery of any notice pursuant to this
Section 7.8 shall not cure any breach of any representation
or warranty requiring disclosure of such matter prior to the
date of this Agreement or otherwise limit or affect the remedies
available hereunder to the party receiving such notice.
Section 7.9. Employee
Matters.
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(a) Without limiting any additional rights that any Company
Employee employed by the Company or any of its Subsidiaries at
the Effective Time (Current Employee) may
have under any Company Benefit Plan, the Surviving Corporation
and each of its Subsidiaries, for the period commencing at the
Effective Time and ending on the first anniversary thereof,
shall maintain for each Current Employee (i) his or her
salary or hourly wage rate, commission structure and
opportunities, and/or target cash bonus opportunities under
annual programs (but, except as otherwise agreed with Parent or
the Surviving Corporation, excluding any equity or equity
equivalent award opportunities, and any other equity-based
compensation) (collectively, Compensation),
that in the aggregate are no less favorable than, and
(ii) severance, pension and welfare benefits (excluding any
value attributable to any equity-based benefits) provided under
the Company Benefit Plans that in the aggregate are no less
favorable than, the Compensation and benefits, as applicable,
maintained for and provided to such Current Employees
immediately prior to the Effective Time; provided, however,
that subject to the foregoing and Section 7.9(c),
nothing herein shall prevent the amendment or termination of any
Company Benefit Plans or interfere with the Surviving
Corporations right or obligation to make such changes as
are necessary to conform with applicable Law. Nothing in this
Section 7.9 shall limit the right of the Surviving
Corporation or any of its Subsidiaries to terminate the
employment of any Current Employee at any time. |
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(b) As of and after the Effective Time, the Surviving
Corporation shall give Current Employees full credit for all
purposes (but not benefit accruals under any newly-established
defined benefit pension plans, except for vacation and
severance, if applicable, under the Company Benefit Plans),
under any new employee compensation and incentive plans, benefit
(including vacation) plans, programs, policies and arrangements
maintained for the benefit of Current Employees as of and after
the Effective Time by the Surviving Corporation or any of its
Subsidiaries for the Company Employees service with the
Company, its Subsidiaries and their predecessor entities (each,
a Surviving Corporation Plan) to the same
extent recognized by the Company immediately prior to the
Effective Time. With respect to each Surviving Corporation Plan
that is a welfare benefit plan (as defined in
Section 3(1) of ERISA), the Surviving Corporation or its
Subsidiaries shall (i) cause there to be waived any
pre-existing condition or eligibility limitations and
(ii) give effect, for the |
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applicable plan year in which the Closing occurs, in determining
any deductible and maximum
out-of-pocket
limitations, to claims incurred and amounts paid by, and amounts
reimbursed to, Current Employees under similar plans maintained
by the Company and its Subsidiaries immediately prior to the
Effective Time. |
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(c) In connection with the foregoing, (i) prior to the
Effective Time, the Company shall take all actions necessary to
eliminate any obligation of the Company or any of its
Subsidiaries to make any contributions to any grantor trust
maintained for the benefit of participants with respect to
obligations under the Company Supplemental Executive Retirement
Plan (the SERP) or any other non-qualified
retirement plan, and (ii) prior to the Effective Time, the
Company shall take all actions necessary to provide that the
SERP shall, except as may be required by applicable Law, in no
event be terminated, or amended in a manner that would adversely
affect any of the participants in the SERP as of the date
hereof, at least until such time as each such participant has
become fully vested in the maximum benefit available to each
such participant under the SERP (including achieving the maximum
years of service under the SERP). |
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(d) At the Effective Time, each of the nine Covered
Officers (as defined in the Companys 2005 Equity
Incentive Plan) who are participants in the Companys 2006
Senior Officer Performance Excellence Program (the
PEP) will be paid out in cash at the level of their
2006 Target bonus amount set forth in the PEP,
pursuant to the terms of the Companys 2005 Equity
Incentive Plan. The Company may take all actions necessary to
effectuate the provisions of this Section 7.9(d). |
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(e) The provisions of this Section 7.9 are for the
sole benefit of the parties to this Agreement and nothing
herein, expressed or implied, is intended or shall be construed
to confer upon or give to any person (including for the
avoidance of doubt any Company Employees), other than the
parties hereto and their respective permitted successors and
assigns, any legal or equitable or other rights or remedies
(with respect to the matters provided for in this
Section 7.9) under or by reason of any provision of this
Agreement. |
Section 7.10. Financing.
(a) Prior to the Effective Time, the Company shall provide,
and shall cause its Subsidiaries to, and shall use its
reasonable best efforts to cause their respective
Representatives, including legal and accounting, to provide all
cooperation reasonably requested by Parent in connection with
the arrangement of the Debt Financing (provided that such
requested cooperation does not unreasonably interfere with the
ongoing operations of the Company and its Subsidiaries),
including (i) participation in a reasonable number of
meetings, presentations, road shows, due diligence sessions and
sessions with rating agencies, (ii) assisting with the
preparation of materials for rating agency presentations,
offering documents, private placement memoranda, bank
information memoranda, prospectuses and similar documents
required in connection with the Debt Financing; provided
that any private placement memoranda or prospectuses in
relation to high yield debt securities need not be issued by the
Company or any of its Subsidiaries; provided further
that, any such memoranda or prospectuses shall contain
disclosure and financial statements with respect to the Company
or the Surviving Corporation reflecting the Surviving
Corporation and/or its Subsidiaries as the obligor,
(iii) executing and delivering any pledge and security
documents, other definitive financing documents, or other
certificates, legal opinions or documents as may be reasonably
requested by Parent (including a certificate of the chief
financial officer of the Company or any Subsidiary with respect
to solvency matters and consents of accountants for use of their
reports in any materials relating to the Debt Financing) and
otherwise reasonably facilitating the pledging of collateral,
(iv) furnishing Parent and its Financing sources as
promptly as practicable (and in any event no later than 25
Business Days prior to the End Date) with financial and other
pertinent information regarding the Company as may be reasonably
requested by Parent, including all financial statements and
financial data of the type required by
Regulation S-X and
Regulation S-K
under the Securities Act and of the type and form customarily
included in private placements under Rule 144A of the
Securities Act to consummate the offerings of debt securities
contemplated by the Debt Financing Commitments at the time
during the Companys fiscal year such offerings will be
made (the Required Financial Information),
(v) using reasonable best efforts to obtain
accountants comfort letters, legal opinions, surveys and
title insurance as reasonably requested by Parent,
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(vi) providing monthly financial statements (excluding
footnotes) within the time frame, and to the extent, the Company
prepares such financial statements, (vii) taking all
actions reasonably necessary to (A) permit the prospective
lenders involved in the Financing to evaluate the Companys
current assets, cash management and accounting systems, policies
and procedures relating thereto for the purpose of establishing
collateral arrangements and (B) establish bank and other
accounts and blocked account agreements and lock box
arrangements in connection with the foregoing,
(viii) entering into one or more credit or other agreements
on terms satisfactory to Parent in connection with the Debt
Financing immediately prior to the Effective Time; provided
that, subject to taking the actions required by
clause (ix) below, the Company shall not be required
to enter into any purchase agreement for any high-yield debt
financing (other than bridge financing), (ix) taking all
corporate actions, subject to the occurrence of the Closing,
reasonably requested by Parent to permit the consummation of the
Debt Financing and the direct borrowing or incurrence of all of
the proceeds of the Debt Financing, including any high yield
debt financing, by the Surviving Corporation immediately
following the Effective Time, and (x) assisting Parent with
any presentation to the SEC with regard to the recording of the
Merger as a recapitalization for financial reporting purposes in
accordance with GAAP and cooperating in good faith with Parent,
if so requested by Parent, in order to develop alternative means
of recording the Merger as a recapitalization for financial
reporting purposes in accordance with GAAP; provided that
none of the Company or any of its Subsidiaries shall be required
to pay any commitment or other similar fee or incur any other
cost or expense that is not simultaneously reimbursed by Parent
in connection with the Debt Financing prior to the Effective
Time. Parent shall, promptly upon request by the Company,
reimburse the Company for all reasonable and documented
out-of-pocket costs
incurred by the Company or its Subsidiaries in connection with
such cooperation and shall indemnify and hold harmless the
Company, its Subsidiaries and their respective Representatives
for and against any and all losses suffered or incurred by them
in connection with the arrangement of the Debt Financing and any
information utilized in connection therewith (other than
information provided by the Company or the Subsidiaries). The
Company hereby consents to the use of its and its
Subsidiaries logos in connection with the Debt Financing;
provided that such logos are used solely in a manner that
is not intended to nor reasonably likely to harm or disparage
the Company or any of it Subsidiaries or the reputation or
goodwill of the Company or any of its Subsidiaries and its or
their marks. All non-public or otherwise confidential
information regarding the Company obtained by Parent, Merger Sub
or their Representatives pursuant to this Section 7.10(a)
shall be kept confidential in accordance with the
Confidentiality Agreement.
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(b) Parent shall use its reasonable best efforts to arrange
the Debt Financing as promptly as practicable taking into
account the expected timing of the Marketing Period and the End
Date on the terms and conditions described in the Debt Financing
Commitments, including using reasonable best efforts to
(i) negotiate definitive agreements with respect thereto on
the terms and conditions contained therein or on other terms no
less favorable to Parent and (ii) to satisfy on a timely
basis all conditions applicable to Parent in such definitive
agreements that are within its control. In the event that all
conditions to the Financing Commitments (other than in
connection with the Debt Financing, the availability or funding
of any of the Equity Financing) have been satisfied in
Parents good faith judgment, and subject in the case of
bridge financing to the fifth sentence of this
Section 7.10(b), Parent shall use its reasonable best
efforts to cause the lenders and the other Persons providing
such Financing to fund the Financing required to consummate the
Merger on the Closing Date (including by taking enforcement
action to cause such lenders and other Persons providing such
Financing to fund such Financing). In the event any portion of
the Debt Financing becomes unavailable on the terms and
conditions contemplated in the Debt Financing Commitments,
Parent shall use its reasonable best efforts to arrange to
obtain alternative financing from alternative sources on terms
no less favorable to Parent (as determined in the reasonable
judgment of Parent) as promptly as practicable following the
occurrence of such event but no later than the final day of the
Marketing Period or if, earlier, the End Date. Parent shall keep
the Company reasonably apprised of material developments
relating to the Financing. For the avoidance of doubt, in the
event that (x) all or any portion of the Debt Financing
structured as high yield financing has not been consummated,
(y) all closing conditions contained in Article VIII
(other than those contained in Section 8.2(c) and |
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Section 8.3(c)) shall have been satisfied or waived and
(z) the bridge facilities contemplated by the Debt
Financing Commitments (or alternative bridge financing obtained
in accordance with this Agreement) are available on the terms
and conditions described in the Debt Financing Commitments (or
replacements thereof), then Parent shall cause the proceeds of
such bridge financing to be used to replace such high yield
financing no later than the final day of the Marketing Period
or, if earlier, the End Date. For purposes of this Agreement,
Marketing Period shall mean the first period
of 20 consecutive Business Days after the date hereof throughout
which (A) Parent shall have the Required Financial Information
that the Company is required to provide to Parent pursuant to
Section 7.10(a) and (B) the conditions set forth in
Section 8.1 shall be satisfied and nothing has occurred and
no condition exists that would cause any of the conditions set
forth in Sections 8.2(a) or 8.2(b) to fail to be satisfied
assuming the Closing were to be scheduled for any time during
such 20 consecutive Business Day period; provided, that
if the Marketing Period has not ended on or prior to
December 19, 2006, the Marketing Period shall commence no
earlier than January 2, 2007; and provided, further,
that the Marketing Period shall not be deemed to
have commenced if, prior to the completion of the Marketing
Period, Ernst &Young LLP shall have withdrawn its audit
opinion with respect to any financial statements contained in
the Company SEC Reports. |
(c) Notwithstanding anything in the Confidentiality
Agreements to the contrary, Parent, Merger Sub and their
respective Affiliates may enter into discussions, negotiations,
arrangements or understanding with respect to equity financing
or equity financing commitments in respect of the Merger or the
other transactions contemplated by the Merger Agreement with any
Person listed on Section 7.10(c) of the Company Disclosure
Letter.
Section 7.11. Actions
with Respect to Existing Debt. As soon as reasonably
practicable after the receipt of any written request by Parent
to do so, the Company shall commence offers to purchase with
respect to all of the outstanding aggregate principal amount of
those series of the Company debt securities listed on
Schedule 7.11 (the Short-Dated Notes),
on such terms and conditions, including pricing terms, that are
proposed, from time to time, by Parent (each a Debt
Tender Offer and collectively, the Debt
Tender Offers) and Parent shall assist the Company in
connection therewith. Notwithstanding the foregoing, the closing
of the Debt Tender Offers shall be conditioned on the occurrence
of the Closing, and the parties shall use their reasonable best
efforts to cause the Debt Tender Offers to close on the Closing
Date. The Company shall provide, and shall cause its
Subsidiaries to, and shall use its reasonable best efforts to
cause their respective Representatives to, provide all
cooperation requested by Parent in connection with the Debt
Tender Offers. With respect to any series of Short-Dated Notes,
if requested by Parent in writing, in lieu of commencing a Debt
Tender Offer for such series (or in addition thereto), the
Company shall, to the extent permitted by the Indenture and the
Debt Securities (as defined in the Indenture) for such
Short-Dated Notes, (A) issue not less than 30 days and
not more than 60 days prior to the Effective Time a notice
of optional redemption for all of the outstanding aggregate
principal amount of Short-Dated Notes of such series pursuant to
Section 1204 of the Indenture or (B) take any actions
reasonably requested by Parent to facilitate the satisfaction
and/or discharge of such series pursuant to Section 401 or
Article 14 of the Indenture, and shall redeem or satisfy
and/or discharge, as applicable, such series in accordance with
the terms of the Indenture at the Effective Time; provided
that prior to the Company being required to take any of the
actions described in clause (A) or (B) above that
cannot be conditioned upon the occurrence of the Closing, Parent
shall have, or shall have caused to be, deposited with the
trustee under the Indenture sufficient funds to effect such
redemption or satisfaction and discharge. If this Agreement is
terminated (other than pursuant to Section 9.1(c)(ii) or
9.1(d)) prior to the consummation of the Merger, Parent shall
reimburse the Company for its reasonable
out-of-pocket fees and
expenses incurred pursuant to, and in accordance with, this
Section 7.11. If the Effective Time does not occur, Parent
shall indemnify and hold harmless the Company, its Subsidiaries
and their respective officers and directors and each Person, if
any, who controls the Company within the meaning of
Section 20 of the Exchange Act from and against any and all
damages suffered or incurred by them in connection with any
actions taken pursuant to this Section 7.11; provided,
however, that Parent shall not have any obligation to
indemnify and hold harmless any such party or Person to the
extent that any such
34
damages suffered or incurred arose from disclosure regarding the
Company that is determined to have contained a material
misstatement or omission.
Section 7.12. Actions
with Respect to Foundation Options and HTI Warrant. As soon
as practicable following the date of this Agreement,
(a) the Company shall use its reasonable best efforts to
obtain such consents as are necessary under the HTI Warrant to
amend the HTI Warrant in order to provide for the cancellation
of the HTI Warrants immediately prior to the Effective Time in
exchange for the payment by the Surviving Corporation to each
holder thereof of cash in an amount equal to (A) the number
of shares of Common Stock subject to the HTI Warrant held by
such holder multiplied by (B) the excess of the Merger
Consideration over the per share exercise price applicable to
the HTI Warrant and (b) recommend to the board of directors
(or equivalent governing body) of HCA Healthcare Foundation Inc.
that the Foundation Options be exercised prior to the Effective
Time.
Section 7.13. Insurance
Matters. To the extent requested by Parent, the Company
shall use its reasonable best efforts to purchase by the
Effective Time tail policies to the current fiduciary liability
and excess hospital professional liability polices maintained on
the date hereof by the Company and its Subsidiaries, which tail
policies shall be effective for a period from the Effective Time
through a reasonable period specified by Parent and shall
contain the coverage and amount reasonably requested by Parent.
Section 7.14. Section 16(b).
The Company shall take all steps reasonably necessary to cause
the transactions contemplated by this Agreement and any other
dispositions of equity securities of the Company (including
derivative securities) in connection with the transactions
contemplated by this Agreement by each individual who is a
director or executive officer of the Company to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
Section 7.15. Resignation
of Directors. At the Closing, except as otherwise may be
agreed by Parent, the Company shall deliver to Parent evidence
reasonably satisfactory to Parent of the resignation of all
directors of the Company. Upon the request of Parent, as
specified by Parent reasonably in advance of the Closing, the
Company will seek to obtain the resignation of all directors of
Subsidiaries of the Company, in each case, effective at the
Effective Time.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1. Conditions
to the Obligations of Each Party. The obligations of the
Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction of the following conditions:
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(a) Stockholder Approval. This Agreement shall have
been adopted by the Requisite Stockholder Vote. |
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(b) Regulatory Approval. Any applicable waiting
period under the HSR Act (and any extension thereof) relating to
the Merger shall have expired or been terminated. |
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(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction
or other judgment or order issued by a court or agency of
competent jurisdiction or other Law shall be in effect which
prohibits, restrains or renders illegal the consummation of the
Merger. |
Section 8.2. Conditions
to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the
Merger are subject to the satisfaction or valid waiver of the
following further conditions:
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(a) Representations and Warranties. The
representations and warranties (i) set forth in
Section 4.5 shall be true and correct in all material
respects as of the Effective Time as if made at and as of such
time, (ii) set forth in Section 4.6(a) shall be true
and correct in all respects as of the |
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Effective Time as if made at and as of such time, except in the
case of this clause (ii) where the failure to be so true
and correct has not had a material adverse effect on
Parents ability to obtain the Debt Financing on the terms
and conditions set forth in the Debt Financing Commitments,
(iii) set forth in Section 4.14(b) shall be true and
correct in all material respects as of the Effective Time as if
made at and as of such time, and (iv) set forth in
Article IV, other than those described in clauses (i),
(ii) and (iii) above, shall be true and correct as of
the Effective Time as if made at and as of such time (without
giving effect to any qualification as to Material Adverse
Effect set forth therein), except in the case of this
clause (iv) where the failure to be so true and correct,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Company; provided that representations made as of a
specific date shall be required to be so true and correct
(subject to such qualifications) as of such date only. |
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(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all
obligations, and complied in all material respects with the
agreements and covenants, required to be performed by or
complied with by it hereunder. |
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(c) Officers Certificate. Parent and Merger
Sub shall have received a certificate signed by a senior officer
of the Company certifying as to the matters set forth in
Section 8.2(a) and Section 8.2(b). |
Section 8.3. Conditions
of the Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction
or valid waiver of the following further conditions:
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(a) Representations and Warranties. The
representations and warranties of Parent and Merger Sub
contained in this Agreement that are qualified as to materiality
shall be true and correct as of the Effective Time as if made at
and as of such time and those which are not so qualified shall
be true and correct in all material respects as of the Effective
Time as if made at and as of such time, except where the failure
of such representations and warranties to be so true would not
prevent the consummation of the Merger; provided that
representations made as of a specific date shall be required to
be true as of such date only. |
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(b) Performance of Obligations of Parent and Merger
Sub. Parent and Merger Sub shall have performed in all
material respects all obligations, and complied in all material
respects with the agreements and covenants, required to be
performed by or complied with by it hereunder. |
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(c) Officers Certificate. The Company shall
have received a certificate signed by a senior officer of Parent
and Merger Sub certifying as to the matters set forth in
Section 8.3(a) and Section 8.3(b). |
ARTICLE IX
TERMINATION
Section 9.1. Termination.
This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time (notwithstanding any
prior adoption of this Agreement by the stockholders of the
Company):
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(a) by mutual written consent of the Company, on the one
hand, and Parent or Merger Sub, on the other hand; |
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(b) by either the Company, on the one hand, or Parent or
Merger Sub, on the other hand, if: |
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(i) the Effective Time shall not have occurred on or before
December 19, 2006, or if the Marketing Period has not ended
on or before December 19, 2006 (the End
Date), the End Date shall be extended to
January 31, 2007 (and in such event the term End
Date shall mean January 31, 2007); unless the failure
of the Effective Time to occur by such date is the result of, or
caused by, the failure of the party seeking to exercise such
termination right to perform or observe any of the covenants or
agreements of such party set forth in this Agreement; |
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(ii) there shall be any final and nonappealable Law that
makes consummation of the Merger illegal or otherwise
prohibited; or |
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(iii) at the Company Stockholder Meeting or any adjournment
thereof at which this Agreement has been voted upon, the
stockholders of the Company fail to adopt this Agreement by the
Requisite Stockholder Vote; |
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(i) if a breach of any representation, warranty, covenant
or agreement on the part of Parent or Merger Sub set forth in
this Agreement shall have occurred which would cause any of the
conditions set forth in Sections 8.3(a) or (b) not to
be satisfied, and such breach is incapable of being cured by the
End Date; provided, however, that the Company is not then
in material breach of this Agreement so as to cause any of the
conditions set forth in Section 8.1, 8.2(a) or 8.2(b) not
to be satisfied; |
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(ii) prior to obtaining the Requisite Stockholder Vote, in
accordance with, and subject to the terms and conditions of,
Section 7.4(d); or |
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(iii) if all of the conditions set forth in
Sections 8.1, 8.2(a) and 8.2(b) have been satisfied and
Parent has failed to consummate the Merger no later than 5
calendar days after the final day of the Marketing Period. |
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(d) by Parent or Merger Sub, if: |
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(i) a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement
shall have occurred which would cause any of the conditions set
forth in Sections 8.2(a) or (b) not to be satisfied,
and such breach is incapable of being cured by the End Date;
provided, however, that neither Parent nor Merger Sub is
then in material breach of this Agreement so as to cause any of
the conditions set forth in Section 8.1, 8.3(a) or 8.3(b)
not to be satisfied; or |
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(ii) the Board of Directors of the Company or any committee
thereof (A) shall have effected a Recommendation
Withdrawal, or publicly proposed to effect a Recommendation
Withdrawal, (B) shall have approved or recommended to the
stockholders of the Company a Company Acquisition Proposal other
than the Merger, or shall have resolved to effect the foregoing
or (C) the Company fails to include the Recommendation in
the Company Proxy Statement. |
Section 9.2. Termination
Fee. (a) In the event that this Agreement is terminated
by the Company pursuant to Section 9.1(c)(ii) or by Parent
or Merger Sub pursuant to Section 9.1(d)(ii), then the
Company shall pay the Termination Fee as directed in writing by
Parent, at or prior to the time of termination in the case of a
termination pursuant to Section 9.1(c)(ii) or as promptly
as possible (but in any event within two Business Days)
following termination of this Agreement in the case of a
termination pursuant to Section 9.1(d)(ii).
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(b) In the event that this Agreement is terminated by
Parent or Merger Sub, on the one hand, or the Company, on the
other hand, pursuant to Section 9.1(b)(iii) (or is
terminated by the Company pursuant to a different section of
Section 9.1 at a time when this Agreement was terminable
pursuant to Section 9.1(b)(iii)) or by Parent or Merger Sub
pursuant to Section 9.1(d)(i) (or is terminated by the
Company pursuant to a different section of Section 9.1 at a
time when this Agreement was terminable pursuant to
Section 9.1(d)(i)) and, at any time after the date of this
Agreement and prior to the Company Stockholder Meeting (in the
case of a termination pursuant to Section 9.1(b)(iii)) or
prior to the breach giving rise to the right of termination (in
the case of a termination pursuant to Section 9.1(d)(i)), a
bona fide, written Company Acquisition Proposal involving the
purchase of not less than a majority of the outstanding voting
securities of the Company shall have been publicly announced or
publicly made known and, in the case of termination pursuant to
Section 9.1(b)(iii), not publicly withdrawn at least two
Business Days prior to the |
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Company Stockholder Meeting, and, if within twelve months after
such termination pursuant to Section 9.1(b)(iii) or
Section 9.1(d)(i) the Company or any of its Subsidiaries
enters into a definitive agreement with respect to, or
consummates, any Company Acquisition Proposal involving the
purchase of not less than a majority of the outstanding voting
securities of the Company (whether or not the same as that
originally announced or consummated), then, on the date of such
execution or consummation, the Company shall pay the Termination
Fee as directed in writing to Parent, less the amount of any
Parent Expenses previously paid to Parent by the Company. |
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(c) In the event that this Agreement is terminated by
Parent or Merger Sub, on the one hand, or the Company, on the
other hand, pursuant to Section 9.1(b)(iii) (or is
terminated by the Company pursuant to a different section of
Section 9.1 at a time when this Agreement was terminable
pursuant to Section 9.1(b)(iii)) or by Parent or Merger Sub
pursuant to Section 9.1(d)(i) (or is terminated by the
Company pursuant to a different section of Section 9.1
hereof at a time when this Agreement was terminable pursuant to
Section 9.1(d)(i)) under circumstances in which the
Termination Fee is not payable pursuant to this
Section 9.2, then the Company shall pay as promptly as
possible (but in any event within two Business Days) following
receipt of an invoice therefor all of Parents actual and
reasonably documented
out-of-pocket fees and
expenses (including reasonable legal fees and expenses) actually
incurred by Parent and its Affiliates on or prior to the
termination of this Agreement in connection with the
transactions contemplated by this Agreement (Parent
Expenses) as directed by Parent in writing, which
amount shall not be greater than $50 million; provided,
that the existence of circumstances which could require the
Termination Fee to become subsequently payable by the Company
pursuant to Section 9.2(b) shall not relieve the Company of
its obligations to pay the Parent Expenses pursuant to this
Section 9.2(c); and provided, further that the
payment by the Company of Parent Expenses pursuant to this
Section 9.2(c) shall not relieve the Company of any
subsequent obligation to pay the Termination Fee pursuant to
Section 9.2(b) except to the extent indicated in
Section 9.2(b). |
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(d) In the event that this Agreement is terminated by the
Company pursuant to (i) Section 9.1(b)(i) and at the
time of such termination the conditions set forth in
Sections 8.1, 8.2(a) and 8.2(b) have been satisfied,
(ii) Section 9.1(c)(i) and at the time of such
termination there is no state of facts or circumstances that
would reasonably be expected to cause the conditions set forth
in Section 8.1, 8.2(a) and 8.2(b) not to be satisfied on or
prior to the End Date, or (iii) Section 9.1(c)(iii),
then Parent shall pay the Company the Termination Fee as
promptly as possible (but in any event within two Business Days)
following such termination by the Company. |
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(e) Any amount that becomes payable pursuant to
Section 9.2(a), 9.2(b) or 9.2(c) or 9.2(d) shall be paid by
wire transfer of immediately available funds to an account
designated by the party entitled to receive such payment. |
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(f) Each of the Company, Parent and Merger Sub acknowledges
that the agreements contained in this Section 9.2 are an
integral part of the transactions contemplated by this
Agreement, that without these agreements the Company, Parent and
Merger Sub would not have entered into this Agreement, and that
any amounts payable pursuant to this Section 9.2 do not
constitute a penalty. If the Company fails to pay as directed in
writing by Parent any amounts due to Parent or Merger Sub
pursuant to this Section 9.2 within the time periods
specified in this Section 9.2 or Parent fails to pay the
Company any amounts due to the Company pursuant to this
Section 9.2 within the time periods specified in this
Section 9.2, the Company or Parent, as applicable, shall
pay the costs and expenses (including reasonable legal fees and
expenses) incurred by Parent or the Company, as applicable, in
connection with any action, including the filing of any lawsuit,
taken to collect payment of such amounts, together with interest
on such unpaid amounts at the prime lending rate prevailing
during such period as published in The Wall Street
Journal, calculated on a daily basis from the date such
amounts were required to be paid until the date of actual
payment. Notwithstanding anything to the contrary in this
Agreement, the Companys right to receive payment of the
Termination Fee from Parent pursuant to this Section 9.2 or
the guarantee thereof pursuant to the Guarantees shall be the
sole and exclusive remedy of the Company and its Subsidiaries
against Parent, Merger Sub, the |
38
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Guarantors and any of their respective former, current, or
future general or limited partners, stockholders, managers,
members, directors, officers, Affiliates or agents for the loss
suffered as a result of the failure of the Merger to be
consummated, and upon payment of such amount, none of Parent,
Merger Sub, the Guarantors or any of their respective former,
current, or future general or limited partners, stockholders,
managers, members, directors, officers, Affiliates or agents
shall have any further liability or obligation relating to or
arising out of this Agreement or the transactions contemplated
by this Agreement (except that Parent shall also be obligated
with respect to the second sentence of this Section 9.2(f)
and the indemnification and reimbursement obligations of Parent
contained in Sections 7.10(a) and 7.11, and that Parent and
Merger Sub shall also be obligated with respect to the
provisions of Sections 7.3(c) and the last sentence of
Section 7.10(a), it being understood that no other Person
(including the Guarantors) shall have any liability or
obligation under or with respect to such Sections 7.3(c)
and such last sentence of Section 7.10(a). |
Section 9.3. Effect
of Termination. If this Agreement is terminated pursuant to
Section 9.1, this Agreement shall forthwith become null and
void and there shall be no liability or obligation on the part
of the Company, Parent, Merger Sub or their respective
Subsidiaries or Affiliates, except that the Guarantees referred
to in Section 5.9, the indemnification and reimbursement
provisions of Sections 7.10(a) and 7.11, and the provisions
of Section 7.3(c), the last sentence of
Section 7.10(a), Sections 9.2 and 9.3 and
Article X will survive the termination hereof; provided,
however, that nothing herein shall relieve the Company from
liabilities for Damages incurred or suffered by Parent or Merger
Sub as a result of any willful breach by the Company of any of
its representations, warranties, covenants or other agreements
set forth in this Agreement that would reasonably be expected to
cause any of the conditions set forth in Sections 8.1,
8.2(a) or 8.2(b) not to be satisfied.
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices.
All notices, requests and other communications to any part
hereunder shall be in writing (including facsimile or similar
writing) and shall be given:
if to Parent or Merger Sub, to:
c/o:
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ML Global Private Equity Fund, L.P. |
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c/o Merrill Lynch Global Private Equity |
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Four World Financial Center, Floor 23 |
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New York, NY 10080 |
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Attention: George A. Bitar |
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Christopher Birosak |
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Fax: (212) 449-1119 |
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c/o: |
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Bain Capital Fund IX, L.P. |
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c/o Bain Capital Partners, LLC |
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111 Huntington Avenue |
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Boston, MA 02199 |
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Attention: Chris Gordon |
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Fax: (617) 516-2010 |
39
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c/o: |
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KKR Millennium Fund, L.P. |
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c/o Kohlberg Kravis Roberts & Co. L.P. |
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2800 Sand Hill Road, Suite 200 |
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Menlo Park, CA 94025 |
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Attention: James C. Momtazee |
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Fax: (650) 233-6584 |
with a copy (which shall not constitute notice) to:
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Simpson Thacher & Bartlett LLP |
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425 Lexington Avenue |
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New York, New York 10017 |
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Attention: David J. Sorkin, Esq. |
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Fax: (212) 455-2502 |
if to the Company, to:
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HCA Inc. |
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One Park Plaza |
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Nashville, TN 37203 |
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Attention: General Counsel |
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Fax: (615) 344-1531 |
with copies (which shall not constitute notice) to:
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Bass, Berry & Sims PLC |
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AmSouth Center |
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315 Deaderick Street |
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Suite 2700 |
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Nashville, Tennessee 37238 |
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Attention: James H. Cheek III, Esq. |
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J.
Page Davidson, Esq. |
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Fax: (615) 742-6293 |
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Shearman & Sterling LLP |
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599 Lexington Avenue |
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New York, New York 10022 |
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Attention: Clare OBrien, Esq. |
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Creighton
OM. Condon, Esq. |
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Fax: (212) 848-7179 |
or such other address or facsimile number as such party may
hereafter specify by notice to the other parties hereto. Each
such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is
transmitted to the facsimile number specified above and
electronic confirmation of transmission is received or
(ii) if given by any other means, when delivered at the
address specified in this Section 10.1.
Section 10.2. Representations
and Warranties. None of the representations, warranties,
covenants and agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective
Time, except for those covenants and agreements contained herein
and therein which by their terms apply in whole or in part after
the Effective Time and then only to such extent. Each of Parent,
Merger Sub and the Company acknowledges and agrees that, except
for the representations and warranties expressly set forth in
this Agreement (a) no party makes, and has not made, any
representations or warranties relating to itself or its
businesses or otherwise in connection with the Merger,
(b) no person has been authorized by any party to make any
representation or warranty relating to itself or its businesses
or otherwise in connection with the Merger and, if made, such
representation or warranty
40
must not be relied upon as having been authorized by such party,
and (c) any estimates, projections, predictions, data,
financial information, memoranda, presentations or any other
materials or information provided or addressed to any party or
any of its Representatives are not and shall not be deemed to be
or to include representations or warranties unless any such
materials or information is expressly the subject of any
representation or warranty set forth in this Agreement.
Section 10.3. Expenses.
Except as otherwise expressly provided in Sections 7.10,
7.11 and 9.2, all costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or
expense.
Section 10.4. Amendment.
This Agreement may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors
(in the case of the Company, acting through the Special
Committee if such committee still exists) at any time prior to
the Effective Time, whether before or after adoption of this
Agreement by the stockholders of the Company; provided,
however, that, after adoption of this Agreement by the
stockholders of the Company, no amendment may be made which
under applicable Law requires the further approval of the
stockholders of the Company without such further approval. This
Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 10.5. Waiver.
At any time prior to the Effective Time, any party hereto may
(i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered
pursuant hereto and (iii) subject to the requirements of
applicable law, waive compliance with any of the agreements or
conditions contained for the benefit of such party contained
herein; provided that for so long as the Special
Committee exists, the Company may not take any such action
unless previously authorized by the Special Committee. Any such
extension or waiver shall be valid if set forth in an instrument
in writing signed by the party or parties to be bound thereby.
The failure of any party to assert any rights or remedies shall
not constitute a waiver of such rights or remedies.
Section 10.6. Successors
and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, provided that no party
may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the
other parties hereto (and any purported assignment without such
consent shall be void and without effect), except that each of
Parent and Merger Sub may assign all or any of its rights and
obligations hereunder to any Affiliate of Parent; provided,
however, that no such assignment shall relieve the assigning
party of its obligations hereunder.
Section 10.7. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
Section 10.8. Counterparts;
Effectiveness; Third Party Beneficiaries. This Agreement may
be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement shall become effective only when
actually signed by each party hereto and each such party has
received counterparts hereof signed by all of the other parties
hereto. No provision of this Agreement is intended to or shall
confer upon any Person other than the parties hereto any rights
or remedies hereunder or with respect hereto, except as
otherwise expressly provided in Section 7.5.
Section 10.9. Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by virtue of any Law, or
due to any public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner so
that the transactions contemplated hereby are fulfilled to the
extent possible.
41
Section 10.10. Entire
Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to its subject matter and
supersedes all oral or written prior or contemporaneous
agreements and understandings among the parties with respect to
such subject matter.
Section 10.11. Remedies.
(a) The Company agrees that to the extent it has incurred
losses or damages in connection with this Agreement,
(i) the maximum aggregate liability of Parent and Merger
Sub for such losses or damages shall be limited to
$500 million and any amounts owed pursuant to
Sections 7.10(a) and 7.11, (ii) the maximum liability
of each Guarantor, directly or indirectly, shall be limited to
the express obligations of such Guarantor under its Guarantee,
and (iii) in no event shall the Company seek to recover any
money damages in excess of such amount from Parent, Merger Sub,
the Guarantors, or their respective Representatives and
Affiliates in connection therewith.
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(b) The parties hereto agree that irreparable damage would
occur in the event that any provision of this Agreement were not
performed by the Company in accordance with the terms hereof and
that, prior to the termination of this Agreement pursuant to
Section 9.1, Parent and Merger Sub shall be entitled to
specific performance of the terms hereof, in addition to any
other remedy at law or equity. The parties acknowledge that the
Company shall not be entitled to an injunction or injunctions to
prevent breaches of this Agreement by Parent or Merger Sub or to
enforce specifically the terms and provisions of this Agreement
and that the Companys sole and exclusive remedy with
respect to any such breach shall be the remedy set forth in
Sections 9.2(d) and 10.11(a); provided, however,
that the Company shall be entitled to specific performance
against Parent and Merger Sub to prevent any breach by Parent or
Merger Sub of Section 7.3(c) and the last sentence of
Section 7.10(a). |
Section 10.12. Jurisdiction.
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(a) In any action or proceeding between any of the parties
arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement, each of the parties
hereto: (i) irrevocably and unconditionally consents and
submits, for itself and its property, to the exclusive
jurisdiction and venue of the Court of Chancery of the State of
Delaware (or, in the case of any claim as to which the federal
courts have exclusive subject matter jurisdiction, the Federal
court of the United States of America, sitting in Delaware);
(ii) agrees that all claims in respect of such action or
proceeding must be commenced, and may be heard and determined,
exclusively in the Court of Chancery of the State of Delaware
(or, if applicable, such Federal court); (iii) waives, to
the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of
venue of any such action or proceeding in the Court of Chancery
of the State of Delaware (and, if applicable, such Federal
court); and (iv) waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in the Court of Chancery of the State
of Delaware (or, if applicable, such Federal court). Each of the
parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Each party to this Agreement irrevocably
consents to service of process in the manner provided for
notices in Section 10.1. Nothing in this Agreement shall
affect the right of any party to this Agreement to serve process
in any other manner permitted by law. |
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(b) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH PARTY |
42
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UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND
(IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.12. |
Section 10.13. Authorship.
The parties agree that the terms and language of this Agreement
were the result of negotiations between the parties and their
respective advisors and, as a result, there shall be no
presumption that any ambiguities in this Agreement shall be
resolved against any party. Any controversy over construction of
this Agreement shall be decided without regard to events of
authorship or negotiation.
[signature page follows]
43
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first written above.
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HCA INC. |
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By: /s/ Jack O. Bovender, Jr. |
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Name: Jack O. Bovender, Jr. |
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Title: Chairman and Chief Executive Officer |
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HERCULES HOLDING II, LLC |
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By: /s/ Chris Gordon |
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Name: Chris Gordon |
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Title: President |
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HERCULES ACQUISITION CORPORATION |
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By: /s/ Chris Gordon |
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Name: Chris Gordon |
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Title: President |
44
ANNEX B
Opinion of Credit Suisse Securities (USA) LLC
July 23, 2006
Special Committee of the Board of Directors
HCA Inc.
One Park Plaza
Nashville, Tennessee 37203
Members of the Special Committee:
You have asked us to advise you with respect to the fairness,
from a financial point of view, to the holders of the common
stock, voting and nonvoting, each par value $.01 per share
(collectively, the Company Common Stock), of HCA
Inc. (the Company), other than holders of Company
Common Stock that are affiliates of Parent (as defined below) or
the Surviving Corporation (as defined below) and the Rollover
Holders (as defined below), of the Merger Consideration (as
defined below) to be received by such holders pursuant to the
terms of the proposed Agreement and Plan of Merger (the
Merger Agreement) to be entered into among Hercules
Holding II, LLC (the Parent), Hercules
Acquisition Corporation, a wholly owned subsidiary of Parent
(Merger Co), and the Company. The proposed Merger
Agreement provides for, among other things, the merger (the
Merger) of Merger Co with and into the Company
pursuant to which the Company will be the surviving corporation
(the Surviving Corporation) and each outstanding
share of Company Common Stock will be converted into the right
to receive $51.00 in cash (the Merger
Consideration). We understand that certain holders of
Company Common Stock or other equity securities of the Company
(collectively, the Rollover Holders) will invest in
securities of Parent or the Surviving Corporation in connection
with the merger.
In arriving at our opinion, we have reviewed the proposed Merger
Agreement and certain related documents as well as certain
publicly available business and financial information relating
to the Company. We also have reviewed certain other information
relating to the Company, including financial forecasts, provided
to or discussed with us by the Company, and have met with the
management of the Company to discuss the business and prospects
of the Company. We also have considered certain financial and
stock market data of the Company, and we have compared that data
with similar data for other publicly held companies in
businesses we deemed similar to that of the Company and we have
considered, to the extent publicly available, the financial
terms of certain other business combinations and other
transactions which have been recently effected or announced. We
also considered such other information, financial studies,
analyses and investigations and financial, economic and market
criteria which we deemed relevant.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the
foregoing information and have relied on such information being
complete and accurate in all material respects. With respect to
the financial forecasts for the Company which we have reviewed,
the management of the Company has advised us, and we have
assumed, that such forecasts have been reasonably prepared on
bases reflecting the best currently available estimates and
judgments of the Companys management as to the future
financial performance of the Company. We also have assumed that
the final Merger Agreement, when executed, will conform to the
draft Merger Agreement in all respects material to our analyses.
We also have assumed, with your consent, that in the course of
obtaining any regulatory or third party consents, approvals or
agreements in connection with the Merger, no modification,
delay, limitation, restriction or condition will be imposed that
would have an adverse effect on the Company or the Merger and
that the Merger will be consummated in accordance with the terms
of the draft Merger Agreement without waiver, modification,
amendment or adjustment of any material term, condition or
agreement therein, including that Parent will obtain the
necessary financing to effect the Merger in accordance with the
terms of the draft debt and equity financing commitments
provided to or discussed with us by Parent. In addition, we have
not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of the Company, nor have we been furnished with
any such evaluations or appraisals. We understand that, in
accordance
B-1
with the Companys restated certificate of incorporation,
filed with the Delaware Secretary of State on February 3,
2004, the voting and nonvoting common stock of the Company will
receive the same consideration in the proposed Merger and, for
purposes of our opinion and related analyses, we have treated
the voting and nonvoting common stock identical in all material
respects. Our opinion addresses only the fairness, from a
financial point of view, to the holders of Company Common Stock
(other than holders of Company Common Stock that are affiliates
of Parent and the Rollover Holders) of the Merger Consideration
and does not address any other aspect or implication of the
Merger or any other agreement, arrangement or understanding
entered into in connection with the Merger or otherwise. Our
opinion is necessarily based upon information made available to
us as of the date hereof and upon financial, economic, market
and other conditions as they exist and can be evaluated on the
date hereof. Prior to the date hereof, we were not asked to, and
we did not solicit third party indications of interest in
acquiring the Company, but we note that we have been authorized
in accordance with the Merger Agreement to do so for a
prescribed period of time following the execution of the Merger
Agreement. Our opinion does not address the relative merits of
the Merger as compared to alternative transactions or strategies
that might be available to the Company, nor does it address the
underlying business decision of the Company to proceed with the
Merger.
We have acted as financial advisor to the Special Committee in
connection with the Merger and will receive a fee for our
services, a portion of which is a fee for rendering this
opinion. Our aggregate fee will be increased if the Merger is
consummated. In addition, the Company has agreed to indemnify us
for certain liabilities and other items arising out of our
engagement. From time to time, we and our affiliates have in the
past provided, are currently providing and in the future we may
provide, investment banking and other financial services to the
Company, as well as the private investment firms whose
affiliates are stockholders of Parent, and their respective
affiliates, for which we have received, and would expect to
receive, compensation. We and certain of our affiliates and
certain of our and their respective employees and certain
private investment funds affiliated or associated with us have
invested in private equity funds managed or advised by the
private investment firms whose affiliates are stockholders of
Parent. We are a full service securities firm engaged in
securities trading and brokerage activities as well as providing
investment banking and other financial services. In the ordinary
course of business, we and our affiliates may acquire, hold or
sell, for our own accounts and the accounts of customers,
equity, debt and other securities and financial instruments
(including bank loans and other obligations) of the Company,
Parent, affiliates of the stockholders of Parent and any other
company that may be involved in the Merger and, accordingly, may
at any time hold a long or short position in such securities, as
well as provide investment banking and other financial services
to such companies.
It is understood that this letter is for the information of the
Special Committee of the Board of Directors of the Company in
connection with its consideration of the Merger and does not
constitute a recommendation to any stockholder as to how such
stockholder should vote or act on any matter relating to the
proposed Merger.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration to be received
by the holders of Company Common Stock (other than holders of
Company Common Stock that are affiliates of Parent and the
Rollover Holders) is fair to such holders, from a financial
point of view.
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Very truly yours, |
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Credit Suisse Securities (USA) LLC |
B-2
ANNEX C
Opinion of Morgan Stanley & Co. Incorporated
July 23, 2006
Special Committee of the Board of Directors
HCA Inc.
One Park Plaza
Nashville, TN 37203
Members of the Special Committee of the Board:
We understand that HCA Inc. (the Company), Hercules
Holding II, LLC (Buyer) and Hercules
Acquisition Corporation, a wholly owned subsidiary of Buyer
(Acquisition Sub) propose to enter into an Agreement
and Plan of Merger, substantially in the form of the draft dated
July 23, 2006 (the Merger Agreement), which
provides, among other things, for the merger (the
Merger) of Acquisition Sub with and into the
Company. Pursuant to the Merger, the Company will become a
wholly owned subsidiary of Buyer and each outstanding share of
common stock, par value $0.01 per share, of the Company
(the Common Stock) and each share of nonvoting
common stock, par value $0.01 per share, of the Company
(the Nonvoting Common Stock and, collectively with
shares of Common Stock, the Shares) of the Company
(other than Shares held by the Company as treasury stock, Shares
owned by Buyer immediately prior to the effective time of the
Merger, including any Shares contributed to Buyer by the
Rollover Investors (as defined below), or Shares as to which
dissenters rights have been perfected) will be converted
into the right to receive $51.00 per share in cash. The
terms and conditions of the Merger are more fully set forth in
the Merger Agreement. We understand that Frisco, Inc.,
Frisco Partners and certain other holders of Shares or other
equity securities of the Company (collectively, the
Rollover Investors) will invest in securities of
Buyer or the surviving corporation in the Merger pursuant to
agreements entered into in connection with the Merger (the
Rollover Investors Agreements).
You have asked for our opinion as to whether the consideration
to be received by the holders of Shares (other than the Rollover
Investors, Buyer and its affiliates) pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
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(i) reviewed certain publicly available financial
statements and other information of the Company; |
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(ii) reviewed certain internal financial statements and
other financial and operating data concerning the Company
prepared by the management of the Company; |
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(iii) analyzed certain financial projections prepared by
the management of the Company; |
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(iv) discussed the past and current operations and
financial condition and the prospects of the Company with senior
executives of the Company; |
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(v) reviewed the reported prices and trading activity for
the Shares; |
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(vi) compared the financial performance of the Company and
the prices and trading activity of the Shares with that of
certain other comparable publicly-traded companies and their
securities; |
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(vii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; |
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(viii) participated in discussions and negotiations among
representatives of the Special Committee and Buyer and their
financial and legal advisors; |
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(ix) reviewed the Merger Agreement, the debt and equity
financing commitments provided to Buyer by certain lending
institutions and private equity funds (the Financing
Agreements), the |
C-1
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commitments by Frisco, Inc. and Frisco Partners to
contribute Shares to Buyer in connection with the Merger, each
substantially in the form of the drafts dated July 23,
2006, and certain related documents; and |
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(x) performed such other analyses and considered such other
factors as we have deemed appropriate. |
We have assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by us
for the purposes of this opinion. With respect to the financial
projections, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of
the Company. We have also assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger
Agreement without any waiver, amendment or delay of any terms or
conditions including, among other things, that Buyer will obtain
financing for the Merger in accordance with the terms set forth
in the Financing Agreements and that the transactions
contemplated by the Rollover Investors Agreements will be
consummated in accordance with their terms. We have assumed that
in connection with the receipt of all the necessary
governmental, regulatory or other approvals and consents
required for the Merger, no delays, limitations, conditions or
restrictions will be imposed that would have an adverse effect
on the contemplated benefits expected to be derived in the
Merger. We are not legal, tax or regulatory advisors and have
relied upon, without independent verification, the assessment of
the Company and its legal, tax or regulatory advisors with
respect to such matters.
This opinion does not address the fairness of any consideration
to be received by the Rollover Investors pursuant to the Merger
Agreement or the Rollover Investors Agreements, the relative
merits of the Merger as compared to alternative transactions or
strategies that might be available to the Company, or the
underlying business decision of the Company to enter into the
Merger. We have not made any independent valuation or appraisal
of the assets or liabilities of the Company nor have we been
furnished with any such appraisals. We understand that, in
accordance with the Companys restated certificate of
incorporation, filed with the Delaware Secretary of State on
February 3, 2004, the Common Stock and Nonvoting Common
Stock of the Company will receive the same consideration in the
proposed Merger and, for purposes of our opinion and related
analyses, we have treated the Common Stock and Nonvoting Common
Stock as identical in all material respects. Our opinion is
necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. Events occurring after the date
hereof may affect this opinion and the assumptions used in
preparing it, and we do not assume any obligation to update,
revise or reaffirm this opinion.
In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any party with respect to the
acquisition of the Company or any of its assets (but we note
that we have been so authorized for a period of time following
execution of the Merger Agreement, subject to the terms,
conditions and procedures set forth therein), nor did we
negotiate with any parties, other than Buyer, with respect to a
possible acquisition of the Company or certain of its
constituent businesses.
We have acted as financial advisor to the Special Committee of
the Board of Directors of the Company in connection with this
transaction and will receive a fee for our services.
In the past, we and our affiliates have provided financial
advisory and financing services for the Company and affiliates
of Buyer and have received fees for the rendering of these
services. In addition, we and our affiliates, directors or
officers, including individuals working with the Company in
connection with this transaction, may have committed and may
commit in the future to invest in private equity funds managed
by affiliates of Buyer. In the ordinary course of our trading,
brokerage, investment management and financing activities, we or
our affiliates may at any time hold long or short positions, and
may trade or otherwise effect transactions, for our own account
or the accounts of customers, in debt or equity securities or
senior loans of the Company, affiliates of Buyer or any other
company or any currency or commodity that may be involved in
this transaction.
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It is understood that this letter is for the information of the
Special Committee of the Board of Directors of the Company and
may not be used for any other purpose without our prior written
consent. This opinion may be reproduced in full in any proxy or
information statement mailed to shareholders of the Company in
connection with this transaction if required by applicable law
but may not otherwise be disclosed publicly in any manner
without our prior approval. We express no opinion or
recommendation as to how the shareholders of the Company should
vote at the shareholders meeting to be held in connection
with the Merger.
Based on the foregoing, we are of the opinion on the date hereof
that the consideration to be received by the holders of Shares
(other than the Rollover Investors, Buyer and its affiliates)
pursuant to the Merger Agreement is fair from a financial point
of view to such holders.
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Very truly yours, |
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MORGAN STANLEY & CO. INCORPORATED |
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By: |
/s/ Michael J. Boublik |
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Michael J. Boublik |
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Managing Director |
C-3
ANNEX D
Section 262 of the General Corporation Law of the State
of Delaware
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this
section and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to
§ 228 of this title shall be entitled to an appraisal
by the Court of Chancery of the fair value of the
stockholders shares of stock under the circumstances
described in subsections (b) and (c) of this section.
As used in this section, the word stockholder means
a holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words
stock and share mean and include what is
ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words depository receipt mean a receipt or other
instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
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(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of
§ 251 of this title. |
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(2) Notwithstanding paragraph (1) of this
subsection, appraisal rights under this section shall be
available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except: |
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a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof; |
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b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders; |
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c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or |
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d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph. |
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(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation. |
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
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(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or |
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(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, |
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provided, that if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which
the notice is given. |
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections
(a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw
such stockholders demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and
with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days
after such stockholders written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for
delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining
their fair value exclusive of any element of value arising from
the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest,
the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would
have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit
discovery or other pretrial proceedings and may proceed to trial
upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section
and who has submitted such stockholders certificates of
stock to the Register in Chancery, if such is required, may
D-3
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in
subsection (e) of this section or thereafter with the
written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms
as the Court deems just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
ANNEX E
Information Relating to the Sponsors, the Frist Entities and
HCA Directors and Executive Officers
Directors and Executive Officers
The following information sets forth the names, ages, titles of
our directors and executive officers, their present principal
occupation and their business experience during the past five
years. During the last five years, none of HCA, its executive
officers or directors has been (i) convicted in a criminal
proceeding (excluding traffic violations and similar
misdemeanors) or (ii) a party to any judicial or
administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a
judgment, decree or final order enjoining such person from
future violations of, or prohibiting activities subject to,
federal or state securities laws, or a finding of any violation
of federal or state securities laws. All of the directors and
executive officers listed below are U.S. citizens. The
business address of each of the director or officer listed below
is c/o HCA Inc., One Park Plaza, Nashville, Tennessee
37203; (615) 344-9551.
C. Michael Armstrong
Director Since 2004
Age 67
Mr. Armstrong was Chairman of the Board of Directors of
Comcast Corporation from November 2002 to May 2004 and continued
to serve as a director of Comcast Corporation until June 2005.
From 1997 until 2002, Mr. Armstrong served as Chairman and
Chief Executive Officer of AT&T Corp. Prior to that time,
Mr. Armstrong served as Chairman and Chief Executive
Officer of Hughes Electronics Corporation. Prior to that,
Mr. Armstrong served as Chairman of IBM World Trade Corp.
Mr. Armstrong also serves as a director of Citigroup Inc.
and IHS Inc.
Magdalena H. Averhoff, M.D.
Director Since 1992
Age 55
Magdalena H. Averhoff, M.D. is a retired physician who
specialized in gastroenterology. She practiced in Miami, Florida
from 1982 until her retirement in 2005. Dr. Averhoff serves
on the Board of Cedars Medical Center prior to her retirement.
She has served as the Chairperson of the Performance Improvement
Committee and the Credentials Committee and as the President and
Chief of Staff at Cedars Medical Center.
Jack O. Bovender, Jr.
Director Since 1999
Age 61
Jack O. Bovender, Jr. has served as our Chairman and Chief
Executive Officer since January 2002. Mr. Bovender served
as President and Chief Executive Officer of the Company from
January 2001 to December 2001. From August 1997 to January 2001,
Mr. Bovender served as President and Chief Operating
Officer of the Company. From April 1994 to August 1997, he was
retired. Prior to his retirement, Mr. Bovender served as
Chief Operating Officer of HCA-Hospital Corporation of America
from 1992 until 1994. Prior to 1992, Mr. Bovender held
several senior level positions with HCA-Hospital Corporation of
America.
Richard M. Bracken
Director Since 2002
Age 54
Richard M. Bracken was appointed President and Chief Operating
Officer in January 2002; he was appointed Chief Operating
Officer in July 2001. Mr. Bracken served as
President Western Group of the Company from August
1997 until July 2001. From January 1995 to August 1997,
Mr. Bracken served as
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President of the Pacific Division of the Company. Prior to 1995,
Mr. Bracken served in various hospital Chief Executive
Officer and Administrator positions with HCA-Hospital
Corporation of America.
Martin Feldstein
Director Since 1998
Age 66
Martin Feldstein has been a Professor of Economics at Harvard
University since 1969. Dr. Feldstein also has served as the
President and Chief Executive Officer of the National Bureau of
Economic Research, a nonprofit economic research firm, since
1977, except for the period from August 1982 to July 1984 when
he served as Chairman of the Council of Economic Advisors.
Dr. Feldstein is also a director of American International
Group, Inc. and Eli Lilly and Company.
Thomas F. Frist, Jr., M.D.
Director Since 1994
Age 68
Thomas F. Frist, Jr., M.D. stepped down as our
Chairman in January 2002. Dr. Frist served as an executive
officer and Chairman of our Board of Directors from January 2001
to January 2002. From July 1997 to January 2001, Dr. Frist
served as our Chairman and Chief Executive Officer.
Dr. Frist served as Vice Chairman of the Board of Directors
from April 1995 to July 1997 and as Chairman from February 1994
to April 1995. He was Chairman, Chief Executive Officer and
President of HCA-Hospital Corporation of America from 1988 to
February 1994.
Frederick W. Gluck
Director Since 1998
Age 71
Frederick W. Gluck served as senior counselor to
McKinsey & Company, Inc., an international consulting
firm, from July 1998 to July 2003. He worked with Bechtel Group,
Inc. from February 1995 to July 1998, serving as its Vice
Chairman and Director from January 1996 to July 1997.
Mr. Gluck held various positions with McKinsey &
Company, Inc. from 1968 to 1995, including leading the firm as
its managing partner from 1988 to 1994. Mr. Gluck is also a
director of Amgen Inc.
Glenda A. Hatchett
Director Since 2000
Age 55
Glenda A. Hatchett is an author and has hosted a nationally
syndicated television court show, Judge Hatchett,
since 2000. Ms. Hatchett served as the Chief Judge of
Fulton County Juvenile Court from 1991 until May 1999.
Ms. Hatchett served as Judge of Fulton County Juvenile
Court from 1990 until 1991. Prior to that time,
Ms. Hatchett held various leadership positions with Delta
Air Lines, Inc.s legal and public relations departments.
Charles O. Holliday, Jr.
Director Since 2002
Age 58
Charles O. Holliday, Jr. has served as the Chairman and
Chief Executive Officer of E. I. du Pont de Nemours and Company,
or DuPont, since January 1999, and has served as Chief Executive
Officer of DuPont since February 1998. Mr. Holliday served
as President of DuPont from December 1997 to December 1998. He
was Chairman of DuPont, Asia Pacific from July 1995 until
November 1997. Mr. Holliday held a number of other
positions with DuPont from 1970 to 1995.
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T. Michael Long
Director Since 1991
Age 63
T. Michael Long is a partner with Brown Brothers
Harriman & Co., a private banking firm. Mr. Long
joined Brown Brothers Harriman & Co. in 1971 and became
a partner in 1984. He is currently
Co-Manager of The 1818
Fund III, L.P. and its predecessor, The 1818 Fund II,
L.P. He participates as a member of the Investment Committees of
other private equity funds sponsored by the firm and serves as a
senior advisor in certain financial advisory relationships with
firm clients.
John H. McArthur
Director Since 1998
Age 72
John H. McArthur served as Dean of the Faculty of the Harvard
University Graduate School of Business Administration from 1980
to 1995. He was on the faculty of the Harvard Business School
from 1962 to 1995. From 1996 to 2005, Mr. McArthur served
as Senior Advisor to the President of the World Bank.
Mr. McArthur currently serves as Chairman of the Board at
the Asia Pacific Foundation of Canada. Mr. McArthur is also
a director of AES Corporation, BCE Inc., Bell Canada and
Cabot Corporation.
Kent C. Nelson
Director Since 1998
Age 69
Kent C. Nelson served as Chairman and Chief Executive Officer of
United Parcel Service from November 1989 to December 1996.
Mr. Nelson held various positions with United Parcel
Service over a 37-year
period.
Frank S. Royal, M.D.
Director Since 1994
Age 67
Frank S. Royal, M.D. is a physician who has been practicing
in Richmond, Virginia for over 20 years. Dr. Royal
served as President and Chairman of the National Medical
Association. Dr. Royal is a director of Chesapeake
Corporation, CSX Corporation, Smithfield Foods, Inc., Dominion
Resources, Inc. and SunTrust Banks, Inc.
Harold T. Shapiro
Director Since 2001
Age 71
Harold T. Shapiro currently serves as Professor of Economics and
Public Affairs at Princeton University. Dr. Shapiro served
as the President of Princeton University from January 1988 to
July 2001. Dr. Shapiro served as chairman of the National
Bioethics Advisory Commission from 1986 to 2001, and is
currently chair of the Alfred P. Sloan Foundation.
Dr. Shapiro is also a director of DeVry Inc.
R. Milton Johnson
Age 49
R. Milton Johnson has served as Executive Vice President
and Chief Financial Officer of the Company since July 2004.
Mr. Johnson served as Senior Vice President and Controller
of the Company from July 1999 until July 2004. Mr. Johnson
served as Vice President and Controller of the Company from
November 1998 to July 1999. Prior to that time, Mr. Johnson
served as Vice President Tax of the Company from
April 1995 to October 1998. Prior to that time, Mr. Johnson
served as Director of Tax for Healthtrust from September 1987 to
April 1995.
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David G. Anderson
Age 59
David G. Anderson has served as Senior Vice
President Finance and Treasurer of the Company since
July 1999. Mr. Anderson served as Vice
President Finance of the Company from September
1993 to July 1999 and was elected to the additional position of
Treasurer in November 1996. From March 1993 until September
1993, Mr. Anderson served as Vice President
Finance and Treasurer of Galen Health Care, Inc. From July 1988
to March 1993, Mr. Anderson served as Vice
President Finance and Treasurer of Humana Inc.
Victor L. Campbell
Age 59
Victor L. Campbell has served as Senior Vice President of the
Company since February 1994. Prior to that time,
Mr. Campbell served as HCA-Hospital Corporation of
Americas Vice President for Investor, Corporate and
Government Relations. Mr. Campbell joined HCA-Hospital
Corporation of America in 1972. Mr. Campbell is the
chairman of the Board of the Federation of American Hospitals
and serves on the Board of HRET, a subsidiary of the American
Hospital Association.
Rosalyn S. Elton
Age 45
Rosalyn S. Elton has served as Senior Vice President
Operations Finance of the Company since July 1999.
Ms. Elton served as Vice President Operations
Finance of the Company from August 1993 to July 1999. From
October 1990 to August 1993, Ms. Elton served as Vice
President Financial Planning and Treasury for the
Company.
Charles R. Evans
Age 59
Charles R. Evans was appointed President Eastern
Group of the Company in May 2004. Mr. Evans served as
President Southeast Division from January 2001 until
May 2004. Mr. Evans served as President Mid
America Division from January 1998 until December 2000. Prior to
that time, Mr. Evans served as President North
Carolina Division from April 1996 until December 1997, and as
President First Coast Health Network from January
1995 until March 1996. Prior to that time, Mr. Evans served
in various positions with Community Hospitals Indianapolis.
V. Carl George
Age 62
V. Carl George has served as Senior Vice
President Development of the Company since July
1999. Mr. George served as Vice President
Development of the Company from April 1995 to July 1999. From
September 1987 to April 1995, Mr. George served as Director
of Development for Healthtrust. Prior to working for
Healthtrust, Mr. George served with HCA-Hospital
Corporation of America in various positions.
R. Sam Hankins, Jr.
Age 56
R. Sam Hankins, Jr. was appointed Chief Financial
Officer Outpatient Services Group in May 2004.
Mr. Hankins served as Chief Financial Officer
West Florida Division from January 1998 until May 2004. Prior to
that time, Mr. Hankins served as Chief Financial
Officer Northeast Division from March 1997 until
December 1997, and as Chief Financial Officer
Richmond Division from March 1996 until February 1997. Prior to
that time, Mr. Hankins served in various positions with CJW
Medical Center in Richmond, Virginia and with several hospitals.
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Russell K. Harms
Age 48
Russell K. Harms was appointed Chief Financial
Officer Central Group in October 2005. From January
2001 to October 2005, Mr. Harms served as Chief Financial
Officer of HCAs MidAmerica Division. From December 1997 to
December 2000, Mr. Harms served as Chief Financial Officer
of Presbyterian/ St. Lukes Medical Center.
Samuel N. Hazen
Age 46
Samuel N. Hazen was appointed President Western
Group of the Company in July 2001. Mr. Hazen served as
Chief Financial Officer Western Group of the Company
from August 1995 to July 2001. Mr. Hazen served as Chief
Financial Officer North Texas Division of the
Company from February 1994 to July 1995. Prior to that time,
Mr. Hazen served in various hospital and regional Chief
Financial Officer positions with Humana Inc. and Galen Health
Care, Inc.
Frank M. Houser
Age 65
Frank M. Houser, M.D. has served as Senior Vice
President Quality and Medical Director of the
Company since November 1997. Dr. Houser served as
President Physician Management Services of the
Company from May 1996 to November 1997. Dr. Houser served
as President of the Georgia Division of the Company from
December 1994 to May 1996. From May 1993 to December 1994,
Dr. Houser served as the Medical Director of External
Operations at The Emory Clinic, Inc. in Atlanta, Georgia.
Dr. Houser served as State Public Health Director, Georgia
Department of Human Resources from July 1991 to May 1993.
Patricia T. Lindler
Age 59
Patricia T. Lindler has served as Senior Vice
President Government Programs of the Company since
July 1999. Ms. Lindler served as Vice
President Reimbursement of the Company from
September 1998 to July 1999. Prior to that time,
Ms. Lindler was the President of Health Financial
Directions, Inc. from March 1995 to November 1998. From
September 1980 to February 1995, Ms. Lindler served as
Director of Reimbursement of the Companys Florida Group.
A. Bruce Moore, Jr.
Age 46
A. Bruce Moore, Jr. was appointed
President Outpatient Services Group in January 2006.
Mr. Moore had served as Senior Vice President and as Chief
Operating Officer Outpatient Services Group since
July 2004 and as Senior Vice President Operations
Administration from July 1999 until July 2004. Mr. Moore
served as Vice President Operations Administration
of the Company from September 1997 to July 1999, as Vice
President Benefits from October 1996 to September
1997, and as Vice President Compensation from March
1995 until October 1996.
Jonathan B. Perlin, M.D.
Age 45
Dr. Jonathan B. Perlin was appointed Senior Vice
President Quality and Medical Director of the
Company in August 2006. Prior to joining the Company,
Dr. Perlin had served as Undersecretary of Health in the
U.S. Department of Veterans Affairs since April 2004. Dr.
Perlin joined the Veterans Health Administration in November
1999 where he served in various capacities, including as Deputy
Undersecretary of Health from July 2002 to April 2004, and as
Chief Quality and Performance Officer from November 1999 to
September 2002.
E-5
W. Paul Rutledge
Age 51
W. Paul Rutledge was appointed as President
Central Group in October 2005. Mr. Rutledge had served as
President of the MidAmerica Division since January 2001. He
served as President of TriStar Health System from June 1996 to
January 2001 and served as president of Centennial Medical
Center from May 1993 to June 1996. He has served in leadership
capacities with HCA for more than 20 years, working with
hospitals in New Orleans, La., Rome, Ga. and Nashville Tn.
Richard J. Shallcross
Age 47
Richard J. Shallcross was appointed Chief Financial
Officer Western Group of the Company in August 2001.
Mr. Shallcross served as Chief Financial
Officer Continental Division of the Company from
September 1997 to August 2001. From October 1996 to August 1997,
Mr. Shallcross served as Chief Financial
Officer Utah/ Idaho Division of the Company. From
November 1995 until September 1996, Mr. Shallcross served
as Vice President of Finance and Managed Care for the Colorado
Division of the Company.
Joseph N. Steakley
Age 52
Joseph N. Steakley has served as Senior Vice
President Internal Audit Services of the Company
since July 1999. Mr. Steakley served as Vice
President Internal Audit Services from November
1997 to July 1999. From October 1989 until October 1997,
Mr. Steakley was a partner with Ernst & Young LLP.
John M. Steele
Age 50
John M. Steele has served as Senior Vice President
Human Resources of the Company since November 2003.
Mr. Steele served as Vice President
Compensation and Recruitment of the Company from November 1997
to October 2003. From March 1995 to November 1997,
Mr. Steele served as Assistant Vice President
Recruitment.
Donald W. Stinnett
Age 50
Donald W. Stinnett was appointed Chief Financial
Officer Eastern Group in October 2005.
Mr. Stinnett had served as Chief Financial Officer of the
Far West Division since July 1999. Mr. Stinnett served as
Chief Financial Officer and Vice President of Finance of
Franciscan Health System of the Ohio Valley from 1995 until
1999, and served in various capacities with Franciscan Health
System of Cincinnati and Providence Hospital in Cincinnati prior
to that time.
Beverly B. Wallace
Age 55
Beverly B. Wallace was appointed President Shared
Services Group in March 2006. From January 2003 until March
2006, Ms. Wallace served as President
Financial Services Group. Ms. Wallace served as Senior Vice
President Revenue Cycle Operations Management of the
Company from July 1999 to January 2003. Ms. Wallace served
as Vice President Managed Care of the Company from
July 1998 to July 1999. From 1997 to 1998, Ms. Wallace
served as President Homecare Division of the
Company. From 1996 to 1997, Ms. Wallace served as Chief
Financial Officer Nashville Division of the Company.
From 1994 to 1996, Ms. Wallace served as Chief Financial
Officer Mid-America Division of the Company.
E-6
Robert A. Waterman
Age 52
Robert A. Waterman has served as Senior Vice President and
General Counsel of the Company since November 1997.
Mr. Waterman served as a partner in the law firm of
Latham & Watkins from September 1993 to October 1997;
he was also Chair of the firms healthcare group during
1997.
Noel Brown Williams
Age 51
Noel Brown Williams has served as Senior Vice President and
Chief Information Officer of the Company since October 1997.
From October 1996 to September 1997, Ms. Williams served as
Chief Information Officer for American Service Group/ Prison
Health Services, Inc. From September 1995 to September 1996,
Ms. Williams worked as an independent consultant. From June
1993 to June 1995, Ms. Williams served as Vice President,
Information Services for HCA Information Services. From February
1979 to June 1993, she held various positions with HCA-Hospital
Corporation of America Information Services.
Alan R. Yuspeh
Age 57
Alan R. Yuspeh has served as Senior Vice President
Ethics, Compliance and Corporate Responsibility of the Company
since October 1997. From September 1991 until October 1997,
Mr. Yuspeh was a partner with the law firm of
Howrey & Simon. As a part of his law practice,
Mr. Yuspeh served from 1987 to 1997 as Coordinator of the
Defense Industry Initiative on Business Ethics and Conduct.
Hercules Holding II, LLC
Hercules Holding II, LLC is a Delaware limited liability
company that was formed solely for the purpose of acquiring HCA.
Hercules Holding II, LLC has not engaged in any business
except as contemplated by the merger agreement. The principal
office addresses of Hercules Holding II, LLC are c/o Bain
Capital Partners, LLC, 111 Huntington Avenue, Boston, MA
02199, c/o Kohlberg Kravis Roberts & Co. L.P., 2800
Sand Hill Road, Suite 200, Menlo Park, CA 94025 and c/o
Merrill Lynch Global Private Equity, Four World Financial
Center, Floor 23, New York, NY 10080. The telephone
number at each of the principal offices is
(617) 516-2000,
(650) 233-6560 and (212) 449-1000, respectively.
The names and material occupations, positions, offices or
employment during the past five years of each executive officer
and member of Hercules Holding II, LLC are set forth below:
Chris Gordon, President and Assistant Secretary. Chris
Gordon is a principal of Bain Capital Partners, LLC, a private
investment firm (Bain), the current business address
of which is 111 Huntington Avenue, Boston, Massachusetts
02199 and has been at Bain since 1997. Mr. Gordon is a
United States citizen.
James C. Momtazee, Vice President, Treasurer and Assistant
Secretary. James C. Momtazee is a director of Kohlberg
Kravis Roberts & Co. L.P., a private investment firm,
the current business address of which is 2800 Sand Hill
Road, Suite 200, Menlo Park, California 94025, and has held
such position since 2005. From May 2005 to December 2005,
Mr. Momtazee served as a Principal of the firm and served
as an Associate from 2001 to May 2005. Mr. Momtazee is a
United States citizen.
Christopher Birosak, Vice President, Secretary and Assistant
Treasurer. Refer to ML Global Private
Equity Fund, L.P. below.
Bain Capital Fund IX, L.P., member. Refer to
Bain Capital Fund IX, L.P. below.
KKR Millennium Fund L.P, member. Refer to
KKR Millennium Fund L.P. below.
E-7
ML Global Private Equity Fund, L.P, member. Refer to
ML Global Private Equity Fund, L.P.
below.
During the last five years, no person or entity described above
has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party
to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of
any violation of federal or state securities laws.
Hercules Acquisition Corporation
Hercules Acquisition Corporation is a Delaware corporation that
was formed solely for the purpose of completing the proposed
merger. Upon the consummation of the proposed merger, Hercules
Acquisition Corporation will cease to exist and HCA will
continue as the surviving corporation. Hercules Acquisition
Corporation is wholly-owned by Hercules Holding II, LLC and
has not engaged in any business except as contemplated by the
merger agreement. The principal office addresses of Hercules
Acquisition Corporation are c/o Bain Capital Partners, LLC,
111 Huntington Avenue, Boston, MA 02199, c/o Kohlberg
Kravis Roberts & Co. L.P., 2800 Sand Hill Road,
Suite 200, Menlo Park, CA 94025 and c/o Merrill Lynch
Global Private Equity, Four World Financial Center,
Floor 23, New York, NY 10080. The telephone number at
each of the principal offices is (617) 516-2000,
(650) 233-6560 and (212) 449-1000, respectively.
The names and material occupations, positions offices or
employment during the past five years of the current executive
officers and directors of Hercules Acquisition Corporation are
set forth below:
Chris Gordon, Director, President and Assistant
Secretary. Refer to Hercules Holding II,
LLC above.
James C. Momtazee, Director, Vice President, Treasurer and
Assistant Secretary. Refer to Hercules
Holding II, LLC above.
Christopher Birosak, Director, Vice President, Secretary and
Assistant Treasurer. Refer to
ML Global Private Equity Fund, L.P.
below.
During the last five years, no person or entity described above
has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party
to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of
any violation of federal or state securities laws.
Bain Capital Fund IX, L.P.
Bain Capital Fund IX, L.P. (Bain Fund IX)
is a Cayman Islands exempted limited partnership engaged in the
business of making private equity and other types of investments.
Bain Capital Fund IX, LLC (IX LLC) is a
Delaware limited liability company whose sole member is Bain
Fund IX.
Bain Capital Partners IX, L.P. (Bain Partners
IX) is the general partner of Bain Fund IX. Bain
Partners IX is a Cayman Islands exempted limited
partnership, the principal business of which is acting as
general partner of Bain Fund IX and a related fund.
Bain Capital Investors, LLC (Bain Capital Investors)
is the general partner of Bain Partners IX. Bain Capital
Investors is a Delaware limited liability company engaged in the
business of acting as the general partner of persons primarily
engaged in the business of making private equity and other types
of investments.
E-8
The business address of each of Bain Fund IX, IX LLC,
Bain Partners IX, Bain Capital Investors and the managing
directors listed below (collectively, the Bain
Parties) is c/ o Bain Capital Partners, LLC,
111 Huntington Avenue, Boston, Massachusetts 02199, except
that the address of the Bain Parties working in the
New York office is c/ o Bain Capital NY, LLC, 745 5th
Avenue, New York, New York 10151.
The names and material occupations, positions offices or
employment during the past five years of each managing director
of Bain Capital Investors are set forth below. Each is a
U.S. citizen.
Andrew B. Balson is a managing director of Bain Capital
Investors. He joined Bain in 1996 and became a managing director
in 2000.
Steven W. Barnes is a managing director of Bain Capital
Investors. He has been associated with Bain since 1988 and
became a managing director in 2000.
Joshua Bekenstein is a managing director of Bain Capital
Investors. He joined Bain at its inception in 1984 and became a
managing director in 1986.
Edward W. Conard is a managing director of Bain Capital
Investors. He joined Bain and became a managing director in
1993. Mr. Conard works in Bain Capitals New York
office.
John P. Connaughton is a managing director of Bain
Capital Investors. He joined Bain in 1989 and became a managing
director in 1997.
Paul B. Edgerley is a managing director of Bain Capital
Investors. He joined Bain in 1988 and became a managing director
in 1990.
Michael F. Goss is a managing director COO of
Bain Capital Investors. He joined Bain in 2001 as a managing
director.
S. Jordan Hitch is a managing director of Bain Capital
Investors. He joined Bain in 1997 and became a managing director
in 2005.
Matthew S. Levin is a managing director of Bain Capital
Investors. He joined Bain in 1992 and became a managing director
in 2000.
Ian K. Loring is a managing director of Bain Capital
Investors. He joined Bain in 1996 and became a managing director
in 2000.
Phil Loughlin is a managing director of Bain Capital
Investors. He joined Bain in 1996 and became a managing director
in 2004.
Mark E. Nunnelly is a managing director of Bain Capital
Investors. He joined Bain and became a managing director in 1990.
Stephen G. Pagliuca is a managing director of Bain
Capital Investors. He joined Bain and became a managing director
in 1989.
Michael Ward is a managing director of Bain Capital
Investors. He joined Bain in 2002 and became a managing director
in 2005. Prior to joining Bain Capital, Mr. Ward was
President and Chief Operating Officer of Digitas, located at
Prudential Center, 800 Boylston Street, Prudential Tower,
Boston, MA 02199.
Stephen M. Zide is a managing director of Bain Capital
Investors. He joined Bain in 1997 and became a managing director
in 2001. Mr. Zide works in Bain Capitals New York
office.
During the last five years, no person or entity described above
has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party
to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of
any violation of federal or state securities laws.
E-9
KKR Millennium Fund L.P. and KKR 2006 Fund L.P.
KKR Millennium Fund L.P. is a Delaware limited partnership
principally engaged in the business of making investments in
equity, debt and other securities issued in connection with
KKR-sponsored management buyouts or
build-ups. KKR
Associates Millennium L.P., a Delaware limited partnership, is
the sole general partner of KKR Millennium Fund L.P. and is
principally engaged in the business of serving as the general
partner of KKR Millennium Fund L.P. and making, managing
and disposing of investments on its behalf. KKR Millennium
GP LLC is the sole general partner of KKR Associates
Millennium L.P. KKR Millennium GP LLC is a Delaware limited
liability company principally engaged in the business of serving
as the general partner of KKR Associates Millennium L.P. The
managing members of KKR Millennium GP LLC are also managing
members of KKR & Co. L.L.C., a Delaware limited
liability company that is the general partner of Kohlberg Kravis
Roberts & Co. L.P., a Delaware limited partnership
(KKR). KKR is a private investment firm which
provides management services to KKR Millennium Fund L.P.
pursuant to the terms of a management agreement. KKR &
Co. L.L.C. and its 24 members carry out the management of
KKRs business and affairs.
KKR 2006 Fund L.P., a Delaware limited partnership, is
principally engaged in the business of making investments in
equity, debt and other securities issued in connection with
KKR-sponsored management buyouts or
build-ups. KKR
Associates 2006 L.P., a Delaware limited partnership, serves as
the general partner of KKR 2006 Fund L.P., and is
principally engaged in the business of serving as the general
partner of KKR 2006 Fund L.P. and making, managing and
disposing of investments on its behalf. KKR 2006 GP LLC, a
Delaware limited liability company, is the sole general partner
of KKR Associates 2006 L.P. and is principally engaged in the
business of serving as the general partner of KKR Associates
2006 L.P. The managing members of KKR 2006 GP LLC are also
managing members of KKR & Co. L.L.C., a Delaware
limited liability company that is the general partner of KKR.
The management of KKRs business and affairs is carried out
by KKR & Co. L.L.C. and its 24 members.
The business address of each of KKR Millennium Fund L.P.,
KKR Associates Millennium L.P., KKR Millennium GP LLC, Kohlberg
Kravis Roberts & Co. L.P., KKR & Co. L.L.C.,
KKR 2006 Fund L.P., KKR Associates 2006 L.P. and KKR 2006
GP LLC is 9 West 57th Street, New York, NY 10019.
The names and material occupations, positions, offices or
employment during the past five years of each member of
KKR & Co. L.L.C., the general partner of KKR, are set
forth below:
Henry R. Kravis serves as a managing member of
KKR & Co. L.L.C. and has held this position since 1996.
Mr. Kravis is a citizen of the United States.
George R. Roberts serves as a managing member of
KKR & Co. L.L.C. and has held this position since 1996.
Mr. Roberts is a citizen of the United States.
Paul E. Raether serves as a member of KKR &
Co. L.L.C. and has held this position since 1996.
Mr. Raether is a citizen of the United States.
Michael W. Michelson serves as a member of KKR &
Co. L.L.C. and has held this position since 1996.
Mr. Michelson is a citizen of the United States.
James H. Greene serves as a member of KKR &
Co. L.L.C. and has held this position since 1996.
Mr. Greene is a citizen of the United States.
Perry Golkin serves as a member of KKR &
Co. L.L.C. and has held this position since 1996.
Mr. Golkin is a citizen of the United States.
Johannes Huth serves as a member of KKR &
Co. L.L.C. and has held this position since 2000.
Mr. Huth is a citizen of Germany.
Alexander Navab serves as a member of KKR &
Co. L.L.C. and has held this position since 2001. From 1993
until 2001, Mr. Navab was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Navab is a citizen of the
United States.
E-10
Todd A. Fisher serves as a member of KKR &
Co. L.L.C. and has held this position since 2001. From 1999
until 2001, Mr. Fisher was an executive of Kohlberg Kravis
Roberts & Co. Ltd. Mr. Fisher is a citizen of the
United States.
Jacques Garaïalde serves as a member of
KKR & Co. L.L.C. and has held this position since
2004. Prior to that, Mr. Garaïalde, was an executive
at The Carlyle Group. Mr. Garaïalde is a citizen of
France.
Marc S. Lipschultz serves as a member of KKR &
Co. L.L.C. and has held this position since 2004. From 1995
until 2004, Mr. Lipschultz was an executive of Kohlberg
Kravis Roberts & Co. L.P. Mr. Lipschultz is a
citizen of the United States.
Reinhard Gorenflos serves as a member of KKR &
Co. L.L.C. and has held this position since 2005. From 2002
until 2005, Mr. Gorenflos was an executive of Kohlberg
Kravis Roberts & Co. Ltd. Prior to 2002,
Mr. Gorenflos served as an executive of Aral.
Mr. Gorenflos is a citizen of Germany.
Michael M. Calbert serves as a member of KKR &
Co. L.L.C. and has held this position since 2005. From 2000
until 2005, Mr. Calbert was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Calbert is a citizen of the
United States.
Scott C. Nuttall serves as a member of KKR &
Co. L.L.C. and has held this position since 2005. From 1997
until 2005, Mr. Nuttall was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Nuttall is a citizen of the
United States.
Joseph Y. Bae serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 1997
until 2006, Mr. Bae was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Bae is a citizen of the
United States.
Brian F. Carroll serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 1997
until 2006, Mr. Carroll was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Carroll is a citizen of the
United States.
Adam H. Clammer serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 1997
until 2006, Mr. Clammer was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Clammer is a citizen of the
United States.
Frederick M. Goltz serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 1996
until 2006, Mr. Goltz was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Goltz is a citizen of the
United States.
Oliver Haarmann serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 1999
until 2006, Mr. Haarmann was an executive of Kohlberg
Kravis Roberts & Co. Ltd. Mr. Haarmann is a
citizen of Germany.
Michael E. Marks serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. Prior to
that, Mr. Marks was an executive at Flextronics.
Mr. Marks is a citizen of the United States.
Dominic P. Murphy serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 2005
until 2006, Mr. Murphy was an executive of Kohlberg Kravis
Roberts & Co. Ltd. Prior to that, Mr. Murphy was
an executive at Cinven. Mr. Murphy is a citizen of the
United Kingdom.
John L. Pfeffer serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 2001
until 2006, Mr. Pfeffer was an executive of Kohlberg Kravis
Roberts & Co. Ltd. Mr. Pfeffer is a citizen of the
United States.
John K. Saer, Jr. serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 2001
until 2006, Mr. Saer was an executive of Kohlberg Kravis
Roberts & Co. L.P. Mr. Saer is a citizen of the
United States.
E-11
Clive Hollick serves as a member of KKR &
Co. L.L.C. and has held this position since 2006. From 2005
until 2006, Mr. Hollick was an executive of Kohlberg Kravis
Roberts & Co. Ltd. Prior to that, Mr. Hollick was
an executive at United Business Media. Mr. Hollick is a
citizen of the United Kingdom.
The current business address of each such member is c/ o
Kohlberg Kravis Roberts & Co. L.P., 9 West
57th Street, New York, New York 10019, except as
follows: (i) the current business address of
Messrs. Roberts, Michelson, Greene, Calbert, Clammer, Goltz
and Marks is c/o Kohlberg Kravis Roberts & Co. L.P.,
2800 Sand Hill Road, Suite 200, Menlo Park, California
94025; (ii) the current business address of
Messrs. Huth, Fisher, Garaïalde, Gorenflos, Haarmann,
Murphy, Pfeffer and Hollick is c/ o Kohlberg Kravis
Roberts & Co. Ltd., Stirling Square, 7 Carlton
Gardens, London, SW1Y 5AD, England and (iii) the current
business address of Mr. Bae is 25/ F AIG Tower,
1 Connaught Road, Central, Hong Kong.
During the last five years, none of the persons or entities
described above has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to any judicial or
administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a
judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or
state securities laws, or a finding of any violation of federal
or state securities laws.
ML Global Private Equity Fund, L.P.
Merrill Lynch & Co., Inc., a Delaware corporation, and
its subsidiaries provide investment, financing, insurance and
related services to individuals and institutions on a global
basis through its broker, dealer, banking, insurance and other
financial services subsidiaries. ML Global Private Equity Fund,
L.P., a Cayman Islands exempted limited partnership, is the
investment vehicle for investments made by Merrill Lynch Global
Private Equity, the private equity arm of Merrill
Lynch & Co., Inc.
MLGPE LTD, a Cayman Islands exempted company and wholly-owned
subsidiary of ML Global Private Equity Partners, L.P., is the
general partner of ML Global Private Equity Fund, L.P. ML Global
Private Equity Partners, L.P., a Cayman Islands exempted limited
partnership, is a limited partner of ML Global Private Equity
Fund, L.P. Merrill Lynch GP Inc., a Delaware corporation and
wholly-owned subsidiary of Merrill Lynch Group, Inc., is the
General Partner of ML Global Private Equity Partners, L.P.
Merrill Lynch Group, Inc., a Delaware corporation and
wholly-owned subsidiary of Merrill Lynch & Co., Inc., is a
holding company for a variety of subsidiaries engaged in
banking, trust services, private equity and insurance.
The names and material occupations, positions, offices or
employment during the last five years of each officer and
director of Merrill Lynch & Co., Inc. and MLGPE LTD,
the general partner of ML Global Private Equity Fund, L.P., are
set forth below:
Merrill Lynch & Co., Inc.
Rosemary T. Berkery serves as Executive Vice President
and General Counsel of Merrill Lynch & Co., Inc. and
has held each position since 2001. Ms. Berkery is a citizen
of the United States.
Armando M. Codina serves as a Director of Merrill Lynch
& Co., Inc. and has held this position since 2005.
Mr. Codina is the President and Chief Executive Officer of
Flagler Development Group, the successor to Codina Group, Inc.,
a real estate investment, development, construction, brokerage
and property management firm, that he founded in 1979.
Mr. Codina is a citizen of the United States.
Jill K. Conway serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
1978. Ms. Conway is a Visiting Scholar at the Massachusetts
Institute of Technology, and has held this position since 1985.
Ms. Conway is a citizen of the United States.
E-12
Alberto Cribiore serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
2003. Mr. Cribiore is a Founder and Managing Principal of
Brera Capital Partners LLC, a private equity investment firm,
and has held this position since 1997. Mr. Cribiore is a
citizen of the United States.
Robert C. Doll serves as Senior Vice President of Merrill
Lynch & Co., Inc. and also serves as the President and
Chief Investment Officer of Merrill Lynch Investment Managers.
Mr. Doll has held the position of Senior Vice President
since 2002 and has served as President and Chief Investment
Officer of Merrill Lynch Investment Managers since 2001.
Mr. Doll is a citizen of the United States.
Jeffrey N. Edwards serves as Senior Vice President and
Chief Financial Officer of Merrill Lynch & Co., Inc.
and has held each position since 2005. Mr. Edwards served
as the Senior Vice President and Head of Investment Banking for
the Americas region from 2004 to 2005, as Head of Global Capital
Markets and Financing from 2003 to 2004 and Co-Head of Global
Equity Markets (covering trading, sales and origination
activities) from 2001 to 2003. Mr. Edwards is a citizen of
the United States and of the United Kingdom.
Ahmass L. Fakahany serves as Executive Vice President,
Vice Chairman and Chief Administrative Officer of Merrill
Lynch & Co., Inc. and has held the positions since 2002
and 2005, respectively. Mr. Fakahany served as Chief
Financial Officer from 2002 to 2005, Chief Operating Officer for
Global Markets and Investment Banking from 2001 to 2002, and
Senior Vice President and Finance Director from 1998 to 2001.
Mr. Fakahany is a citizen of the United States.
John D. Finnegan serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
2004. Mr. Finnegan is the Chairman of the Board, President
and Chief Executive Officer of The Chubb Corporation, a property
and casualty insurance company, and has held each position since
2003, 2002 and 2002, respectively. Mr. Finnegan served as
Executive Vice President of General Motors Corporation,
primarily engaged in the development, manufacture and sale of
automotive vehicle from 1999 to 2002. Mr. Finnegan is a
citizen of the United States.
Gregory J. Fleming serves as Executive Vice President of
Merrill Lynch & Co., Inc. and President of Global
Markets and Investment Banking. Mr. Fleming has held each
position since 2003. Prior to this, Mr. Fleming served as
Chief Operating Officer of the Global Investment Banking Group
of Global Markets and Investment Banking from January to August
2003, and as Co-Head of the Global Financial Institutions Group
of Global Markets and Investment Banking from 2001 to 2003.
Mr. Fleming is a citizen of the United States.
Dow Kim serves as Executive Vice President of Merrill
Lynch & Co., Inc. and President of Global Markets and
Investment Banking. Mr. Kim has held each position since
2003. Mr. Kim served as Head of the Global Debt Markets
Group of Global Markets and Investment Banking from 2001 to
2003, and as Managing Director and Head of Global Enterprise
Risk Management within the Global Debt Markets Group of Global
Markets and Investment Banking from 2000 to 2001. Mr. Kim
is a citizen of the United States.
Robert J. McCann serves as Executive Vice President and
Vice Chairman of Merrill Lynch & Co., Inc. and
President of Global Private Client. Mr. McCann has held
each position since 2003 and 2005, respectively. Mr. McCann
served as Vice Chairman of Wealth Management Group from 2003 to
2005, Vice Chairman and Director of Distribution and Marketing
for AXA Financial Inc. from March 2003 to August 2003, Head of
the Global Securities Research and Economics Group of Merrill
Lynch from 2001 to 2003 and Chief Operating Officer of Global
Markets and Investment Banking from 2000 to 2001.
Mr. McCann is a citizen of the United States.
David K. Newbigging serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
1996. Mr. Newbigging is the Chairman of the Board of Talbot
Holdings Limited, a non-life insurance company whose operations
are U.K.-based, and has held the position since 2003.
Mr. Newbigging served as Chairman of the Board of Friends
Provident plc, a U.K.-based life assurance company, from 2001 to
2005. Mr. Newbigging is a citizen of the United Kingdom.
E-13
E. Stanley ONeal serves as the Chairman of the
Board, Chief Executive Officer and President of Merrill
Lynch & Co., Inc. and has held each position since
2003, 2002 and 2001, respectively. Mr. ONeal has
served as a Director since 2001, and is a citizen of the United
States.
Aulana L. Peters serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
1994. Ms. Peters primary occupation is serving as a
corporate director and is a retired Partner of Gibson,
Dunn & Crutcher LLP. Ms. Peters is a citizen of
the United States.
Joseph W. Prueher serves as a Director of Merrill
Lynch & Co., Inc. and has held the position since 2001.
Adm. Pruehers primary occupation is serving as a
corporate director and Consulting Professor at the Stanford
University Center for International Security and Cooperation,
and has held the position since 2001. Adm. Prueher served
as the U.S. Ambassador to the Peoples Republic of
China from 1999 to 2001, and is a citizen of the United States.
Ann N. Reese serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
2004. Ms. Reese is the Co-Founder and Co-Executive Director
of the Center for Adoption Policy, a not-for-profit corporation,
and has held this position since 2001. Ms. Reese is a
citizen of the United States.
Charles O. Rossotti serves as a Director of Merrill
Lynch & Co., Inc. and has held this position since
2004. Mr. Rossotti is the Senior Advisor to The Carlyle
Group, a private global investment firm, and has held this
position since 2003. Prior to 2003, Mr. Rossotti served as
the Commissioner of Internal Revenue at the Internal Revenue
Service from 1997 to 2002. Mr. Rossotti is a citizen of the
United States.
ML Global Private Equity Fund, L.P.
Christopher J. Birosak serves as a Director and a
Managing Director of MLGPE LTD. Mr. Birosak also serves as
an executive officer of Merrill Lynch Global Private Equity and
has held the position since 2004. From 1994 to 2004,
Mr. Birosak was a Managing Director of Merrill Lynch
Leveraged Finance. Mr. Birosak is a citizen of the United
States.
George A. Bitar serves as a Director and a Managing
Director of MLGPE LTD. Mr. Bitar also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position for over five years. Mr. Bitar is a
citizen of the United States.
Marcelo Di Lorenzo serves as a Director and a Managing
Director of MLGPE LTD. Mr. Di Lorenzo also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position for over five years. Mr. Di Lorenzo is a
citizen of Brazil and Italy.
Robert F. End serves as a Director and a Managing
Director of MLGPE LTD. Mr. End also serves as an executive
officer of Merrill Lynch Global Private Equity and has held the
position since 2004. From 1994 to 2004, Mr. End served as a
Partner of Stonington Partners, Inc., the principal address of
which is 767 Fifth Avenue, 48th Floor, New York, New York,
10153. Mr. End is a citizen of the United States.
Eric J. Kump serves as a Director and a Managing Director
of MLGPE LTD. Mr. Kump also serves as an executive officer
of Merrill Lynch Global Private Equity and has held the position
for over five years. Mr. Kump is a citizen of the United
States.
Terutomo Mitsumasu serves as a Director and a Managing
Director of MLGPE LTD. Mr. Mitsumasu also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position since 2005. From 2002 to 2005,
Mr. Mitsumasu served as Deputy General Manager of Shinsei
Bank, the principal address of which is 1-8, Uchisaiwaicho
2-chrome, Chiyoda-ku, Tokyo 100-8501, Japan. Mr. Mitsumasu
is a citizen of Japan.
Djamal Moussaoui serves as a Director and a Managing
Director of MLGPE LTD. Mr. Moussaoui also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position for over five years. Mr. Moussaoui is a
citizen of France.
E-14
Guido Padovano serves as a Director and a Managing
Director of MLGPE LTD. Mr. Padovano also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position for over five years. Mr. Padovano is a
citizen of Italy.
Mandakini Puri serves as a Director and a Managing
Director of MLGPE LTD. Ms. Puri also serves as an executive
officer of Merrill Lynch Global Private Equity and has held the
position for over five years. Ms. Puri is a citizen of the
United States.
Brian A. Renaud serves as a Director and a Managing
Director of MLGPE LTD. Mr. Renaud also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position for over five years. Mr. Renaud is a
citizen of the United States.
Nathan C. Thorne serves as a Director and President of
MLGPE LTD., and as a Senior Vice President of Merrill
Lynch & Co., Inc. Mr. Thorne also serves as an
executive officer of Merrill Lynch Global Private Equity and has
held the position for over five years. Mr. Thorne is a
citizen of the United States.
The current business address of each such person is Four World
Financial Center, 250 Vesey Street, New York, NY 10080, except
as follows: (i) the current business address of
Messrs. Kump and Moussaoui is Merrill Lynch Financial
Centre, 2 King Edward Street, London EC1A 1 HQ, United Kingdom;
(ii) the current business address of Messrs. Di
Lorenzo and Padovano is Av. Brigadeiro Faria Lima, 3400
18th Floor, 04538-132 Sao Paulo, Brazil; (iii) the
current business address of Mr. Mitsumasu is Nihonbashi
1-chrome Building, 1-4-1 Nihonbashi, Chuo-ku, Tokyo 1003- 8230,
Japan and (iv) the current business address of
Mr. Renaud is Governor Phillip Tower, Level 38, 1
Farrer Place, Sydney NSW 2000, Australia.
On May 31, 2006, as part of a settlement relating to
managing auctions for auction rate securities, the SEC accepted
the offer of settlement of fifteen firms, including Merrill
Lynch, Pierce, Fenner & Smith Incorporated (Merrill
Lynch), and issued a settlement order on May 31,
2006. The SEC found, and Merrill Lynch neither admitted nor
denied, that Merrill Lynch violated section 17(a)(2) of the
Securities Act by managing auctions for auction rate securities
in ways that were not adequately disclosed or that did not
conform to disclosed procedures. Merrill Lynch submitted, and
the SEC accepted, an offer of settlement whereby, without
admitting or denying the findings contained in the SECs
order, Merrill Lynch consented to a cease and desist order, a
censure, a civil money penalty of $1,500,000 (paid to the
SECs on June 1, 2006) and compliance with certain
undertakings to provide customers with written descriptions of
Merrill Lynchs material auction practices and procedures
and to implement procedures reasonably designed to prevent and
detect failures by Merrill Lynchs to conduct auctions for
auction rate securities in accordance with disclosed procedures.
On March 13, 2006, Merrill Lynch entered into a settlement
with the SEC, without admitting or denying the allegations, that
includes findings with regard to failure to provide in a timely
manner representatives of the SEC with electronic mail
communications as required and failure to retain certain emails
related to its business in violation of Section 17(A) of
the Exchange Act and
Rules 17A-4(J) and
17A-4(B)(4),
respectively. The settlement resulted in the payment of
$2.5 million to the SEC.
In March 2005, Merrill Lynch reached agreements with the State
of New Jersey and the New York Stock Exchange (NYSE)
and reached an agreement in principle with the State of
Connecticut pursuant to which Merrill Lynch, without admitting
or denying the allegations, consented to a settlement that
included findings that it failed to maintain certain books and
records and to reasonably supervise a team of former FAs who
facilitated improper market timing by a hedge fund client.
Merrill Lynch terminated the FAs in October 2003, brought the
matter to the attention of regulators, and cooperated fully in
the regulators review. The settlement will result in
aggregate payments of $13.5 million.
In July 2005, Merrill Lynch entered into a settlement with the
NYSE, without admitting or denying the allegations, that
includes findings with regard to certain matters relating to the
failure to deliver prospectuses for certain auction rate
preferred shares and open-end mutual funds; the failure to
deliver product descriptions with regard to certain exchange
traded funds; the failure to ensure that proper
E-15
registration qualifications were obtained for certain personnel;
issues with regard to the retention, retrieval and review of
e-mails; isolated lapses in branch office supervision; late
reporting of certain events such as customer complaints and
arbitrations; the failure to report certain complaints in
quarterly reports to the NYSE due to a systems error; and
partial non-compliance with Continuing Education requirements.
The settlement resulted in a payment of $10 million to the
NYSE.
On June 3, 2005, entered into a settlement with the State
of New Jersey, without admitting or denying the allegations, in
connection with the termination of a financial advisors
IAR registration in error, which error caused the financial
advisor to engage in business within the state without the
proper registration. The settlement resulted in a payment of
$53,000 to the State of New Jersey.
On November 3, 2004, a jury in Houston, Texas convicted
four former Merrill Lynch employees of criminal misconduct in
connection with a Nigerian barge transaction that the government
alleged helped Enron inflate its 1999 earnings by
$12 million. The jury also found that the transaction led
to investor losses of $13.7 million. Those convictions were
vacated by a federal appellate court on August 1, 2006,
except for one conviction against one employee based on perjury
and obstruction of justice. In 2003, Merrill Lynch agreed,
without admitting or denying the charges, to pay
$80 million to settle SEC charges that it aided and abetted
Enrons fraud by engaging in two improper year-end
transactions in 1999, including the Nigerian barge transaction.
The $80 million paid in connection with the settlement with
the SEC will be made available to settle investor claims. In
September 2003, the United States Department of Justice agreed
not to prosecute Merrill Lynch for crimes that may have been
committed by its former employees related to certain
transactions with Enron, subject to certain understandings,
including Merrill Lynchs continued cooperation with the
Department, its acceptance of responsibility for conduct of its
former employees, and its agreement to adopt and implement new
policies and procedures related to the integrity of client and
counter-party financial statements, complex structured finance
transactions and year-end transactions.
On April 22, 2005, Merrill Lynch was fined $7,000 for
failing to provide in a timely manner information requested by
the State of Wisconsin Department of Financial Institutions,
Division of Securities, in connection with an agents
insurance license application and for failing to update the
agents record to reflect his current address.
On June 17, 2004, Merrill Lynch was fined $10,000 by the
State of Florida because, as a result of an administrative
error, two offices were operating without being properly
licensed.
On January 30, 2004, Merrill Lynch entered into a
settlement with the Commonwealth of Virginia, without admitting
or denying the allegations, in connection with an investigation
into certain improprieties by former financial advisors in the
accounts of two customers. The settlement resulted in aggregate
payments of $342,267.93 in restitution to these customers.
On April 28, 2003, the SEC, the NYSE, the National
Association of Securities Dealers, and state securities
regulators announced settlements with regard to ten securities
firms, including Merrill Lynch. On October 31, 2003, the
United States District Court for the Southern District of New
York entered final judgments in connection with the
April 28, 2003, research settlements. This settlement
followed a settlement with all 50 states, Washington, D.C.,
Puerto Rico and the National Association of State Securities
Administrators pursuant to which Merrill Lynch made payments
totaling $100 million. The final settlements pertaining to
Merrill Lynch, which involved both monetary and non-monetary
relief set forth in the regulators announcements, brought
to a conclusion the regulatory actions against Merrill Lynch
related to alleged conflicts of interest affecting research
analysts. Merrill Lynch entered into these settlements without
admitting or denying the allegations and findings by the
regulators, and the settlements did not establish wrongdoing or
liability for purposes of any other proceedings.
On July 23, 2002, Merrill Lynch entered into a settlement
with the State of Delaware Securities Division, without
admitting or denying the allegations, in connection with an
investigation into unauthorized trading in a customers
account. The settlement resulted in aggregate payments of
$28,290.93 in administrative fines and restitution to the
customer.
E-16
On July 12, 2002, Merrill Lynch entered into a settlement
with the State of New Hampshire Bureau of Securities Regulation,
without admitting or denying the allegations, in connection with
an investigation into certain improprieties, including Blue Sky
violations, by a financial advisor. Under the settlement,
Merrill Lynch was required to retain a consultant to review
current compliance policy and procedures in its Manchester
office; circulate a global compliance alert to all U.S. private
client personnel addressing the issues raised in this matter;
and offering rescission of the purchases of the specific stocks
by those clients of the financial advisor. The settlement
resulted in a payment of $575,000 to the State of New Hampshire
Bureau of Securities Regulation.
For further information, reference is made to the Form ADV
of Merrill Lynch and Merrill Lynch Trust Company, FSB on
file with, and publicly available on the website of, the SEC.
Frisco, Inc.
Frisco, Inc. is a Delaware corporation and Frisco Partners is a
Tennessee general partnership. Frisco, Inc. is wholly owned by
members of Dr. Frists immediate family. Frisco, Inc.
was formed for the purpose of personal investing by
Dr. Frist and his family. The business address of Frisco,
Inc. is 3100 West End Ave, Suite 500,
Nashville, TN 37203.
The names and material occupations, positions, offices or
employment during the past five years of each executive officer
and member of Frisco, Inc. are set forth below:
Thomas F. Frist, Jr., Director. Dr. Frist
stepped down as HCAs Chairman in January 2002.
Dr. Frist served as an executive officer and Chairman of
HCAs Board of Directors from January 2001 to January 2002.
From July 1997 to January 2001, Dr. Frist served as
HCAs Chairman and Chief Executive Officer. Dr. Frist
served as Vice Chairman of the Board of Directors from April
1995 to July 1997 and as Chairman from February 1994 to April
1995. He was Chairman, Chief Executive Officer and President of
HCA-Hospital Corporation of America from 1988 to February 1994.
Dr. Frist is also a general partner at Frisco Partners.
Dr. Frist is a United States citizen.
Patricia Champion Frist, Director and President. Patricia
Champion Frist is a private investor, and has held such position
throughout her adult life. Mrs. Frist is also a general
partner at Frisco Partners. Mrs. Frist is a United States
citizen.
Patricia Frist Elcan, Director. Patricia Frist Elcan is a
private investor, and has held such position throughout her
adult life. Mrs. Elcan is also a general partner at Frisco
Partners. Mrs. Elcan is a United States citizen.
Thomas F. Frist III, Director. Thomas F.
Frist III is a principal of Frist Capital LLC, a private
investment vehicle for Thomas F. Frist III and certain
related persons, the current business address of which is
3100 West End Ave Suite 500, Nashville, TN 37203, and
has held such position since 1998. Mr. Frist is also a
general partner at Frisco Partners. Mr. Frist is a United
States citizen.
William Robert Frist, Director. William Robert Frist is a
principal of Frist Capital LLC, a private investment vehicle for
Mr. Thomas F. Frist, Jr. and certain related persons,
the current business address of which is 3100 West End Ave
Suite 500, Nashville, TN 37203, and has held such position
since 1998. Mr. Frist is also a general partner at Frisco
Partners. Mr. Frist is a United States citizen.
Tika A. Love, Secretary and Treasurer. Tika A. Love is
Secretary and Treasurer of Frisco, Inc., a private investment
vehicle for Dr. Frist and certain related persons, the
current business address of which is 3100 West End Ave,
Suite 500, Nashville, TN 37203, and has held such position
since July 2006. Ms. Love is a United States citizen.
During the last five years, no person or entity described above
has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party
to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting
E-17
activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
Frisco Partners
Frisco Partners is a Tennessee general partnership. Frisco
Partners is wholly owned by Dr. Frist and members of his
immediate family. Frisco Partners was formed for the purpose of
personal investing by Dr. Frist and his family. The
business address Frisco Partners is 3100 West End Ave,
Suite 500, Nashville, TN 37203.
The names and material occupations, positions, offices or
employment during the past five years of each general partner of
Frisco Partners are set forth below:
Thomas F. Frist, Jr., General Partner.
Dr. Frist, stepped down as HCAs Chairman in January
2002. Dr. Frist served as an executive officer and Chairman
of HCAs Board of Directors from January 2001 to January
2002. From July 1997 to January 2001, Dr. Frist served as
HCAs Chairman and Chief Executive Officer. Dr. Frist
served as Vice Chairman of the Board of Directors from April
1995 to July 1997 and as Chairman from February 1994 to April
1995. He was Chairman, Chief Executive Officer and President of
HCA-Hospital Corporation of America from 1988 to February 1994.
Dr. Frist is also a director of Frisco, Inc. Dr. Frist
is a United States citizen.
Patricia Frist Elcan, General Partner. Patricia Frist
Elcan is a private investor, and has held such position
throughout her adult life. Mrs. Elcan is also a director of
Frisco, Inc. Mrs. Elcan is a United States citizen.
Thomas F. Frist III, General Partner. Thomas F.
Frist III is a principal of Frist Capital LLC, a private
investment vehicle for Thomas F. Frist III, Jr. and
certain related persons, the current business address of which
is 3100 West End Ave Suite 500, Nashville, TN 37203,
and has held such position since 1998. Mr. Frist is also a
director of Frisco, Inc. Mr. Frist is a United States
citizen.
William Robert Frist, General Partner. William Robert
Frist is a principal of Frist Capital LLC, a private investment
vehicle for Thomas F. Frist III, Jr. and certain
related persons, the current business address of which is
3100 West End Ave Suite 500, Nashville, TN 37203, and
has held such position since 1998. Mr. Frist is also a
director of Frisco, Inc. Mr. Frist is a United States
citizen.
During the last five years, no person or entity described above
has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party
to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of
any violation of federal or state securities laws.
E-18
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c/o National City Bank
Shareholder Services Operations
Locator 5352
P. O. Box 94509
Cleveland, OH 44101-4509 |
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Vote
by Telephone
Have
your proxy card available when you call the Toll-Free number
1-888-693-8683 using a touch-tone telephone and follow the
simple instructions to record your vote.
Vote
by Internet
Have
your proxy card available when you access the website
http://www.cesvote.com and follow the simple instructions
to record your vote.
Vote
by Mail
Please
mark, sign and date your proxy card and return it in the
postage-paid envelope provided or return it to: National
City Bank, P.O. Box 535800, Pittsburgh, PA 15253. |
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Vote by Telephone |
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Vote by Internet |
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Vote by Mail |
Call Toll-Free using a |
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Access the Website and |
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Return your proxy |
Touch-Tone phone: |
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Cast your vote: |
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in the Postage-Paid |
1-888-693-8683 |
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http://www.cesvote.com |
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envelope provided |
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Vote 24 hours a day, 7 days a week
Your telephone or Internet vote must be received by
6:00 a.m. local time in Nashville, Tennessee
on ,
2006, to be counted in the final tabulation.
If you vote by telephone or Internet, please do not send your
proxy by mail.
By voting by telephone or Internet, you acknowledge receipt
of the Notice of Special Meeting of
Shareholders of HCA Inc. and the Companys Proxy
Statement
dated ,
2006.
Proxy must be signed and dated below.
Please fold and detach card at perforation before mailing.
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This proxy is solicited on behalf of the Board of Directors
of HCA Inc.
for the Special Meeting of Shareholders
on , 2006. |
The undersigned hereby (1) acknowledges receipt of the
Notice of Special Meeting of Shareholders of HCA Inc. to be held
at the executive offices of HCA located at One Park Plaza,
Nashville, Tennessee
on ,
2006 beginning
at .m.,
local time in Nashville, Tennessee, and (2) appoints Robert
A. Waterman and John M. Franck II, and each of them,
attorney, agent and proxy of the undersigned, with full power of
substitution to vote all shares of common stock of HCA that the
undersigned would be entitled to cast if personally present at
the meeting and at any adjournment(s) or postponement(s) thereof.
The Board of Directors recommends a vote FOR the
adoption of the Agreement and Plan of Merger, dated
July 24, 2006, and entered into by and among HCA Inc.,
Hercules Holding II, LLC and Hercules Acquisition
Corporation.
The undersigned hereby revokes any proxy heretofore given to
vote or act with respect to the common stock of HCA and hereby
ratifies and confirms all that the proxies, their substitutes,
or any of them may lawfully do by virtue hereof. If one or more
of the proxies named shall be present in person or by substitute
at the meeting or at any adjournment(s) or postponement(s)
thereof, the proxies so present and voting, either in person or
by substitute, shall exercise all of the powers hereby given.
Please date, sign exactly as your name appears on the form and
promptly mail this proxy in the enclosed envelope. No postage is
required.
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Signature |
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Signature |
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Date: _______________________________________, 2006 |
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Please date this proxy and sign your name exactly as it appears
on this form. Where there is more than one owner, each should
sign. When signing as an attorney, administrator, executor,
guardian, or trustee, please add your title as such. If executed
by a corporation, the proxy should be signed by a duly
authorized officer. If a partnership, please sign in partnership
name by an authorized person. |
YOUR VOTE IS IMPORTANT!
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If you do not vote by telephone
or Internet, please sign and date
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this proxy card and return it promptly in the enclosed postage-
paid envelope so your shares may be represented at the Meeting.
Please fold and detach card at perforation before mailing.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER, DATED
JULY 24, 2006, AND ENTERED INTO BY AND AMONG HCA INC.,
HERCULES HOLDING II, LLC AND HERCULES ACQUISITION
CORPORATION.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
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1. |
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER DATED JULY 24,
2006 BY AND AMONG HERCULES HOLDING II, LLC, HERCULES
ACQUISITION CORPORATION, AND HCA INC., AS DESCRIBED IN THE PROXY
STATEMENT. |
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o FOR |
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o AGAINST |
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o ABSTAIN |
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2. |
APPROVAL OF THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY
OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE
INSUFFICIENT VOTES AT THE TIME OF THE MEETING TO ADOPT THE
MERGER AGREEMENT. |
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o FOR |
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o AGAINST |
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IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING. |
ImportantThis Proxy must be signed and dated on the
reverse side.
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c/o National City Bank
Shareholder Services Operations
Locator 5352
P. O. Box 94509
Cleveland, OH 44101-4509 |
|
Vote
by Telephone
Have
your voting instruction card available when you call the
Toll-Free number 1-888-693-8683 using a touch-tone
telephone and follow the simple instructions to record your
vote.
Vote
by Internet
Have
your voting instruction card available when you access the
website http://www.cesvote.com and follow the simple
instructions to record your vote.
Vote
by Mail
Please
mark, sign and date your voting instruction card and return it
in the postage-paid envelope provided or return it to:
National City Bank, P.O. Box 535800, Pittsburgh PA
15253-9937. |
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Vote by Telephone |
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Vote by Internet |
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Vote by Mail |
Call Toll-Free using a |
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Access the Website and |
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Return your voting instruction card |
Touch-Tone telephone: |
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cast your vote: |
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in the Postage-Paid |
1-888-693-8683 |
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http://www.cesvote.com |
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envelope provided |
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Vote 24 hours a day, 7 days a week
Your telephone or Internet vote must be received by
6:00 a.m. local time in Nashville, Tennessee
on ,
2006 in order to be counted in the final tabulation.
If you vote by telephone or Internet, please do not send the
card below by mail.
By voting by telephone or Internet, you acknowledge receipt
of the Notice of Special Meeting of
Shareholders of HCA Inc. and the Companys Proxy
Statement
dated ,
2006.
Sign and date this card where indicated below.
Please fold and detach card at perforation before mailing.
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Voting Instructions to the Record Keeper of the
HCA Employee Stock Purchase Plan and the Triad Hospitals, Inc.
Employee Stock Purchase Plan
for the Special Meeting of HCA Inc. Shareholders
on , 2006 |
The undersigned, a Participant in either the HCA Employee Stock
Purchase Plan or the Triad Hospitals, Inc. Employee Stock
Purchase Plan (individually, a Plan and together,
the Plans) hereby instructs Computershare Trust
Company, as record keeper for each of the Plans (the
Record Keeper), to vote in accordance with the
instructions on the reverse hereof all shares of common stock of
HCA Inc. credited, as
of ,
2006, to the account of the undersigned Participant under either
Plan, and to represent the undersigned Participant at the
Special Meeting of Shareholders of HCA to be held at the
executive offices of HCA located at One Park Plaza, Nashville,
Tennessee
on ,
2006 beginning
at .m.,
local time in Nashville, Tennessee, and any adjournments or
postponements thereof.
The Board of Directors recommends a vote FOR the
adoption of the Agreement and Plan of Merger, dated
July 24, 2006, and entered into by and among HCA Inc.,
Hercules Holding II, LLC and Hercules Acquisition
Corporation.
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Signature |
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Date: _______________________________________, 2006 |
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Please date this card and sign your name exactly as it appears
to the left. |
YOUR VOTE IS IMPORTANT!
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If you do not vote by telephone
or Internet, please sign and date this
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voting instruction card and return it promptly in the enclosed
postage-
paid envelope so your shares may be represented at the Meeting.
Please fold and detach card at perforation before mailing.
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HCA INC.
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VOTING INSTRUCTIONS |
The Board of Directors recommends a vote FOR the
adoption of the Agreement and Plan of Merger, dated
July 24, 2006, and entered into by and among HCA Inc.,
Hercules Holding II, LLC and Hercules Acquisition
Corporation.
Your shares will be voted as specified below. If no
specification is made, the Record Keeper will vote FOR
Proposals 1 and 2.
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1. |
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER DATED JULY 24,
2006 BY AND AMONG HERCULES HOLDING II, LLC, HERCULES
ACQUISITION CORPORATION, AND HCA INC., AS DESCRIBED IN THE PROXY
STATEMENT. |
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o FOR |
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o AGAINST |
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o ABSTAIN |
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2. |
APPROVAL OF THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY
OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE
INSUFFICIENT VOTES AT THE TIME OF THE MEETING TO ADOPT THE
MERGER AGREEMENT. |
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o FOR |
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o AGAINST |
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o ABSTAIN |
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3. |
IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING. |
Important This voting instruction card must be
signed and dated on the reverse side.