HCA Inc.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): November 24, 2006 (November 17, 2006)
HCA INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware
(State or Other
Jurisdiction
of Incorporation)
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001-11239
(Commission File Number)
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75-2497104
(I.R.S. Employer
Identification No.) |
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One Park Plaza, Nashville, Tennessee
(Address of Principal Executive Offices)
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37203
(Zip Code) |
Registrants telephone number, including area code: (615) 344-9551
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
TABLE OF CONTENTS
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Item 1.01 Entry into a Material Definitive Agreement |
Item 1.02 Termination of a Material Definitive Agreement |
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing |
Item 3.03 Material Modification to Rights of Security Holders |
Item 5.01 Changes in Control of Registrant |
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers |
Item 5.03 Amendments to Articles of Incorporation or By-laws; Change in Fiscal Year |
Item 9.01. Financial Statements and Exhibits. |
SIGNATURES |
INDEX TO EXHIBITS |
Ex-3.1 Restated Certificate of Incorporation |
Ex-3.2 Amended and Restated Bylaws |
Ex-4.1 November 17, 2006 Indenture |
Ex-4.2 November 17, 2006 Security Agreement |
Ex-4.3 November 17, 2006 Pledge Agreement |
Ex-4.4 November 17, 2006 Registration Rights Agreement |
Ex-4.8 November 17, 2006 $13,550,000,000 Credit Agreement |
Ex-4.9 November 17, 2006 U.S. Guarantee |
Ex-4.10 November 17, 2006 Security Agreement |
Ex-4.11 November 17, 2006 Pledge Agreement |
Ex-4.12 November 17, 2006 $2,000,000,000 Credit Agreement |
Ex-4.13 November 17, 2006 Security Agreement |
Introductory Note
On November 17, 2006, HCA Inc. (the Company) completed its merger (the Merger) with
Hercules Acquisition Corporation (Merger Sub) pursuant to which the Company has been acquired by
a private investor group including affiliates of Bain Capital, Kohlberg Kravis Roberts & Co.,
Merrill Lynch Global Private Equity (each a Sponsor), HCA founder Dr. Thomas F. Frist, Jr. (the
Frist Entities, and together with the Sponsors, the Investors) and certain members of
management.
Section 1 Registrants Business and Operations
Item 1.01 Entry into a Material Definitive Agreement
1. Senior Secured Credit Facilities
Overview
On
November 17, 2006, in connection with the Merger, the Company entered into a credit agreement, and related
security and other agreements, with Banc of America Securities LLC, J.P. Morgan Securities Inc.,
Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead
arrangers and joint bookrunners, Bank of America, N.A., as administrative agent, JPMorgan Chase
Bank, N.A. and Citicorp North America, Inc., as co-syndication agents, and Merrill Lynch Capital
Corporation, as documentation agent, that provides senior secured financing of $14.800 billion,
consisting of:
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$12.800 billion-equivalent in term loan facilities, comprised of a $2.750
billion senior secured term loan A facility with a term of six years, a $8.800 billion
senior secured term loan B facility with a term of seven years and a euro-denominated
$1.250 billion-equivalent (approximately 1.000 billion) senior secured European
term loan facility with a term of seven years; and |
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a $2.000 billion revolving credit facility available in dollars, euros and
pounds sterling with a term of six years. |
The Company is the primary borrower under the senior secured credit facilities, except that a
U.K. subsidiary is the borrower under the European term loan facility. The revolving credit
facility includes borrowing capacity available for letters of credit and for borrowings on same-day
notice, referred to as swingline loans. A portion of the letter of credit availability is available
in euros, dollars and pounds sterling.
Interest Rate and Fees
Borrowings under the senior secured credit facilities bear interest at a rate equal to, at the
Companys option, either (a) LIBOR for deposits in the applicable currency plus an applicable
margin or (b) the higher of (1) the prime rate of Bank of America, N.A. and (2) the federal funds
effective rate plus 0.50%, plus an applicable margin. The initial applicable margin for borrowings
is (x) under the revolving credit facility, the term loan A facility and the European term loan
facility, 1.50% with respect to base rate borrowings and 2.50% with respect to LIBOR borrowings
and (y) under the term loan B facility, 1.75% with respect to base rate borrowings and 2.75% with
respect to LIBOR borrowings. The applicable margins may be reduced subject to the Company
attaining certain leverage ratios.
In addition to paying interest on outstanding principal under the senior secured credit
facilities, the Company is required to pay a commitment fee to the lenders under the revolving
credit facility in respect of the unutilized commitments thereunder. The initial commitment fee
rate is 0.50% per annum, which may be reduced subject to the Company reducing its leverage to
specified ratios. The Company is also required to pay customary letter of credit fees.
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Prepayments
The senior secured credit facilities require the Company to prepay outstanding term loans,
subject to certain exceptions, with:
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50% (which percentage will be reduced to 25% if the Companys leverage
ratio is 5.50x or less and to 0% if the Companys leverage ratio is 5.00x or less) of
the Companys annual excess cash flow; |
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100% of the net cash proceeds of all nonordinary course asset sales or
other dispositions of property, other than the Receivables Collateral (as defined
below), if the Company does not (1) reinvest or commit to reinvest those proceeds in
assets to be used in its business, or commit to make certain other permitted
investments, within 15 months, as long as such reinvestment is completed within 180
days after the date a binding commitment has been entered into, or (2) apply such
proceeds within 15 months to repay debt of the Company that was outstanding on the
effective date of the Merger scheduled to mature prior to the earliest final maturity
of the senior secured credit facilities; and |
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100% of the net cash proceeds of any incurrence of debt, other than
proceeds from the receivables facility and other debt permitted under the senior
secured credit facilities. |
The foregoing mandatory prepayments will be applied among the term loan facilities (1) during
the first three years after the effective date of the Merger, pro rata to such facilities based on
the respective aggregate amounts of unpaid principal installments thereof due during such period,
with amounts allocated to each facility being applied to the remaining installments thereof in
direct order of maturity and (2) thereafter, pro rata to such facilities based on the principal
remaining unpaid thereunder, with amounts allocated to each facility being applied, in the case of
the term loan A facility, pro rata to the remaining installments thereof, and in the case of the
term loan B facility or the European term loan facility, to the next eight unpaid scheduled
installments of principal of such facility and then pro rata to the remaining amortization payments
under such facility. Notwithstanding the foregoing, (i) proceeds of asset sales by foreign
subsidiaries will be applied solely to prepay European term loans until such term loans have been
repaid in full and (ii) the Company will not be required to prepay loans under the term loan A
facility or the term loan B facility with net cash proceeds of asset sales or with excess cash flow
in each case attributable to foreign subsidiaries to the extent that the repatriation of such
amounts is prohibited or delayed by applicable local law or would result in material adverse tax
consequences.
The Company may voluntarily repay outstanding loans under the senior secured credit facilities
at any time without premium or penalty, other than customary breakage costs with respect to LIBOR
loans.
Amortization
The Company is required to repay the loans under the term loan facilities as follows:
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the term loan A facility will amortize in quarterly installments such that
the aggregate amount of the original funded principal amount of such facility repaid
pursuant to such amortization payments in each year, commencing with the year ending
December 31, 2007, is equal to $112.5 million in each of years 1 and 2, $225 million in
each of years 3 and 4, $450 million in year 5 and $1.625 billion in year 6; and |
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each of the term loan B facility and the European term loan facility will
amortize in equal quarterly installments commencing March 31, 2007 in aggregate annual
amounts equal to 1% of the original funded principal amount of such facility, with the
balance being payable on the final maturity date of such term loans. |
Principal amounts outstanding under the revolving credit facility are due and payable in full
at maturity, six years from the date of the closing of the senior secured credit facilities.
Guarantee and Security
Pursuant
to a Guarantee, dated as of November 17, 2006, among the
Company, the U.S. subsidiary guarantors and Bank of America,
N.A., as administrative agent, all obligations under the senior secured credit facilities are unconditionally guaranteed by
substantially all existing and future, direct and indirect, wholly-owned material domestic
subsidiaries of the Company that are
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Unrestricted Subsidiaries under the Companys existing indenture, dated as of December 16, 1993,
as amended (the 1993 Indenture) (except for certain special purpose subsidiaries that only
guarantee and pledge their assets under the asset-based revolving
credit facility described below and certain other entities), and the
obligations under the European term loan facility are also unconditionally guaranteed by the
Company and each of its existing and future wholly owned material subsidiaries formed under the
laws of England and Wales, subject, in each of the foregoing cases, to any applicable legal,
regulatory or contractual constraints and to the requirement that such guarantee will not cause
adverse tax consequences.
Pursuant to a Security Agreement and a Pledge Agreement, each dated as of November 17, 2006,
among the Company, the U.S. subsidiary guarantors and Bank of America, N.A., as collateral agent,
all obligations under the senior secured credit facilities, and the guarantees of such
obligations, are secured, subject to permitted liens and other exceptions, by:
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a first-priority lien on the capital stock owned by the Company or by any
U.S. guarantor in each of their respective first tier subsidiaries (limited, in the
case of foreign subsidiaries, to 65% of the voting stock of such subsidiaries); |
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a first-priority lien on substantially all present and future assets of the
Company and of each U.S. guarantor other than (i) Principal Properties (as defined
under the 1993 Indenture) except for certain Principal Properties not to exceed 10%
of Consolidated Net Tangible Assets (as defined under the 1993 Indenture), (ii)
certain other real properties and (iii) deposit accounts, other bank or securities
accounts, cash, leaseholds, motor vehicles, and with other exceptions; and |
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a second-priority lien on certain of the Receivables
Collateral (as defined below). |
The obligations of the borrowers and the guarantors under the European term loan facility are
also secured by substantially all present and future assets of such borrowers and each such
guarantor, subject to permitted liens and other exceptions (including, without limitation,
exceptions for deposit accounts, other bank or securities accounts, cash, leaseholds and
motor-vehicles) and subject to such security interests otherwise being permitted by applicable law
and contract and not resulting in adverse tax consequences.
Certain Covenants and Events of Default
The senior secured credit facilities contain a number of covenants that, among other things,
restrict, subject to certain exceptions, the ability of the Company and certain of its subsidiaries
to:
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incur additional indebtedness; |
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create liens; |
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enter into sale and leaseback transactions; |
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engage in mergers or consolidations; |
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sell or transfer assets; |
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pay dividends and distributions or repurchase its own capital stock; |
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make investments, loans or advances; |
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prepay certain indebtedness (including the senior secured
second-lien notes discussed below and certain other debt securities existing on the
effective date of the Merger (Retained Indebtedness)), subject to exceptions for
repayments of Retained Indebtedness maturing prior to the senior secured credit
facilities and, in certain cases, to satisfaction of a maximum first-lien leverage
condition; |
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make certain acquisitions; |
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engage in certain transactions with affiliates; |
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amend material agreements governing certain subordinated indebtedness
(including the senior secured second-lien notes discussed below); and |
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change its lines of business. |
In addition, the senior secured credit facilities require the Company to maintain a maximum
total leverage ratio, and contain certain customary affirmative covenants and events of default,
including upon a change of control.
Certain Relationships
The lenders or their affiliates have in the past engaged, and may in the future engage, in
transactions with and perform services, including commercial banking, financial advisory and
investment banking services, for the Company and its affiliates in the ordinary course of business
for which they have received or will receive customary fees and expenses. Affiliates of Merrill
Lynch, Pierce, Fenner & Smith Incorporated indirectly own approximately 25% of the shares of the
Company after the Merger. Pursuant to equity commitment letters with Hercules Holding II, LLC, the
parent of the Company, Citigroup Inc. (the parent of Citigroup Global Markets Inc.) and Banc of
America Securities LLC (or their affiliates) contributed $150 million and $50 million,
respectively, in connection with the Merger. In connection with the Merger, Citigroup Global
Markets Inc., Banc of America Securities LLC, J.P. Morgan Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated have provided financial advisory services to, and will receive
financial advisory fees from, the Sponsors and their affiliates. Affiliates of certain of the
lenders acted as initial purchasers of the notes issued under the Indenture described below and
participated in other financing aspects relating to the Merger (including as dealer managers for
the tender offers for certain indebtedness refinanced in connection with the Merger). Affiliates
of certain of the lenders were lenders under the Companys prior credit facilities that were repaid
in connection with the Merger as described under Item 1.02 below and received their pro rata
portion of such repayment. Messrs. John Connaughton and Steven Pagliuca, who have become directors
of the Company following the Merger, serve as directors of Warner Chilcott Corporation, and Mr.
Connaughton serves as a director of AMC Entertainment Inc., which are partly owned by an affiliate
of J.P. Morgan Securities Inc., one of the joint lead arrangers and joint bookrunners under the
senior secured credit facilities.
2. Senior Secured Asset-Based Revolving Credit Facility
Overview
On November 17, 2006, in connection with the Merger, the Company and certain of its
subsidiaries entered into a new $2.000 billion senior secured asset-based revolving credit facility
with a six-year term with Banc of America Securities LLC, J.P. Morgan Securities Inc., Citigroup
Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers
and bookrunners, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A. and
Citicorp North America, Inc., as co-syndication agents, and Merrill Lynch Capital Corporation, as
documentation agent.
Availability
under the new senior secured asset-based revolving credit facility is subject to a
borrowing base. The borrowing base at any time will be equal to 85% of eligible accounts
receivable of the borrowers under the facility at such time, less customary reserves. The new
senior secured asset-based revolving credit facility includes a sub-limit for letters of credit and for
borrowings on same-day notice, referred to as swingline loans, and is available only in U.S.
dollars. $1.575 billion of loans were drawn under the new senior secured asset-based revolving
credit facility at closing. No letters of credit were issued thereunder. The Company and, subject
to certain exceptions, substantially all of its existing and future, direct and indirect,
wholly-owned material domestic subsidiaries that are Unrestricted Subsidiaries under the 1993
Indenture are co-borrowers under the senior secured asset-based
revolving credit facility on a joint and
several basis.
The
commitments under the new senior secured asset-based revolving credit facility may be increased,
or new commitments may be added thereunder, subject only to the consent of the new or existing
lenders providing such commitments or increases, in up to an aggregate principal amount that, when
taken together with the amount of any new or increased commitments under the other senior secured
credit facilities, does not exceed $1.500 billion. The lenders under this facility are under no
obligation to provide any such additional commitments, and any increase in commitments will be
subject to customary conditions precedent. Notwithstanding any such increase in the facility size,
the Companys ability to borrow under the facility will remain limited at all times by the
borrowing base.
Interest Rate and Fees
Borrowings under the senior secured asset-based revolving credit facility bear interest at a
rate equal to, at the Companys option, either (a) LIBOR for deposits in U.S. dollars plus an
applicable margin or (b) a base rate equal to the higher of (1) the prime rate of Bank of America,
N.A. and (2) the federal funds effective rate plus 0.50%, plus in either case an applicable margin.
The initial applicable margin for borrowings under the new senior secured asset-based revolving
credit facility is 0.75% with respect to base rate borrowings and 1.75% with respect to LIBOR
borrowings. The applicable margins may be reduced subject to the Company attaining certain leverage
ratios.
In addition to paying interest on outstanding principal under the senior secured asset-based
revolving credit facility, the Company is required to pay a commitment fee at an initial rate of
0.375% per annum in respect of the unutilized commitments thereunder. The commitment fee rate may
be reduced subject to the Company attaining certain leverage ratios. The Company must also pay
customary letter of credit fees.
Prepayments
If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit
drawings and undrawn letters of credit under the new senior secured asset-based revolving credit
facility exceeds the lesser of (i) the total
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commitments under such facility and (ii) the borrowing base, the Company will be required to
repay outstanding loans or cash collateralize letters of credit in an aggregate amount equal to the
amount of such excess, without any reduction of the commitments. During any time that the
aggregate amount available under the new senior secured asset-based revolving credit facility and
the senior secured revolving credit facility discussed above is less than $250.00 million, or
a payment or bankruptcy event of default has occurred under the senior secured asset-based
revolving credit facility, all collateral proceeds collected through the cash management system in
favor of the collateral agent will be swept to a collection account and applied daily to repay
outstanding loans and cash collateralize letters of credit under the facility.
The Company may voluntarily reduce the unutilized portion of the commitment amount and repay
outstanding loans at any time without premium or penalty other than customary breakage costs with
respect to LIBOR loans.
Amortization
There is no scheduled amortization under the new senior secured asset-based revolving credit
facility. The entire outstanding principal amount of the loans (if any) under the new senior
secured asset-based revolving credit facility are due and payable in full at maturity on November
16, 2012.
Security
The borrowers under the new senior secured asset-based revolving credit facility are jointly
and severally liable for all borrowings and other obligations thereunder. Pursuant to a Security Agreement, dated as of November 17, 2006, between the borrowers and
Bank of America, N.A., as collateral agent, such obligations are
secured, subject to permitted liens and other exceptions, by a perfected first-priority lien on
substantially all accounts receivable of such borrowers, and all proceeds thereof (the Receivables
Collateral). The new senior secured asset-based revolving credit facility requires the Company to
establish, within 60 days of the closing date, blocked account agreements or other control
arrangements in order to perfect the collateral agents security interest in deposit accounts that
contain proceeds of collateral.
Certain Covenants and Events of Default
The senior secured asset-based revolving credit facility contains a number of covenants that,
among other things, restricts, subject to certain exceptions, the ability of the Company and the
other borrowers to:
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incur additional indebtedness; |
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create liens; |
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enter into sale and leaseback transactions; |
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engage in mergers or consolidations; |
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sell or transfer assets; |
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pay dividends and distributions or repurchase the Companys capital stock; |
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make investments, loans or advances; |
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prepay certain indebtedness (including the senior secured second-lien
notes discussed below and the Retained Indebtedness) subject to exceptions for repayments of Retained Indebtedness maturing prior to the
senior secured credit facilities and, in certain cases, to satisfaction of a maximum
first-lien leverage condition; |
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make certain acquisitions; |
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engage in certain transactions with affiliates; |
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amend material agreements governing certain indebtedness (including
the senior secured second-lien notes discussed below); and |
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change the Companys lines of business. |
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addition, at any time when availability under the senior secured
asset-based revolving credit facility is
less than 10% of the borrowing base, the Company will be required to maintain a minimum interest
coverage ratio of 1.5:1.0.
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The senior secured asset-based revolving credit facility also contains certain customary
affirmative covenants and events of default, including upon a change of control.
See also Certain Relationships under 1. Senior Secured Credit Facilities above.
3. Indenture and Senior Secured Notes due 2014, Senior Secured Notes due 2016 and Senior Secured
Toggle Notes due 2016
Overview
On
November 17, 2006, the Company issued $1,000,000,000 aggregate principal amount of 91/8%
senior secured notes due 2014 (the 2014 cash pay notes), which mature on November 15, 2014;
$3,200,000,000 aggregate principal amount of 91/4% senior secured notes due 2016 (the 2016 cash pay
notes), which mature on November 15, 2016; and $1,500,000,000 aggregate principal amount of
95/8%/103/8% senior secured toggle notes due 2016 (the toggle notes),
which mature on November 15, 2016, in each case pursuant to an indenture, dated
as of November 17, 2006 (the Indenture), among the Company, the guarantors party thereto and The
Bank of New York, as trustee. The 2014 cash pay notes, the 2016 cash pay notes and the toggle notes
are collectively referred to herein as the notes.
Interest on the 2014 cash pay notes and the 2016 cash pay notes will be payable in cash. Interest on the notes
is payable on May 15 and November 15 of each year, commencing on May 15, 2007. Cash
interest on the toggle notes will accrue at a rate of
95/8% per annum, and PIK interest (as such term
is defined below) will accrue at a rate of
103/8% per annum. The initial interest payment on the
toggle notes will be payable in cash. For any interest period thereafter through November 15, 2011,
the Company may elect to pay interest on the toggle notes (i) in cash, (ii) by increasing the
principal amount of the toggle notes or issuing new toggle notes (PIK interest) or (iii) by
paying interest on half of the principal amount of the toggle notes in cash interest and half in
PIK interest. After November 15, 2011, all interest on the toggle notes will be payable in cash.
The following is a brief description of the terms of the notes and the Indenture.
Ranking
The notes are the Companys senior secured obligations and rank senior in right of payment to
any future subordinated indebtedness; rank equally in right of payment with all of the Companys
existing and future senior indebtedness; are effectively subordinated in right of payment to
indebtedness under the Companys asset-based revolving credit facility to the extent of the
collateral securing such indebtedness on a first-priority basis and to indebtedness under the
Companys other senior secured credit facilities to the extent of the collateral securing such
indebtedness on a first- and second-priority basis; and effectively are subordinated in right of
payment to all existing and future indebtedness and other liabilities of the Companys
non-guarantor subsidiaries (other than indebtedness and liabilities owed to the Company or one of
its subsidiary guarantors (as such term is defined below)).
Guarantees
The notes are fully and unconditionally guaranteed on a senior secured basis by each of the
Companys existing and future direct or indirect wholly owned domestic subsidiaries that guarantees
the Companys obligations under its senior secured credit facilities (except for certain special
purpose subsidiaries that only guarantee and pledge their assets under the Companys asset-based
revolving credit facility). Such subsidiary guarantors are collectively referred to herein as the
subsidiary guarantors, and such subsidiary guarantees are collectively referred to herein as the
subsidiary guarantees. Each subsidiary guarantee ranks senior in right of payment to all
existing and future subordinated indebtedness of the subsidiary guarantor; ranks equally in right
of payment with all existing and future senior indebtedness of the subsidiary guarantor; is
effectively subordinated in right of payment to indebtedness under the Companys asset-based
revolving credit facility to the extent of the collateral securing such indebtedness on a
first-priority basis and to indebtedness under the Companys other senior secured credit facilities
to the extent of the collateral securing such indebtedness on a first- and second-priority basis;
and is effectively subordinated in right of payment to all existing and future indebtedness and
other liabilities of any subsidiary of a subsidiary guarantor that is not also a guarantor of the
notes. Any subsidiary guarantee of the notes will be released in the event such subsidiary
guarantee is released under the senior secured credit facilities.
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Security
Pursuant to a Security Agreement and a Pledge Agreement, each dated as of November 17, 2006,
among the Company, the subsidiary guarantors and The Bank of New York, as collateral agent, the notes and subsidiary guarantees are secured by second-priority liens, subject to permitted
liens, on certain of the assets of the Company and the subsidiary guarantors that secure the
Companys senior secured credit facilities on a first-priority basis, which assets include
substantially all the capital stock of any material wholly owned first-tier subsidiary of the
Company or of any subsidiary guarantor of the notes (but limited to 65% of the voting stock of any
such material wholly owned first-tier subsidiary that is a foreign subsidiary) and substantially
all tangible and intangible assets of the Company and each subsidiary guarantor, other than (1)
properties defined as Principal Properties under the 1993 Indenture, so long as any indebtedness
secured by those properties on a first-priority basis remains outstanding, (2) other properties
that do not secure the Companys senior secured facilities, (3) deposit accounts, other bank or
securities accounts and cash and (4) leaseholds and motor vehicles.
The notes and subsidiary guarantees also are secured by third-priority liens, subject to
permitted liens, on the accounts receivable and certain related assets of the Company and certain
of the subsidiary guarantors, and the proceeds thereof, to the extent permitted by law and
contract, which assets secure the Companys asset-based revolving credit facility on a
first-priority basis and the Companys other senior secured credit facilities on a second-priority
basis.
Optional Redemption
2014 Cash Pay Notes
At any time prior to November 15, 2010, the Company may redeem all or a part of the 2014 cash
pay notes, at a redemption price equal to 100% of the principal amount of the 2014 cash pay notes
redeemed plus the greater of (1) 1.0% of the principal amount of the 2014 cash pay notes; and (2)
the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of
the 2014 cash pay notes at November 15, 2010 (as set forth in the table appearing below), plus (ii)
all required interest payments due on the 2014 cash pay notes through November 15, 2010 (excluding
accrued but unpaid interest to such redemption date), computed using a discount rate equal to the
applicable treasury rate as of such redemption date plus 50 basis points; over (b) the then
outstanding principal amount of the 2014 cash pay notes (as of, and plus accrued and unpaid interest and
additional interest, if any, to, the date of redemption), subject to the rights of holders of 2014
cash pay notes on the relevant record date to receive interest due on the relevant interest payment
date.
On and after November 15, 2010, the Company may redeem the 2014 cash pay notes, in whole or in
part, at the redemption prices (expressed as percentages of the principal amount of the 2014 cash
pay notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and additional
interest, if any, to the applicable redemption date, subject to the right of holders of 2014 cash
pay notes of record on the relevant record date to receive interest due on the relevant interest
payment date, if redeemed during the twelve month period beginning on November 15 of each of the
years indicated below:
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Year |
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Percentage |
2010 |
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104.563 |
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2011 |
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102.281 |
% |
2012 and thereafter |
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100.000 |
% |
In addition, until November 15, 2009, the Company may, at its option, on one or more occasions
redeem up to 35% of the aggregate principal amount of 2014 cash pay notes at a redemption price
equal to 109.125% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon and additional interest, if any, to the applicable redemption date, subject to the right of
holders of 2014 cash pay notes of record on the relevant record date to receive interest due on the
relevant interest payment date, with the net cash proceeds of one or more equity offerings;
provided that at least 50% of the sum of the aggregate principal amount of 2014 cash pay notes
issued under the Indenture and the original principal amount of any additional notes that are 2014
cash pay notes issued under the Indenture after the issue date remains outstanding immediately
after the occurrence of each such redemption; provided further that each such redemption occurs
within 90 days of the date of closing of each such equity offering.
8
2016 Cash Pay Notes
At any time prior to November 15, 2011, the Company may redeem all or a part of the 2016 cash
pay notes, at a redemption price equal to 100% of the principal amount of the 2016 cash pay notes
redeemed plus the greater of (1) 1.0% of the principal amount of the 2016 cash pay notes; and (2)
the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of
the 2016 cash pay notes at November 15, 2011 (as set forth in the table appearing below), plus (ii)
all required interest payments due on the 2016 cash pay notes through November 15, 2011 (excluding
accrued but unpaid interest to such redemption date), computed using a discount rate equal to the
applicable treasury rate as of such redemption date plus 50 basis points; over (b) the then
outstanding principal amount of the 2016 cash pay notes (as of, and
plus accrued and unpaid interest and
additional interest, if any, to, the date of redemption), subject to the rights of holders of 2016
cash pay notes on the relevant record date to receive interest due on the relevant interest payment
date.
On and after November 15, 2011, the Company may redeem the 2016 cash pay notes, in whole or in
part, at the redemption prices (expressed as percentages of the principal amount of the 2016 cash
pay notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and additional
interest, if any, to the applicable redemption date, subject to the right of holders of 2016 cash
pay notes of record on the relevant record date to receive interest due on the relevant interest
payment date, if redeemed during the twelve month period beginning on November 15 of each of the
years indicated below:
|
|
|
|
|
Year |
|
Percentage |
2011 |
|
|
104.625 |
% |
2012 |
|
|
103.083 |
% |
2013 |
|
|
101.542 |
% |
2014 and thereafter |
|
|
100.000 |
% |
In addition, until November 15, 2009, the Company may, at its option, on one or more occasions
redeem up to 35% of the aggregate principal amount of 2016 cash pay notes at a redemption price
equal to 109.250% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon and additional interest, if any, to the applicable redemption date, subject to the right of
holders of 2016 cash pay notes of record on the relevant record date to receive interest due on the
relevant interest payment date, with the net cash proceeds of one or more equity offerings;
provided that at least 50% of the sum of the aggregate principal amount of 2016 cash pay notes
issued under the Indenture and the original principal amount of any additional notes that are 2016
cash pay notes issued under the Indenture after the issue date remains outstanding immediately
after the occurrence of each such redemption; provided further that each such redemption occurs
within 90 days of the date of closing of each such equity offering.
Toggle Notes
At any time prior to November 15, 2011, the Company may redeem all or a part of the toggle
notes, at a redemption price equal to 100% of the principal amount of the toggle notes redeemed
plus the greater of (1) 1.0% of the principal amount of the toggle notes; and (2) the excess, if
any, of (a) the present value at such redemption date of (i) the redemption price of the toggle
notes at November 15, 2011 (as set forth in the table appearing below), plus (ii) all required
interest payments due on the toggle notes through November 15, 2011 (excluding accrued but unpaid
interest to such redemption date), computed using a discount rate equal to the applicable treasury
rate as of such redemption date plus 50 basis points; over (b) the then outstanding principal
amount of the toggle notes (as of, and plus accrued and unpaid interest and additional interest, if any,
to, the date of redemption), subject to the rights of holders of toggle notes on the relevant record
date to receive interest due on the relevant interest payment date.
On and after November 15, 2011, the Company may redeem the toggle notes, in whole or in part,
at the redemption prices (expressed as percentages of the principal amount of the toggle notes to
be redeemed) set forth below, plus accrued and unpaid interest thereon and additional interest, if
any, to the applicable redemption date, subject to the right of holders of toggle notes of record
on the relevant record date to receive interest due on the relevant interest payment date, if
redeemed during the twelve month period beginning on November 15 of each of the years indicated
below:
9
|
|
|
|
|
Year |
|
Percentage |
2011 |
|
|
104.813 |
% |
2012 |
|
|
103.208 |
% |
2013 |
|
|
101.604 |
% |
2014 and thereafter |
|
|
100.000 |
% |
In addition, until November 15, 2009, the Company may, at its option, on one or more occasions
redeem up to 35% of the aggregate principal amount of toggle notes at a redemption price equal to
109.625% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and
additional interest, if any, to the applicable redemption date, subject to the right of holders of
toggle notes of record on the relevant record date to receive interest due on the relevant interest
payment date, with the net cash proceeds of one or more equity offerings; provided that at least
50% of the sum of the aggregate principal amount of toggle notes issued under the Indenture and the
original principal amount of any additional notes that are toggle notes issued under the Indenture
after the issue date remains outstanding immediately after the occurrence of each such redemption;
provided further that each such redemption occurs within 90 days of the date of closing of each
such equity offering.
Change of Control
Upon the occurrence of a change of control, which is defined in the Indenture, each holder of
the notes has the right to require the Company to repurchase some or all of such holders notes at
a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the repurchase date.
Covenants
The
Indenture contains covenants limiting, among other things, the Companys ability and the ability of its
restricted subsidiaries to (subject to certain exceptions):
|
|
|
incur additional debt or issue certain preferred shares; |
|
|
|
|
pay dividends on or make other distributions in respect of the Companys
capital stock or make other restricted payments; |
|
|
|
|
make certain investments; |
|
|
|
|
prepay the Retained Indebtedness, other than Retained Indebtedness maturing on or prior to December 31, 2011 and, in the event of satisfaction of a maximum consolidated secured debt ratio and a maximum consolidated leverage ratio, Retained Indebtedness maturing on or prior to November 15, 2016; |
|
|
|
|
sell certain assets; |
|
|
|
|
create liens on certain assets to secure debt; |
|
|
|
|
consolidate, merge, sell or otherwise dispose of all or substantially all of the Companys assets; |
|
|
|
|
enter into certain transactions with the Companys affiliates; and |
|
|
|
|
designate the Companys subsidiaries as unrestricted subsidiaries. |
Events of Default
The Indenture also provides for events of default which, if any of them occurs, would permit
or require the principal of and accrued interest on the notes to become or to be declared due and
payable.
Intercreditor Arrangements
The Bank of New York, as collateral agent in connection with the notes (the Junior Lien
Collateral Agent), and Bank of America, N.A., as collateral agent in connection with the senior
secured credit facilities (the First Lien Collateral Agent), entered into a General Intercreditor
Agreement, dated as of November 17, 2006, with respect to the collateral securing the notes and the
senior secured credit facilities (the Collateral). Pursuant to the terms of the General
Intercreditor Agreement, prior to the discharge of the obligations under the senior secured credit
facilities, the First Lien Collateral Agent will determine the time and method by which the
security interests in the Collateral will be enforced and will have the sole and exclusive right to
manage, perform and enforce the terms of the security documents relating to the Collateral and to
exercise and enforce all privileges, rights and remedies thereunder according to its direction,
including to take or retake control or possession of such Collateral and to hold, prepare for sale,
marshall, process, sell, lease, dispose of or liquidate such Collateral, including, without
limitation, following the occurrence of a default or event of default under the Indenture. The
Junior Lien Collateral Agent will not be permitted to enforce the security interests even if any
event of default under the Indenture has occurred and the Notes have been accelerated, with limited
exceptions.
Similarly, the Junior Lien Collateral Agent, the First Lien Collateral Agent and Bank of
America, N.A., as collateral agent in connection with the senior secured asset-based revolving
facility described above, entered into a Receivables Intercreditor Agreement, dated as of November
17, 2006, that contains similar intercreditor provisions with respect to the Receivables
Collateral.
See also Certain Relationships under 1. Senior Secured Credit Facilities above.
10
4. Registration Rights Agreement
On November 17, 2006, the Company and the subsidiary guarantors entered into a registration rights agreement with respect to
the notes with Citigroup Global Markets Inc., Banc of America Securities LLC, J.P. Morgan Securities
Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchasers of the notes
(the Initial Purchasers). In the registration rights agreement, the Company has agreed that it will use its
reasonable best efforts to register with the Securities and Exchange Commission notes having
substantially identical terms as the 2014 cash pay notes, notes having substantially identical
terms as the 2016 cash pay notes and notes having substantially identical terms as the toggle notes
as part of offers to exchange freely tradable exchange notes for each such series of notes.
The Company is required to use its reasonable best efforts to cause the exchange offer to be
completed or, if required, to have one or more shelf registration statements declared effective,
within 360 days after the issue date of each of the notes.
If the Company fails to meet this target (a registration default), the annual interest rate
on the applicable series of notes will increase by 0.25%. The annual interest rate on the
applicable series of notes will increase by an additional 0.25% for each subsequent 90-day period
during which the registration default continues, up to a maximum additional interest rate of 1.0%
per year over the applicable interest rate described above. If the registration default is
corrected, the applicable interest rate on such notes will revert to the original level.
See also Certain Relationships under 1. Senior Secured Credit Facilities above.
5. Employment Agreements
On November 16, 2006, Hercules Holding II, LLC (Holding) entered into substantially similar
employment agreements with each of Jack O. Bovender, Jr., Richard M. Bracken, R. Milton Johnson,
Samuel N. Hazen, W. Paul Rutledge, Beverly B. Wallace, Charles J. Hall, and Robert A. Waterman
(each an Executive), which agreements were shortly thereafter assumed by the Company and which
agreements will govern the terms of each Executives employment. The respective offices held by
each Executive have not changed as a result of execution of these employment agreements, although
the agreements provide that Jack O. Bovender, Jr. and Richard M. Bracken will be members of the
Board of Directors of the Company so long as they remain officers of the Company, with Mr. Bovender
continuing to serve as the Chairman of the Board of Directors. The term of employment under each of
these agreements are indefinite and are terminable by either party at any time; provided that an
Executive must give no less than 90 days notice prior to a resignation.
Each employment agreement sets forth the Executives annual base salary, which will be subject
to discretionary annual increases upon review by the Board of Directors, and states that the
Executive will be eligible to earn an annual bonus as a percentage of salary with respect to each
fiscal year, based upon the extent to which annual performance targets established by the Board of
Directors are achieved. With respect to the 2007 fiscal year, each Executive is 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 of Directors, for performance
results that exceed threshold levels but do not meet or exceed maximum levels. The employment
agreements 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 or its shareholders. For later fiscal years, the Companys Board of
Directors will set bonus opportunities in consultation with the Companys chief executive officer.
Each employment agreement also sets forth the number of options that the executive will be granted
pursuant to an equity plan to be implemented by the Company as a percentage of the total equity
initially to be made available for grants pursuant to such plan.
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)).
11
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 (i) entitled to the accrued
rights; (ii) subject to compliance with certain confidentiality, non-competition and
non-solicitation covenants contained in his or her employment agreement and execution of a general
release of claims on behalf of the Company, an amount equal to the product of (x) two (three in the case of
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) entitled to the pro rata bonus; and (iv) entitled to 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 qualifying termination
or a termination due to death or disability, he or she will only be entitled to the accrued
rights (as defined above).
In each of the employment agreements with the Executives (exclusive of Robert A. Waterman),
the Company also commits to grant, among the Executives (exclusive of Robert A. Waterman), 10% of
the options initially authorized for grant under its new stock incentive plan at some time before
November 17, 2011 (but with a good faith commitment to do so before a change in control or a
public offering (as those terms are defined in the new
stock incentive plan) and before the time
when the Board of Directors of the Company reasonably believes that
the fair market value of the Companys common
stock is likely to exceed the equivalent of $102.00 per share) at an exercise price per share that
is the equivalent of $102.00 per share. A percentage of these options will be vested at the time of
the grant, such percentage corresponding to the elapsed percentage of the period measured between
November 17, 2006 and November 17, 2011. When granted, these options will be allocated among the
recipients by the Board of Directors of the Company in consultation with the chief executive
officer of the Company based upon the perceived contributions of each of recipient since November
17, 2006. The terms of these options will otherwise be consistent with other time vesting options
granted under the new stock incentive plan.
Additionally, pursuant to the employment agreement, the Company agrees 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 acquisition of the Company by Holding or
the future payment of any extraordinary cash dividends.
The employment agreement with Jack O. Bovender Jr. also provides 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 Holding 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 new equity plan 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,
(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, and (E) the Company will continue to provide
coverage for Mr. Bovender and his spouse under the Companys group health plan (on the same basis as such
coverage was provided immediately prior to termination of employment) until, in each case, Mr.
Bovender and his spouse attain 65 years of age.
12
6. Management Agreement
On November 17, 2006, upon consummation of the Merger, affiliates of the Investors entered
into a management agreement with the Company pursuant to which such affiliates will provide
management services to the Company. Pursuant to the management agreement, the affiliates of the
Investors are entitled to receive an aggregate annual management fee of $15 million, which amount
will increase annually beginning in 2008 at a rate equal to the percentage increase of the
Companys EBITDA in the applicable year compared to the preceding year, and reimbursement of
out-of-pocket expenses incurred in connection with the provision of services pursuant to the
agreement. The management agreement has an initial term expiring on December 31, 2016, provided
that the term will be extended annually for one additional year unless the Company or the Investors
provide notice to the other of their desire not to automatically extend the term. In addition,
pursuant to the management agreement, affiliates of the Investors also received aggregate
transaction fees of $175 million in connection with certain services provided in connection with
the Merger and related transactions. In addition, the management agreement provides that the
affiliates of the Investors will be entitled to receive a fee equal to 1% of the gross transaction
value in connection with certain subsequent financing, acquisition, disposition, and change of
control transactions as well as a termination fee based on the net present value of future payment
obligations under the management agreement in the event of an initial public offering or under
certain other circumstances. The agreement also contains customary exculpation and indemnification
provisions in favor of the Investors and their affiliates.
7. 2006 Stock Incentive Plan
In connection with the Merger, the Company established the HCA Inc. 2006 Stock Incentive Plan
(the Plan). The Plan is designed to promote the long term financial interests and growth of the
Company and its subsidiaries by attracting and retaining management and other personnel and key
service providers with the training, experience and ability to enable them to make a substantial
contribution to the success of the Companys business, motivate management personnel by means of
growth-related incentives to achieve long range goals and further the alignment of interests of
participants with those of the stockholders of the Company through opportunities for increased
stock, or stock-based ownership in the Company. The Plan permits the granting of awards covering
10% of the fully diluted equity of the Company immediately after
consummation of the Merger. A portion of the options under the Plan 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. Jack O. Bovender, Jr. is expected to receive an equity grant
covering at least 3.75% of the total number of options that can be granted under the Plan. The
size of the grants to the other named executive officers has not yet been determined.
8. Rollover Agreements
In connection with the Merger, certain members of management of the Company entered into
agreements with the Company and/or Holding, pursuant to which they elected to invest in the
Company, as the surviving corporation in the Merger, through a cash investment, a rollover of
employee stock options, a rollover of shares of common stock of the Company, or a combination
thereof.
9. Stockholder Agreements
In connection with the Merger, certain members of management entered into stockholder
agreements with the Company. The stockholder agreements, among other things, contain agreements
among the parties with respect to restrictions on the transfer of shares, including tag along
rights and drag along rights, registration rights (including customary indemnification provisions)
and call options and put rights.
Item 1.02 Termination of a Material Definitive Agreement
1. Stock Purchase Plans
13
On November 17, 2006, the Company terminated its Employee Stock Purchase Plan (the ESPP) and
its Amended and Restated Management Stock Purchase Plan (the MSPP). The ESPP provided an
opportunity to purchase shares of the Companys common stock at a discount (through payroll
deductions over six-month periods) to substantially all employees. Under the MSPP, the Company made
grants of restricted shares or units of the Companys common stock to provide equity compensation
to employees. The MSPP allowed eligible employees to defer an elected percentage (not to exceed
25%) of their base salaries through the purchase of restricted stock at a 25% discount from the
average market price.
2. Existing Senior Credit Facilities
In connection with the Merger, on November 17, 2006, the Company repaid in full all
outstanding term loans and revolving loans, together with interest and all other amounts due in
connection with such repayment, under the $2,500,000,000 Credit Agreement, dated as of November 9,
2004, among the Company, the several banks and other financial institutions from time to time
parties thereto and JPMorgan Chase Bank, N.A., as agent, as amended by the First Amendment, dated
as of November 3, 2005 (the JPMorgan Existing Facility), and all outstanding term loans, together
with interest and all other amounts due in connection with such repayment, under the $400,000,000
Credit Agreement, dated as of May 25, 2006 (the 2006 Term Loan), among the Company, the several banks and other
financial institutions from time to time parties thereto and Merrill Lynch Capital Corporation, as
administrative agent. No penalties were due in connection with such repayments.
The JPMorgan Existing Facility included a $750 million term loan that was scheduled to
mature in 2009 and a $1.750 billion revolving credit facility that was scheduled to expire in
November 2009. Interest under the facility was payable at a spread to LIBOR, a spread to the prime
lending rate or a competitive bid rate. The spread was dependent on the Companys credit ratings.
The credit agreement governing the facility contained customary covenants that included limitations
on debt levels, limitations on sales of assets, mergers and changes of ownership, and maintenance
of minimum interest coverage ratios. The 2006 Term Loan was scheduled to mature in May 2007.
Certain letters of credit outstanding under the JPMorgan Existing Facility were transferred
under the senior secured revolving credit facility discussed under Item 1.01 above, and continue to
exist under such facility.
Section 2 Financial Information
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Sections 1, 2 and 3 of Item 1.01 are incorporated by reference into
this Item 2.03.
Section 3 Securities and Trading Markets
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
In connection with the closing of the Merger, the Company notified the New York Stock Exchange
(the NYSE) on November 17, 2006 that shares of common stock of the Company were generally
converted into the right to receive $51.00, without interest, and requested that the NYSE file with
the Securities and Exchange Commission an application on Form 25 to report that the shares of
common stock of the Company are no longer listed on the NYSE.
Item 3.03 Material Modification to Rights of Security Holders.
In connection with the Merger, each share of common stock of the Company was generally
converted into the right to receive $51.00, without interest.
Section 5 Corporate Governance and Management
Item 5.01 Changes in Control of Registrant.
On November 17, 2006, pursuant to the terms of the Agreement and Plan of Merger (the Merger
Agreement), dated as of July 24, 2006, by and among the Company, Merger Sub and Holding, the
Investors consummated the acquisition of the Company through the merger of Merger Sub with and into
the Company. The Company was the surviving corporation in the Merger. Approximately 98% of the
common stock of the Company is owned directly by Holding, with the remainder being owned by certain
members of management of the Company and certain other investors. Affiliates of each of the
Sponsors indirectly own approximately 25% of the common stock of the Company through their
ownership in Holding, and affiliates of the Frist Entities and certain co-investors directly and
indirectly own approximately 20% of the common stock of the Company through direct ownership and
through their ownership in Holding. The aggregate purchase price paid for all of the equity
securities of the Company was approximately $21 billion, which purchase price was funded by the
equity financing from the
14
Investors, certain members of management and certain other coinvestors and by the new credit
facilities and debt securities described in Item 1.01 above.
On November 17, 2006, affiliates of the Investors entered into a limited liability company
agreement in respect of Holding (the LLC Agreement). Pursuant to the LLC Agreement, affiliates of
each of the Sponsors have the right to appoint three directors of the Company and affiliates of the
Frist Entities have the right to appoint two directors. Jack O. Bovender, Jr., the Companys chief
executive officer, and Richard M. Bracken, the Companys president, will continue to serve as
directors pursuant to the terms of their employment agreements.
Item 5.02
Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers; Compensatory Arrangements of Certain
Officers.
In connection with the Merger, each of C. Michael Armstrong, Magdalena H. Averhoff, Martin
Feldstein, Frederic W. Gluck, Glenda A. Hatchett, Charles O. Holliday, Jr., T. Michael Long, John
H. McArthur, Kent C. Nelson, Frank S. Royal and Harold T. Shapiro voluntarily resigned from the
board of directors of the Company on November 17, 2006.
Following such resignations, ten new directors were elected to the Companys board of
directors: Christopher Birosak, a managing director in the Merrill Lynch Global Private Equity
Division, George Bitar, a managing director in the Merrill Lynch Global Private Equity Division,
Nathan C. Thorne, a Senior Vice President of Merrill Lynch &
Co., Inc. and President of the Merrill
Lynch Global Private Equity Division, John Connaughton, a managing director of Bain Capital Partners, LLC,
Steven Pagliuca, a managing director of Bain Capital Partners, LLC, Chris Gordon, a principal of
Bain Capital Partners, LLC, Mike Michelson, a member of the limited liability company that serves
as the general partner of Kohlberg Kravis Roberts & Co., L.P.,
Jim Momtazee, a director of
Kohlberg Kravis Roberts & Co., L.P., Peter Stavros, a principal of Kohlberg Kravis Roberts & Co.,
L.P. and Thomas F. Frist, III, a principal of Frist Capital LLC and the son of Dr. Thomas F.
Frist, Jr. In addition, Dr. Thomas F. Frist, Jr., Jack O. Bovender, Jr. and Richard M. Bracken
will continue to serve as directors of the Company.
As a result of their respective positions with affiliates of the Investors, one or more of the
directors may be deemed to have an indirect material interest in the Management Agreement entered
into by the Company on November 17, 2006, and the information set forth in Section 6 of Item 1.01 is
accordingly incorporated by reference into this Item 5.02.
On November 16, 2006, in connection with the Merger, Holding entered into a definitive
employment agreement with each of Jack O. Bovender, Jr. and Richard M. Bracken. The information
set forth in Section 5 of Item 1.01 is incorporated by reference into this Item 5.02.
The Companys executive officers are expected to participate in the Companys newly
established HCA Inc. 2006 Stock Incentive Plan. The information set forth in Section 7 of Item
1.01 is incorporated by reference into this Item 5.02.
Pursuant to the LLC Agreement, affiliates of the Investors have the right to designate 11 of
the Companys 13 directors.
Item 5.03 Amendments to Articles of Incorporation or By-laws; Change in Fiscal Year
In connection with the consummation of the Merger, the Companys certificate of incorporation
and by-laws were amended and restated, effective November 17, 2006, so that they read in their entirety as the certificate of
incorporation and by-laws of Merger Sub read immediately prior to the effective time of the Merger in
accordance with the Merger Agreement. Among other things, the Restated Certificate of Incorporation reduces the number of
shares of common stock the Company is authorized to issue from 1,650,000,000 to 125,000,000 and the
Amended and Restated By-laws set the number of directors constituting the board of directors of the
Company at not less than one nor more than fifteen. Copies of the Restated Certificate of Incorporation and
Amended and Restated By-laws of the Company are attached as Exhibits 3.1 and 3.2 hereto and are
incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit 3.1
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Restated Certificate of
Incorporation of the Company. |
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Exhibit 3.2
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Amended and Restated Bylaws of the
Company. |
15
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Exhibit 4.1
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Indenture, dated November 17, 2006, among HCA Inc., the
guarantors party thereto and The Bank of New York, as trustee. |
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Exhibit 4.2
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|
Security Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary grantors party thereto and
The Bank of New York, as collateral agent. |
|
|
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Exhibit 4.3
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|
Pledge Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary pledgors party thereto and The
Bank of New York, as collateral agent. |
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|
Exhibit 4.4
|
|
Registration Rights Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary guarantors party
thereto and the Initial Purchasers. |
|
|
|
Exhibit 4.5
|
|
Form of 91/8
% Senior Secured Notes due 2014 (included in Exhibit 4.1). |
|
|
|
Exhibit 4.6
|
|
Form of 91/4% Senior Secured Notes due 2016 (included in Exhibit 4.1). |
|
|
|
Exhibit 4.7
|
|
Form of
95/8%/103/8% Senior Secured Toggle Notes due 1016 (included in Exhibit 4.1). |
|
|
|
Exhibit 4.8
|
|
$13,550,000,000 1,000,000,000 Credit Agreement, dated as of November 17, 2006, among HCA Inc., HCA UK
Capital Limited, the lending institutions from time to time parties thereto, Banc of America Securities LLC,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A., as administrative agent,
JPMorgan Chase Bank, N.A. and Citicorp North America, Inc., as co-syndication agents and Merrill Lynch Capital
Corporation, as documentation agent. |
|
|
|
Exhibit 4.9
|
|
U.S. Guarantee, dated November 17, 2006, among HCA Inc., the
subsidiary guarantors party thereto and Bank of America,
N.A., as administrative agent. |
|
|
|
Exhibit 4.10
|
|
Security Agreement, dated November 17, 2006, among HCA Inc.,
the subsidiary grantors party thereto and Bank of America,
N.A., as collateral agent. |
|
|
|
Exhibit 4.11
|
|
Pledge Agreement, dated November 17, 2006, among HCA Inc.,
the subsidiary pledgors party thereto and Bank of America,
N.A., as collateral agent. |
|
|
|
Exhibit 4.12
|
|
$2,000,000,000 Credit Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary borrowers
parties thereto, the lending institutions from time to time parties thereto, Banc of America Securities LLC,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A., as administrative agent,
JPMorgan Chase Bank, N.A. and Citicorp North America, Inc., as co-syndication agents and Merrill Lynch Capital
Corporation, as documentation agent. |
|
|
|
Exhibit 4.13
|
|
Security Agreement, dated as of
November 17, 2006, among HCA Inc., the subsidiary borrowers
party thereto and Bank of America, N.A., as collateral agent. |
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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|
|
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|
HCA INC.
(Registrant)
|
|
|
By: |
/s/
R. Milton Johnson
|
|
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|
R. Milton Johnson |
|
|
|
Executive Vice President and Chief
Financial Officer |
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Date:
November 24, 2006
17
INDEX TO EXHIBITS
|
|
|
Exhibit Number |
|
Exhibit |
Exhibit 3.1
|
|
Restated Certificate of
Incorporation of the Company. |
|
|
|
Exhibit 3.2
|
|
Amended and Restated Bylaws of the
Company. |
|
|
|
Exhibit 4.1
|
|
Indenture, dated November 17, 2006, among HCA Inc., the
guarantors party thereto and The Bank of New York, as
trustee. |
|
|
|
Exhibit 4.2
|
|
Security Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary grantors party thereto and
The Bank of New York, as collateral agent. |
|
|
|
Exhibit 4.3
|
|
Pledge Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary pledgors party thereto and The
Bank of New York, as collateral agent. |
|
|
|
Exhibit 4.4
|
|
Registration Rights Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary guarantors party
thereto and the Initial Purchasers. |
|
|
|
Exhibit 4.5
|
|
Form of
91/8% Senior Secured Notes due 2014 (included in Exhibit 4.1). |
|
|
|
Exhibit 4.6
|
|
Form of 91/4% Senior Secured Notes due 2016 (included in Exhibit 4.1). |
|
|
|
Exhibit 4.7
|
|
Form of
95/8%/103/8% Senior Secured Toggle Notes due 1016 (included in Exhibit 4.1). |
|
|
|
Exhibit 4.8
|
|
$13,550,000,000 1,000,000,000 Credit Agreement, dated as of November 17, 2006, among HCA Inc., HCA UK
Capital Limited, the lending institutions from time to time parties thereto, Banc of America Securities LLC,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A., as administrative agent,
JPMorgan Chase Bank, N.A. and Citicorp North America, Inc., as co-syndication agents and Merrill Lynch Capital
Corporation, as documentation agent. |
|
|
|
Exhibit 4.9
|
|
U.S. Guarantee, dated November 17, 2006, among HCA Inc., the
subsidiary guarantors party thereto and Bank of America,
N.A., as administrative agent. |
|
|
|
Exhibit 4.10
|
|
Security Agreement, dated November 17, 2006, among HCA Inc.,
the subsidiary grantors party thereto and Bank of America,
N.A., as collateral agent. |
|
|
|
Exhibit 4.11
|
|
Pledge Agreement, dated November 17, 2006, among HCA Inc.,
the subsidiary pledgors party thereto and Bank of America,
N.A., as collateral agent. |
|
|
|
Exhibit 4.12
|
|
$2,000,000,000 Credit Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary borrowers
parties thereto, the lending institutions from time to time parties thereto, Banc of America Securities LLC,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A., as administrative agent,
JPMorgan Chase Bank, N.A. and Citicorp North America, Inc., as co-syndication agents and Merrill Lynch Capital
Corporation, as documentation agent. |
|
|
|
Exhibit 4.13
|
|
Security Agreement, dated as of
November 17, 2006, among HCA Inc., the subsidiary borrowers
party thereto and Bank of America, N.A., as collateral agent. |
18