-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VpsDDZbhc53Ck4tsOfDS15mJHPrh4fTFyYTdOk7E3Z1fUMLg+NegIZYSET1pPhZK gGgu4f+dvLDLy5JraCWe1w== 0000912057-96-012092.txt : 19960613 0000912057-96-012092.hdr.sgml : 19960613 ACCESSION NUMBER: 0000912057-96-012092 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19960611 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY HEALTH SYSTEMS INC CENTRAL INDEX KEY: 0000022735 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 760137985 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-42052 FILM NUMBER: 96579491 BUSINESS ADDRESS: STREET 1: 3707 FM 1960 WEST SUITE 500 CITY: HOUSTON STATE: TX ZIP: 77068 BUSINESS PHONE: 7135375230 MAIL ADDRESS: STREET 1: 3707 FM 1960 WEST STREET 2: SUITE 500 CITY: HOUSTON STATE: TX ZIP: 77068 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FLCH HOLDINGS CORP CENTRAL INDEX KEY: 0001016464 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: C/O FORSTMANN LITTLE & CO CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2123555656 MAIL ADDRESS: STREET 1: C/O FORSTMANN LITTLE & CO CITY: NEW YORK STATE: NY ZIP: 10153 SC 14D1 1 SCHEDULE 14D1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ COMMUNITY HEALTH SYSTEMS, INC. (Name of Subject Company) FLCH HOLDINGS CORP. FLCH ACQUISITION CORP. --------------- (BIDDERS) COMMON STOCK, $.01 PAR VALUE (INCLUDING THE ASSOCIATED RIGHTS) _____________________________ (TITLE OF CLASS OF SECURITIES) 203666 10 2 _______________________________________ (CUSIP NUMBER OF COMMON STOCK) FLCH ACQUISITION CORP. C/O FORSTMANN LITTLE & CO. 767 FIFTH AVENUE NEW YORK, NY 10153 (212) 355-5656 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) COPY: STEPHEN FRAIDIN, P.C. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON ONE NEW YORK PLAZA NEW YORK, NEW YORK 10004-1980 (212) 859-8000 ------------------------ CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE $1,078,269,175 $215,653.84
* For the purpose of calculating the fee only. This amount assumes the purchase of 19,731,068 shares of Common Stock of Community Health Systems, Inc. at $52.00 per share. Such number of shares includes all outstanding shares as of June 11, 1996, and assumes the cancellation of all stock options to purchase shares of Common Stock outstanding as of such date at a net cost to the Bidders of $52,253,639. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 1 of 6 Pages The Index to Exhibits begins on Page 6. This Statement relates to a tender offer by FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation (the "Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which are incorporated herein by reference. Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership ("Forstmann Little"), in connection with the Offer and the transactions contemplated thereby. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Community Health Systems, Inc. The address of the principal executive offices of the Company is set forth in Section 8 ("Certain Information Concerning the Company") of the Offer to Purchase and is incorporated herein by reference. (b) The information set forth in the Introduction to the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a) through (d), (g) This Schedule 14D-1 is filed by Parent and the Purchaser. The information set forth in the Introduction and Section 9 ("Certain Information Concerning Forstmann Little, Parent and the Purchaser") of the Offer to Purchase and in Schedules I and II thereto is incorporated herein by reference. (e) and (f) None of the Purchaser, Parent, Forstmann Little, FLC Partnership, L.P., a New York limited partnership, FLC XXIX Partnership, a New York general partnership, FLC XXX Partnership, a New York general partnership and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VI, or, to the best of their knowledge, any of the persons listed in Schedule I or II of the Offer to Purchase, has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) None. (b) The information set forth in the Introduction and Section 11 ("Background of the Offer"), Section 8 ("Certain Information Concerning the Company") and Section 9 ("Certain Information Concerning Forstmann Little, Parent and the Purchaser") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. 2 ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a) through (g) The information set forth in the Introduction, Section 7 ("Effect of the Offer on the Market for Shares, Stock Quotation, Exchange Act Registration and Margin Securities") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement and the Rights Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) None. (b) Not applicable. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 9 ("Certain Information Concerning Forstmann Little, Parent and the Purchaser"), Section 10 ("Source and Amount of Funds") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement and the Rights Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and in Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not applicable. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the Introduction, Section 9 ("Certain Information Concerning Forstmann Little, Parent and the Purchaser") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement and the Rights Agreement") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 15 ("Certain Regulatory and Legal Matters") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7 ("Effect of the Offer on the Market for Shares, Stock Quotation, Exchange Act Registration and Margin Securities") of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference in its entirety. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated June 11, 1996. (a)(2) Letter of Transmittal. (a)(3) Letter from Lehman Brothers Inc., as Dealer Manager, to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients. (a)(5) Notice of Guaranteed Delivery. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Announcement, dated June 11, 1996. (a)(8) Press Release issued by Parent on June 10, 1996. (a)(9) Press Release issued by Parent on June 11, 1996.
3 (b) Commitment Letter, dated June 9, 1996 and related Fee Letter, dated as of June 9, 1996, from Chemical Bank and Chase Securities Inc. (c) Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company. (d) None. (e) Not applicable. (f) None.
4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 11, 1996 FLCH ACQUISITION CORP. By: /s/ THOMAS H. LISTER _________________________ Name: Thomas H. Lister Title: Vice President FLCH HOLDINGS CORP. By: /s/ THOMAS H. LISTER _________________________ Name: Thomas H. Lister Title: Vice President 5 EXHIBIT INDEX
EXHIBIT DESCRIPTION NO. PAGE NO. - --------- ---------------------------------------------------------------------------------------- ----------- (a)(1) -- Offer to Purchase, dated June 11, 1996. (a)(2) -- Letter of Transmittal. (a)(3) -- Letter from Lehman Brothers Inc., as Dealer Manager, to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(4) -- Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients. (a)(5) -- Notice of Guaranteed Delivery. (a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) -- Summary Announcement, dated June 11, 1996. (a)(8) -- Press Release issued by Parent on June 10, 1996. (a)(9) -- Press Release issued by Parent on June 11, 1996. (b) -- Commitment Letter, dated June 9, 1996 and related Fee Letter, dated as of June 9, 1996, from Chemical Bank and Chase Securities Inc. (c) -- Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company. (d) -- None. (e) -- Not applicable. (f) -- None.
6 EX-99.(A)(1) 2 OFFER TO PURCHASE Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights) of COMMUNITY HEALTH SYSTEMS, INC. at $52.00 Net Per Share by FLCH ACQUISITION CORP. a corporation formed by FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF COMMUNITY HEALTH SYSTEMS, INC. (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT THERETO. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED) OF THE OFFER THAT NUMBER OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS. SEE SECTIONS 12 AND 14. ------------------------ IMPORTANT ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S SHARES AND THE ASSOCIATED RIGHTS (EACH AS HEREINAFTER DEFINED) SHOULD EITHER (I) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL AND MAIL OR DELIVER THE CERTIFICATE(S) REPRESENTING THE TENDERED SHARES, AND ALL OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 OR (II) REQUEST HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR HIM. A STOCKHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH PERSON IF HE DESIRES TO TENDER SUCH SHARES. A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES REPRESENTING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3. QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION AGENT OR TO THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED DELIVERY AND OTHER RELATED MATERIALS MAY BE OBTAINED FROM THE INFORMATION AGENT OR FROM BROKERS, DEALERS, COMMERCIAL BANKS AND TRUST COMPANIES. ------------------------ THE DEALER MANAGER FOR THE OFFER IS: LEHMAN BROTHERS June 11, 1996 TABLE OF CONTENTS
PAGE ---- INTRODUCTION 1. Terms of the Offer.............................................. 4 2. Acceptance for Payment and Payment for Shares................... 4 3. Procedure for Tendering Shares.................................. 6 4. Withdrawal Rights............................................... 8 5. Certain Federal Income Tax Consequences......................... 9 6. Price Range of Shares; Dividends................................ 9 7. Effect of the Offer on the Market for Shares, Stock Quotation, Exchange Act Registration and Margin Securities................ 10 8. Certain Information Concerning the Company...................... 11 9. Certain Information Concerning Forstmann Little, Parent and the Purchaser...................................................... 13 10. Source and Amount of Funds...................................... 15 11. Background of the Offer......................................... 18 12. Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement and the Rights Agreement...................... 28 13. Dividends and Distributions..................................... 28 14. Certain Conditions to the Offer................................. 29 15. Certain Regulatory and Legal Matters............................ 30 16. Fees and Expenses............................................... 32 17. Miscellaneous................................................... 32
Schedule I -- GENERAL PARTNERS OF FORSTMANN LITTLE & CO., FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P., FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P., FLC PARTNERSHIP, L.P., FLC XXIX PARTNERSHIP AND FLC XXX PARTNERSHIP........ I-1 Schedule II -- DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER........................................... II-1
i TO THE HOLDERS OF COMMON STOCK OF COMMUNITY HEALTH SYSTEMS, INC.: INTRODUCTION FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation (the "Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The Rights were issued pursuant to a Rights Agreement dated as of September 7, 1995 (the "Rights Agreement"), between the Company and First Union National Bank of North Carolina, as rights agent, and are currently evidenced by and trade with certificates evidencing the Common Stock. See Section 12 for a brief discussion of the Rights Agreement and its application to the Offer and the Merger (as hereinafter defined). Parent and the Purchaser are corporations formed by Forstmann Little & Co. Equity Partnership-V, L.P., a Delaware limited partnership ("Forstmann Little"), in connection with the Offer and the transactions contemplated thereby. The general partner of Forstmann Little is FLC XXX Partnership, a New York general partnership ("FLC XXX"). For information concerning Forstmann Little and FLC XXX, see Section 9. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of Lehman Brothers Inc. ("Lehman Brothers"), which is acting as Dealer Manager (the "Dealer Manager"), Chase Mellon Shareholder Services, L.L.C., which is acting as the Depositary (the "Depositary"), and Georgeson & Company Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT THERETO. Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the Company's financial advisor, has delivered to the Board of Directors its written opinion dated June 9, 1996 to the effect that, as of such date, the cash consideration of $52.00 per Share to be received by the holders of the Shares in the Offer and the Merger is fair to such stockholders from a financial point of view. Such opinion is set forth in full as an annex to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders of the Company concurrently herewith. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (SUCH CONDITION THE "MINIMUM CONDITION", AND SUCH SHARES THE "MINIMUM SHARES"). SEE SECTIONS 12 AND 14. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of June 9, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the Company, pursuant to which, as promptly as practicable following the later of the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company. Following the consummation of the Merger, the Company will be the surviving corporation (the "Surviving Corporation"). Under the Merger Agreement, with the mutual agreement of the Parent and the Company, the Merger may be restructured to 1 be a merger of the Company into the Purchaser, in which case the Purchaser would be the Surviving Corporation. The Purchaser also has the right to assign its rights under the Merger Agreement to an affiliate of the Purchaser. In the Merger, each outstanding Share (other than Shares held by the Company or owned by Parent or the Purchaser or any other subsidiary of either Parent or the Purchaser and other than Shares held by stockholders, if any, who perfect their appraisal rights under Delaware law) will be converted into the right to receive $52.00, without interest thereon, in cash (the "Merger Consideration") and the Company will become a wholly owned subsidiary of Parent. See Section 12. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred or shall have been determined by the Purchaser to have occurred, (i) to extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (ii) to amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. If by 12:00 Midnight, New York City time, on Tuesday, July 9, 1996 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Commission, to (i) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, (ii) waive all the unsatisfied conditions and, subject to complying with the terms of the Merger Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. The Merger Agreement provides that, so long as the Merger Agreement is in effect and the Offer conditions have not been satisfied or waived, at the request of the Company, the Purchaser will, and Parent will cause the Purchaser to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement thereof. In the case of an extension, Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act, subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change). Without limiting the obligation of the Purchaser under such rules or the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. In the Merger Agreement, the Purchaser has agreed that, except as otherwise required by law, it will not, without the prior consent of the Company, extend the Offer if all of the Offer conditions are satisfied or waived, except that the Purchaser may, in its sole discretion, extend the Offer at any time and from time to time (i) if at the then scheduled expiration date of the Offer any of the conditions to the Purchaser's obligation to accept for payment and pay for Shares shall not have been satisfied or waived, (ii) for any period required by any rule, regulation, interpretation or position of the Commission or its staff applicable to the Offer, (iii) for any period required by applicable law in connection with an increase in the consideration to be paid pursuant to the Offer, and (iv) if all Offer conditions are satisfied or waived but the number of Shares tendered is 85% or more, but less than 90%, of the then outstanding number of Shares, for an aggregate period of not more than 5 business days (for all such extensions under this clause (iv)) beyond the latest expiration date that would be permitted under clause (i), (ii) or (iii) of this sentence. In addition, the 2 Purchaser has agreed that, without the prior written consent of the Company it will not (i) waive the Minimum Condition, (ii) reduce the number of Shares subject to the Offer, (iii) reduce the price per Share to be paid pursuant to the Offer, (iv) change the form of consideration payable in the Offer, or (v) amend or modify any term or condition of the Offer (including the conditions described in Section 14) in any manner adverse to the holders of Shares. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of, or payment for, Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, with the consent of the Company, the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. Based on the representations and warranties of the Company contained in the Merger Agreement and information provided by the Company, as of June 6, 1996; (i) 19,731,068 Shares were outstanding and (ii) 2,017,515 Shares were reserved for issuance upon the exercise of outstanding employee stock options. Based on the foregoing, the Minimum Condition will be satisfied if 10,874,292 Shares are validly tendered and not withdrawn prior to the Expiration Date. The number of Shares required to be validly tendered and not withdrawn in order to satisfy the Minimum Condition will increase to the extent additional Shares are deemed to be outstanding on a fully diluted basis under the Merger Agreement. For purposes of the Merger Agreement, "on a fully diluted basis" means, as of any date, the number of Shares outstanding, together with Shares the Company is then required to issue pursuant to obligations outstanding at that date under employee stock option or other benefit plans or otherwise (assuming all options and other rights to acquire Shares are fully vested and exercisable and all Shares issuable at any time have been issued), including without limitation, pursuant to the Company's stock option plans (the "Stock Option Plans"). The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval of the Merger by the requisite vote or consent of the stockholders of the Company. Under the General Corporation Law of the State of Delaware ("Delaware Law") and the Company's Amended and Restated Certificate of Incorporation, the stockholder vote necessary to approve the Merger will be the affirmative vote of the holders of at least a majority of the outstanding Shares, including Shares held by the Purchaser and its affiliates. Accordingly, if the Purchaser acquires a majority of the outstanding Shares, the Purchaser will have the voting power required to approve the Merger without the affirmative vote of any other stockholders of the Company. Furthermore, if the Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the "short-form" merger provisions of Section 253 of the Delaware Law, 3 without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser intends to effect the Merger as promptly as practicable following the purchase of Shares in the Offer. The Merger Agreement is more fully described in Section 12. On or about the date of the commencement of the Offer, the Company is commencing an offer (the "Debenture Offer") to purchase all of its outstanding 10 1/4% Senior Subordinated Debentures due 2003 (the "Debentures") for an amount in cash equal to 107 3/4% (109 3/4% including payment of an early consent fee and consent fee) of their principal amount, plus accrued and unpaid interest to, but not including the Payment Date (as defined in the related offer to purchase and consent solicitation statement), from any and all registered holders thereof. In conjunction with the Debenture Offer, the Company is soliciting consents of the registered holders of the Debentures to certain proposed amendments to the Indenture, dated as of August 11, 1993 (the "Indenture"), pursuant to which the Debentures were issued. The consummation of the Debenture Offer is conditioned on the consummation of the Offer. In connection with such solicitation, each holder of record of the Debentures who validly consents to the proposed amendments (i) prior to the later of the tenth business day after commencement of the Debenture Offer and the date the requisite consents to amend the Indenture are achieved and a supplemental indenture executed will receive a consent payment equal to 3/4% of the principal amount of the Debentures for which consents are granted, and (ii) prior to the expiration date of the Debenture Offer will receive an additional consent payment equal to 1 1/4% of the principal amount of the Debentures for which consents are granted. The Company has distributed one Right for each outstanding share of Common Stock pursuant to the Rights Agreement. Based on the information disclosed by the Company in the Merger Agreement and in the Schedule 14D-9, in connection with the Company's entering into the Merger Agreement, the Board of Directors authorized an amendment to the Rights Agreement so that the Rights Agreement shall not be applicable to the purchase of the Shares pursuant to the Offer or the Merger or the consummation of the other transactions contemplated by the Merger Agreement. If the Rights Agreement had not been so amended a distribution of Rights certificates separate from the Common Stock might have resulted from the Offer or the Merger Agreement or any of the respective transactions contemplated thereby. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, July 9, 1996, unless and until the Purchaser (subject to the terms of the Merger Agreement) shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Consummation of the Offer is conditioned upon satisfaction of the Minimum Condition and the other conditions set forth in Section 14. Subject to the terms and conditions contained in the Merger Agreement, the Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions. The Company is providing the Purchaser with its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 4 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date, and not properly withdrawn in accordance with Section 4, promptly after the Expiration Date. Any determination concerning the satisfaction or waiver of such terms and conditions will be within the sole discretion of the Purchaser, and such determination will be final and binding on all tendering stockholders. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility" and, collectively, the "Book Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as hereinafter defined) in connection with a book-entry transfer and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and any such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. 5 The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to any of its affiliates (including Parent), or the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES. VALID TENDER. For Shares to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date. In addition, either (i) certificates for tendered Shares must be received by the Depositary along with the Letter of Transmittal at one of such addresses or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation received by the Depositary), in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry at a Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder of Shares (which term, for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) such Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association, Inc. (an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed 6 exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instruction 5 to the Letter of Transmittal. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Depositary as provided below, prior to the Expiration Date; and (3) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for the Shares or a Book-Entry Confirmation with respect to such Shares, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message in connection with a book-entry delivery of Shares, and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. BACKUP WITHHOLDING. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%. Backup withholding generally applies if the stockholder (a) fails to furnish his social security number, (b) furnishes an incorrect taxpayer identification number ("TIN"), (c) fails to properly include a reportable interest or dividend payment on his federal income tax return, or (d) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is his correct number and that he is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are entitled to exemption from backup withholding, including corporations and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include reportable payments in income. Each stockholder should consult with his own tax advisor as to his qualification for exemption from backup withholding and the procedure for obtaining such exemption. Tendering stockholders may be able to prevent backup withholding by completing the Substitute Form W-9 included in the appropriate Letter of Transmittal. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the 7 information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 10 to the Letter of Transmittal. APPOINTMENT. By executing the Letter of Transmittal, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after June 11, 1996. All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney and proxies may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares or other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, subject to the terms and conditions of the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Shares, whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of Parent, the Purchaser, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after August 9, 1996. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set 8 forth in Section 3, the notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO HOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE OFFER OR WHOSE SHARES ARE CONVERTED INTO THE RIGHT TO RECEIVE CASH IN THE MERGER (INCLUDING PURSUANT TO THE EXERCISE OF APPRAISAL RIGHTS). THE DISCUSSION APPLIES ONLY TO HOLDERS OF SHARES IN WHOSE HANDS SHARES ARE CAPITAL ASSETS, AND MAY NOT APPLY TO SHARES RECEIVED UPON CONVERSION OF SECURITIES OR EXERCISE OF WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OR PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR TO HOLDERS OF SHARES WHO ARE IN SPECIAL TAX SITUATIONS (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS OR NON-U.S. PERSONS). THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS. The receipt of cash for Shares pursuant to the Offer or the Merger (including pursuant to the exercise of appraisal rights) will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended (and also may be a taxable transaction under applicable state, local and other income tax laws). In general, for federal income tax purposes, a holder of Shares will recognize gain or loss equal to the difference between his adjusted tax basis in the Shares sold pursuant to the Offer or converted into the right to receive cash in the Merger and the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss (other than, with respect to the exercise of appraisal rights, amounts, if any, which are or are deemed to be interest for federal income tax purposes, which amounts will be taxed as ordinary income) and will be long-term gain or loss if, on the date of sale (or, if applicable, the date of the Merger), the Shares were held for more than one year. In the case of an individual, net long-term capital gain may be subject to a reduced rate of tax and net capital losses may be subject to limits on deductibility. Payments in connection with the Offer or the Merger may be subject to "backup withholding" as discussed in Section 3. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (the "Company Form 10-K") and information supplied to the Purchaser by the Company, the Shares were approved for listing on the NYSE under the trading symbol "CYH" on October 19, 1994. Prior to such date, the Shares were traded on the National Association of Securities Dealers Automated Quotation National Market System ("NASDAQ/NMS"). The Company has never paid or declared cash dividends on the Shares. 9 The following table sets forth, for the periods indicated, the high and low closing bid prices per Share on the NASDAQ/NMS and the high and low closing sale prices per Share as reported on the NYSE, as applicable, for the applicable periods.
HIGH LOW --------- --------- 1994: First Quarter.............................................................. $ 26 $ 17 1/2 Second Quarter............................................................. 24 1/4 19 1/4 Third Quarter.............................................................. 27 20 1/4 Fourth Quarter............................................................. 27 3/4 22 1/8 1995: First Quarter.............................................................. $ 31 5/8 $ 26 1/4 Second Quarter............................................................. 36 30 5/8 Third Quarter.............................................................. 42 3/4 33 3/8 Fourth Quarter............................................................. 40 3/4 29 1996: First Quarter.............................................................. $ 44 $ 34 1/8 Second Quarter (through June 7, 1996)...................................... $ 44 5/8 $ 40 1/4
On June 7, 1996, the last full trading day before the public announcement of the execution of the Merger Agreement, the closing sales price per Share as reported on the NYSE was $43 3/8. On June 10, 1996, the last full trading day before the commencement of the Offer, the closing sales price per Share as reported on the NYSE was $51 7/8 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares, if any, held by the public. The Shares are currently listed and traded on the NYSE, which constitutes the principal trading market for the Shares. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NYSE for continued listing and may, therefore, be delisted from such exchange. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of publicly held Shares (excluding Shares held by officers, directors, their immediate families and other concentrated holdings of 10% or more) were less than 600,000, there were fewer than 1,200 holders of at least 100 shares or the aggregate market value of the publicly held Shares were less than $5 million. The Company has informed the Purchaser that as of June 6, 1996 there were approximately 829 holders of record and 19,731,068 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NYSE for continued listing and the listing of Shares is discontinued, the market for the Shares could be adversely affected. If the NYSE were to delist the Shares, it is possible that the Shares would trade on another securities exchange or in the over-the-counter market and that price quotations for the Shares would be reported by such exchange or through the NASDAQ/NMS or other sources. The extent of the public market for the Shares and availability of such quotations would, however, depend upon such factors as the number of holders and/or the aggregate market value of the publicly held Shares at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act and other factors. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be 10 furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser intends to seek delisting of the Shares from the NYSE and to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such delisting and termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will cease to be reported on the NYSE and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that following the Offer the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for listing or NASDAQ/NMS reporting. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The historical information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. None of Parent, the Purchaser or the Dealer Manager assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information to Parent or the Purchaser. The Company is a Delaware corporation with its principal place of business located at 155 Franklin Road, Brentwood, Tennessee, 37027. According to the Company Form 10-K, the Company owns and operates acute care hospitals that are the prominent providers of primary health care services in non-urban communities. As the nucleus of their local healthcare delivery systems, the Company's hospitals offer a variety of services including a broad range of inpatient and outpatient surgical services, rehabilitation treatment, home health care, psychiatric and chemical dependency treatment, and skilled nursing care. As of March 31, 1996, the Company owned, leased or managed 38 hospitals, with a total of 3,276 licensed beds in 18 states, primarily in the southeastern and southwestern regions of the United States. Of the 38 hospitals operated, 28 are owned, six are leased and four are managed. Set forth below is certain selected historical consolidated financial information with respect to the Company and its subsidiaries excerpted or derived from the audited consolidated financial statements included in the Company Form 10-K and from the unaudited consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. The reports and other documents filed with the Commission should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". 11 COMMUNITY HEALTH SYSTEMS, INC. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, ---------------------- ---------------------------------- 1996 1995 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (UNAUDITED) INCOME STATEMENT DATA: Net operating revenues............................. $ 155,243 $ 142,065 $ 562,745 $ 467,214 $ 421,253 Income before extraordinary items.................. 12,730 12,068 21,585 11,389 18,150 Extraordinary items: Gain on debt restructuring....................... -- -- -- -- 21,311 Loss from early extinguishment of debt........... -- -- -- (3,521) -- Net income......................................... 12,730 12,068 21,585 7,868 39,461 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income per share before extraordinary items............................................ 0.63 0.61 1.08 0.73 1.20 Extraordinary items: Gain on debt restructuring....................... -- -- -- -- 1.41 Loss from early extinguishment of debt........... -- -- -- (0.23) -- Net income per share............................... 0.63 0.61 1.08 0.50 2.61 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
MARCH 31, 1996 ----------- DECEMBER 31, (UNAUDITED) 1995 ------------ BALANCE SHEET DATA (AT END OF PERIOD): Total current assets................................................................ $ 152,409 $ 156,597 Total assets........................................................................ 568,959 567,713 Total current liabilities........................................................... 73,873 76,279 Long-term debt...................................................................... 191,884 207,013 Total stockholders' equity.......................................................... 249,046 232,655
CERTAIN COMPANY PROJECTIONS. To the knowledge of Parent and the Purchaser, the Company does not as a matter of course make public forecasts as to its future financial performance. However, in connection with the preliminary discussions concerning the feasibility of the Offer and the Merger, the Company prepared and furnished Parent with certain financial projections. The projections presented in the tables below (the "Projections") are derived or excerpted from information provided by the Company and are based on numerous assumptions concerning future events. The Projections have not been adjusted to reflect the effects of the Offer or the Merger or the incurrence of indebtedness in connection therewith. The Projections should be read together with the other information contained in this Section 8. COMMUNITY HEALTH SYSTEMS, INC. SELECTED PROJECTIONS OF FUTURE OPERATING RESULTS -- WITHOUT ADDITIONAL FUTURE ACQUISITIONS (1) (DOLLARS IN MILLIONS)
1996 1997 1998 1999 --------- --------- --------- --------- Net Revenue............................................ $ 573.3 $ 617.8 $ 671.5 $ 733.1 Net Income............................................. 45.6 56.2 67.9 81.0 --------- --------- --------- --------- --------- --------- --------- ---------
- ------------------------ (1) Assumes capital expenditures of $1 million per hospital per year or a total of $30 million per year which is depreciable on a weighted average basis over 10.7 years and physician recruiting investment of $200,000 per hospital annually or a total of $6 million, which is amortizable over 3 years. 12 COMMUNITY HEALTH SYSTEMS, INC. SELECTED PROJECTIONS OF FUTURE OPERATING RESULTS -- WITH ACQUISITIONS(1) (DOLLARS IN MILLIONS)
1996 1997 1998 1999 --------- --------- --------- --------- Net Revenue.......................................... $ 594.1 $ 738.0 $ 893.9 $ 1,065.2 Net Income........................................... 46.4 63.2 82.2 104.8 --------- --------- --------- --------- --------- --------- --------- ---------
- ------------------------ (1) Assumes hypothetical acquisitions by the Company at an aggregate cost of $70 million for 1996 and at an aggregate cost of $90 million for each of 1997, 1998 and 1999. Inpatient revenues are assumed to grow 6% per year and outpatient revenues are assumed to grow at 10%. Operating margins are assumed to achieve a 50 basis point improvement in the first full year after acquisition and 100 basis points each year thereafter. Capital expenditures and physician recruiting investment are assumed to total $3 million per year for each $70 million of acquisitions. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT AND ITS PROSPECTIVE LENDERS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING HYPOTHETICAL ACQUISITION ASSUMPTIONS AND ASSUMED INTEREST EXPENSE AND EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE FINANCIAL ADVISORS CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE PURCHASER, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. NONE OF PARENT, THE PURCHASER, THE COMPANY AND ANY OF THEIR FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS 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. AVAILABLE INFORMATION. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to 13 the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such information should also be available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. 9. CERTAIN INFORMATION CONCERNING FORSTMANN LITTLE, PARENT AND THE PURCHASER. Forstmann Little is a private investment partnership. The general partner of Forstmann Little is FLC XXX, the general partners of which are Theodore J. Forstmann, Nicholas C. Forstmann, Steven B. Klinsky, Sandra J. Horbach and Winston W. Hutchins. The foregoing individuals are also the general partners of FLC XXIX Partnership ("FLC XXIX"), a New York general partnership. FLC XXIX is the general partner of Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VI, L.P. ("MBO-VI"), which is a Delaware limited partnership formed to provide the subordinated debt financing and a portion of the equity financing required in leveraged buyout acquisitions arranged by Forstmann Little. Forstmann Little & Co., a New York limited partnership affiliated with Forstmann Little, is a party to various ancillary agreements entered into in connection with the Offer and the transactions contemplated thereby, including the Confidentiality Agreement, the Engagement Letter and the Dealer Manager Agreement (each as hereinafter defined). The General Partners of Forstmann Little & Co. are FLC XXIX and FLC Partnership, L.P., a New York limited partnership ("FLC"). The general partners of FLC are the same as the general partners of FLC XXIX. Forstmann Little, MBO-VI and Forstmann Little & Co. are collectively referred to as the "FL & Co. Companies". FLC, FLC XXIX, FLC XXX and the individuals listed above are collectively herein referred to as the "General Partners". The offices of each of the foregoing partnerships are located at 767 Fifth Avenue, New York, New York 10153. Each of Parent and the Purchaser is a Delaware corporation, newly formed by Forstmann Little for the purpose of effecting the Offer and the Merger. The offices of Parent and the Purchaser are located at 767 Fifth Avenue, New York, New York 10153. Parent owns all the outstanding capital stock of the Purchaser. It is not anticipated that, prior to the consummation of the Offer and the Merger, the Purchaser or Parent will have any significant assets or liabilities or will engage in any activities other than those incident to the Offer and the Merger and the financing thereof. After the completion of the sale of the equity interests in Parent, the outstanding common stock of Parent will be owned by Forstmann Little and MBO-VI. In each of its prior acquisitions, Forstmann Little has offered equity ownership opportunities to the key management of the companies it has acquired, and likewise intends to offer key management of the Company an opportunity to acquire a portion of the equity interest in Parent. While general discussions regarding this have been held with certain members of management, and it is expected that senior executive and operating management will be offered equity ownership, no decisions have been made at this time, either as to the identity of the persons who may be offered the opportunity to invest in Parent or as to the amount or nature of any equity interest any members of management of the Company may be offered. If and to the extent members of management of the Company are given the opportunity to, and do, invest in the equity of Parent, the equity interest of Forstmann Little and MBO-VI would be reduced. For certain information concerning the General Partners and the directors and executive officers of the Purchaser, see Schedules I and II, respectively, to this Offer to Purchase. Except as set forth in this Offer to Purchase: (i) none of the FL & Co. Companies, Parent, the Purchaser and the General Partners nor, to the best knowledge of any of the foregoing, any of the persons listed in Schedule I or II to this Offer to Purchase or any associate or majority owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any Shares or any other equity securities of the Company; (ii) none of the FL & Co. Companies, Parent, the Purchaser or the General Partners nor, to the best knowledge of any of the foregoing, any of the persons or entities referred to in clause (i) above or any of their executive officers, directors, or subsidiaries has effected any transaction in the Shares or any other equity securities of the Company during the past 60 days; (iii) none of the FL & Co. Companies, Parent, the Purchaser and the General Partners nor, to the best knowledge of any of the foregoing, any of the persons listed in Schedule I or II to this Offer to Purchase has any contract, arrangement, understanding or 14 relationship with any other person with respect to any securities of the Company, including but not limited to, contracts, arrangements, understandings or relationships concerning the transfer or voting thereof, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations; (iv) since January 1, 1993, there have been no transactions or business relationships which would be required to be disclosed under the rules and regulations of the Commission between any of the FL & Co. Companies, Parent, the Purchaser and the General Partners or any of their respective subsidiaries or, to the best knowledge of any of the FL & Co. Companies, Parent, the Purchaser and the General Partners, any of the persons listed in Schedule I or II to this Offer to Purchase, on the one hand, and the Company or any of its executive officers, directors or affiliates, on the other hand; and (v) since January 1, 1993, there have been no contacts, negotiations or transactions between any of the FL & Co. Companies, Parent, the Purchaser and the General Partners or any of their respective subsidiaries or, to the best knowledge of any of the FL & Co. Companies, Parent, the Purchaser and the General Partners, any of the persons listed in Schedule I or II to this Offer to Purchase, on the one hand, and the Company or its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets of the Company or any of its subsidiaries. None of the FL & Co. Companies, Parent, the Purchaser and the General Partners had any relationship with the Company prior to the commencement of the discussions which led to the execution of the Merger Agreement. See Section 11. Each of the FL & Co. Companies, Parent, the Purchaser and the General Partners disclaims that it is an "affiliate" of the Company within the meaning of Rule 13e-3 under the Exchange Act. 10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase all of the Shares and to cancel all of the Options pursuant to the Offer and the Merger and to pay related fees and expenses is expected to be approximately $1.2 billion. In addition, the total amount of funds required by the Company to repurchase or refinance certain of its existing indebtedness is expected to be approximately $140 million. The Offer is not conditioned on the obtaining of financing. The FL & Co. Companies and the Purchaser expect to obtain debit and equity financing in an aggregate amount of approximately $1.43 billion for the purchase of Shares by the Purchaser in the Offer and the payment of related fees and expenses and the repurchase or refinancing by the Company of certain of its existing indebtedness of which up to $450 million to finance the Offer (the "Demand Facility") will be obtained from the bank facilities described below, a minimum of $480 million will be obtained from the sale by the Purchaser of its common stock to Parent and approximately $500 million will be obtained from the sale by the Purchaser at par of an aggregate of $500 million principal amount of its Subordinated Note (the "Purchaser Subordinated Pledged Note") to Parent. Parent will, in turn, obtain the funds required to purchase the common stock of the Purchaser and the Purchaser Subordinated Pledged Note from the sale of its common stock to the FL & Co. Companies and, possibly, management and from the sale, at par, of an aggregate of $500 million principal amount of its Subordinated Debentures (the "Parent Subordinated Debentures") to MBO-VI. At the request of the Purchaser, the Company may be designated as the borrower of a portion of the Demand Facility in order to repurchase or refinance certain of the Company's outstanding indebtedness, including, without limitation, its revolving credit and letter of credit facilities. At the closing of the Merger, the FL & Co. Companies and the Purchaser expect that the Surviving Corporation will obtain the funds to refinance the borrowings of the Purchaser (and, if any, the Company) under the Demand Facility, to finance the payment of the consideration payable in the Merger to the holders of Shares, to finance the refinancing of all or such portion of the debt (approximately $198 million outstanding as of March 31, 1996) of the Company outstanding after the Merger, to pay the fees and expenses of the Offer and the Merger, to finance the purchase price of permitted acquisitions and for general corporate purposes of the Company through bank borrowings by the Surviving Corporation in an aggregate amount of up to $900 million. 15 Pursuant to a commitment letter, dated June 9, 1996 (the "Commitment Letter"), Chase Securities Inc. and Chemical Bank ("Chemical") have committed to provide a senior credit facility, or, to the extent the Demand Facility is made available to the Company, an unsecured credit facility, under which Chemical will make demand loans to the Purchaser (the "Demand Loans") in an aggregate principal amount up to $450 million. The Demand Loans will be payable on demand at any time after three months following the date the Purchaser accepts for payment at least a majority of the Shares in the Offer (the "Offer Closing Date"), but in no event later than the earlier of the date of the Merger and six months after the Offer Closing Date (the date on which the Demand Loans are repayable, the "Maturity Date"). The Demand Loans will bear interest at the highest of (i) the rate from time to time publicly announced by Chemical in New York City as its prime rate (the "Prime Rate"), (ii) the secondary market rate for three-month certificates of deposit from time to time plus 1% and (iii) the federal funds rate from time to time, plus 1/2 of 1%, in each case plus 1.50% per annum. Overdue principal, interest, fees and other amounts owing will bear interest at 2% over the rate otherwise applicable thereto. The Demand Loans will be available for multiple drawings during the period commencing on the Offer Closing Date (in no event later than November 30, 1996) and ending on the Maturity Date, provided that in no event may the amount of Demand Loans made available to the Purchaser exceed 50% of the purchase price of the Shares accepted for payment pursuant to the Offer or otherwise acquired by the Purchaser. The obligations of the Purchaser under the Demand Facility will be unconditionally guaranteed by the Parent. The obligations of the Purchaser under the Demand Facility and the guarantee thereof will be secured by a perfected first priority security interest in (a) all of the capital stock of the Purchaser and all Shares owned by the Purchaser or any affiliate or designee thereof, whether acquired in the Offer or otherwise, and (b) all intercompany notes. All or a portion of the outstanding Demand Loans may be prepaid at any time and the unutilized portion of the Demand Facility may be terminated in whole or in part at the Purchaser's option. Such prepayments of the Demand Loans may not be reborrowed. The Demand Facility is conditioned on certain customary conditions, including conditions substantially similar to those set forth in the Merger Agreement, and are expected to contain customary representations and warranties, covenants and events of default. Pursuant to the Commitment Letter, Chemical also committed to provide an aggregate principal amount of $900 million in financing to the Surviving Corporation (the "Merger Commitment"). The financing under the Merger Commitment will consist of (i) a 6 1/2 year term loan facility (the "Tranche A Term Loan Facility") in an aggregate principal amount equal to $50 million, (ii) a 7 1/2 year term loan facility (the "Tranche B Term Loan Facility") in an aggregate principal amount equal to $132.5 million, (iii) an 8 1/2 year term loan facility (the "Tranche C Term Loan Facility") in an aggregate principal amount equal to $132.5 million (collectively, the Tranche A Term Loan Facility, the Tranche B Term Loan Facility and the Tranche C Term Loan Facility shall be referred to as the "Term Loan Facilities"), (iv) a revolving credit facility (the "Revolving Credit Facility") in an aggregate principal amount equal to $200 million, of which up to $90 million may be used, to the extent available, for standby and commercial letters of credit (each a "Letter of Credit" and collectively, "Letters of Credit") and up to $25 million will be made available to the Surviving Corporation pursuant to a swingline facility and (v) a reducing credit facility (the "Acquisition Facility," and together with the Term Loan Facilities and the Revolving Credit Facility, the "Merger Facilities") in an aggregate principal amount equal to $385 million. At the election of the Purchaser, the Acquisition Facility will be reduced by $100 million and a 9 1/2 year term loan facility (the "Tranche D Term Loan Facility") will be established in an aggregate principal amount equal to $100 million, with a repayment schedule to be agreed upon between the Purchaser and Chemical. Loans under the Term Loan Facilities (the "Term Loans") will be made to the Surviving Corporation in one drawing on or before the date on which initial Loans (as hereinafter defined) are made and the Merger is consummated (the "Merger Closing Date"). The loans under the Tranche A Term Loan Facility will be repayable in consecutive quarterly installments commencing on June 30, 1997: amortization of $16 million in 16 years two through three, $29 million in years four through six and $5 million in year seven. The loans under the Tranche B Term Loan Facility will be repayable in consecutive quarterly installments commencing on June 30, 1997: amortization of $10 million in years two through six and $122.5 million in years seven through eight. The loans under the Tranche C Term Loan Facility will be repayable in consecutive quarterly installments commencing on June 30, 1997: amortization of $12 million in years two through seven and $120.5 million in years eight through nine. Loans under the Revolving Credit Facility (the "Revolving Credit Loans") may be made, and Letters of Credit may be issued, at any time during the period between the Merger Closing Date and the date 6 1/2 years thereafter (the "Termination Date"). No Letter of Credit will have an expiration date after the Termination Date. Loans under the Acquisition Facility (the "Acquisition Loans", and together with the Term Loans, and the Revolving Credit Loans, "Loans") may be made at any time during the period between the Merger Closing Date and the Termination Date. The Acquisition Facility will be automatically reduced and prepaid to the following levels on each of the following anniversaries of the Merger Closing Date: third, 95%; fourth, 80%; fifth, 55%; sixth, 20%; and seventh, 0%. The Surviving Corporation may elect that all or a portion of the Loans bear interest at a rate per annum equal to (a) the highest of (i) the Prime Rate, (ii) the secondary market rate for three-month certificates of deposit from time to time plus 1% and (iii) the federal funds rate from time to time, plus 1/2 of 1% (such higher rate, the "ABR") or (b) the rate (grossed-up for reserve requirements as described in the Commitment Letter) at which eurodollar deposits for one, two, three or six months (as selected by the Surviving Corporation) are offered in the interbank eurodollar market in the approximate amount of the relevant Loan (the "Eurodollar Rate") in each case plus a margin which will vary between 1.5% and 4% per annum, which margin will be subject to stepdowns based on a ratio of total senior debt to consolidated EBITDA. All or a portion of the outstanding Loans may be prepaid at any time and the unutilized portion of the Revolving Credit Facility or the Acquisition Facility may be terminated in whole or in part at the Surviving Corporation's option, subject to certain conditions. Prepayments of Term Loans and the Acquisition Loans may not be reborrowed. The Loans shall be prepaid (and Letters of Credit shall be cash collateralized or replaced) with the net proceeds (in excess of $20 million and subject to exceptions to be agreed upon between the Purchaser and Chemical) of certain permitted asset sales and issuances of debt obligations (other than certain permitted indebtedness to be agreed upon) of the Surviving Corporation or any of its subsidiaries following the Merger Closing Date. Such net proceeds shall be applied, except to the extent the lenders agree otherwise, first to prepay Term Loans and Acquisition Loans then outstanding, second to reduce the Acquisition Facility, and then to prepay Revolving Credit Loans (and cash collateralize or replace outstanding Letters of Credit) and simultaneously reduce the Revolving Credit Facility. Optional and mandatory prepayments of Term Loans will be applied among the Term Loans under the Tranche A Term Loan Facility, the Tranche B Term Loan Facility, the Tranche C Term Loan Facility and, if applicable, the Tranche D Term Loan Facility on a pro rata basis. Prepayments applicable to the Term Loans and the Acquisition Loans shall be applied, subject to the immediately preceding sentence, first, to the installments (or scheduled reduction of commitments) scheduled to be paid during the next twelve months after the date of such prepayment and second, to the remaining installments (or scheduled reduction of commitments) on a pro rata basis. The Merger Facilities will be unconditionally guaranteed by the Parent and all domestic subsidiaries of the Surviving Corporation. The Merger Facilities and all guarantees thereof will be secured by (a) a perfected first priority security interest in all of the capital stock of the Surviving Corporation and all capital stock owned by the Surviving Corporation and its subsidiaries of all material domestic subsidiaries (including any subsidiary acquired with the proceeds of the Acquisition Facility) of the Surviving Corporation, and by a first priority security interest in 65% of the capital stock of all material first-tier foreign subsidiaries of the Surviving Corporation and (b) all intercompany notes (including any note payable to the Parent related to 17 the Offer, the Merger or the capitalization of the Surviving Corporation, if applicable). In addition, the documentation for the Merger Facilities will contain a negative pledge on the assets of the Surviving Corporation and its subsidiaries, subject to exceptions to be agreed upon between the Surviving Corporation and Chemical. The Merger Facilities are conditioned on certain customary conditions and representations and warranties, covenants and events of default. Forstmann Little & Co. has agreed to pay to Chemical a financing delivery fee equal to $1 million if (a) Chemical does not provide the Demand Facility or the Merger Facilities due to Forstmann Little & Co. or one of its affiliates obtaining financing from another source or (b) the Merger is not consummated and Forstmann Little & Co. or one of its affiliates receives a termination fee or other economic return (other than reimbursement of documented expenses), in each case payable on the earlier of the date of expiration of Chemical's commitment and the date Forstmann Little & Co. or its affiliates receive such fee or economic return. The Commitment Letter also provides for the payment to Chemical fees customary for commitments of the types described herein, including commitment fees, underwriting fees and annual administrative agent's fees. All such fees are non-refundable. In connection with the Commitment Letter, Forstmann Little has agreed to indemnify Chemical and the lenders against certain liabilities. The foregoing summary of the Commitment Letter is qualified in its entirety by reference to the text of the Commitment Letter, which was filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") and is incorporated herein by reference. The Parent Subordinated Debentures issued to MBO-VI will bear interest at a rate not in excess of 8.25% per annum and are expected to mature in three equal annual installments commencing on the eleventh anniversary of issuance. The Parent Subordinated Debentures will contain agreements, subordination provisions, events of default, indemnities and certain other provisions which are usual in institutional financings of this type. 11. BACKGROUND OF THE OFFER. In late April, 1996, a representative of Merrill Lynch contacted Forstmann Little to inquire as to Forstmann Little's potential interest in pursuing a transaction with the Company. Following this contact, Forstmann Little initiated a review of certain publicly available information concerning the Company. On May 6, 1996, Forstmann Little & Co. entered into a confidentiality agreement with the Company, pursuant to which Forstmann Little & Co. agreed to treat as confidential certain information provided to it by or on behalf of the Company and agreed for a period of two years not to propose any transaction with the Company or its stockholders involving the Shares or an acquisition of control of the Company without the consent of the Company or the Board of Directors. On May 7, 1996, the Company furnished to Forstmann Little certain non-public information about the Company. See Section 8. Thereafter, representatives of Forstmann Little requested additional information concerning the Company and had a series of telephone conversations and meetings with senior and operating management of the Company and representatives of Merrill Lynch to further investigate the business, strategies and prospects of the Company and to discuss a possible acquisition of the Company by Forstmann Little and the possible terms of the Merger Agreement. These conversations included preliminary discussions between E. Thomas Chaney and Richard Ragsdale and representatives of Forstmann Little regarding their continuing as equity investors in the Company in the event that a transaction with Forstmann Little were to result from the process. On June 3, 1996 representatives of Merrill Lynch advised Forstmann Little that the Board of Directors had established a special committee of the Board of Directors in order, among other things, to consider any proposal to acquire the Company that Forstmann Little might submit. Late on June 3, 1996, Forstmann Little communicated a proposal to acquire the Company to Merrill Lynch. Forstmann Little's proposal contemplated acquiring the Company at a price of $50.50 per share, subject to certain conditions, but 18 pursuant to a tender offer that would not be subject to any financing condition. The proposal contemplated that the Company would grant Forstmann Little an option to acquire 19.9% of the outstanding Shares, exercisable in certain circumstances, a $75 million termination fee and reimbursement of Forstmann Little's expenses, in each case payable if the transaction failed to proceed under certain circumstances. Forstmann Little further indicated a desire to move quickly to negotiate a definitive agreement and to announce a proposed transaction. On June 5, 1996, Forstmann Little indicated to Merrill Lynch its insistence that the Company work with Forstmann Little exclusively in negotiating a transaction and that it effectively terminate the process in which it was engaged with other prospective buyers of the Company. Forstmann Little further indicated a willingness to increase its proposed purchase price in exchange for such an exclusive arrangement. Over the next day, the parties negotiated an understanding in which Forstmann Little increased its purchase price to $52.00 per Share, withdrew its request for the 19.9% option, and reduced its requested termination fee to $45 million, including expenses, in exchange for the exclusive arrangement it desired, an undertaking by the Company to schedule a meeting of the Board of Directors no later than June 9, 1996, the Company's acceptance in principle of the form of acquisition agreement proposed by Forstmann Little and the Company's acceptance in principle that there would be a termination fee payable if the transaction failed to proceed under certain circumstances. Thereafter, the representatives of Forstmann Little and the Company continued negotiations regarding such proposed acquisition which resulted in Parent, the Purchaser and the Company entering into the Merger Agreement on June 9, 1996. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER AGREEMENT AND THE RIGHTS AGREEMENT. PURPOSE OF THE OFFER AND THE MERGER The purpose of the Offer is to enable Parent to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. The purchase of Shares pursuant to the Offer will increase the likelihood that the Merger will be effected. Following the completion of the Offer, Parent intends to acquire any remaining Shares not then owned by it by consummating the Merger. In the Merger, each outstanding Share (other than Shares held by the Company as treasury stock, or owned by Parent, the Purchaser or any other subsidiary of either Parent or the Purchaser and other than Shares held by stockholders who perfect appraisal rights, if any, under the Delaware Law), will be converted into the right to receive the Merger Consideration, without interest, and the Company will become a wholly owned subsidiary of Parent. The acquisition of the entire interest in the Company is structured as a cash tender offer followed by a merger in order to expedite the opportunity for Parent to obtain a controlling interest in the Company. Under the Delaware Law and the Company's Restated Certificate of Incorporation, the affirmative vote of the holders of a majority of the outstanding Shares is required to approve the Merger. If the Minimum Condition is satisfied, Parent would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. PLANS FOR THE COMPANY If and to the extent that the Purchaser acquires control of the Company, Parent and the Purchaser intend to conduct a detailed review of the Company and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Such strategies could include, among other things and subject to the terms of the Merger Agreement, changes in the Company's business, corporate structure, Amended and Restated Certificate of Incorporation, Bylaws, capitalization, management or dividend policy. Except as noted in this Offer to Purchase, the Purchaser and Parent have no present plans nor proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, or sale or transfer of a material amount of assets, involving the Company or any subsidiary of the Company or any other material changes in the Company's capitalization, dividend policy, corporate structure, business or composition of its management or Board of Directors. 19 THE MERGER AGREEMENT The following is a summary of the material terms of the Merger Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined, and copies thereof may be obtained, as set forth in Section 8. THE OFFER. The Merger Agreement provides for the commencement of the Offer, in connection with which Parent and the Purchaser have expressly reserved the right to waive certain conditions of the Offer, but without the prior written consent of the Company, the Purchaser has agreed not to (i) waive the Minimum Condition, (ii) reduce the number of Shares subject to the Offer, (iii) reduce the price per Share to be paid pursuant to the Offer, (iv) extend the Offer if all of the Offer conditions are satisfied or waived, (v) change the form of consideration payable in the Offer, or (vi) amend or modify any term or condition of the Offer (including the conditions described in Section 14) in any manner adverse to the holders of Shares. Notwithstanding the foregoing, the Purchaser may, in its sole discretion without the consent of the Company, extend the Offer at any time and from time to time (A) if at the then scheduled expiration date of the Offer any of the conditions to the Purchaser's obligation to accept for payment and pay for Shares shall not have been satisfied or waived; (B) for any period required by any rule, regulation, interpretation or position of the Commission or its staff applicable to the Offer; (C) for any period required by applicable law in connection with an increase in the consideration to be paid pursuant to the Offer; and (D) if all Offer conditions are satisfied or waived but the number of Shares tendered is 85% or more, but less than 90%, of the then outstanding number of Shares, for an aggregate period of not more than 5 business days (for all such extensions under this clause (D)) beyond the latest expiration date that would be permitted under clause (A), (B) or (C) of this sentence. So long as the Merger Agreement is in effect and the Offer conditions have not been satisfied or waived, at the request of the Company, the Purchaser will, and Parent will cause the Purchaser to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that upon the terms (but subject to the conditions) set forth in the Merger Agreement, the Purchaser will be merged with and into the Company and the separate existence of the Purchaser will cease, and the Company shall be the Surviving Corporation and shall be a wholly owned subsidiary of the Parent. In the Merger, each share of common stock, $.01 par value per share, of the Purchaser outstanding immediately prior to the time of filing of a certificate of merger relating to the Merger with the Secretary of State of the State of Delaware, or such later time as is agreed by the parties (the "Effective Time"), shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of Common Stock, $.01 par value per share, of the Surviving Corporation. In the Merger, each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by Parent or the Purchaser or held by the Company, all of which shall be cancelled, and Shares held by stockholders who perfect appraisal rights under Delaware law) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Merger Consideration, without interest. The Merger Agreement provides that (subject to the provisions of the Merger Agreement) the closing of the Merger shall occur as soon as practicable following the satisfaction or, to the extent permitted under the Merger Agreement, waiver of the conditions to the Merger set forth in Article 9 of the Merger Agreement. The Merger Agreement permits Parent and Purchaser, in their sole discretion, to defer the closing of the Merger for a period of 135 days following consummation of the Offer if, in Parent's and Purchaser's sole judgment, the deferral is necessary to enable the Company to effect a covenant defeasance under the Indenture. TREATMENT OF STOCK OPTIONS. The Merger Agreement provides that all options (individually, an "Option" and collectively, the "Options") outstanding immediately prior to the Effective Time under any of the Stock Option Plans, whether or not then exercisable, shall be cancelled and each holder of an Option will be entitled to receive from the Surviving Corporation, for each Share subject to an Option, an amount in cash equal to the excess, if any, of the Merger Consideration over the per share exercise price of such Option, without interest. The amounts payable pursuant to the Merger Agreement shall be paid (i) with respect to 20 Shares subject to Options held by employees who are ranked for compensation purposes below the level of corporate vice-president of the Company and by non-employees of the Company or its subsidiaries who held Options, at the Effective Time, and (ii) with respect to Shares subject to Options held by employees who are ranked for compensation purposes at or above such level, at the time or times the Option or portion of an Option will become exercisable in accordance with its terms as in effect on the date of the Merger Agreement (or, to the extent the Option is already exercisable at the Effective Time, payment shall be made at the Effective Time), provided the holder of the Option continues in employment with the Company at the time the payment is due, and provided further that the entire amount shall come due and payable if the holder of the Option is terminated without cause prior to the first anniversary of the Effective Time. All amounts payable in respect of Options shall be subject to all applicable withholding of taxes. The Company has agreed to use its reasonable best efforts to obtain all necessary consents of the holders of Options, provided, however, that any failure by the Company to obtain any one or more of such consents will have no effect on Parent's and Purchaser's Obligations to consummate the Offer and the Merger. BOARD REPRESENTATION. The Merger Agreement provides that, promptly upon the purchase of Shares pursuant to the Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, as will give Parent representation on the Board of Directors equal to the product of (i) the number of directors on the Board of Directors and (ii) the percentage that the number of Shares purchased by the Purchaser or Parent or any affiliate bears to the number of Shares outstanding, and the Company will, upon request by Parent, promptly increase the size of the Board of Directors and/or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Board of Directors and will cause Parent's designees to be so elected. At the request of Parent, the Company will use its best efforts to cause such individuals designated by Parent to constitute the same percentage of (i) each committee of the Board of Directors, (ii) the board of directors of Community Health Investment Corporation and Hallmark Healthcare Corporation, and (iii) the committees of each such board of directors. The Company's obligations to appoint designees to the Board of Directors are subject to Section 14(f) of the Exchange Act. The parties have agreed to use their respective best efforts to ensure that at least two of the members of the Board of Directors shall at all times prior to the Effective Time be Continuing Directors (as defined in the Merger Agreement). STOCKHOLDER MEETING. The Merger Agreement provides that, if required by applicable law, the Company, acting through the Board of Directors, shall (i) call a meeting of its stockholders (the "Stockholder Meeting") for the purpose of voting on the Merger, (ii) hold the Stockholder Meeting as soon as practicable after the purchase of Shares pursuant to the Offer and (iii) subject to its fiduciary duties under applicable law as advised by outside counsel, recommend to its stockholders the approval of the Merger. At the Stockholder Meeting, Parent shall cause all the Shares then owned by Parent, the Purchaser and any of their subsidiaries or affiliates to be voted in favor of the Merger. The Merger Agreement provides that, notwithstanding the foregoing, if the Purchaser, or any other direct or indirect subsidiary of Parent, shall acquire at least 90 percent of the outstanding Shares, the parties thereto shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a meeting of stockholders of the Company, in accordance with Section 253 of the Delaware Law. However, the Merger Agreement permits Parent and Purchaser, in their sole discretion, to defer the closing of the Merger for a period of 135 days following consummation of the Offer if, in Parent's and Purchaser's sole judgment, the deferral is necessary to enable the Company to effect a covenant defeasance under the Indenture. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various representations and warranties of the parties thereto. These include representations and warranties by the Company with respect to (i) the due incorporation, existence and, subject to certain limitations, the qualification, good standing, corporate power and authority of the Company and certain significant subsidiaries; (ii) the due authorization, execution, and delivery of the Merger Agreement and certain ancillary documents executed in connection therewith and the consummation of transactions contemplated thereby, and the validity and enforceability thereof; (iii) subject to certain exceptions and limitations, the compliance by the Company and its subsidiaries with all applicable foreign, federal, state or local laws, statutes, ordinances, rules, regulations, orders, judgments, rulings and decrees ("Laws") of any foreign, federal, state or local judicial, legislative, 21 executive, administrative or regulatory body or authority, or any court, arbitration, board or tribunal ("Governmental Entity"); (iv) the capitalization of the Company, including the number of shares of capital stock of the Company outstanding, the number of shares reserved for issuance on the exercise of options and similar rights to purchase shares; (v) the identity, ownership (subject to certain exceptions and limitations) and capitalization of each of the Company's subsidiaries and ownership by the Company and its subsidiaries of interests or investments in entities other than subsidiaries of the Company or its subsidiaries; (vi) subject to certain exceptions and limitations, the absence of consents and approvals necessary for consummation by the Company of the Merger and the absence of any violations, breaches or defaults which would result from compliance by the Company with any provision of the Merger Agreement; (vii) compliance with the Securities Act and the Exchange Act, in connection with each registration statement, report, proxy statement or information statement (as defined under the Exchange Act) prepared by it since January 1, 1993, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "Company Reports") and the financial statements included therein filed by the Company with the Commission, the Schedule 14D-9, the information statement, if any, filed by the Company in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act; (viii) subject to certain exceptions and limitations, the absence of pending or (to the knowledge of the Company through receipt of written notice) threatened claims, actions, suits, proceedings, arbitrations, investigations or audits (collectively, "Litigation") or violation of any law by the Company which would have a material adverse effect on the business, results of operations, assets, or financial condition of the Company and its subsidiaries taken as a whole ("Material Adverse Effect"); (ix) the absence of certain changes or effects; (x) certain tax matters; (xi) certain employee benefit and ERISA matters; (xii) certain labor and employment matters; (xiii) certain fees in connection with the transactions contemplated by the Merger Agreement; (xiv) subject to certain exceptions and limitations, the possession by the Company, its subsidiaries and all of the hospitals and other health care facilities owned, leased or managed by the Company or any of its subsidiaries (the "Hospitals") of necessary licenses, permits, certificates of need, approvals and authorizations; (xv) the Medicare and Medicaid participation and accreditation of each of the Hospitals and, subject to certain exceptions and limitations, the absence of any notices or pending or threatened investigations, audits or surveys relating to the Medicare and Medicaid participation and accreditation of Company or any of its subsidiaries; (xvi) subject to certain exceptions and limitations, Medicare/Medicaid compliance; (xvii) certain environmental matters; (xviii) subject to certain exceptions and limitations, title to assets; (xix) material contracts of the Company and its subsidiaries; (xx) the required vote of stockholders of the Company with respect to the transactions contemplated by the Merger Agreement; and (xxi) the Rights Agreement. Parent and the Purchaser and have also made certain representations and warranties, including with respect to (i) the due incorporation, existence, good standing and, subject to certain limitations, corporate power and authority of Parent and the Purchaser; (ii) the due authorization, execution and delivery of the Merger Agreement and certain ancillary documents executed in connection therewith and the consummation of the transactions contemplated thereby, and the validity and enforceability thereof; (iii) the accuracy and the adequacy of the information contained in the Schedule 14D-1 and the documents therein pursuant to which the Offer is being made, any Schedule required to be filed with the Commission, and any amendment or supplement to any of the foregoing and the accuracy of the information provided by Parent and the Purchaser for inclusion in the Schedule 14D-9; (iv) subject to certain exceptions and limitations, the absence of consents and approvals necessary for consummation by Parent and the Purchaser, and the absence of any violations, breaches or defaults which would result from compliance by Parent and the Purchaser with any provision of the Merger Agreement; and (v) the sufficiency of funds available to Parent and the Purchaser for the consummation of the Offer and the Merger. CONDUCT OF BUSINESS PENDING MERGER. The Company has agreed that from the date of the Merger Agreement to the Effective Time, with certain exceptions, unless Parent has consented in writing thereto, the Company will, and will cause each of its subsidiaries to; (i) conduct its operations according to its usual, regular and ordinary course of business consistent with past practice; (ii) use its reasonable best efforts to preserve intact their business organizations and goodwill, maintain in effect all existing qualifications, licenses, permits, approvals and other authorizations, keep available the services of their officers and employees and maintain satisfactory relationships with those persons having business relationships with 22 them; (iii) promptly upon the discovery thereof notify Parent of the existence of any breach of any representation or warranty contained in the Merger Agreement (or, in the case of any representation and warranty that makes no reference to Material Adverse Effect, any breach of such representation and warranty in any material respect) or the occurrence of any event that would cause any representation or warranty contained in the Merger Agreement no longer to be true and correct (or in the case of any representation and warranty that makes no reference to Material Adverse Effect, to no longer be true and correct in any material respect); and (iv) promptly deliver to the Purchaser true and correct copies of any report, statement or schedule filed with the Commission subsequent to the date of the Merger Agreement, any internal monthly reports prepared for or delivered to the Board of Directors after the date of the Merger Agreement and monthly financial statements for the Company and its subsidiaries for and as of each month end subsequent to the date of the Merger Agreement. The Company has agreed that from the date of the Merger Agreement to the Effective Time, with certain exceptions, unless the Parent has consented in writing thereto, the Company shall not, and shall not permit any of its Subsidiaries to, (i) amend its Amended and Restated Certificate of Incorporation or Bylaws or comparable governing instruments; (ii) issue, sell or pledge any shares of its capital stock or other ownership interest in the Company (other than issuances of shares of Common Stock in respect of any exercise of Options outstanding on the date of the Merger Agreement and disclosed to Parent) or any of the subsidiaries, or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire or with respect to any such shares of capital stock, ownership interest, or convertible or exchangeable securities; or accelerate any right to convert or exchange or acquire any securities of the Company or any of its subsidiaries for any such shares or ownership interest; (iii) effect any stock split or otherwise change its capitalization as it exists on the date of the Merger Agreement; (iv) grant, confer or award any option, warrant, convertible security or other right to acquire any shares of its capital stock or take any action to cause to be exercisable any otherwise unexercisable option under any existing stock option plan; (v) declare, set aside or pay any dividend or make any other distribution or payment with respect to any shares of its capital stock or other ownership interests (other than such payments by a wholly owned subsidiary); (vi) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital stock or capital stock of any of its subsidiaries; (vii) sell, lease or otherwise dispose of any of its assets (including capital stock of subsidiaries), except in the ordinary course of business, none of which dispositions individually or in the aggregate will be material; (viii) settle or compromise any pending or threatened litigation, other than settlements which involve solely the payment of money (without admission of liability) not to exceed $500,000 in any one case; (ix) acquire by merger, purchase or any other manner, any business or entity or otherwise acquire any assets that are material, individually or in the aggregate, to the Company and its subsidiaries taken as a whole, except for purchases of inventory, supplies or capital equipment in the ordinary course of business consistent with past practice; (x) incur or assume any long-term or short-term debt, except for working capital purposes in the ordinary course of business under the Company's existing credit agreement; (xi) assume, guarantee or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except wholly owned subsidiaries of the Company; (xii) with certain exceptions, make or forgive any loans, advances or capital continuations to, or investments in, any other person; (xiii) make any tax election or settle any tax liability other than settlements involving solely the payment of money which would be permitted by clause (viii); (xiv) except in certain circumstances, grant any stock related or performance awards; (xv) enter into any new employment, severance, consulting or salary continuation agreements with any officers, directors or employees or grant any increases in compensation or benefits to employees other than increases permitted under certain circumstances; (xvi) adopt, amend in any material respect or terminate any employee benefit plan or arrangement; (xvii) amend, change or waive (or exempt any person or entity from the effect of) the Rights Agreement, except in connection with the exercise of its fiduciary duties by the Board of Directors or as set forth in the Merger Agreement; (xviii) permit any insurance policy naming the Company or any subsidiary as a beneficiary or a loss payee to be cancelled or terminated other than in the ordinary course of business, or (xix) agree in writing or otherwise to take any of the foregoing actions. CONDITIONS TO THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (i) if 23 approval of the Merger Agreement and the Merger by the holders of Shares is required by applicable law, the Merger Agreement and the Merger shall have been approved by the requisite vote of such holders; and (ii) there shall not have been issued any injunction or issued or enacted any Law which prohibits or has the effect of prohibiting the consummation of the Merger or making such consummation illegal. The obligations of Parent and the Purchaser to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that the Purchaser shall have accepted for payment and paid for Shares tendered pursuant to the Offer, provided the condition will be deemed satisfied if Purchaser's failure to accept for payment and pay for such shares is a breach of the Merger Agreement or violates the terms and conditions of the Offer. ACCESS TO INFORMATION. Under the Merger Agreement, from the date of the Merger Agreement to the Merger Closing Date, the Company shall, and shall cause its subsidiaries to, (i) give the Parent and its authorized representatives and lender banks full access to all books, records, personnel, offices and other facilities and properties of the Company and its subsidiaries and their accountants and accountants' work papers, (ii) permit the Parent to make such copies and inspections thereof as the Parent may reasonably request and (iii) furnish the Parent with such financial and operating data and other information with respect to the business and properties of the Company and its subsidiaries as the Parent may from time to time reasonably request; provided that no investigation or information furnished pursuant to the Merger Agreement shall affect any representations or warranties made by the Company therein or the conditions to the obligations of the Parent to consummate the transactions contemplated thereby. NO SOLICITATION. The Company has agreed in the Merger Agreement that neither it nor any of its subsidiaries, nor any of their respective officers, directors, employees, representatives, agents or affiliates, shall, directly or indirectly, encourage, solicit, initiate or, except as is required in the exercise of the fiduciary duties of the Company's directors to the Company or its stockholders after consultation with outside counsel to the Company, participate in any way in any discussions or negotiations with, or provide any information to, or afford any access to the properties, books or records of the Company or any of its subsidiaries to, or otherwise assist, facilitate or encourage, any corporation, partnership, person or other entity or group (other than the Parent or any affiliate or associate of Parent) concerning any merger, consolidation, business combination, liquidation, reorganization, sale of substantial assets, sale of shares of capital stock or similar transactions involving the Company or any subsidiary or any division of any thereof (an "Alternative Proposal"), and shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted theretofore with respect to any of the foregoing; provided, however, that nothing contained in the Merger Agreement shall prohibit the Company or the Board of Directors from complying with Rule 14e-2(a) under the Exchange Act or taking such action promulgated thereunder or from making such disclosure to the Company's stockholders or taking such action which, in the judgment of the Board of Directors with the advice of outside counsel, may be required under applicable law. The Company has agreed promptly to notify Parent if any such information is requested from it or any such negotiations or discussions are sought to be initiated with the Company. FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the transactions contemplated by the Merger Agreement shall be paid by the party incurring such expenses. The Merger Agreement provides that, under certain circumstances, the Company will pay to Forstmann Little & Co. and its affiliates, in such manner as is designated by Forstmann Little & Co., the amount of $45,000,000 (the "Commitment Amount") as compensation to Forstmann Little & Co. and its affiliates for incurring the costs and expenses related to the Offer and the Merger and for their foregoing of the opportunity to invest in the Company. The Company is obligated to pay the Commitment Amount under the following circumstances: (i) the Company terminates the Merger Agreement because of an Alternative Proposal which the Board of Directors in good faith determines is more favorable from a financial point of view to the stockholders of the Company as compared to the Offer and the Merger and the Board of Directors determines, after consultation with Skadden, Arps, Slate, Meagher & Flom, that failure to terminate the Merger Agreement would be inconsistent with the compliance by the Board of Directors with 24 its fiduciary duties, subject to certain provisos that would render such termination right unavailable; (ii) Parent terminates the Merger Agreement (x) because the Board of Directors failed to recommend, or withdraws, modifies or amends in any material respect, its approval or recommendation of the Offer or the Merger, or recommended acceptance of any Alternative Proposal, or resolved to do any of the foregoing (unless the foregoing occurred solely as a result of the Parent's willful breach in any material respect of its representations, warranties or obligations under the Merger Agreement) or (y) after October 31, 1996 if Purchaser has not purchased any Shares by that date because of the Company's willful breach or willful failure to comply in any material respect with any of its material obligations under the Merger Agreement; (iii) Parent or the Company terminate the Merger Agreement after October 31, 1996 because of the failure of any condition to the Offer (which failure was not caused by Parent's failure to fulfill its obligations under the Merger Agreement) at a time when the Minimum Condition shall not have been satisfied and (x) during the term of the Merger Agreement or within 12 months after the termination of the Merger Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a majority of the outstanding Shares is acquired by a third party (including a "group" as defined in the Exchange Act) (a "Stock Acquisition") which Alternative Proposal (or another Alternative Proposal by the same or a related person or entity) was made prior to the termination of the Merger Agreement or (y) during the term of the Merger Agreement or within two months after the termination of the Merger Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a Stock Acquisition occurs. The Company has agreed that under certain circumstances it will reimburse Parent and its affiliates for their documented reasonable out-of-pocket expenses, but not in excess of $15,000,000 in the aggregate, incurred in connection with the Offer and the Merger (including amounts paid or payable to banks and investment bankers, fees and expenses of counsel, accountants and consultants, and printing expenses) regardless of when those expenses are incurred (collectively, the "Expenses"). The Company will pay the Expenses under the circumstances described in the foregoing clauses (i), (ii)(x), (iii)(x) and (iii)(y). The Company will also reimburse the Expenses if the Merger Agreement terminates after October 31, 1996 because any of the Company's representations and warranties contained in the Merger Agreement are not true in all material respects or the Company failed to comply in any material respect with any of its obligations under the Merger Agreement. The Purchaser will not be entitled to be reimbursed for its expenses if it is paid the Commitment Amount, and if the Company has reimbursed Parent and its affiliates for their Expenses and thereafter pays the Commitment Amount, then the Commitment Amount will be reduced by the amount of any reimbursed Expenses. The Merger Agreement provides that if the Company fails to pay the Commitment Amount (other than in the case where the Commitment Amount is owing because of the event set forth in (iii)(y) above) or Expenses when due, the Company will pay Parent all costs and expenses incurred in collecting those amounts, together with interest on those amounts at Chemical Bank's prime rate. OTHER AGREEMENTS. The Merger Agreement provides that, subject to the terms and conditions provided in the Merger Agreement, the Company, Parent, and the Purchaser shall: (a) use their best efforts to cooperate with one another in (i) determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits, authorizations or waivers are required to be obtained prior to the Effective Time from, Governmental Entities or other third parties in connection with the execution and delivery of the Merger Agreement and certain other ancillary documents and the consummation of the transactions contemplated thereby and (ii) timely making all such filings and timely seeking all such consents, approvals, permits, authorizations and waivers; and (b) use their best efforts to take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions contemplated by the Merger Agreement. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purpose of the Merger Agreement, the proper officers and directors of Parent and the Surviving Corporation shall take all such necessary action. The Merger Agreement requires that, concurrently with the commencement of the Offer, the Company commence the Debenture Offer and a solicitation as part of the Debenture Offer (the "Solicitation") of 25 consents to amendments to the Indenture from the holders of not less than a majority in aggregate principal amount of the Debentures outstanding. The Merger Agreement provides that the Debenture Offer and Solicitation (including the amendments) be on terms determined by Parent, provided that the Company shall not be required to purchase the Debentures pursuant to the Debenture Offer, and the proposed amendments, if approved, shall not become operative, unless (i) Parent has consummated the Offer and (ii) the Company has received the proceeds of financing arranged by Purchaser in an amount sufficient to (a) consummate the Debenture Offer and pay all fees and expenses associated therewith, and (b) refinance any indebtedness of the Company coming due by reason of the Debenture Offer and Solicitation and consummation thereof. The Company has agreed that, promptly following the date the consents of a majority in aggregate principal amount of the outstanding Debentures are obtained, it will execute a supplemental indenture containing the proposed amendments that by their terms shall become operative only upon consummation of the Offer and the Debenture Offer. CONDITIONS TO THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) if approval of the Merger Agreement and the Merger by the holders of Shares is required by applicable law, the Merger Agreement and the Merger shall have been approved by the requisite vote of such holders; and (b) there shall not have been issued any injunction or issued or enacted any Law which prohibits or has the effect of prohibiting the consummation of the Merger or makes such consummation illegal. The obligations of Parent and the Purchaser to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that the Purchaser shall have accepted for payment and paid for Shares tendered pursuant to the Offer. TERMINATION. The Merger Agreement may be terminated and the Merger contemplated thereby may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company, but prior to the Effective Time: (a) by mutual written consent of the Board of Directors of Parent and the Company (which consent will require the approval of a majority of the Continuing Directors if such termination occurs following the election or appointment of Parent's designees, if applicable); (b) by the Parent or the Company: (i) if the Effective Time shall not have occurred on or before December 31, 1996 (provided that the right to terminate the Merger Agreement pursuant to this clause (i) shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of or resulted in the failure of the Effective Time to occur on or before such date); (ii) if there shall be any statute, law, rule or regulation that makes consummation of the Offer or the Merger illegal or prohibited or if any court of competent jurisdiction in the United States or other Governmental Entity shall have issued an order, judgment, decree or ruling, or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, judgment, decree, ruling or other action shall have become final and non-appealable; (iii) after October 31, 1996 if, on account of the failure of any condition specified in Section 14, the Purchaser has not purchased any Shares thereunder by that date (provided that the right to terminate the Merger Agreement pursuant to this clause (iii) shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of or resulted in the failure of any such condition); or (iv) upon a vote at a duly held meeting or upon any adjournment thereof, the stockholders of the Company shall have failed to give any approval required by applicable law; (c) by the Company if there is an Alternative Proposal which the Board of Directors in good faith determines is more favorable from a financial point of view to the stockholders of the Company as 26 compared to the Offer and the Merger, and the Board of Directors determines, after consultation with Skadden, Arps, Slate, Meagher & Flom, that failure to terminate the Merger Agreement would be inconsistent with the compliance by the Board of Directors with its fiduciary duties to stockholders imposed by law; provided, however, that the right to terminate the Merger Agreement in such event shall not be available (i) if the Company has breached in any material respect its obligations not to solicit Alternative Proposals, or (ii) if the Alternative Proposal (x) is subject to a financing condition or (y) involves consideration that is not entirely cash or does not permit stockholders to receive the payment of the offered consideration in respect of all Shares at the same time, unless the Board of Directors has been furnished with a written opinion of Merrill Lynch or other nationally recognized investment banking firm to the effect that (in the case of clause (x)) the Alternative Proposal is readily financeable and (in the case of clause (y)) that such offer provides a higher value per share than the consideration per share pursuant to the Offer or the Merger, or (iii) if, prior to or concurrently with any purported termination pursuant to this clause (c), the Company shall not have paid the Commitment Fee and the Expenses, if applicable, or (iv) if the Company has not provided Parent and the Purchaser with prior written notice of its intent to so terminate the Merger Agreement and delivered to Parent and the Purchaser a copy of the written agreement embodying the Alternative Proposal in its then most definitive form concurrently with the earlier of (x) the public announcement of, or (y) filing with the Commission of any documents relating to, the Alternative Proposal; and (d) by Parent if the Board of Directors shall have failed to recommend, or shall have withdrawn, modified or amended in any material respect, its approval or recommendation of the Offer or the Merger or shall have recommended acceptance of any Alternative Proposal, or shall have resolved to do any of the foregoing. INDEMNIFICATION. The Merger Agreement provides that the Parent will cause the Surviving Corporation to purchase a pre-paid noncancellable directors and officers insurance policy expiring not earlier than October 7, 1999, covering the current and all former directors and officers with respect to acts or failures to act prior to the Effective Time, in a single aggregate amount over such period equal to the policy limit for the Company's current directors and officers insurance policy (the "Current Policy"). If such insurance is not obtainable at a cost not in excess of the annual premium paid by the Company for the Current Policy (the "Cap") times 3.25, then Parent will cause the Surviving Corporation to purchase policies providing at least the same coverage as the Current Policy and containing terms and conditions no less advantageous to the current and former directors and officers of the Company than the Current Policy with respect to acts or failures to act prior to the Effective Time; provided, however, that Parent and the Surviving Corporation shall not be required to obtain policies providing such coverage except to the extent that such coverage can be provided at an annual cost of no greater than the Cap; and if equivalent coverage cannot be obtained, or can be obtained only by paying an annual premium in excess of the Cap, the Purchaser or the Surviving Corporation shall be required to obtain only as much coverage as can be obtained by paying an annual premium equal to the Cap. The Purchaser has also agreed to cause the Surviving Corporation to keep in effect in its By-Laws a provision for a period of not less than three years from the Effective Time (or, in the case of matters occurring prior to the Effective Time which have not been resolved prior to the third anniversary of the Effective Time, until such matters are finally resolved) which provides for indemnification of the past and present officers and directors of the Company to the fullest extent permitted by the Delaware Law. The Merger Agreement provides that from and after the Effective Time, Parent shall indemnify and hold harmless, to the fullest extent permitted under applicable law, each person who is, or has been at any time prior to the date of the Merger Agreement or who becomes prior to the Effective Time, an officer or director of the Company or any subsidiary against all losses, claims, damages, liabilities, costs or expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement (collectively, "Losses") in connection with any Litigation arising out of or pertaining to acts or omissions, or alleged acts or omissions, by them in their capacities as such, which acts or omissions existed or occurred prior to the Effective Time, whether commenced, asserted or claimed before or after the Effective Time, including, without limitation, liabilities arising under the Securities Act, the Exchange Act and state corporation laws in 27 connection with the transactions contemplated hereby. The Company and, after the Effective Time, the Parent shall periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. If the Merger is consummated, the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless Parent and any person or entity who was a stockholder, officer, director or affiliate of Parent prior to the Effective Time against any losses in connection with any Litigation arising out of or pertaining to any of the transactions contemplated by the Merger Agreement or certain ancillary documents relating thereto. Parent is required to periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. The Surviving Corporation will control the defense, through its counsel, of any action brought against any person seeking indemnification pursuant to the preceding two paragraphs (an "Indemnified Party"). Counsel for the Indemnified Party shall be selected by the Indemnified Party and will be permitted to participate in the defense of such action at the Surviving Corporation's expense. CERTAIN EMPLOYEE MATTERS. The Merger Agreement provides that, from and after the Effective Time, the Surviving Corporation will honor and assume, and Parent will cause the Surviving Corporation to honor and assume, in accordance with their terms all existing employment and severance agreements between the Company or any of its subsidiaries and any officer, director, or employee of the Company or any of its subsidiaries and all benefits or other amounts earned or accrued to the extent vested or which becomes vested in the ordinary course, through the Effective Time under all employee benefit plans of the Company and any of its subsidiaries. The Parent confirms in the Merger Agreement that it is the Purchaser's intention that, until the first anniversary of the Effective Time, the Surviving Corporation and its subsidiaries will provide benefits to their employees (excluding any employees covered by collective bargaining agreements) which will, in the aggregate, be substantially equivalent to those currently provided by the Company and its subsidiaries to such employees (other than pursuant to stock option, stock purchase or other stock based plans). The Parent intends that, after the first anniversary of the Effective Time, the Surviving Corporation and its subsidiaries will provide benefits to their employees (excluding employees covered by collective bargaining agreements, if any) which benefits are appropriate in the judgment of the Surviving Corporation. AMENDMENT. To the extent permitted by applicable law, the Merger Agreement may be amended by action taken by or on behalf of the Board of Directors of the Company (by action of a majority of the Continuing Directors if such amendment occurs following the election or appointment of Parent's designees, if applicable) and the Purchaser at any time before or after adoption of the Merger Agreement by the stockholders of the Company but, after any such stockholder approval, no amendment shall be made which decreases the Merger Consideration or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of all of the parties. TIMING. The exact timing and details of the Merger will depend upon legal requirements and a variety of other factors, including the number of Shares acquired by the Purchaser pursuant to the Offer. Although Parent has agreed to cause the Merger to be consummated on the terms contained in the Merger Agreement, there can be no assurance as to the timing of the Merger. OTHER MATTERS SECTION 203 OF THE DELAWARE LAW. Section 203 of the Delaware Law limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) unless, among other things, the corporation's board of directors has given its prior approval to either the business combination or the 28 transaction which resulted in the stockholder's becoming an "interested stockholder". On June 9, 1996, the Board of Directors approved the Offer and the Merger for purposes of Section 203, and, therefore, Section 203 is inapplicable to the Merger. APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in connection with the Offer. However, if the Merger is consummated, holders of Shares will have certain rights under Section 262 of the Delaware Law to dissent and demand appraisal of, and payment in cash for the fair value of, their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than in addition to the Offer Price and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Section 262 of the Delaware Law fails to perfect, or effectively withdraws or losses his right to appraisal, as provided in the Delaware Law, the shares of such holder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Section 262 of the Delaware Law for perfecting appraisal rights may result in the loss of such rights. RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act ("Rule 13e-3"), which is applicable to certain "going private" transactions. Rule 13e-3 requires, among other things, that certain financial information concerning the company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. Parent believes that Rule 13e-3 will not be applicable to the Merger because of the exemption afforded by Rule 13e-3(g)(1), among other reasons. However, under certain circumstances, Rule 13e-3 could be applicable to the Merger or other business combination in which Parent seeks to acquire the remaining Shares it does not beneficially own following the purchase of Shares pursuant to the Offer. For example, if the Merger as consummated is not substantially similar to the Merger as described in this Offer to Purchase and the Merger Agreement, Rule 13e-3 could apply. However, the terms and conditions of the Merger are governed by the Merger Agreement, and any amendment to the Merger Agreement must be approved by each party thereto. If Parent has exercised its right to appoint directors to the Board of Directors following its purchase of Shares pursuant to the Offer, any such amendment must be approved on behalf of the Company by a majority of the directors of the Company then in office who have not been designated by Parent. There can be no assurance that the Merger will take place, even though each party has agreed in the Merger Agreement to use its best efforts to cause the Merger to occur, because the Merger is subject to certain conditions, some of which are beyond the control of either the Purchaser or the Company. Since the Purchaser's ultimate objective is to acquire ownership of all the Shares, if the Merger does not take place, the Purchaser would consider the acquisition, whether directly or through an affiliate of Shares through private or open market purchases, or subsequent tender offers or a different type of merger or other combination of the Company with the Purchaser or an affiliate or subsidiary thereof, or by any other permissible means deemed advisable by it. Except as described in the section captioned "The Merger Agreement", any of these possible transactions might be on terms the same as, or more or less favorable than, those of the Offer or the Merger. 29 13. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the two following paragraphs, and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If on or after the date of the Merger Agreement the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or (c) issue or sell additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, other than Shares issued pursuant to the exercise of outstanding employee stock options, then subject to the provisions of Section 14 below, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If on or after the date of the Merger Agreement the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 14 below, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other term of the Offer, the Purchaser shall not be required to accept for payment or pay for, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) of the Exchange Act, any Shares not theretofore accepted for payment or paid for and may terminate or amend the Offer as to such Shares unless there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would represent at least a majority of the outstanding Shares on a fully diluted basis. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer if at any time on or after the date of the Merger Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exist or shall occur and remain in effect: (a) there shall have been instituted or pending any litigation by the Government of the United States of America or any agency or instrumentality thereof (i) which seeks to challenge the acquisition by Parent or the Purchaser (or any of its affiliates) of Shares pursuant to the Offer or restrain, prohibit or delay the making or consummation of the Offer or the Merger, (ii) which seeks to make the purchase of or payment for some or all of the Shares pursuant to the Offer or the Merger illegal, (iii) which seeks to impose limitations on the ability of Parent or the Purchaser (or any of their affiliates) effectively to acquire or hold, or to require Parent, the Purchaser or the Company or any of their respective affiliates or subsidiaries to dispose of or hold separate, any material portion of their assets or business, (iv) which seeks to impose limitations on the ability of Parent, the Purchaser or their affiliates to exercise full rights 30 of ownership of the Shares purchased by it, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the stockholders of the Company, or (v) which seeks to limit or prohibit any future business activity by Parent, the Purchaser or any of their affiliates, including, without limitation, requiring the prior consent of any person or entity (including the Government of the United States of America or any agency or instrumentality thereof) to future transactions by Parent, the Purchaser or any of their affiliates; or (b) there shall have been promulgated, enacted, entered, enforced or deemed applicable to the Offer or the Merger, by any Governmental Entity, any Law or there shall have been issued any injunction that results in any of the consequences referred to in subsection (a) above; or (c) the Merger Agreement shall have been terminated in accordance with its terms; or (d) (i) any of the representations and warranties made by the Company in the Merger Agreement shall not have been true and correct in all material respects when made, or shall thereafter have ceased to be true and correct in all material respects as if made as of such later date (other than representations and warranties made as of a specified date) or (ii) the Company shall have breached or failed to comply in any material respect with any of its obligations under the Merger Agreement; or (e) any corporation, entity, "group" or "person" (as defined in the Exchange Act), other than Parent or the Purchaser, shall have acquired beneficial ownership of more than 49% of the outstanding Shares; or (f) except as set forth in the Company Reports thereto or the schedules to the Merger Agreement, any change shall have occurred or be threatened which individually or in the aggregate has had or is continuing to have a material adverse effect on the prospects of the Company and its Subsidiaries taken as a whole; or (g) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over the counter market in the United States, (ii) a declaration of any banking moratorium by federal or state authorities or any suspension of payments in respect of banks or any limitation (whether or not mandatory) imposed by federal or state authorities on the extension of credit by lending institutions in the United States, (iii) a commencement of a war, armed hostilities or any other international or national calamity directly or indirectly involving the United States, other than any war, armed hostilities or other international calamity involving the former Yugoslavia, (iv) any mandatory limitation by the federal government on the extension of credit by banks or other financial institutions generally, (v) any increase of 500 or more basis points in the prime rate as announced by Chemical Bank, measured from the date of the Merger Agreement, or (vi) in the case of the foregoing clause (iii), if existing at the time of the commencement of the Offer, in the reasonable judgment of Parent, a material acceleration or worsening thereof. The foregoing conditions are for the sole benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances (including any action or inaction by Parent or the Company) giving rise to any such condition and may be waived by Parent or the Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right will be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment shall forthwith be returned by the depositary to the tendering stockholders. 15. CERTAIN REGULATORY AND LEGAL MATTERS. Except as described in this Section 15, based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, as well as certain representations made to the Purchaser and Parent in the Merger Agreement by the Company, 31 neither the Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by any Governmental Entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws". While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer, pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business, or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. The Company is incorporated under the laws of Delaware. Section 203 of the Delaware Law prevents an "Interested Stockholder" (defined generally as a person with 15% or more of the corporation's outstanding voting stock) from engaging in a "Business Combination" (defined to include a variety of transactions, including mergers) with a Delaware corporation for three years following the date such person becomes an Interested Stockholder, unless (i) before such person became an Interested Stockholder, the board of directors of the corporation approved the transaction in which the Interested Stockholder became an Interested Stockholder or approved the Business Combination, or (ii) upon consummation of the transaction which resulted in the Interested Stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding stock held by directors who are also officers of the corporation and by certain employee stock ownership plans), or (iii) following the transaction in which such person became an Interested Stockholder, the Business Combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of two-thirds of the outstanding voting stock of the corporation not owned by the Interested Stockholder. The Board of Directors has unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Offer, for purposes of Section 203 of the Delaware Law, and the restrictions of such Section 203 are, accordingly, not applicable to Parent, the Purchaser or affiliates or associates of the Purchaser as a result of the consummation of the transactions contemplated by this Offer to Purchase. Neither the Purchaser nor Parent has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be 32 unable to accept for payment or pay for Shares tendered pursuant to the Offer or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obliged to accept for payment or pay for any Shares tendered pursuant to the Offer. ANTITRUST. The Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's purchase of Shares pursuant to the Offer, 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 purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of Parent or its subsidiaries, or the Company or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the results thereof. OTHER REGULATORY APPROVAL. A change in ownership of the Company would require various regulatory notifications and approvals at the federal, state and local government levels. For instance, at the federal level, Medicare and Medicaid providers are required to notify their fiscal intermediaries and the Health Care Financing Administration regional office no later than 15 days after the change of ownership has occurred. At the state and local levels, there are licensing and certification requirements for hospitals and related health services. States and municipalities may require notification of a change in ownership for such facilities, or new licenses or certifications, prior to consummation of any change of control transaction. The Company will seek to obtain all necessary licenses or certifications as expeditiously as possible. 16. FEES AND EXPENSES. Lehman Brothers is acting as Dealer Manager in connection with the Offer and has provided certain financial advisory services to Purchaser in connection with the Offer and the Merger pursuant to an engagement letter dated June 7, 1996 (the "Engagement Letter") and a Dealer Manager Agreement dated as of June 11, 1996 (the "Dealer Manager Agreement"). Pursuant to the Engagement Letter, Forstmann Little & Co. has agreed to pay Lehman Brothers a fee equal to 0.3% of the consideration to be paid in the Offer and the Merger. Pursuant to the Dealer Manager Agreement, the Purchaser and Forstmann Little & Co. have agreed to pay Lehman Brothers $500,000 for its services as Dealer Manager, which fee will be credited against fees payable under the Engagement Letter. In addition, the Purchaser and Forstmann Little & Co. have agreed to reimburse the Dealer Manager for its out-of-pocket expenses, including the reasonable fees and expenses of its counsel, in connection with the Offer. Fees payable under the Engagement Letter and the Dealer Manager Agreements together with the reimbursement of expenses, will not exceed $4 million in the aggregate. The Purchaser and Forstmann Little & Co. have agreed to indemnify the Dealer Manager and certain related persons against certain liabilities and expenses, including certain liabilities under the federal securities laws. Lehman Brothers is also acting as dealer manager for the Debt Tender Offer, for which it will be paid a fee of $500,000. Fees payable therefor will be credited against fees payable under the Engagement Letter. Lehman Brothers has from time to time provided investment banking, financial advisory and other services to the Company and Forstmann Little and its affiliates. In the ordinary course of its business, Lehman Brothers trades debt and equity securities of the Company for its own account and accounts of its customers, and accordingly, it may at any time have a net long or short position in such securities. The Purchaser has retained Georgeson & Company Inc. to act as the Information Agent and Chase Mellon Shareholders Services, L.L.C. to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Except as described herein, neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager) in connection with the solicitation of 33 tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser or Parent becomes aware of any state law prohibiting the making of the Offer or the acceptance of Shares pursuant thereto in such state, the Purchaser will make a good faith effort to comply with any such state statute or seek to have such state statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such jurisdiction. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PARENT, THE PURCHASER OR THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE. The Purchaser or Parent has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Sections 8 and 9 (except that they will not be available at the regional offices of the Commission). FLCH ACQUISITION CORP. June 11, 1996 34 SCHEDULE I CERTAIN INFORMATION CONCERNING THE GENERAL PARTNERS OF FORSTMANN LITTLE & CO., FORSTMANN LITTLE & CO., SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P., FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P., FLC PARTNERSHIP, L.P., FLC XXIX PARTNERSHIP AND FLC XXX PARTNERSHIP Set forth below is the name, age, present principal occupation or employment and five-year employment history of each general partner of: FLC Partnership, L.P., a general partner of Forstmann Little & Co.; FLC XXIX, the other general partner of Forstmann Little & Co. and the general partner of MBO-VI; and FLC XXX, the general partner of Forstmann Little. Each person listed below has been employed with Forstmann Little & Co. affiliated partnerships for the last five years, is a citizen of the United States of America, and each such person's business address is 767 Fifth Avenue, New York, New York 10153.
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY AGE - -------------------------- ------------------------------------------------------------------------------- ----- Theodore J. Forstmann General Partner of Forstmann Little & Co. affiliated partnerships. Mr. T. 56 Forstmann has been a General Partner of Forstmann Little & Co. affiliated partnerships since 1978. Nicholas C. Forstmann General Partner of Forstmann Little & Co. affiliated partnerships. Mr. N. 49 Forstmann has been a General Partner of Forstmann Little & Co. affiliated partnerships since 1978. Steven B. Klinsky General Partner of Forstmann Little & Co. affiliated partnerships. Mr. Klinsky 40 has been a General Partner of Forstmann Little & Co. affiliated partnerships since December 1986, and has been associated with such partnerships since December 1984. Sandra J. Horbach General Partner of Forstmann Little & Co. affiliated partnerships. Ms. Horbach 35 has been a General Partner of Forstmann Little & Co. affiliated partnerships since January 1993, and has been associated with such partnerships since August 1987. Winston W. Hutchins General Partner of Forstmann Little & Co. affiliated partnerships. Mr. Hutchins 37 has been a General Partner of Forstmann Little & Co. affiliated partnerships since January 1990, and has been associated with such partnerships since July 1983.
I-1 SCHEDULE II CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name, age, present principal occupation or employment and five-year employment history of each director and executive officer of Parent. All persons listed below are citizens of the United States of America, and each such person's business address is 767 Fifth Avenue, New York, New York 10153.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME OFFICE HELD IN PARENT FIVE-YEAR EMPLOYMENT HISTORY AGE - ------------------------ --------------------- ---------------------------------------------------------- ----- Sandra J. Horbach Director and General Partner of Forstmann Little & Co. affiliated 35 President partnerships. Ms. Horbach has been a General Partner of Forstmann Little & Co. affiliated partnerships since January 1993, and has been associated with such partnerships since August 1987. Thomas H. Lister Vice President and Associated with Forstmann Little & Co. affiliated 32 Secretary partnerships since March 1993. Formerly associated with Morgan Stanley & Co. from June 1986 to July 1989 and from June 1991 to February 1993. Jamie C. Nicholls Vice President and Associated with Forstmann Little & Co. affiliated 29 Treasurer partnerships since January 1995. Formerly with Goldman, Sachs & Co. from July 1988 to July 1990 and from August 1993 to January 1995 and with McKinsey & Co. from October 1992 to August 1993.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER. Unless otherwise indicated below, all information concerning each person listed below is the same as shown above.
NAME OFFICE HELD IN PURCHASER - ------------------------ -------------------------------- Sandra J. Horbach Director and President Thomas H. Lister Vice President and Secretary Jamie C. Nicholls Vice President and Treasurer
II-1 Facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: THE DEPOSITARY FOR THE OFFER IS: CHASE MELLON SHAREHOLDER SERVICES, L.L.C. ---------------
BY MAIL: BY HAND/OVERNIGHT Chase Mellon Shareholder Services, L.L.C. Chase Mellon Shareholder Services, L.L.C. P.O. Box 798 120 Broadway, 13th Floor Midtown Station New York, New York 10271 New York, New York 10018 Attn: Reorg. Dept. Attn: Reorg. Dept.
FOR INFORMATION: 1 (800) 223-2064 BY FACSIMILE TRANSMISSION: (201) 329-8936 (FOR ELIGIBLE INSTITUTIONS ONLY) CONFIRM BY TELEPHONE: (201) 296-4983 ------------------------ Any questions or requests for assistance or additional copies of the Offer to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations listed below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: ABCDEF WALL STREET PLAZA NEW YORK, NEW YORK 10005 CALL TOLL-FREE (800) 223-2064 BANKERS AND BROKERS, PLEASE CALL COLLECT (212) 440-9800 THE DEALER MANAGER FOR THE OFFER IS: LEHMAN BROTHERS 3 WORLD FINANCIAL CENTER NEW YORK, NEW YORK 10285 (212) 526-3025 OR (212) 526-4601 (CALL COLLECT) EX-99.(A)(2) 3 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF COMMUNITY HEALTH SYSTEMS, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 11, 1996 BY FLCH ACQUISITION CORP. A CORPORATION FORMED BY FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: CHASE MELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND/OVERNIGHT: Chase Mellon Shareholder Services, L.L.C. Chase Mellon Shareholder Services, L.L.C. P.O. Box 798 120 Broadway, 13th Floor Midtown Station New York, New York 10271 New York, New York 10018 Attn: Reorg. Depart. Attn: Reorg. Depart. FOR INFORMATION: (800) 223-2064
BY FACSIMILE TRANSMISSION: (201) 329-8936 (FOR ELIGIBLE INSTITUTIONS ONLY) CONFIRM BY TELEPHONE: (201) 296-4983 -------------------------- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THAT SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by holders of Shares (as defined below) (the "Tendering Stockholders") if certificates evidencing Shares ("Certificates") are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is used, if delivery of Shares is to be made by book-entry transfer to an account maintained by Chase Mellon Shareholder Services, L.L.C. (the "Depositary") at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Tendering Stockholders whose Certificates for Shares are not immediately available or who cannot deliver their Certificates for, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to, their Shares and all other required documents to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) may tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2 hereof. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. DESCRIPTION OF SHARES TENDERED
TOTAL NUMBER NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE OF SHARES (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE REPRESENTED BY NUMBER OF APPEAR(S) ON THE CERTIFICATE(S)) NUMBER(S)(1) CERTIFICATE(S)(1) SHARES TENDERED(2) TOTAL SHARES (1) Need not be completed by holders of Shares delivering Shares by Book-Entry Transfer. (2) Unless otherwise indicated, it will be assumed that all Shares represented by Certificates delivered to the Depositary are being tendered. See Instruction 4.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER). Name of Tendering Institution: Check Box of Book-Entry Transfer Facility: / / DTC / / PDTC Account Number: Transaction Code Number: / / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): Window Ticket Number (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: If delivery is by book-entry transfer, check box of Applicable Book-Entry Transfer Facility: / / DTC / / PDTC Account Number: Transaction Code Number:
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to FLCH Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), the above-described shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation ("Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any amendments or supplements thereto, collectively, constitute the "Offer"). Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership, in connection with the Offer and the transactions contemplated thereby. The Offer is being made in connection with the Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company. The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its or Parent's affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of Tendering Stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Subject to, and effective upon, acceptance for payment of, or payment for, Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all other Shares or other securities issued or issuable in respect of such Shares on or after June 9, 1996 (a "Distribution") and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (i) deliver Certificates evidencing such Shares (and Distributions), or transfer ownership of such Shares (and any Distributions) on the account books maintained by a Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, upon receipt by the Depositary as the undersigned's agent, of the purchase price with respect to such Shares, (ii) present such Shares (and all Distributions) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distributions), all in accordance with the terms and subject to the conditions of the Offer. The undersigned hereby irrevocably appoints each of Sandra J. Horbach, Thomas H. Lister and Jamie C. Nicholls (each a "Purchaser Designee") as the attorney-in-fact and proxy of the undersigned, each with full power of substitution, to the full extent of the undersigned's rights with respect to all Shares tendered hereby and accepted for payment and paid for by the Purchaser (and any Distributions), including, without limitation, the right to vote such Shares (and any Distributions) in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper. All such powers of attorney and proxies, being deemed to be irrevocable, shall be considered coupled with an interest in the Shares tendered herewith. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by the undersigned with respect to such Shares (and any Distributions) will be revoked, without further action, and no subsequent powers of attorney and proxies may be given with respect thereto (and, if given, will be deemed ineffective). The Purchaser Designees will, with respect to the Shares (and any Distributions), for which such appointment is effective, be empowered to exercise all voting and other rights of the undersigned with respect to such Shares (and any Distributions) as they in their sole discretion may deem proper. The Purchaser reserves the absolute right to require that, in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, the Purchaser or the Purchaser Designees are able to exercise full voting rights and all other rights which inure to a record and beneficial holder with respect to such Shares (and any Distributions), including voting at any meeting of stockholders then scheduled. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators, trustee in bankruptcy, personal and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable, provided that the Shares tendered pursuant to the Offer may be withdrawn prior to their acceptance for payment. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that, when the same are accepted for payment and paid for by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and that the Shares tendered hereby (and any Distributions) will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of Shares tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions issued to the undersigned on or after June 9, 1996 in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and may withhold the entire purchase price or deduct from the purchase price the amount of value thereof, as determined by the Purchaser in its sole discretion. The undersigned understands that the valid tender of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser with respect to such Shares upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Shares tendered hereby or may accept for payment fewer than all of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue a check for the purchase price and/or return any Certificates evidencing Shares not tendered or not accepted for payment in the names(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Certificates evidencing Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the "Special Payment Instructions" and the "Special Delivery Instructions" are completed, please issue the check for the purchase price and /or return any such Certificates evidencing Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return such Certificates (and accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein under "Special Payment Instructions," in the case of a book-entry delivery of Shares, please credit the account maintained at the Book-Entry Transfer Facility indicated above with respect to any Shares not accepted for payment. The undersigned recognizes that the Purchaser has no obligations pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares tendered hereby. SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Certificates for To be completed ONLY if Certificates for Shares not tendered or not accepted for Shares not tendered or not accepted for payment and/or the check for the purchase payment and/or the check for the purchase price of Shares accepted for payment are to be price of Shares accepted for payment are to be issued in the name of someone other than the sent to someone other than the undersigned or undersigned, or if Shares delivered by to the undersigned at an address other than book-entry transfer that are not accepted for that shown above. payment are to be returned by credit to an Mail (check appropriate box(es)): account maintained at a Book-Entry Transfer / / Check to: Facility, other than to the account indicated / / Certificate(s) to: above. Name Issue (check appropriate Address box(es)): ---------------------------------------------- / / Check to: (INCLUDE ZIP CODE) / / Certificate(s) to: ---------------------------------------------- Name (TAX IDENTIFICATION OR Address SOCIAL SECURITY NO.) - ---------------------------------------------- (SEE SUBSTITUTE FORM W-9) (INCLUDE ZIP CODE) - ---------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9) / / Credit unpurchased Shares tendered by book-entry transfer to the account set forth below: / / DTC / /PDTC (check one) - ---------------------------------------------- (DTC/PDTC Account Number)
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures on this Letter of Transmittal must be guaranteed by a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association, Inc. (an "Eligible Institution"), unless the Shares tendered hereby are tendered (i) by the registered holder (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of such Shares who has completed neither the box labeled "Special Payment Instructions" nor the box labeled "Special Delivery Instructions" herein or (ii) for the account of an Eligible Institution. See Instruction 5. If the Certificates are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or delivered to, or Certificates evidencing unpurchased Shares are to be issued or returned to, a person other than the registered owner, then the tendered Certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the Certificates or stock powers guaranteed by an Eligible Institution as provided herein. See Instruction 5. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by Tendering Stockholders if Certificates evidencing Shares are to be forwarded herewith or if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase. For a Tendering Stockholder to validly tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date or (ii) Shares must be delivered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be received by the Depositary on or prior to the Expiration Date or (b) the Tendering Stockholder must comply with the guaranteed delivery procedures set forth below and in Section 3 of the Offer to Purchase. Tendering Stockholders whose Certificates are not immediately available or who cannot deliver their Certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer on or prior to the Expiration Date may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date, and (iii) the Certificates representing all tendered Shares in proper form for transfer, or a Book-Entry Confirmation with respect to all tendered Shares, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by this Letter of Transmittal, must be received by the Depositary within three NYSE trading days after the date of such Notice of Guaranteed Delivery. If Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) must accompany each such delivery. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering Stockholders, by execution of this Letter of Transmittal (or a facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the information required under "Description of Shares Tendered" should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. If fewer than all the Shares represented by any Certificates delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new Certificate for the remainder of the Shares that were evidenced by your old certificate(s) will be sent, without expense, to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" or this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Certificate(s) delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or instruments of transfer are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority to so act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Certificates or separate instruments of transfer are required unless payment is to be made, or Certificates not tendered or not purchased are to be issued or returned, to a person other than the registered holder(s). Signatures on such Certificates or instruments of transfer must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares evidenced by the Certificate(s) listed and transmitted hereby, the Certificate(s) must be endorsed or accompanied by appropriate instruments of transfer, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Certificate(s). Signatures on any such Certificates or instruments of transfer must be guaranteed by an Eligible Institution. 6. TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted hereby) if Certificates for Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered holder(s) or such persons) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Certificate(s) listed in this Letter of Transmittal. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or Certificates for unpurchased Shares are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal must be completed. If any tendered Shares are not purchased for any reason and such Shares are delivered by Book-Entry Transfer Facility, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses or telephone numbers set forth below and requests for additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or brokers, dealers, commercial banks and trust companies and such materials will be furnished at the Purchaser's expense. 9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the Purchaser, in whole or in part, at any time or from time to time, in the Purchaser's sole discretion. 10. BACKUP WITHHOLDING. Each Tendering Stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided under "Important Tax Information" below and to certify that the stockholder is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the Tendering Stockholder to 31% federal income tax backup withholding on the payment of the purchase price for the Shares. The Tendering Stockholder should indicate in the box in Part III of the Substitute Form W-9 if the Tendering Stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the Tendering Stockholder has indicated in the box in Part III that a TIN has been applied for and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price, if any, made thereafter pursuant to the Offer until a TIN is provided by the Depositary. 11. LOST OR DESTROYED CERTIFICATES. If any Certificate representing Shares has been lost or destroyed, the holder(s) should promptly notify the Company's transfer agent and registrar, First Union National Bank of North Carolina. The holders will then be instructed as to the procedure to be followed in order to replace such Certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed Certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a Tendering Stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payor) with such Tendering Stockholder's correct TIN on Substitute Form W-9 below. If such Tendering Stockholder is an individual, the TIN is his social security number. If the Tendering Stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such Tendering Stockholder should so indicate on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, the Tendering Stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such Tendering Stockholders with respect to Shares purchased pursuant to the Offer may be subject to backup federal income tax withholding. Certain Tendering Stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that Tendering Stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Forms for such statements may be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the Tendering Stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup federal income tax withholding on payments of the purchase price for Shares purchased pursuant to the Offer, a Tendering Stockholder must provide the Depositary with his or her correct TIN by completing the Substitute Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Tendering Stockholder is awaiting a TIN) and that (1) such Tendering Stockholder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the Tendering Stockholder that he or she is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The Tendering Stockholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares tendered hereby. If the Shares are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the Tendering Stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for in the TIN in Part III, and sign and date the Substitute Form W-9. If "Applied For" is written in Part III and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price made thereafter until a TIN is provided to the Depositary. IMPORTANT TENDERING SHAREHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE X SIGNATURE(S) OF TENDERING STOCKHOLDERS(S)) Dated: , 1996 (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock Certificate(s) or on a security position listing or by the person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5). Name(s): (PLEASE PRINT) - ------------------------------------------------------------------------ Capacity (full title): - ---------------------------------------------------------------- - ---------------------------------------------------------------- (SEE INSTRUCTION 5) Address: - ---------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: (HOME) - ------------------------------------------------------------------------ (BUSINESS) Tax Identification No. or Social Security No.: (COMPLETE SUBSTITUTE W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW PAYER'S NAME: CHASE MELLON SHAREHOLDER SERVICES, INC. SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE PART III--Social Security Number or FORM W-9 BOX AT THE RIGHT AND CERTIFY BY SIGNING Employer Identification Number DEPARTMENT OF THE TREASURY AND DATING BELOW. INTERNAL REVENUE SERVICE (If awaiting TIN write "Applied For") PAYER'S REQUEST FOR PART II--For Payees exempt from backup withholding, see the enclosed Guidelines TAXPAYER IDENTIFICATION for Certification of Taxpayer Identification Number on Substitute Form W-9 and NUMBER ("TIN") complete as instructed therein. Certification -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me); and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS -- You must cross out Item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that you were no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines). NAME: (Please Print) SIGNATURE: DATE:
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TIN. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments pursuant to the Offer made to me thereafter will be withheld until I provide a number. SIGNATURE ______________________________________ DATE __________________________ THE INFORMATION AGENT FOR THE OFFER IS: [GEORGESON LOGO] Wall Street Plaza New York, New York 10005 Call Toll-Free (800) 223-2064 Bankers and Brokers, please call collect (212) 440-9800 THE DEALER MANAGER FOR THE OFFER IS: LEHMAN BROTHERS 3 World Financial Center New York, New York 10285 (212) 526-3025 or (212) 526-4601 (Call collect) EX-99.(A)(3) 4 LETTER FROM LEHMAN BROTHERS OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF COMMUNITY HEALTH SYSTEMS, INC. AT $52.00 NET PER SHARE BY FLCH ACQUISITION CORP. A CORPORATION FORMED BY FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. TO BROKERS, DEALERS, COMMERCIAL BANKS, June 11, 1996 TRUST COMPANIES AND OTHER NOMINEES: We have been appointed by FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), to act as Dealer Manager in connection with the Purchaser's offer to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation ("Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") enclosed herewith. Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership ("Forstmann Little"), in connection with the Offer and the transactions contemplated thereby. The Offer is being made in connection with the Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company (the "Merger Agreement"). Holders of Shares whose certificates for such Shares (the "Certificates") are not immediately available or who cannot deliver their Certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase, dated June 11, 1996. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. A letter to stockholders of the Company from Richard E. Ragsdale, Chairman of the Board, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company and mailed to the stockholders of the Company. 4. The Notice of Guaranteed Delivery for Tender of Shares to be used to accept the Offer if following the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to Chase Mellon Shareholder Services, L.L.C. (the "Depositary"). YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. Please note the following: 1. The tender price is $52.00 per Share, net to the seller in cash, without interest. 2. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) of the Offer that number of Shares which would represent at least a majority of the outstanding Shares on a fully diluted basis. 3. The Offer is being made for all of the outstanding Shares. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer of Shares pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is available or unless the required taxpayer identification information is provided. See Instruction 10 of the Letter of Transmittal. 5. The Board of Directors of the Company has unanimously approved the Offer and the Merger (as defined in the Offer to Purchase) and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company, and recommends that the stockholders of the Company accept the Offer and tender all of their Shares pursuant thereto. 6. Notwithstanding any other provision of the Offer, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) Certificates pursuant to the procedures set forth in Section 3 of the Offer to Purchase or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares, (b) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when Certificates for Shares or Book-Entry Confirmations (as defined in the Offer to Purchase) are actually received by the Depositary. In order to take advantage of the Offer, (i) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal should be sent to the Depositary and (ii) Certificates representing the tendered Shares or a timely Book-Entry Confirmation should be delivered to the Depositary in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. 2 If holders of Shares wish to tender, but it is impracticable for them to forward their Certificates or other required documents or complete the procedures for book-entry transfer prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. None of the Purchaser, Parent or Forstmann Little, or any officer, director, stockholder, agent or other representative of the Purchaser, Parent or Forstmann Little, will pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Georgeson & Company Inc., the Information Agent for the Offer, at Wall Street Plaza, New York, New York 10005, (800) 223-2064 or Lehman Brothers Inc., the Dealer Manager, at 3 World Financial Center, New York, New York 10285, (212) 526-3025 or (212) 526-4601 (call collect). Requests for copies of the enclosed materials may be directed to the Information Agent at its address and telephone number above. Very truly yours, LEHMAN BROTHERS INC. NEW YORK, NEW YORK NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF PARENT, THE PURCHASER, THE DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(4) 5 LETTER FROM BROKERS, DEALERS OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF COMMUNITY HEALTH SYSTEMS, INC. AT $52.00 NET PER SHARE BY FLCH ACQUISITION CORP. A CORPORATION FORMED BY FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. TO OUR CLIENTS: Enclosed for your consideration are the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to an offer by FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation (the "Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company (the "Merger Agreement"). Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership, in connection with the Offer and the transactions contemplated thereby. This material is being forwarded to you as the beneficial owner of Shares carried by us in your account but not registered in your name. WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender any or all of the Shares held by us for your account pursuant to the terms and conditions set forth in the Offer. Please note the following: 1. The tender price is $52.00 per Share, net to the seller in cash, without interest. 2. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) of the Offer that number of Shares which would represent at least a majority of the outstanding Shares on a fully diluted basis. 3. The Offer is being made for all of the outstanding Shares. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer of Shares pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is available or unless the required taxpayer identification information is provided. See Instruction 10 of the Letter of Transmittal. 5. The Board of Directors of the Company has unanimously approved the Offer and the Merger (as defined in the Offer to Purchase) and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company, and recommends that the stockholders of the Company accept the Offer and tender all of their Shares pursuant thereto. 6. Notwithstanding any other provision of the Offer, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) Certificates pursuant to the procedures set forth in Section 3 of the Offer to Purchase or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares, (b) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when Certificates for Shares or Book-Entry Confirmations are actually received by the Depositary. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth below. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise indicated in such instruction form. An envelope to return your instruction to us is enclosed. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the securities laws of such jurisdiction. However, the Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky, or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by Lehman Brothers Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF COMMUNITY HEALTH SYSTEMS, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") in connection with the offer by FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation (the "Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership, in connection with the Offer and the transactions contemplated thereby. The Offer is being made in connection with the Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company (the "Merger Agreement"). This will instruct you to tender to the Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. SIGN HERE Number of Shares to be Tendered:* ______ -------------------------------------------- -------------------------------------------- Signature(s) -------------------------------------------- -------------------------------------------- (Print Name(s)) -------------------------------------------- (Area Code and Telephone Number(s)) -------------------------------------------- (Taxpayer Identification or Social Security Number(s)) Dated:, 1996
- ------------------------ * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.(A)(5) 6 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF COMMUNITY HEALTH SYSTEMS, INC. This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation (the "Company"), are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by hand or facsimile transmission or mailed to the Depositary. See Section 3 of the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"). THE DEPOSITARY FOR THE OFFER IS: CHASE MELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND/OVERNIGHT: Chase Mellon Shareholder Services, L.L.C. Chase Mellon Shareholder Services, L.L.C. P.O. Box 798 120 Broadway, 13th Floor Midtown Station New York, New York 10271 New York, New York 10018 Attn: Reorg. Depart. Attn: Reorg. Depart.
FOR INFORMATION: (800) 223-2064 BY FACSIMILE TRANSMISSION: (201) 329-8936 (FOR ELIGIBLE INSTITUTIONS ONLY) CONFIRM BY TELEPHONE: (201) 296-4983 ------------------------ DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION OF INSTRUMENTS VIA FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent's Message (as defined in the Offer to Purchase) and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. Ladies and Gentlemen: The undersigned hereby tenders to FLCH Acquisition Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of FLCH Holdings Corp. ("Parent"), a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares indicated below, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership, in connection with the Offer and the transactions contemplated thereby. Number of Shares: SIGN HERE Certificate No(s). (if available): Name(s) of Record Holder(s): - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- If Shares will be tendered by book-entry (Please Print) transfer: Addresses: Name of Tendering Institutions (Zip Code) - ------------------------------------------- Area Code and Telephone No.: Account No.: at ------------------------------------------- / / The Depository Trust Company Signature(s): / / Philadelphia Depository Trust Company Dated: , 1996
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, as Eligible Institution (as such term is defined in Section 3 of the Offer to Purchase), hereby guarantees to deliver to the Depositary the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depositary Trust Company, in each case, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, all within three New York Stock Exchange trading days after the date hereof. Name of Firm: (Authorized Signature) Address: Name: Title: Zip Code Area Code and Tel. No.: Date:
DO NOT SEND CERTIFICATES FOR SHARES AND/OR RIGHTS WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES SHOULD BE SENT TOGETHER WITH A LETTER OF TRANSMITTAL. EX-99.(A)(6) 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID NUMBER GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. - ----------------------------------------------
GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF--
- ---------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint The actual owner of the account) account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee for a incompetent person(3) designated ward, minor, or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under State law 8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------- - ----------------------------------------------------------
GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF--
- ---------------------------------------------------------- 9. A valid trust, estate, or The legal entity (Do not pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in The partnership the name of the business 13. Association, club or other The organization tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the Department The public entity of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- ---------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments, other than interest, dividends and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045 and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(7) 8 SUMMARY ANNOUNCEMENT THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE, DATED JUNE 11, 1996, AND THE RELATED LETTER OF TRANSMITTAL AND IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. IN THOSE JURISDICTIONS WHERE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE PURCHASER BY LEHMAN BROTHERS INC. OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTIONS. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF COMMUNITY HEALTH SYSTEMS, INC. AT $52.00 NET PER SHARE BY FLCH ACQUISITION CORP. A CORPORATION FORMED BY FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P. FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation (the "Company"), at a purchase price of $52.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Each of Parent and the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited partnership, in connection with the Offer and the transactions contemplated thereby. The Rights were issued pursuant to a Rights Agreement, dated as of September 7, 1995, between the Company and First Union National Bank of North Carolina, as Rights Agent. --------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED. --------------------------------------------------------------------------- The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of June 9, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the Company, pursuant to which, as promptly as practicable following the later of the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"). Following the consummation of the Merger, the Company will be the surviving corporation (the "Surviving Corporation"). In the Merger, each outstanding Share (other than Shares held by the Company as treasury stock or by any subsidiary of the Company, or owned by Parent, the Purchaser or any subsidiary of either Parent or the Purchaser and other than Shares held by stockholders, if any, who perfect their appraisal rights under Delaware law) will be converted into the right to receive $52.00, or any higher price per Share paid pursuant to the Offer, without interest thereon, in cash. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT THERETO. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as hereinafter defined) of the Offer that number of Shares which would represent at least a majority of the outstanding Shares on a fully diluted basis. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to Chase Mellon Shareholder Services, L.L.C. (the "Depositary") of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation of the book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to the procedures set forth in the Offer to Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of shares, and (iii) any other documents required by the Letter of Transmittal. If by 12:00 Midnight, New York City time, on Tuesday, July 9, 1996 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), to (i) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, (ii) waive all the unsatisfied conditions and, subject to complying with the terms of the Merger Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. The Merger Agreement provides that so long as the Merger Agreement is in effect and the Offer conditions have not been satisfied or waived, at the request of the Company, the Purchaser will, and Parent will cause the Purchaser to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. The term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, July 9, 1996, unless and until the Purchaser (subject to the terms of the Merger Agreement) shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the conditions set forth in the Offer to Purchase shall have been satisfied or shall have been determined by the Purchaser to have been satisfied, (i) to extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary, and (ii) to amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. The Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares whether or not the Purchaser exercises such rights. Except as otherwise provided in the Offer to Purchase, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after Friday, August 9, 1996. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in the Offer to Purchase, the notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. The information required to be disclosed by Paragraph (e)(1)(vii) of Rule 14d-6 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Requests for copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer material may be directed to the Information Agent or the Dealer Manager as set forth below, and copies will be furnished promptly at the Purchaser's expense. No fees or commissions will be payable to brokers, dealers or other persons other than the Information Agent, the Dealer Manager, and the Depositary for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [Georgeson Logo] Wall Street Plaza New York, New York 10005 Banks and Brokers call collect (212) 440-9800 Toll-Free (800) 223-2064 The Dealer Manager for the Offer is: LEHMAN BROTHERS 3 World Financial Center, 17th Floor New York, New York 10285 (212) 526-3025 or (212) 526-4601 (Call Collect) June 11, 1996 EX-99.(A)(8) 9 PRESS RELEASE - JUNE 10, 1996 SARD VERBINNEN & CO NEWS FOR IMMEDIATE RELEASE CONTACT FOR COMMUNITY HEALTH SYSTEMS: CONTACT FOR FORSTMANN LITTLE: Merilyn Herbert George Sard/Anna Cordasco Director of Investor Relations Sard Verbinnen & Co 615/373-9600 212/687-8080 FORSTMANN LITTLE TO ACQUIRE COMMUNITY HEALTH SYSTEMS, LEADING PROVIDER OF HEALTHCARE SERVICES IN NON-URBAN AREAS, FOR $1.37 BILLION ---------------------------------------------------------------- NEW YORK AND NASHVILLE, TN, JUNE 10, 1996 -- Forstmann Little & Co. and Community Health Systems, Inc. (NYSE: CYH), a leading provider of healthcare services in non-urban areas, today announced they have signed a definitive agreement for Forstmann Little to acquire all of the outstanding shares of Community Health Systems for $52 per share in cash. The total value of the transaction is approximately $1.37 billion, including assumed and refinanced debt. Forstmann Little will invest $1 billion of its own capital and Chase Manhattan Corp. has agreed to provide $900 million of bank financing. After all shares are purchased and debt refinanced, this conservative capital structure will provide over $500 million to Community Health Systems to fund internal growth and the acquisition of additional hospitals. The Company now owns or operates 38 hospitals in 18 states, primarily in the Southeast and Southwest. The transaction, which is not subject to financing or antitrust clearance, is expected to be completed in mid-July. A Forstmann Little entity will commence tomorrow a tender offer for all shares of Community Health Systems. Community Health Systems will simultaneously commence a tender offer for its $100 million of outstanding 10 1/4% senior subordinated debentures due November 30, 2003. Community Health Systems will continue to be run by its current management team, headed by Chairman Richard E. Ragsdale and President and Chief Executive Officer E. Thomas Chancy. No changes in operations are expected. "Community Health Systems has all the characteristics we look for in an acquisition -- leading market position, significant growth potential and a great management team," said senior partner Theodore J. Forstmann. "Dick Ragsdale and Tom Chaney founded the company in 1985 with a wise business model. Virtually all of their hospitals are located in communities where the company operates the only hospital in town, or one of two. They have built a superb company that provides high-quality healthcare services to their chosen communities and improves people's lives. We look forward to being partners with these outstanding entrepreneurs and helping them accelerate the company's already outstanding growth." Sard Verbinnen & Co., Inc. 630 Third Avenue New York, NY 10017 Tel 212 687 8080 Fax 212 687 8344 -2- "Forstmann Little has an exceptional track record of enabling companies to achieve their growth potential," said Ragsdale. "They share our commitment to developing high-quality healthcare delivery systems centered around non-urban hospitals. We are extremely fortunate to be joining them as partners." "Forstmann Little and its unique capital structure will be invaluable to us as we pursue our strategy of selective hospital acquisitions coupled with market share expansion in our existing communities," said Chaney. "Our solid base of loyal physicians has been a cornerstone of our company, and we expect to be able to enhance that base. Furthermore, we will now have even more ability to be the provider of choice in our markets, improve physical facilities and expand delivery of a full range of inpatient services as well as state-of-the-art outpatient, diagnostic and home health services." The transaction was approved unanimously yesterday by the Board of Directors of Community Health Systems, based on the recommendation of a Special Committee of independent directors. Merrill Lynch served as financial adviser and provided a fairness opinion to the Special Committee. Community Health Systems, Inc. owns and operates full-service, acute care hospitals in non-urban communities. The hospitals serve as the nucleus for healthcare delivery in their communities by offering easy access to a full range of medical services, excellent care and competitive pricing. Community Health Systems employs over 7,900 healthcare professionals and support personnel. The Company currently has approximately 19.7 million shares of common stock outstanding. Founded in 1978, Forstmann Little is a private investment firm that has invested over $12 billion in 20 acquisitions, including General Instrument, Ziff-Davis Publishing and Gulfstream Aerospace. The firm currently has approximately $2.3 billion in committed capital for future investments. ### EX-99.(A)(9) 10 PRESS RELEASE - JUNE 11, 1996 EXHIBIT (a)(9) AFFILIATE OF FORSTMANN LITTLE COMMENCES TENDER OFFER FOR COMMUNITY HEALTH SYSTEMS NEW YORK AND NASHVILLE, TN, JUNE 11, 1996 -- Forstmann Little & Co. and Community Health Systems, Inc. (NYSE:CYH) today announced that in accordance with their previously announced Merger Agreement, a corporation formed by a Forstmann Little affiliate today commenced a tender offer for all of the outstanding shares of common stock of Community Health Systems, Inc. at a purchase price of $52.00 net per share. The offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Tuesday, July 9, 1996, unless the offer is extended. The offer is subject to certain conditions which are described in an Offer to Purchase being mailed to all shareholders of Community Health Systems. Chase Mellon Shareholder Services, L.L.C. will act as depositary for the tender offer, Georgeson & Company Inc. will act as information agent for the tender offer and Lehman Brothers Inc. will act as dealer-manager for the tender offer. Community Health Systems, Inc. owns and operates full-service, acute care hospitals in non-urban communities. The hospitals serve as the nucleus for healthcare delivery in their communities by offering easy access to a full range of medical services, excellent care and competitive pricing. Community Health Systems employs over 7,900 healthcare professionals and support personnel. The Company currently has approximately 19.7 million shares of common stock outstanding. Founded in 1978, Forstmann Little is a private investment firm that has invested over $12 billion in 20 acquisitions, including General Instrument, Ziff-Davis Publishing and Gulfstream Aerospace. The firm currently has approximately $2.3 billion in committed capital for future investments. EX-99.(B) 11 COMMITMENT LETTER & FEE AGREEMENT [LOGO] CHEMICAL BANK 270 Park Avenue New York, New York 10017 CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 June 9, 1996 Commitment Letter ----------------- Forstmann Little & Co. 767 Fifth Avenue New York, New York 10153 Dear Sirs: You have advised us, Chase Securities Inc. ("CSI") and Chemical Bank ("CHEMICAL"), that a Delaware corporation ("HOLDING") will be organized by you for the purpose of acquiring Community Health Systems, Inc., a Delaware corporation ("TWISTER"). We understand that such acquisition will be accomplished, with Twister's concurrence, through a tender offer (the "TENDER OFFER") by a Delaware corporation that will be a wholly owned subsidiary of Holding ("ACQUISITION CO."), for all of the issued and outstanding shares of common stock, par value $.01 per share, of Twister (the "SHARES"), followed by the Merger described below. The Tender Offer will be contingent upon the purchase by Acquisition Co. pursuant thereto of not less than a majority of the Shares (the "MINIMUM SHARES"), determined on a fully diluted basis after giving effect to the exercise of any warrants, rights, options, conversion privileges or similar rights. You have also advised us that prior to commencement of the Tender Offer, Acquisition Co. and Twister will have entered into a merger agreement in substantially the form previously delivered to you (the "MERGER AGREEMENT") providing for the merger (the "MERGER") of Acquisition Co. or its wholly owned subsidiary with Twister as soon as practicable after completion of the Tender Offer, for cash consideration equal to $52.00 per Share. The Merger Agreement will, among other things, provide that each shareholder of Twister (other than Acquisition Co. and other than shareholders who have perfected appraisal Forstmann Little & Co. -2- June 9, 1996 rights) who has not participated in the Tender Offer will, upon consummation of the Merger, receive a cash merger price per Share equal to $52.00 per Share. We understand that (i) in order to finance the Tender Offer and certain related expenses, Acquisition Co. will require a senior credit facility of $450,000,000 (the "DEMAND FACILITY") (a portion of which may be borrowed by Twister in order to repurchase or refinance certain of its indebtedness) and (ii) in order to finance the Merger and certain related expenses, to refinance certain indebtedness of Twister, to repay amounts owing under the Demand Facility, to provide financing for future acquisitions in the same line of business and for other general corporate purposes, the surviving corporation of the Merger ("NEW TWISTER") will require senior credit facilities of $900,000,000 (the "MERGER FACILITIES"). Attached as Exhibits A and B to this Commitment Letter are statements of terms and conditions (the "TERM SHEETS") setting forth the principal terms and conditions on and subject to which (a) CSI is willing to act as advisor and arranger for the Demand Facility and the Merger Facilities (collectively, the "FACILITIES") and (b) Chemical is willing to provide the entire $450,000,000 of the Demand Facility and the entire $900,000,000 of the Merger Facilities. The definitive credit documentation will contain such customary representations and warranties, covenants, conditions precedent, events of default and other terms and provisions not inconsistent with the Terms Sheets as may be requested by, and will otherwise be in form and substance reasonably satisfactory to, the Administrative Agent and Acquisition Co. As you know, CSI and Chemical have arranged and agented numerous bank financings for your and your sponsored companies, and in developing the final terms and conditions for the Facilities, we will draw upon our experience in such bank financings. It is agreed that CSI will act as the sole arranger for the syndication of the Facilities. It is further agreed that Chemical will act as the sole administrative and collateral agent for the Facilities and will perform all of the duties and functions customarily associated with such roles. The appointment of any co-arrangers and co-agents for the Facilities would be subject to the written approval of CSI, Chemical and you. The co-agent title and other titles awarded to any Lender would be in name only, and no such Lender would have any role with respect to the matters referred to in this paragraph. You agree that Chemical's commitments for the Demand Facility and the Merger Facilities will be reduced by the respective amounts of any commitments of other Lenders approved by you (such approval not to be unreasonably withheld) received prior to the execution of definitive financing documentation for the Demand Facility and the Merger Facilities, respectively. You agree to assist CSI and Chemical in forming the syndicate and to provide each of them and the other Lenders, promptly upon request, with all information reasonably deemed necessary by CSI and Chemical to complete successfully the syndication, including, but not limited to, an information package for delivery to potential syndicate members and participants and certain financial models and projections for New Twister following the Merger. You further agree to make appropriate officers and representatives of Holding and Acquisition Co. and, to the extent practicable, Twister available to participate in information Forstmann Little & Co. -3- June 9, 1996 meetings for potential syndicate members and participants at such times and places as CSI and Chemical may reasonably request. You represent, warrant and covenant that: (x) except as provided in paragraph (y) below, all information which has been or is hereafter made available by you or any of your representatives for inclusion in the information package prepared for delivery to potential syndicate members is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made; and (y) all financial models and projections that have been or are hereafter made available by you or any of your representatives for inclusion in the information package prepared for delivery to potential syndicate members have been or will be prepared in good faith based upon reasonable assumptions. You agree to supplement the information and financial models referred to in clauses (x) and (y) above from time to time until completion of the syndication so that the representations and warranties in the preceding sentence remain correct in all material respects. In arranging and syndicating the Facilities, CSI and Chemical will use and rely on such information and financial models without independent verification thereof. In connection with the syndication of the Facilities, CSI and Chemical may, in their discretion, allocate to other Lenders portions of any fees payable to them in connection with the Facilities. You agree that no Lender will receive any compensation of any kind for its participation in the Facilities, except as expressly provided for in this Commitment Letter, in the Fee Letter referred to below or as may be agreed to by CSI and Chemical. The reasonable costs and expenses (including the reasonable fees and expenses of counsel to CSI and Chemical, any necessary local counsel and other counsel (including, without limitation, any special healthcare law counsel), and each of our syndication and other reasonable out-of-pocket expenses) arising in connection with the preparation, execution and delivery of this letter and the definitive financing agreements shall be for your account. You further agree to indemnify and hold harmless each Lender (including Chemical), CSI and each director, officer, employee, affiliate and agent thereof (each, an "INDEMNIFIED PERSON") against, and to reimburse each indemnified person, upon its demand, for, any losses, claims, damages, liabilities or other expenses ("LOSSES") to which such indemnified person may become subject insofar as such Losses arise out of or in any way relate to or result from this Commitment Letter or the financing contemplated hereby, including, without limitation, Losses consisting of legal or other expenses incurred in connection with investigating, defending or participating in any legal proceeding relating to any of the foregoing (whether or not such indemnified person is a party thereto); PROVIDED that the foregoing will not apply to any Losses to the extent they result from the gross negligence or willful misconduct of such indemnified person. Forstmann Little & Co. -4- June 9, 1996 Your obligations under this paragraph shall remain effective whether or not definitive financing documentation is executed and notwithstanding any termination of this Commitment Letter. Neither CSI nor Chemical nor any other indemnified person shall be responsible or liable to any other person for consequential damages which may be alleged as a result of this Commitment Letter or the financing contemplated hereby. It is agreed that the provisions of this Commitment Letter and the Fee Letter shall supplement and restate the commitment letter dated June 5, 1996 between us and you in connection with the Facilities. The provisions of this Commitment Letter are supplemented as set forth in a separate fee letter dated the date hereof from us to you (the "FEE LETTER") and are subject to the terms of such Fee Letter. By executing this Commitment Letter, you acknowledge that this Commitment Letter and the Fee Letter are the only agreements among you, CSI and Chemical with respect to the Facilities and set forth the entire understanding of the parties with respect thereto. Neither this Commitment Letter nor the Fee Letter shall be assignable by you without the prior written consent of CSI and Chemical, and neither this Letter nor the Fee Letter may be changed except pursuant to a writing signed by each of the parties hereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. This Commitment Letter is delivered to you on the understanding that prior to its acceptance by you, neither this letter, the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except to your employees, agents and advisers who are directly involved in the consideration of this matter or as disclosure may be compelled pursuant to a judicial or administrative proceeding or as otherwise required by law. If you are in agreement with the foregoing, please sign and return to us one of the enclosed copies of each of this Commitment Letter and the Fee Letter no later than 7:00 p.m., New York time, on June 9, 1996. This offer shall terminate at such time unless prior thereto we shall have received signed copies of such letters. Forstmann Little & Co. -5- June 9, 1996 We look forward to working with you on this transaction. Very truly yours, CHASE SECURITIES INC. By: /s/ Allison Conway ------------------------ Name: Allison Conway Title: Managing Director CHEMICAL BANK By: /s/ Douglas Traver ------------------------ Title: Vice President Accepted and agreed to as of the date first above written: FORSTMANN LITTLE & CO. By: /s/ Sandra J. Horbach --------------------- Title: Partner EXHIBIT A [LOGO] DEMAND FACILITY STATEMENT OF TERMS AND CONDITIONS JUNE 9, 1996 BORROWERS: The borrower will be a Delaware corporation to be organized in the future ("ACQUISITION CO.") and will be a direct wholly-owned subsidiary of another Delaware corporation to be organized in the future ("HOLDING"), which in turn will be an affiliate of Forstmann Little & Co. ("FL&CO"). Acquisition Co. proposes to make a tender offer (the "TENDER OFFER") for all of the issued and outstanding shares of common stock, par value $.01 per share (the "SHARES"), of Community Health Systems, Inc., a Delaware corporation ("TWISTER"), pursuant to the Merger Agreement providing for the Merger as soon as is practicable after completion of the Tender Offer, subject to any necessary approval of the Merger by the shareholders of Twister (the survivor of the Merger, "NEW TWISTER"). In addition, at the option of Acquisition Co., Twister may be designated as a borrower of a portion of the facility in order to repurchase or refinance certain of its outstanding indebtedness (including certain letters of credit). In such case, references herein to Acquisition Co. in its capacity as borrower shall, to the extent applicable, be deemed to be references to both Acquisition Co. and Twister in their separate and several capacities as borrowers. It is intended that in connection with its first use of the facility, Twister will replace its existing secured credit facilities. Acquisition Co. and Chemical will agree on a statement of terms and conditions consistent herewith with respect to the portion of the facility made available to Twister. 2 ADMINISTRATIVE AGENT: Chemical Bank ("CHEMICAL") will act as a sole administrative, syndication, documentation and collateral agent (the "ADMINISTRATIVE AGENT") for a syndicate of financial institutions (the "LENDERS"). ADVISOR AND ARRANGER: Chase Securities Inc. ("CSI" or the "ARRANGER"). LENDERS: The financial institutions (including Chemical) included in the syndicate formed by the Arranger (the "LENDERS"). DEMAND FACILITY: An aggregate principal amount of $450,000,000 will be available to Acquisition Co. under a demand senior secured (or, to the extent the Demand Facility is made available to Twister, unsecured) credit facility, (the "DEMAND FACILITY"). The loans (the "DEMAND LOANS") made under the Demand Facility will be repayable at any time after three months following the Closing Date upon demand but in no event later than the earlier of the date of the Merger and six months after the Closing Date (as defined below) (the date on which the Demand Loans are repayable, the "MATURITY DATE"). AVAILABILITY: The Demand Loans will be available for multiple drawings during the period commencing on the date (in no event later than November 30, 1996) on which Acquisition Co. accepts for payment at least a majority of the Shares (the "MINIMUM SHARES") in the Tender Offer (the "CLOSING DATE") and ending on the Maturity Date; PROVIDED that in no event may the amount of the Demand Loans made available to Acquisition Co. (and excluding loans made to Twister) exceed 50% of the purchase price of Shares accepted for payment pursuant to the Tender Offer or otherwise acquired by Acquisition Co. INTEREST RESERVE: A portion of the Demand Facility equal to an amount sufficient to fund interest payments (at an assumed rate of 9.75%), and estimated fees and expenses that become due between the Closing Date and the date six months thereafter shall be set aside and may be drawn upon by Acquisition Co. only to pay such interest payments, fees and other expenses as they become due. USE OF PROCEEDS: After application of the funds received by Acquisition Co. from Holding as equity contributions and intercompany advances, the proceeds of the Demand Loans will be used to finance in part (a) the acquisition 3 by Acquisition Co. of not less than the Minimum Shares pursuant to the Tender Offer, (b) the payment of interest, fees and other expenses incurred in connection with the Tender Offer and Merger and (c) if and to the extent Twister is a borrower, the repurchase or refinancing of certain indebtedness of Twister (including, without limitation, Twister's revolving credit and letter of credit facilities). GUARANTEES: The obligations of Acquisition Co. (but not Twister) under the Demand Facility will be unconditionally guaranteed by Holding. COLLATERAL: The obligations of Acquisition Co. (but not Twister) under the Demand Facility and the guarantee thereof will be secured by a perfected first priority security interest in (a) all of the capital stock of Acquisition Co. and all Shares owned by Acquisition Co. or any affiliate or designee thereof, whether acquired in the Tender Offer or otherwise, and (b) all intercompany notes (including any note payable to Holding related to the capitalization of Acquisition Co.). The portion of the Demand Facility made available to Twister shall be unsecured. INTEREST RATES: The higher of (i) the rate from time to time publicly announced by Chemical in New York City as its prime rate (the "PRIME RATE"), (ii) the secondary market rate for three-month certificates of deposit from time to time plus 1% and (iii) the federal funds rate from time to time, plus 1/2 of 1% (such higher rate, the "ABR"; this rate is not intended to be the lowest rate charged by Chemical to its borrowers), in each case plus 1.50% per annum. Interest will be calculated on the basis of the actual number of days elapsed over a 365/366-day year for borrowings based on the Prime Rate, and over a 360-day year for all other borrowings. OVERDUE RATE: Overdue principal, interest, fees and other amounts owing will bear interest at 2% over the rate otherwise applicable thereto. COMMITMENT FEES: As provided in Fee Letter. INTEREST PAYMENT DATES: Quarterly in arrears and on the Maturity Date. 4 OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS: All or a portion of the outstanding Demand Loans may be prepaid at any time and the unutilized portion of the Demand Facility may be terminated in whole or in part (in minimum amounts to be agreed upon) at Acquisition Co.'s option. Such prepayments of Demand Loans (other than refinancings of Twister's revolving credit and letter of credit facilities) may not be reborrowed. INITIAL CONDITIONS PRECEDENT: The availability of the Demand Facility will be conditioned upon, among other things, satisfaction of the following conditions precedent: (a) Execution and delivery of definitive financing agreements and related documentation for the Demand Facility, reflecting the terms and conditions set forth herein and such other terms and conditions not inconsistent herewith as are reasonably satisfactory to the Lenders. (b) Receipt by Acquisition Co. of not less than $960,000,000 in proceeds from (i) the sale by Holding of not less than $460,000,000 of its common stock and (ii) the sale by Holding of not less than $500,000,000 of subordinated debt (the "SUBORDINATED DEBT") having a maximum interest rate of 8.25% per annum and providing for no scheduled payments of principal prior to the eleventh anniversary of the Closing Date (the proceeds of such equity and such subordinated debt being either loaned to Acquisition Co. by Holding pursuant to a subordinated intercompany note (the "SUBORDINATED INTERCOMPANY NOTE") or contributed by Holding to the equity of Acquisition Co.), in each case on such terms and subject to such conditions consistent with the other bank financings sponsored by affiliates of Acquisition Co. (the "SPONSORED FINANCINGS") and such other terms as are reasonably satisfactory to the Administrative Agent. The Subordinated Intercompany Note issued by Acquisition Co. and the Subordinated Debt 5 issued by Holding will each include provision for payment, within 30 days after the closing of the Demand Loan by each obligor on such indebtedness, of supplemental interest in an aggregate amount not to exceed $12 million ("SUPPLEMENTAL SUBORDINATED DEBT INTEREST"). (c) The Tender Offer shall have been, or shall be concurrently, consummated pursuant to the merger agreement in substantially the form previously delivered to the Administrative Agent (the "Merger Agreement"), and no material provision of the Merger Agreement (including paragraph (g) of Exhibit A thereto) shall have been amended, supplemented, waived or otherwise modified without the prior written consent of the Administrative Agent. (d) Acquisition Co. shall have acquired, concurrently with the making of the first Demand Loans, not fewer than the Minimum Shares, and there not having been any material change in the approximately 19,731,068 Shares outstanding on June 6, 1996 (after giving effect to any dilution), other than the issuance of options to acquire approximately 2,017,515 Shares under Twister's stock option plans as of June 6, 1996. (e) The documents and materials filed publicly by Holding, Acquisition Co. and Twister in connection with the Tender Offer and the Merger shall have been furnished to the Administrative Agent in reasonably satisfactory form. (f) Receipt by the Lenders of a pro forma balance sheet of each of (i) Acquisition Co. as of March 31, 1996 adjusted to give effect to the purchase in the Tender Offer 6 of 90% of the outstanding Shares on a fully diluted basis and the financings contemplated hereby and (ii) New Twister as of March 31, 1996 adjusted to give effect to the Merger and the financings contemplated hereby and by Exhibit B to the Commitment Letter to which this Exhibit A is attached, in each case as if such transactions had been consummated on such date. (g) Receipt by Chemical of a detailed business plan and analysis of the business and prospects of New Twister and its subsidiaries for fiscal years 1996 and 1997, and of financial projections of New Twister and its subsidiaries for the term of the Merger Facilities, which have been previously provided. (h) Except as disclosed in the Merger Agreement, there shall not exist any litigation or any other matters required to be disclosed under Section 6.8 of the Merger Agreement and there shall not have been instituted or pending any litigation of the type described in clause (a) of Exhibit A to the Merger Agreement. (i) Since December 31, 1995, except as disclosed in the Merger Agreement, no event shall have occurred which would have a Material Adverse Effect on, or which has had or is continuing to have a material adverse effect on the prospects of, Acquisition Co. or Twister and its subsidiaries taken as a whole (either before or after giving effect to the Tender Offer) or on the transactions contemplated hereby. 7 (j) Receipt of all necessary or required governmental and third party consents and approvals in connection with the Tender Offer and the Merger, the financings contemplated hereby and the continuing operations of Acquisition Co. and Twister and its subsidiaries following the Tender Offer and of New Twister and its subsidiaries following the Merger (other than shareholder approval of Twister, if required), the lack of which would have a Material Adverse Effect, and all applicable waiting periods shall have elapsed. (k) No default or event of default shall have occurred and be continuing under any capital stock or debt of Holding, Acquisition Co. or Twister or its subsidiaries (either before or after giving effect to the Tender Offer and the Merger), or would result from the transactions contemplated hereby, except any such defaults or breaches (i) which have not previously been waived or the obligation with respect to which default or breach has not been or will not be refinanced or (ii) which would not otherwise have a Material Adverse Effect on Acquisition Co., Twister or New Twister and its subsidiaries, taken as a whole (either before or after giving effect to the Tender Offer and the Merger), or on the transactions contemplated hereby. (l) Holding, Acquisition Co. and Twister and its subsidiaries after giving effect to the Tender Offer and the Merger as contemplated hereby, will have no material indebtedness other than (i) intercompany indebtedness, (ii) $75 million of taxable and tax-exempt bonds, capital leases and other debt and (iii) all or any portion of Twister's $100 million principal amount 10-1/4% Senior Subordinated Debentures due 2003 (the "DEBENTURES"), provided the Indenture under which the Debentures were issued shall have been amended in the 8 form previously provided (collectively, the "EXISTING PERMITTED DEBT"). (m) Receipt by the Lenders of any and all legal opinions, in a manner, and to a substantive effect, reasonably satisfactory to the Administrative Agent. (n) The corporate and capital structure of Holding, Acquisition Co. and New Twister and its subsidiaries shall be consistent with the terms hereof. All corporate and legal matters in connection with the Tender Offer, the Merger and the transactions contemplated by the financing agreements shall be reasonably satisfactory in form and substance to the Administrative Agent. (o) Payment of required fees and expenses to the Administrative Agent and the Lenders. (p) The Lenders shall have received satisfactory evidence that the fees and expenses (excluding interest, including the Supplemental Subordinated Debt Interest) to be incurred in connection with the Tender Offer and the Merger and the financing thereof will not exceed $80,000,000 the aggregate. ON-GOING CONDITIONS PRECEDENT: The making of each Demand Loan will be conditioned upon (a) all representations and warranties in all credit and security documents (including, without limitation, the material adverse change and litigation representations, which will be consistent with the conditions set forth in clauses (h) and (i) under "Initial Conditions Precedent" above, and compliance with law and regulatory requirements representations) being true and correct in all material respects, except to the extent that the failure of any such representation and warranty as to Twister to be true and correct in all material respects is not also a condition to the obligation of Acquisition Co. to consummate the Tender Offer pursuant to the Merger Agreement, (b) there being no default or event of default in existence at the time of, or after giving effect to the 9 making of, such Demand Loan and (c) except as disclosed in the Merger Agreement, no governmental inquiries, injunctions or restraining orders instituted or pending of the type described in clause (a) of Exhibit A to the Merger Agreement or any statute or rule enacted, promulgated, entered or enforced which would have the consequences set forth in clause (a) of Exhibit A to the Merger Agreement. OTHER MATTERS: The definitive credit documentation will contain such customary representations and warranties consistent with those obtained by Acquisition Co. pursuant to the Merger Agreement, covenants, conditions precedent, events of default and other terms and provisions not inconsistent with the terms hereof as may be requested by, and will otherwise be in form and in substance reasonably satisfactory to, the Administrative Agent and Acquisition Co. Without limiting the foregoing, Holding and Acquisition Co. will be prohibited from engaging in any business activity other than related to the Tender Offer and the Merger. TAXES AND YIELD PROTECTION: The usual for facilities of this type and consistent with the recent Sponsored Financings, including but not limited to compensation in respect of taxes and decreased profitability resulting from changes subsequent to the Closing Date in U.S. or foreign capital adequacy requirements, guidelines or policies or their interpretation or application, providing customary protection for U.S. and non-U.S. Lenders. TRANSFER PROVISIONS: The Lenders may at any time grant participations in or sell, assign or otherwise transfer (in a minimum amount so that the assignor and assignee Lenders shall each retain an amount equal to $10 million in commitments or, in the case of the assigning Lender, if less than such amount, zero) all or any part of, their Demand Loans, commitments and other rights and duties to one or more other financial institutions without the consent of Acquisition Co., provided that any such sale, assignment or other transfer other than to a Lender shall be subject to the consent of Acquisition Co. (not to be unreasonably withheld in the case of domestic lenders and foreign lenders which deliver Form 1001 or Form 4224). Each assignment will be subject to the payment of a service 10 fee to the Administrative Agent by the parties to such assignment. Pledges of Demand Loans in accordance with applicable law shall be permitted without restriction; provided that any transfer upon enforcement of any such pledge shall be subject to the consent of Acquisition Co., not to be unreasonably withheld. Promissory notes shall be issued under the Demand Facility only upon request. EXPENSES AND INDEMNIFICATION: Acquisition Co. will pay all reasonable out-of-pocket expenses of the Administrative Agent (and the Lenders relating to enforcement costs and documentary taxes) in connection with (a) the syndication of the Demand Facility (including expenses of Chemical's due diligence investigation) and (b) the preparation, execution, delivery, administration and enforcement of the definitive credit agreement and the other financing and security documentation contemplated hereby (including the reasonable fees, charges and disbursements of counsel). Acquisition Co. will indemnify the Administrative Agent and the Lenders (and their respective directors, officers, employees and agents) and hold each of them harmless from and against all losses, costs, expenses (including reasonable fees, charges and disbursements of counsel) and liabilities, including those resulting from any litigation or other proceedings (regardless of whether the Administrative Agent or any Lender is a party thereto or whether any such litigation or other proceeding is brought by Acquisition Co. or any other person), related to or arising out of the transactions contemplated hereby; PROVIDED that neither the Administrative Agent nor any Lender (nor any of its respective directors, officers, employees and agents) will be indemnified for the gross negligence or willful misconduct of the Administrative Agent or such Lender, as the case may be, or of any of its respective directors, officers, employees and agents. COMMITMENT TERMINATION DATE: Definitive financing documentation for the Demand Facility must be entered into, and the Tender Offer must be consummated, in each case on or before November 30, 1996. GOVERNING LAW: New York. REQUIRED LENDERS: 51% EXHIBIT B [Logo] MERGER FACILITIES STATEMENT OF TERMS AND CONDITIONS JUNE 9, 1996 BORROWER: Community Health Systems, Inc., a Delaware corporation ("TWISTER"), as the surviving corporation (as such, "NEW TWISTER") of a merger (the "MERGER") of Acquisition Corp., a Delaware corporation to be organized in the future ("ACQUISITION CO."), with and into it pursuant to a merger agreement initially providing for a tender offer (the "TENDER OFFER") by Acquisition Co. for all of the issued and outstanding shares of common stock, par value $.01 per share (the "SHARES"), of Twister. Acquisition Co. is, and New Twister will be, a direct wholly-owned subsidiary of a another Delaware corporation to be organized in the future ("HOLDING"), which in turn is an affiliate of Forstmann Little & Co. ("FL&CO"). ADMINISTRATIVE AGENT: Chemical Bank ("CHEMICAL") will act as a sole administrative, syndication, documentation and collateral agent (the "ADMINISTRATIVE AGENT") for a syndicate of financial institutions (the "LENDERS"). ADVISOR AND ARRANGER: Chase Securities Inc. ("CSI" or the "ARRANGER"). LENDERS: The financial institutions (including Chemical) included in the syndicate formed by the Arranger (the "LENDERS"). MERGER FACILITIES: An aggregate principal amount of $900,000,000 will be available to New Twister under the following senior secured credit facilities: TRANCHE A TERM LOAN FACILITY: A 6-1/2 year term loan facility (the "TRANCHE A TERM LOAN FACILITY") in an aggregate principal amount equal to $50,000,000. The loans under the Tranche A Term Loan Facility will be repayable in consecutive quarterly installments commencing one year following the Closing Date (as 2 defined below). The aggregate principal amount repayable in each annual period of repayment (to be divided into equal quarterly installments) is set forth below opposite the date on which such annual period ends: Period Ending Amount ------------- ------ 6/30/97 $ 0 6/30/98 8,000,000 6/30/99 8,000,000 6/30/00 9,000,000 6/30/01 10,000,000 6/30/02 10,000,000 6/30/03 5,000,000 TRANCHE B TERM LOAN FACILITY: A 7-1/2 year term loan facility (the "TRANCHE B TERM LOAN FACILITY") in an aggregate principal amount equal to $132,500,000. The loans under the Tranche B Term Loan Facility will be repayable in consecutive quarterly installments commencing one year following the Closing Date. The aggregate principal amount repayable in each annual period of repayment (to be divided into equal quarterly installments) is set forth below opposite the date on which such annual period ends: Period Ending Amount ------------- ------ 6/30/97 $ 0 6/30/98 2,000,000 6/30/99 2,000,000 6/30/00 2,000,000 6/30/01 2,000,000 6/30/02 2,000,000 6/30/03 57,500,000 6/30/04 65,000,000 TRANCHE C TERM LOAN FACILITY: An 8-1/2 year term loan facility (the "TRANCHE C TERM LOAN FACILITY") in an aggregate principal amount equal to $132,500,000. The loans under the Tranche C Term Loan Facility will be repayable in consecutive quarterly installments commencing one year following the Closing Date. The aggregate principal amount repayable in each annual period of repayment (to be divided into equal quarterly 3 installments) is set forth below opposite the date on which such annual period ends: Period Ending Amount ------------- ------ 6/30/97 $ 0 6/30/98 2,000,000 6/30/99 2,000,000 6/30/00 2,000,000 6/30/01 2,000,000 6/30/02 2,000,000 6/30/03 2,000,000 6/30/04 55,500,000 6/30/05 65,000,000 Collectively, the Tranche A Term Loan Facility, the Tranche B Term Loan Facility, the Tranche C Term Loan Facility and, if applicable, the Tranche D Term Loan Facility (as defined below) shall be referred to as the "TERM LOAN FACILITIES". The Arranger will be entitled, with the consent of Acquisition Co., to allocate a portion of the commitments under any Term Loan Facility to any other Term Loan Facility. REVOLVING CREDIT FACILITY: A revolving credit facility (the "REVOLVING CREDIT FACILITY") in an aggregate principal equal to $200,000,000. To the extent that any Debentures are outstanding at any time, a portion of the Revolving Credit Facility or the Acquisition Facility (as defined below), at the option of Twister, equal to the aggregate principal amount of such outstanding Debentures shall be reserved for the redemption payment or repurchase thereof. A portion of the Revolving Credit Facility, in an amount not to exceed $90,000,000, may be used (to the extent available) for standby and commercial letters of credit (each such letter of credit a "LETTER OF CREDIT"). Letters of Credit will be issued by Chemical or an affiliate thereof or any other Lender designated by New Twister (in such capacity, the "ISSUING BANK") for the account of New Twister and its subsidiaries, and each other Lender will take an irrevocable and unconditional pro rata participation in each Letter of Credit. 4 Up to $25,000,000 of the Revolving Credit Facility will be made available to New Twister pursuant to a swingline facility (loans thereunder, "SWINGLINE LOANS"). ACQUISITION FACILITY: A reducing revolving credit facility (the "ACQUISITION FACILITY"; together with the Term Loan Facilities and the Revolving Credit Facility, the "MERGER FACILITIES") in an aggregate principal equal to $385,000,000. At the election of Acquisition Co. made as soon as practicable but in any event prior to the launch of the syndication of the Merger Facilities, the Acquisition Facility shall be reduced by $100,000,000 and a 9-1/2 year term loan facility (the "TRANCHE D TERM LOAN FACILITY") in an aggregate principal amount equal to $100,000,000 shall be established, with a repayment schedule to be agreed between Acquisition Co. and Chemical. The Acquisition Facility will be automatically reduced on each of the anniversaries of the Closing Date set forth below to the level set forth below opposite such anniversary. Acquisition Loans shall be prepaid on any such date to the extent they exceed such reduced level on such date. Anniversary Level ----------- ----- 3 95% 4 80% 5 55% 6 20% 6-1/2 0% AVAILABILITY: TERM LOAN FACILITIES: Loans under the Term Loan Facilities, including the Tranche D Term Loan Facility, if any (the "TERM LOANS"), will be made to New Twister in one drawing on the Closing Date. REVOLVING CREDIT FACILITY: Loans under the Revolving Credit Facility ("REVOLVING CREDIT LOANS") may be made, and Letters of Credit may be issued, at any time during the period between the Closing Date and the date 6-1/2 years thereafter (the "TERMINATION DATE"), PROVIDED that no Letter of Credit shall have an expiration date after the Termination Date. No standby Letter of Credit shall have an expiry date more than 365 days after its date of issuance, and no commercial Letter of Credit shall have 5 expiry date more than 180 days after its date of issuance. Revolving Credit Loans may be borrowed and/or repaid (i) in the case of Loans based on the ABR (as defined below), on one business day's notice and in a minimum amount of $5,000,000 (or such lesser amount if reasonably practicable) or a multiple of $1,000,000 in excess thereof and (ii) in the case of Loans based on the Eurodollar Rate (as defined below), on three business days' notice and in a minimum amount of $5,000,000 (or such lesser amount if reasonably practicable) or a multiple of $1,000,000 in excess thereof. ACQUISITION FACILITY: Loans under the Acquisition Facility ("ACQUISITION LOANS"; together with the Term Loans, and the Revolving Credit Loans, "LOANS") may be made at any time during the period between the Closing Date and the Termination Date. Acquisition Loans may be borrowed and/or repaid (i) in the case of Loans based on the ABR (as defined below), on one business day's notice and in a minimum amount of $5,000,000 (or such lesser amount if reasonably practicable) or a multiple of $1,000,000 in excess thereof and (ii) in the case of Loans based on the Eurodollar Rate (as defined below), on three business days' notice and in a minimum amount of $5,000,000 (or such lesser amount if reasonably practicable) or a multiple of $1,000,000 in excess thereof. USE OF PROCEEDS: The proceeds of the Term Loans will be used (i) to refinance the borrowings of Acquisition Co. under the Demand Facility described in Exhibit A to the Commitment Letter to which this Exhibit B is attached, (ii) to finance the payment of the consideration payable in the Merger to holders of Shares (other than Acquisition Co.), (iii) to finance the refinancing by New Twister of all or such portion of the debt (approximately $198 million outstanding as of March 31, 1996) of Twister outstanding after the Merger, as New Twister shall determine (the "REFINANCING") and (iv) the payment of the fees and expenses of the Merger and the Tender Offer and the transactions contemplated thereby, including the tender for the Debentures. The Revolving Credit Facility will be used for the purposes for which Term Loans may be used and for working capital and other general corporate purposes 6 including acquisitions (including the payment of up to $80,000,000 of the fees and expenses of the Tender Offer and the Merger and the transactions contemplated thereby, including the tender for the Debentures) of New Twister and its subsidiaries following the Merger, including for the issuance of letters of credit for such purposes. The Acquisition Facility will be used to finance the purchase price of Permitted Acquisitions and to pay related fees and expenses. CLOSING DATE: On or before the date on which initial Loans are made and the Merger is consummated (the "CLOSING DATE"). GUARANTEES: The Merger Facilities will be unconditionally guaranteed by Holding and all material domestic subsidiaries of New Twister. COLLATERAL: The Merger Facilities and all guarantees thereof will be secured by (a) a perfected first priority security interest in all of the capital stock of New Twister and all capital stock owned by New Twister and its subsidiaries of all material domestic subsidiaries (including any subsidiary acquired with the proceeds of the Acquisition Facility) of New Twister, and by a first priority security interest in 65% of the capital stock of all material first-tier foreign subsidiaries of New Twister, and (b) all intercompany notes (including any note payable to Holding related to the Tender Offer, the Merger or the capitalization of New Twister, if applicable). In addition, the documentation for the Merger Facilities will contain a negative pledge on the assets of New Twister and its subsidiaries, subject to exceptions to be agreed between New Twister and Chemical. INTEREST RATES: New Twister may elect that all or a portion of the Loans bear interest at a rate per annum equal to: (a) The higher of (i) the rate from time to time publicly announced by Chemical in New York City as its prime rate (the "PRIME RATE"), (ii) the secondary market rate for three-month certificates of deposit from time to time plus 1% and (iii) the federal funds rate from time to time, plus 1/2 of 1% (such higher rate, the "ABR"; this rate is not 7 intended to be the lowest rate charged by Chemical to its borrowers), in each case plus the Applicable Margin set forth below; or (b) The rate (grossed-up for reserve requirements as described herein) at which eurodollar deposits for one, two, three or six months (as selected by New Twister) are offered in the interbank eurodollar market in the approximate amount of the relevant Loan (the "EURODOLLAR RATE") plus the Applicable Margin set forth below; not available for Swingline Loans. The applicable margins ("APPLICABLE MARGINS") for the Loans shall be as follows: REVOLVING CREDIT LOANS, ACQUISITION LOANS AND TRANCHE A TERM LOANS: Eurodollar Loans: 2.50% per annum ABR Loans: 1.50% per annum TRANCHE B TERM LOANS: Eurodollar Loans: 3.00% per annum ABR Loans: 2.00% per annum TRANCHE C TERM LOANS: Eurodollar Loans: 3.50% per annum ABR Loans: 2.50% per annum TRANCHE D TERM LOANS (IF APPLICABLE): Eurodollar Loans: 4.00% per annum ABR Loans: 3.00% per annum The Applicable Margins for the Revolving Credit Facility, the Acquisition Facility and the Tranche A Term Loan Facility will be subject to stepdowns based on the Applicable Margin set forth below opposite the ratio of Total Senior Debt to Consolidated EBITDA: Eurodollar Ratio Loans ABR Loans ----- ---------- --------- >= 3.25 to 1.00 2.50% 1.50% < 3.25 and >= 3.0 to 1.00 2.25% 1.25% < 3.00 and >= 2.5 to 1.00 2.00% 1.00% < 2.50 and >= 2.0 to 1.00 1.75% 0.75% < 2.0 to 1.00 1.50% 0.50% 8 Interest will be calculated on the basis of the actual number of days elapsed over a 365/366-day year for ABR borrowings based on the Prime Rate, and over a 360-day year for all other borrowings. OVERDUE RATE: Overdue principal, interest, fees and other amounts owing will bear interest at 2% over the rate otherwise applicable thereto. COMMITMENT FEES: Calculated for the period from the Closing Date to the Termination Date on the basis of a 365/366 day year at a rate of 1/2 of 1% per annum on the average daily unused portion of each of the Revolving Credit Facility and the Acquisition Facility, payable in arrears at the end of each quarter and upon any termination thereof. The Commitment Fees will be subject to stepdowns based on the Commitment Fee set forth below opposite the ratio of Total Senior Debt to Consolidated EBITDA: Commitment Ratio Fee ----- ---------- >= 3.25 to 1.00 0.50% < 3.25 and >= 3.0 to 1.00 0.50% < 3.00 and >= 2.5 to 1.00 0.375% < 2.50 and >= 2.0 to 1.00 0.375% < 2.0 to 1.00 0.375% LETTER OF CREDIT FEES: Letter of credit fees will be payable quarterly in arrears on the average outstanding amount available to be drawn on all standby Letters of Credit, and on the aggregate face amount of each commercial Letter of Credit upon issuance of each such Letter of Credit, at a rate per annum equal to the Applicable Margin for Revolving Credit Loans which are Eurodollar Loans in effect at such time, plus an issuing fee equal to 1/2 of 1% per annum payable to the Issuing Bank for its own account. INTEREST PAYMENT DATES: In the case of Loans bearing interest based upon the ABR, quarterly in arrears and, in the case of the Term Loans, on each date principal is due as well. In the case of Loans bearing interest based upon the Eurodollar Rate, on the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period. 9 OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS: All or a portion of the outstanding Loans may be prepaid at any time and the unutilized portion of the Revolving Credit Facility or the Acquisition Facility may be terminated in whole or in part (in minimum amounts to be agreed upon) at New Twister's option, subject to reimbursement of redeployment costs in the case of Eurodollar Loans if prepayment occurs other than at the end of an applicable interest period. Such prepayments of Term Loans may not be reborrowed. MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS: The Loans shall be prepaid (and Letters of Credit shall be cash collateralized or replaced) with the net proceeds (in excess of $20 million and subject to exceptions to be agreed upon between Acquisition Co. and Chemical) of certain permitted asset sales and issuances of debt obligations (other than certain permitted indebtedness to be agreed) of New Twister or any of its subsidiaries following the Closing Date. Such net proceeds shall be applied, except to the extent the Required Lenders agree otherwise, first to prepay Term Loans and Acquisition Loans (and such prepayments of Acquisition Loans shall equivalently reduce the Acquisition Facility) and then to prepay Revolving Credit Loans (and cash collateralize or replace outstanding Letters of Credit) and simultaneously reduce the Revolving Credit Facility. Any prepayment of Term Loans and Acquisition Loans shall be ratable among the outstanding loans thereof. In addition, the Acquisition Facility shall be reduced, and the Acquisition Loans shall be prepaid, as set forth under "Merger Facilities--Acquisition Facility" above. If any such mandatory prepayment shall be required to be made with respect to outstanding Eurodollar Loans on a day other than the last day of the interest period with respect to such Eurodollar Loans, New Twister will be permitted to cash collateralize such Eurodollar Loans in lieu of incurring breakage costs thereon. APPLICATION OF PREPAYMENTS: Optional and mandatory prepayments of Term Loans will be applied among the Term Loans under the Tranche A Term Loan Facility, the Tranche B Term Loan Facility, the Tranche C Term Loan Facility and, if applicable, the Tranche D Term Loan Facility on a pro rata basis. Prepayments applicable to the Term Loans and the Acquisition Loans shall be applied, subject to the 10 immediately preceding sentence, FIRST, to the installments (or scheduled reduction of commitments) scheduled to be paid during the next twelve months after the date of such prepayment and SECOND, to the remaining installments (or scheduled reduction of commitments) on a pro rata basis. Any holder of a Tranche B Term Loan or Tranche C Term Loan may elect not to have optional prepayments applied to such Term Loan, in which case such prepayments shall be applied first to the Tranche A Term Loans and the Acquisition Loans ratably (and such prepayments of Acquisition Loans shall equivalently reduce the Acquisition Facility) and second to the Tranche B Term Loans and Tranche C Term Loans, pro rata. INITIAL CONDITIONS PRECEDENT: The availability of the Merger Facilities will be conditioned upon, among other things, satisfaction of the following conditions precedent: (a) Execution and delivery of definitive financing agreements and related documentation for the Merger Facilities, reflecting the terms and conditions set forth herein and such other terms and conditions as are satisfactory to the Lenders. (b) Receipt by Acquisition Co. prior to the consummation of the Tender Offer of not less than $960,000,000 in proceeds from (i) the sale by Holding of not less than $460,000,000 of common stock and (ii) the sale by Holding of not less than $500,000,000 of subordinated debt (the "SUBORDINATED DEBT") having a maximum interest rate of 8.25% per annum and providing for no scheduled payments of principal prior to the eleventh anniversary of the date of the consummation of the Tender Offer (the "TENDER OFFER DATE") (the proceeds of such equity and such subordinated debt being either loaned to Acquisition Co. by Holding pursuant to a subordinated intercompany note (the "SUBORDINATED INTERCOMPANY NOTE") or contributed by Holding to the equity of Acquisition Co.), in each case on such terms and subject to such conditions consistent with Exhibit A to the letter to which this Exhibit B is attached and the other 11 bank financings sponsored by affiliates of Acquisition Co. (the "SPONSORED FINANCINGS") and such other terms as are reasonably satisfactory to the Administrative Agent. The Subordinated Intercompany Note issued by Acquisition Co. and the Subordinated Debt issued by Holding will each include provision for payment, within 30 days after the closing of the Demand Loans, by each obligor on such indebtedness of supplemental interest in an aggregate amount not to exceed $12 million ("SUPPLEMENTAL SUBORDINATED DEBT INTEREST"). (c) The Merger shall have been, or shall be concurrently, consummated pursuant to the Merger Agreement, all required stockholder approval to effect the Merger shall have been obtained and no material provision of the Merger Agreement shall have been amended, supplemented, waived without the prior written consent of the Administrative Agent. (d) The Tender Offer shall have been consummated; all conditions to drawing by Acquisition Co. under the Demand Facility shall have been satisfied and there shall be no event of default under the Demand Facility. (e) The documents and materials filed publicly by Holding, Acquisition Co. and Twister after the closing of the Demand Loans in connection with the Tender Offer and the Merger shall have been furnished to the Administrative Agent in reasonably satisfactory form. (f) Receipt by the Lenders of any and all legal opinions, in a manner, and to a substantive effect, reasonably satisfactory to the Administrative Agent. (g) All necessary or advisable filings shall have been duly made to create a perfected first priority lien on and security interest in all collateral, and all collateral shall be free and clear of all liens, except permitted liens to be negotiated. 12 (h) Payment of required fees and expenses to the Administrative Agent and the Lenders. CONDITIONS TO ACQUISITION LOANS: The obligation of the Lenders providing the Acquisition Facility to make any Acquisition Loan shall be conditioned upon: (a) The receipt by the Administrative Agent of such pledge agreements as are contemplated by this Term Sheet to be delivered with respect to the assets being acquired. (b) The receipt by the Administrative Agent of such legal opinions, officers' certificates and similar documents as the Administrative Agent reasonably shall request with respect to the relevant Acquisition Loan and the acquisition financed thereby. (c) The acquisition to be funded, in whole or in part, with the proceeds of such Acquisition Loan will be of an entity in a similar line of business. ON-GOING CONDITIONS PRECEDENT: The making of each extension of credit will be conditioned upon (a) all representations and warranties in all credit and security documents (including, without limitation, the material adverse change, litigation and compliance with law and regulatory requirements representations) being true and correct in all material respects and (b) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit. 13 FINANCIAL COVENANTS: To include but not be limited to the following covenants (the covenant levels in clauses 1, 2 and 3 below in 1996 and in each four quarter period following an acquisition (with respect to the business acquired and the indebtedness incurred in connection therewith) will be calculated on an annualized basis for periods since the Closing Date or the date of acquisition, as the case may be): 1. TOTAL SENIOR DEBT TO CONSOLIDATED EBITDA. The ratio of Total Senior Debt to Consolidated EBITDA for each period of four consecutive fiscal quarters ended during each fiscal year listed below shall not be more than the ratio set forth opposite such year below: Year Ratio ---- ----- 1996 4.75 to 1 1997 4.50 to 1 1998 4.25 to 1 1999 3.50 to 1 2000 3.00 to 1 2001 3.00 to 1 2002 2.50 to 1 2003 2.50 to 1 2004 2.50 to 1 2005 2.50 to 1 2. CONSOLIDATED EBITDA MINUS CAPITAL EXPENDITURES TO SENIOR INTEREST EXPENSE. The ratio of Consolidated EBITDA minus Capital Expenditures to Senior Interest Expense for each period of four consecutive fiscal quarters ended during each fiscal year listed below shall not be less than the ratio set forth opposite such year below: Year Ratio ---- ----- 1996 1.50 to 1 1997 2.00 to 1 1998 2.25 to 1 1999 2.50 to 1 2000 3.00 to 1 2001 3.50 to 1 2002 3.50 to 1 14 2003 3.50 to 1 2004 3.50 to 1 2005 3.50 to 1 3. FIXED CHARGE COVERAGE RATIO. The ratio of Consolidated EBITDA minus Principal Debt Payments minus Capital Expenditures to Total Consolidated Cash Interest Expense (the "FIXED CHARGE COVERAGE RATIO") for each period of four consecutive fiscal quarters that ends during the fiscal years set forth below shall not be less than the ratio set forth opposite such fiscal year: Fiscal Coverage Year Ratio ------ -------- 1997 1.00 to 1.00 1998 1.00 to 1.00 1999 1.00 to 1.00 2000 1.10 to 1.00 2001 1.10 to 1.00 2002 1.10 to 1.00 2003 1.10 to 1.00 2004 1.10 to 1.00 2005 1.10 to 1.00 4. ADDITIONAL INDEBTEDNESS. Additional indebtedness will be prohibited except for (a) from and after the Termination Date, pursuant to any revolving credit financings replacing the Revolving Credit Facility, in an aggregate amount not to exceed $200,000,000, which may rank pari passu with the Facilities and may be secured, on a pari passu basis with the Lenders, by the Collateral, (b) the Existing Permitted Debt and refinancings thereof and (c) certain further baskets (which will include separate baskets for indebtedness of Holding, and of New Twister and its subsidiaries) to be mutually agreed upon. 5. CAPITAL EXPENDITURES. Capital Expenditures (which shall not include Permitted Acquisitions, as defined below) in any fiscal year shall not exceed (i) $60 million during each of the fiscal years from and including 1996 to and including 1999, and (ii) $75 million during any fiscal year 15 thereafter, PROVIDED that, in addition to the foregoing, permitted Capital Expenditures may be increased in any year by an aggregate amount not to exceed 4% of the revenues in the year of acquisition for any business acquired during such year or any prior year, with up to $3 million in permitted Capital Expenditures unused in any such year permitted to be carried over to the immediately succeeding year. The applicable definitions, including "Consolidated Senior Debt", "Consolidated EBITDA", "Senior Interest Expense", "Total Consolidated Cash Interest Expense", "Principal Debt Payments", "Indebtedness" and "Capital Expenditures", will be agreed upon by Acquisition Co. and Chemical. For these purposes, Supplemental Subordinated Debt Interest will be excluded from interest expense. NEGATIVE COVENANTS: To include, without limitation, limitations on indebtedness; liens; dividends and other restricted payments (in any event, to permit dividends or distributions up to amounts mutually agreed upon on the stock of certain subsidiaries referred to below in which minority interests are held by health care professionals); guarantee obligations; mergers, consolidations, asset sales and dispositions (in any event to permit asset sales and dispositions of up to $75 million); acquisitions, loans, advances and investments (in any event to permit investments to acquire at least 80% of the capital stock of subsidiaries in which minority interests are held by health care professionals); optional payments and modifications of subordinated and other debt instruments (including the Subordinated Intercompany Note); transactions with affiliates; sale and leaseback transactions; negative pledge clauses; and changes in business conducted. The limitations on acquisitions will, among other things, (i) prohibit acquisitions other than of entities in similar lines of business and (ii) prohibit acquisitions with an aggregate value in excess of $500,000,000 (other than the Merger) (the acquisitions permitted under this clause (iii), the "PERMITTED ACQUISITIONS"). Certain asset-exchange transactions with third parties will be permitted, subject to limitations to be agreed. 16 AFFIRMATIVE COVENANTS: To include, without limitation, delivery of financial statements, reports, accountants' statements and letters, projections, officers' certificates and other information reasonably requested by the Lenders; payment of taxes and other obligations; continuation of business and maintenance of existence, rights and privileges; compliance with contractual obligations and laws (including environmental laws); maintenance of property and insurance; maintenance of books and records; notices of material defaults, material litigation and material events; and agreement to grant security interests in after-acquired property. REPRESENTATIONS AND WARRANTIES: Customary for financings of this type and others deemed appropriate by the Lenders. EVENTS OF DEFAULT: To include, without limitation, nonpayment of principal, interest, fees or other amounts, violation of covenants, inaccuracy of representation and warranties, cross-default, bankruptcy, material judgments, ERISA, invalidity of any loan documents or security interest, or a change of control. COST AND YIELD PROTECTION: The usual for facilities of this type, and consistent with the Sponsored Financings, including but not limited to compensation in respect of redeployment costs, reserve requirements, taxes and decreased profitability resulting from changes subsequent to the Closing Date in U.S. or foreign capital adequacy requirements, guidelines or policies or their interpretation or application, and any other customary yield and increased cost protection deemed reasonably necessary by the Lenders, providing customary protection for U.S. and non-U.S. Lenders. TRANSFER PROVISIONS: The Lenders may at any time grant participations in or sell, assign or otherwise transfer (in a minimum amount so that the assignor and assignee Lenders shall each retain an amount equal to $10 million in commitments or, in the case of the assigning Lender, if less than such amount, zero) all or any part of, their Loans, Letters of Credit, commitments and other rights and duties to one or more other financial institutions without the consent of New Twister, PROVIDED that any such sale, assignment or other transfer other than to a Lender shall be subject to the consent of New Twister (not to be unreasonably withheld in the case of domestic lenders and foreign 17 lenders which deliver Form 1001 or Form 4224). Non-pro rata assignments will be permitted. Each assignment will be subject to the payment of a service fee to the Administrative Agent by the parties to such assignment. Pledges of Loans in accordance with applicable law shall be permitted without restriction, provided that any transfer upon enforcement of any such pledge will be subject to the consent of Acquisition Co., not to be unreasonably withheld. Promissory notes shall be issued under the Merger Facilities only upon request. EXPENSES AND INDEMNIFICATION: New Twister will pay all reasonable out-of-pocket expenses of the Administrative Agent (and the Lenders relating to enforcement costs and documentary taxes) in connection with (a) the syndication of the Merger Facilities (including expenses of Chemical's due diligence investigation) and (b) the preparation, execution, delivery, administration and enforcement of the definitive credit agreement and the other financing and security documentation contemplated hereby (including the reasonable fees, charges and disbursements of counsel). New Twister will indemnify the Administrative Agent and the Lenders (and their respective directors, officers, employees and agents) and hold each of them harmless from and against all losses, costs, expenses (including reasonable fees, charges and disbursements of counsel) and liabilities, including those resulting from any litigation or other proceedings (regardless of whether the Administrative Agent or any Lender is a party thereto or whether any such litigation or other proceeding is brought by New Twister or any other person), related to or arising out of the transactions contemplated hereby; PROVIDED that neither the Administrative Agent nor any Lender (nor any of its respective directors, officers, employees and agents) will be indemnified for the gross negligence or willful misconduct of the Administrative Agent or such Lender, as the case may be, or of any of its respective directors, officers, employees and agents. REQUIRED LENDERS: 51%, PROVIDED that amendments to the order of application of prepayments and releases of substantial portions of the Collateral shall be subject to the approval of 51% of the Lenders with commitments or loans under the Revolving Credit Facility and the Tranche A Term Loan Facility, and of 51% of the Lenders with loans 18 under the Tranche B Term Loan Facility, the Tranche C Term Loan Facility and, if applicable, the Tranche D Term Loan Facility. COMMITMENT TERMINATION DATE: Definitive financing documentation for the Merger Facilities must be entered into, and the Merger must be consummated, in each case on or before November 30, 1996. GOVERNING LAW: New York [LOGO] CHEMICAL BANK 270 Park Avenue New York, New York 10017 CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 As of June 9, 1996 Forstmann Little & Co. 767 Fifth Avenue New York, NY 10153 Dear Sirs: Reference is made to the letter agreement, dated the date hereof (the "COMMITMENT LETTER"), addressed by us to you with respect to the proposed acquisition of a company identified therein as "Twister." This is the Fee Letter referred to therein. Capitalized terms which are used herein and defined in the Commitment Letter are used herein as therein defined. You hereby agree to pay: (i) to Chemical, for allocation by it in its discretion to itself, CSI and the Lenders, a financing delivery fee equal to $1,000,000 if (a) Chemical does not provide the Demand Facility or the Merger Facilities due to you (or one of your affiliates) obtaining financing from another source or (b) the Merger is not consummated and you (or one of your affiliates) receive a termination fee or other economic return (other than reimbursement of your documented expenses), in each case payable on the earlier of the date of expiration of Chemical's commitment and the date you or your affiliates receive such fee or economic return. (ii) to Chemical, for allocation by it in its discretion to itself, CSI and the Lenders, an underwriting fee equal to $11,250,000 (1-1/4% of $900,000,000), 50% of which shall be payable upon the Closing Date of the Demand Facility and 50% of which shall be payable on the Closing Date of the Merger Facilities. Forstmann Little & Co. As of June 9, 1996 (iii) to Chemical, for allocation by it in its discretion to itself and CSI, a structuring fee equal to $11,250,000, 50% of which shall be payable upon the Closing Date of the Demand Facility and 50% of which shall be payable on the Closing Date of the Merger Facilities. (iv) to Chemical, for its own account, an annual administrative agent's fee of $600,000 for the first year after the Closing Date of the Demand Facility and $500,000 for each year thereafter, payable quarterly in advance, commencing on the Closing Date of the Demand Facility. (v) to Chemical, for allocation by it in its discretion to itself, CSI and the Lenders, a commitment fee equal to 1/2 of 1% per annum on the excess of its commitment for the Merger Facilities under the Commitment Letter over the Demand Loans (including, without limitation, the Letters of Credit) outstanding from time to time under the Demand Facility for the period from June 5, 1996 to the Closing Date of the Merger Facilities or, if earlier, the date of termination of the Merger Facilities, payable on the Closing Date of the Demand Facility and on the Closing Date of the Merger Facilities or such earlier date of termination of the Merger Facilities. The commitment fees provided for in this paragraph shall be in addition to the commitment fees provided for in the Term Sheets. All such fees shall be nonrefundable. This letter supercedes and replaces the fee letter dated June 9, 1996, between us and you. EX-99.(C) 12 AGREEMENT AND PLAN OF MERGER -------------------------------------------------- -------------------------------------------------- AGREEMENT AND PLAN OF MERGER between FLCH HOLDINGS CORP.\ FLCH ACQUISITION CORP. and COMMUNITY HEALTH SYSTEMS, INC. Dated as of June 9, 1996 -------------------------------------------------- -------------------------------------------------- TABLE OF CONTENTS Page ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1. The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. The Offer. . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Actions by Purchaser and Merger Sub. . . . . . . . . . . 2 1.3. Actions by the Company . . . . . . . . . . . . . . . . . 3 1.4. Directors. . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . 6 2.2. The Closing. . . . . . . . . . . . . . . . . . . . . . . 6 2.3. Effective Time . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3. Certificate of Incorporation and Bylaws of the Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1. Certificate of Incorporation . . . . . . . . . . . . . . 7 3.2. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. Directors and Officers of the Surviving Corporation. . . . . . 7 4.1. Directors. . . . . . . . . . . . . . . . . . . . . . . . 7 4.2. Officers . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5. Effect of the Merger on Securities of Merger Sub and the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.1. Merger Sub Stock.. . . . . . . . . . . . . . . . . . . . 8 5.2. Company Securities.. . . . . . . . . . . . . . . . . . . 9 5.3. Exchange of Certificates Representing Common Stock.. . . 10 5.4. Adjustment of Merger Consideration . . . . . . . . . . . 11 5.5. Dissenting Company Stockholders. . . . . . . . . . . . . 11 5.6. Merger Without Meeting of Stockholders . . . . . . . . . 12 ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6. Representations and Warranties of Company. . . . . . . . . . . 12 6.1. Existence; Good Standing; Corporate Authority. . . . . . 12 6.2. Authorization, Validity and Effect of Agreements . . . . 13 6.3. Compliance with Laws . . . . . . . . . . . . . . . . . . 13 i 6.4. Capitalization . . . . . . . . . . . . . . . . . . . . . 13 6.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 14 6.6. No Violation . . . . . . . . . . . . . . . . . . . . . . 15 6.7. Company Reports; Offer Documents . . . . . . . . . . . . 15 6.8. Litigation . . . . . . . . . . . . . . . . . . . . . . . 17 6.9. Absence of Certain Changes . . . . . . . . . . . . . . . 17 6.10. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 18 6.11. Employee Benefit Plans . . . . . . . . . . . . . . . . . 18 6.12. Labor and Employment Matters . . . . . . . . . . . . . . 20 6.13. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 20 6.14. Licenses and Permits . . . . . . . . . . . . . . . . . . 20 6.15. Medicare Participation/Accreditation . . . . . . . . . . 21 6.16. Medicare/Medicaid Compliance . . . . . . . . . . . . . . 21 6.17. Environmental Compliance and Disclosure. . . . . . . . . 22 6.18. Title to Assets. . . . . . . . . . . . . . . . . . . . . 22 6.19. Material Contracts . . . . . . . . . . . . . . . . . . . 23 6.20. Required Vote of Company Stockholders. . . . . . . . . . 23 6.21. Rights Agreement . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7. Representations and Warranties of Purchaser and Merger Sub.. . 24 7.1. Existence; Good Standing; Corporate Authority. . . . . . 24 7.2. Authorization, Validity and Effect of Agreements . . . . 24 7.3. Offer Documents. . . . . . . . . . . . . . . . . . . . . 24 7.4. No Violation . . . . . . . . . . . . . . . . . . . . . . 25 7.5. Financing. . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 8. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.1. No Solicitation. . . . . . . . . . . . . . . . . . . . . 26 8.2. Interim Operations . . . . . . . . . . . . . . . . . . . 27 8.3. Company Stockholder Approval; Proxy Statement. . . . . . 28 8.4. Filings; Other Action. . . . . . . . . . . . . . . . . . 30 8.5. Access to Information. . . . . . . . . . . . . . . . . . 31 8.6. Publicity. . . . . . . . . . . . . . . . . . . . . . . . 31 8.7. Further Action . . . . . . . . . . . . . . . . . . . . . 32 8.8. Insurance; Indemnity.. . . . . . . . . . . . . . . . . . 32 8.9. Restructuring of Merger. . . . . . . . . . . . . . . . . 34 8.10. Employee Benefit Plans . . . . . . . . . . . . . . . . . 34 8.11. No Liability for Failure to Obtain Consent of Lenders. . 34 ii ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9. Conditions.. . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.1. Conditions to Each Party's Obligation to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . . 35 9.2. Conditions to Obligation of Purchaser and Merger Sub to Effect the Merger . . . . . . . . . . . . . . . . . . . 35 ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 10. Termination; Amendment; Waiver.. . . . . . . . . . . . . . . . 36 10.1. Termination . . . . . . . . . . . . . . . . . . . . . . 36 10.2. Effect of Termination . . . . . . . . . . . . . . . . . 37 10.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . 37 10.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . 38 ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 11. General Provisions. . . . . . . . . . . . . . . . . . . . . . 38 11.1. Nonsurvival of Representations and Warranties . . . . . 38 11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . 38 11.3. Assignment; Binding Effect. . . . . . . . . . . . . . . 39 11.4. Entire Agreement. . . . . . . . . . . . . . . . . . . . 39 11.5. Fees and Expenses . . . . . . . . . . . . . . . . . . . 39 11.6. Governing Law . . . . . . . . . . . . . . . . . . . . . 41 11.7. Headings. . . . . . . . . . . . . . . . . . . . . . . . 42 11.8. Interpretation. . . . . . . . . . . . . . . . . . . . . 42 11.9. Investigations. . . . . . . . . . . . . . . . . . . . . 42 11.10. Severability. . . . . . . . . . . . . . . . . . . . . . 42 11.11. Enforcement of Agreement. . . . . . . . . . . . . . . . 42 11.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . 43 iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of June 9, 1996, between FLCH Holdings Corp., a Delaware corporation ("PURCHASER"), FLCH Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Purchaser ("MERGER SUB"), and Community Health Systems, Inc., a Delaware corporation (the "COMPANY"). RECITALS WHEREAS, the Boards of Directors of Purchaser and the Company each have determined that it is in the best interests of their respective companies and stockholders for Purchaser to acquire the Company upon the terms and subject to the conditions set forth herein. WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection herewith. NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE 1 THE OFFER 1.1 THE OFFER. (a) Subject to the provisions of this Agreement and this Agreement not having been terminated, as promptly as practicable but in no event later than June 14, 1996, Merger Sub shall, and Purchaser shall cause Merger Sub to, commence, within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "EXCHANGE ACT"), an offer to purchase all of the outstanding shares of Common Stock, par value $.01 per share (the "COMMON STOCK") of the Company together with the associated Rights (as hereinafter defined), at a price of $52.00 (fifty-two dollars) per share of Common Stock net to the seller in cash (the "OFFER"). Except where the context otherwise requires, all references herein to the shares of Common Stock shall include the associated Rights. The obligation of Merger Sub to, and of Purchaser to cause Merger Sub to, commence the Offer and accept for payment, and pay for, any shares of Common Stock tendered pursuant to the Offer shall be subject to the conditions set forth in EXHIBIT A and to the terms and conditions of this Agreement. Subject to the provisions of this Agreement, the Offer shall expire 20 business days after the date of its commencement, unless this Agreement is terminated in accordance with ARTICLE 10, in which case the Offer (whether or not previously extended in accordance with the terms hereof) shall expire on such date of termination. (b) Without the prior written consent of the Company, Merger Sub shall not (i) waive the Minimum Condition (as defined in EXHIBIT A), (ii) reduce the number of shares of Common Stock subject to the Offer, (iii) reduce the price per share of Common Stock to be paid pursuant to the Offer, (iv) extend the Offer if all of the Offer conditions are satisfied or waived, (v) change the form of consideration payable in the Offer, or (vi) amend or modify any term or condition of the Offer (including the conditions set forth on EXHIBIT A) in any manner adverse to the holders of Common Stock. Notwithstanding anything herein to the contrary, Merger Sub may, in its sole discretion without the consent of the Company, extend the Offer at any time and from time to time (i) if at the then scheduled expiration date of the Offer any of the conditions to Merger Sub's obligation to accept for payment and pay for shares of Common Stock shall not have been satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or its staff applicable to the Offer; (iii) for any period required by applicable law in connection with an increase in the consideration to be paid pursuant to the Offer; and (iv) if all Offer conditions are satisfied or waived but the number of shares of Common Stock tendered is 85% or more, but less than 90%, of the then outstanding number of shares of Common Stock, for an aggregate period of not more than 5 business days (for all such extensions under this clause (iv)) beyond the latest expiration date that would be permitted under clause (i), (ii) or (iii) of this sentence. So long as this Agreement is in effect and the Offer conditions have not been satisfied or waived, at the request of the Company, Merger Sub shall, and Purchaser shall cause Merger Sub to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. Subject to the terms and conditions of the Offer and this Agreement (but subject to the right of termination in accordance with ARTICLE 10), Merger Sub shall, and Purchaser shall cause Merger Sub to, accept for payment, in accordance with the terms of the Offer, all shares of Common Stock validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the expiration of the Offer. 1.2. ACTIONS BY PURCHASER AND MERGER SUB. (a) As soon as reasonably practicable following execution of this Agreement, but in no event later than five business days from the date hereof, Purchaser and Merger Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and any other ancillary documents pursuant to which the Offer shall be made (such Schedule 14D-1 and the documents therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). The Company and its counsel shall 2 be given an opportunity to review and comment upon the Offer Documents prior to the filing thereof with the SEC. The Offer Documents shall comply as to form in all material respects with the requirements of the Exchange Act, and on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, the Offer Documents 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 were made, not misleading, except that no representation is made by Purchaser or Merger Sub with respect to information supplied by the Company for inclusion in the Offer Documents. Each of Purchaser, Merger Sub and the Company agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Purchaser, Merger Sub and the Company further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of shares of Common Stock, in each case as and to the extent required by applicable federal securities laws. Purchaser and Merger Sub agree to provide the Company and its counsel in writing with any comments Purchaser, Merger Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after receipt of such comments and with copies of any written responses and telephonic notification of any verbal responses by Purchaser, Merger Sub or their counsel. (b) Purchaser shall provide or cause to be provided to Merger Sub all of the funds necessary to purchase any shares of Common Stock that Merger Sub becomes obligated to purchase pursuant to the Offer. 1.3. ACTIONS BY THE COMPANY. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board of Directors of the Company (the "BOARD OF DIRECTORS" or the "BOARD") at a meeting duly called and held has duly adopted, by unanimous vote, resolutions (i) approving this Agreement, the Offer and the Merger (as hereinafter defined), determining that the Merger is advisable and that the terms of the Offer and Merger are fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders accept the Offer and approve the Merger and this Agreement, and (ii) taking all action necessary to render (x) Section 203 of the Delaware General Corporation Law (the "DGCL"), (y) Article IX of the Company's Certificate of Incorporation, and (z) the Company's Rights Agreement, dated as of September 7, 1995, between the Company and First Union Bank of North Carolina, as trustee (the "RIGHTS AGREEMENT") inapplicable to the Offer, the Merger and this Agreement or any of the transactions contemplated hereby or thereby. The Company further represents and warrants that the Board of Directors has received the written opinion of Merrill Lynch & Co. (the "FINANCIAL ADVISOR") that the proposed consideration to be received by the 3 holders of shares of Common Stock pursuant to the Offer and the Merger is fair to such holders from a financial point of view (the "FAIRNESS OPINION"). The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board of Directors described in the first sentence of this SECTION 1.3(A). The Company hereby represents and warrants that it has been authorized by the Financial Advisor to permit the inclusion of the Fairness Opinion and references thereto, subject to prior review and consent by the Financial Advisor (such consent not to be unreasonably withheld) in the Offer Documents, the Schedule 14D-9 (as hereinafter defined) and the Proxy Statement (as hereinafter defined). (b) On the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D- 9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "SCHEDULE 14D-9") containing the recommendations described in paragraph (a) above and shall mail the Schedule 14D-9 to the stockholders of the Company. To the extent practicable, the Company shall cooperate with Purchaser in mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents to the Company's stockholders. Purchaser and its counsel shall be given an opportunity to review and comment upon the Schedule 14D-9 prior to the filing thereof with the SEC. The Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, 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 were made, not misleading, except that no representation is made by the Company with respect to information supplied by Purchaser or Merger Sub for inclusion in the Schedule 14D-9. Each of the Company, Purchaser and Merger Sub agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of shares of Common Stock, in each case as and to the extent required by applicable federal securities laws. The Company agrees to provide Purchaser and Merger Sub and their counsel in writing with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and with copies of any written responses and telephonic notification of any verbal responses by the Company or its counsel. (c) In connection with the Offer, the Company shall cause its transfer agent to furnish Merger Sub with mailing labels containing the names and addresses of the record holders of Common Stock as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other 4 information in the Company's possession or control regarding the beneficial owners of Common Stock, and shall furnish to Merger Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Merger Sub may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer and the Merger, Purchaser and Merger Sub and each of their affiliates and associates shall hold in confidence the information contained in any of such labels, lists and files, shall use such information only in connection with the Offer and the Merger, and, if this Agreement is terminated, shall promptly deliver to the Company all copies of such information then in their possession. (d) Subject to the terms and conditions of this Agreement, if there shall occur a change in law or in a binding judicial interpretation of existing law which would, in the absence of action by the Company or the Board, prevent the Merger Sub, were it to acquire a specified percentage of the shares of Common Stock then outstanding, from approving and adopting this Agreement by its affirmative vote as the holder of a majority of shares of Common Stock and without the affirmative vote of any other stockholder, the Company will use its best efforts to promptly take or cause such action to be taken. 1.4. DIRECTORS. (a) Promptly upon the purchase of shares of Common Stock pursuant to the Offer, Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number, as will give Purchaser representation on the Board of Directors equal to the product of (i) the number of directors on the Board of Directors and (ii) the percentage that the number of shares of Common Stock purchased by Merger Sub or Purchaser or any affiliate bears to the number of shares of Common Stock outstanding (the "PERCENTAGE"), and the Company shall, upon request by Purchaser, promptly increase the size of the Board of Directors and/or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Purchaser's designees to be elected to the Board of Directors and shall cause the Purchaser's designees to be so elected. At the request of Purchaser, the Company will use its best efforts to cause such individuals designated by Purchaser to constitute the same Percentage of (i) each committee of the Board, (ii) the board of directors of Community Health Investment Corporation and Hallmark Healthcare Corporation and (iii) the committees of each such board of directors. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act. The Company shall take, at its expense, all action necessary to effect any such election, and shall include in the Schedule 14D-9 the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Purchaser will supply to Company in writing and be solely responsible 5 for any information with respect to itself and its nominees, directors and affiliates required by Section 14(f) and Rule 14f-1. Notwithstanding the foregoing, the parties hereto shall use their respective best efforts to ensure that at least two of the members of the Board of Directors shall at all times prior to the Effective Time (as hereinafter defined) be Continuing Directors (as hereinafter defined). (b) Following the election or appointment of Purchaser's designees pursuant to this SECTION 1.4 and prior to the Effective Time, the approval of a majority of the directors of the Company then in office who are not designated by Purchaser (the "CONTINUING DIRECTORS") shall be required to authorize (and such authorization shall constitute the authorization of the Board of Directors and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors, any extension of time for the performance of any of the obligations or other acts of Purchaser or Merger Sub, and any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company. ARTICLE 2 THE MERGER 2.1. THE MERGER. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in SECTION 2.3), Merger Sub shall be merged with and into the Company in accordance with this Agreement and the applicable provisions of the DGCL, and the separate corporate existence of Merger Sub shall thereupon cease (the "MERGER"). The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION"). The Merger shall have the effects specified in the DGCL. 2.2. THE CLOSING. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "CLOSING") shall take place at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York, at 10:00 a.m., local time, as soon as practicable following the satisfaction (or waiver if permissible) of the conditions set forth in ARTICLE 9. The date on which the Closing occurs is hereinafter referred to as the "CLOSING DATE." 2.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in ARTICLE 9 shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in ARTICLE 10, the parties hereto shall cause a Certificate of Merger meeting the requirements of Section 251 of the DGCL to be properly executed and filed in accordance with such Section on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL or at such later time which the parties hereto shall have 6 agreed upon and designated in such filing as the effective time of the Merger (the "EFFECTIVE TIME"). ARTICLE 3 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION 3.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the Surviving Corporation shall be in the form attached hereto as EXHIBIT B, until duly amended in accordance with applicable law. 3.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, until duly amended in accordance with applicable law. ARTICLE 4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION 4.1. DIRECTORS. The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law. 4.2. OFFICERS. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law. ARTICLE 5 EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY 5.1. MERGER SUB STOCK. At the Effective Time, each share of common stock, $.01 Par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of common stock, $.01 Par value per share, of the Surviving Corporation. 7 5.2. COMPANY SECURITIES. (a) At the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock owned by Purchaser or Merger Sub or held by the Company, all of which shall be cancelled, and other than shares of Dissenting Common Stock (as hereinafter defined)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the per share consideration in the Offer, without interest (the "MERGER CONSIDERATION"). (b) As a result of the Merger and without any action on the part of the holder thereof, at the Effective Time all shares of Common Stock shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of shares of Common Stock (other than Merger Sub, Purchaser and the Company) shall thereafter cease to have any rights with respect to such shares of Common Stock, except the right to receive, without interest, the Merger Consideration in accordance with SECTION 5.3 upon the surrender of a certificate or certificates (a "CERTIFICATE") representing such shares of Common Stock. (c) Each share of Common Stock issued and held in the Company's treasury at the Effective Time shall, by virtue of the Merger, cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. (d) All options (individually, an "OPTION" and collectively, the "OPTIONS") outstanding immediately prior to the Effective Time under any Company stock option plan (the "STOCK OPTION PLANS"), whether or not then exercisable, shall be cancelled and each holder of an Option will be entitled to receive from the Surviving Corporation, for each share of Common Stock subject to an Option, an amount in cash equal to the excess, if any, of the Merger Consideration over the per share exercise price of such Option, without interest. The amounts payable pursuant to this SECTION 5.2(d) shall be paid (i) with respect to shares of Common Stock subject to Options held by employees who are ranked for compensation purposes below the level of corporate vice-president of the Company and by non-employees of the Company or its Subsidiaries who hold Options, at the Effective Time and (ii) with respect to shares of Common Stock subject to Options held by employees who are ranked for compensation purposes at or above such level, at the time or times the Option or portion of an Option will become exercisable in accordance with its terms as in effect on the date hereof (or, to the extent the Option is already exercisable at the Effective Time, payment shall be made at the Effective Time), provided the holder of the Option continues in employment with the Company at the time the payment is due and provided further that the entire amount shall come due and payable if the holder of the Option shall be terminated without cause prior to the first anniversary of the Effective Time. All amounts payable pursuant to this SECTION 5.2(d) shall be subject to all applicable withholding 8 of taxes. The Company shall use its reasonable best efforts to obtain all necessary consents of the holders of Options, provided, however, that the failure of the Company to obtain any one or more of such consents shall have no effect on the Purchaser's and Merger Sub's obligation to consummate the Offer and the Merger and shall not afford any basis for them to assert the condition set forth in clause (ii) of paragraph (d) of Exhibit A. 5.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK. (a) Prior to the Effective Time, Purchaser shall appoint a commercial bank or trust company having net capital of not less than $20 million, or such other party reasonably satisfactory to the Company, to act as paying agent hereunder for payment of the Merger Consideration upon surrender of Certificates (the "PAYING AGENT"). Purchaser shall cause the Surviving Corporation to provide the Paying Agent with cash in amounts necessary to pay for all the shares of Common Stock pursuant to SECTION 5.2(a) and, in connection with the Options, pursuant to SECTION 5.2(d), as and when such amounts are needed by the Paying Agent. Such amounts shall hereinafter be referred to as the "EXCHANGE FUND." (b) Promptly after the Effective Time, Purchaser shall cause the Paying Agent to mail to each holder of record of shares of Common Stock (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and which letter shall be in such form and have such other provisions as Purchaser may reasonably specify and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate to the Paying Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall promptly receive in exchange therefor the amount of cash into which shares of Common Stock theretofore represented by such Certificate shall have been converted pursuant to SECTION 5.2, and the shares represented by the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or will accrue on the cash payable upon surrender of any Certificate. In the event of a transfer of ownership of Common Stock which is not registered in the transfer records of the Company, payment may be made with respect to such Common Stock to such a transferee if the Certificate representing such shares of Common Stock is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. (c) At or after the Effective Time, there shall be no transfers on the stock transfer books of the company of the shares of Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, 9 Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged as provided in this ARTICLE 5. (d) Any portion of the Exchange Fund (including the proceeds of any interest and other income received by the Paying Agent in respect of all such funds) that remains unclaimed by the former stockholders of the Company six months after the Effective Time shall be delivered to the Surviving Corporation. Any former stockholders of the Company who have not theretofore complied with this ARTICLE 5 shall thereafter look only to the Surviving Corporation for payment of any Merger Consideration that may be payable in respect of each share of Common Stock such stockholder holds as determined pursuant to this Agreement, without any interest thereon. (e) None of Purchaser, the Company, the Surviving Corporation, the Paying Agent or any other person shall be liable to any former holder of shares of Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (F) If any Certificate shall have 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 and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement. 5.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date of this Agreement but prior to the Effective Time, the outstanding shares of Common Stock shall have been changed into a different number of shares or a different class as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, split, combination, exchange, recapitalization or other similar transaction, the Merger Consideration shall be appropriately adjusted. 5.5. DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision of this Agreement to the contrary, if required by the DGCL but only to the extent required thereby, shares of Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by holders of such shares of Common Stock who have properly exercised appraisal rights with respect thereto in accordance with Section 262 of the DGCL (the "DISSENTING COMMON STOCK") will not be exchangeable for the right to receive the Merger Consideration, and holders of such shares of Dissenting Common Stock will be entitled to receive payment of the appraised value of such shares of Common Stock in accordance with the provisions of such Section 262 unless and until such holders fail to perfect or effectively withdraw or lose their rights to appraisal and payment under the 10 DGCL. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such shares of Common Stock will thereupon be treated as if they had been converted into and to have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon. The Company will give Purchaser prompt notice of any demands received by the Company for appraisals of shares of Common Stock. The Company shall not, except with the prior written consent of Purchaser, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. 5.6. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the foregoing but subject to the provisions of Section 8.3(f), if Merger Sub, or any other direct or indirect subsidiary of Purchaser, shall acquire at least 90 percent of the outstanding shares of Common Stock, the parties hereto shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Purchaser and Merger Sub as follows: 6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of the Company and its Significant Subsidiaries (as hereinafter defined) is (i) a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and (ii) is duly licensed or qualified to do business as a foreign corporation and is in good standing under the laws of any other state of the United States in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified or to be in good standing, individually or in the aggregate, would not have a Material Adverse Effect (as hereinafter defined). Each of the Company and its Significant Subsidiaries has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, except where the failure to have such power and authority, individually or in the aggregate, would not have a Material Adverse Effect. The Company has no reason to believe that the representations and warranties contained in the preceding two sentences are not also true of its Subsidiaries. The Company has heretofore delivered to Purchaser true and correct copies of the Company's Certificate of Incorporation and Bylaws as currently in effect. 6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the requisite corporate power and authority to execute and deliver 11 this Agreement and all agreements and documents contemplated hereby or executed in connection herewith (the "ANCILLARY DOCUMENTS") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the Ancillary Documents or to consummate the transactions contemplated hereby and thereby (other than the approval of this Agreement by the holders of a majority of the shares of Common Stock if required by applicable law). This Agreement has been, and any Ancillary Document at the time of execution will have been, duly and validly executed and delivered by the Company, and (assuming this Agreement and such Ancillary Documents each constitutes a valid and binding obligation of the Purchaser and Merger Sub) constitutes and will constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 6.3. COMPLIANCE WITH LAWS. Except as set forth in the Company Reports (as hereinafter defined), each of the Company and its Subsidiaries is in compliance with all applicable foreign, federal, state or local laws, statutes, ordinances, rules, regulations, orders, judgments, rulings and decrees ("LAWS") of any foreign, federal, state or local judicial, legislative, executive, administrative or regulatory body or authority or any court, arbitration, board or tribunal ("GOVERNMENTAL ENTITY"), except where the failure to be in compliance, individually or in the aggregate, would not have a Material Adverse Effect. 6.4. CAPITALIZATION. The authorized capital stock of the Company consists of 45,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, $.01 par value, of which 830,000 shares have been designated as Series A Junior Participating Preferred Stock ("PREFERRED STOCK"). As of June 6, 1996, (a) 19,731,068 shares of Common Stock were issued and outstanding, (b) 830,000 shares of Preferred Stock were subject to Preferred Stock Purchase Rights ("RIGHTS") issued pursuant to the Company's Rights Agreement and no other shares of Preferred Stock are issued and outstanding, (c) Options to purchase an aggregate of 2,017,515 shares of Common Stock were outstanding, 2,017,515 shares of Common Stock were reserved for issuance upon the exercise of outstanding Options and 42,666 shares were reserved for future grants under the Stock Option Plans, and there are no stock appreciation rights or limited stock appreciation rights outstanding other than those attached to such Options, (d) no shares of Common Stock were held by the Company in its treasury, and (e) no shares of capital stock of the Company were held by the Company's Subsidiaries. Except for the Rights, the Company has no outstanding bonds, debentures, notes or other obligations entitling the holders thereof to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of 12 the Company on any matter. Since June 6, 1996, the Company (i) has not issued any shares of Common Stock other than upon the exercise of Options, (ii) has granted no Options to purchase shares of Common Stock under the Stock Option Plans, and (iii) has not split, combined or reclassified any of its shares of capital stock. All issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. Except for the Rights and except as set forth in this SECTION 6.4 or in SCHEDULE 6.4, there are no other shares of capital stock or voting securities of the Company, and no existing options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company or any of its Subsidiaries to issue, transfer or sell any shares of capital stock of, or equity interests in, the Company or any of its Subsidiaries. There are no outstanding obligations of the Company or any Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company and there are no performance awards outstanding under the Stock Option Plan or any other outstanding stock related awards. After the Effective Time, the Surviving Corporation will have no obligation to issue, transfer or sell any shares of capital stock of the Company or the Surviving Corporation pursuant to any Company Benefit Plan (as defined in SECTION 6.11). There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of capital stock of the Company or any of its Subsidiaries. 6.5. SUBSIDIARIES. Except as set forth in SCHEDULE 6.5, (i) the Company owns, directly or indirectly through a Subsidiary, all of the outstanding shares of capital stock (or other ownership interests having by their terms ordinary voting power to elect directors or others performing similar functions with respect to such Subsidiary) of each of the Company's Subsidiaries, and (ii) each of the outstanding shares of capital stock of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned, directly or indirectly, by the Company free and clear of all liens, pledges, security interests, claims or other encumbrances ("ENCUMBRANCES") except (in the case of Subsidiaries which are not Significant Subsidiaries for Encumbrances which individually or in the aggregate would not have a Material Adverse Effect. SCHEDULE 6.5 sets forth for each Subsidiary of the Company: (i) its name and jurisdiction of incorporation or organization; (ii) its authorized capital stock or share capital; (iii) the number of issued and outstanding shares of capital stock or share capital; (iv) the holder or holders of such shares; and (v) whether such Subsidiary is a Significant Subsidiary. Except for interests in the Company's Subsidiaries or as set forth in SCHEDULE 6.5, neither the Company nor any of its Subsidiaries owns directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or other entity. 6.6. NO VIOLATION. Except as set forth in SCHEDULE 6.6, neither the execution and delivery by the Company of this Agreement or any of the Ancillary Documents nor the consummation by the Company of the transactions 13 contemplated hereby or thereby will: (i) violate, conflict with or result in a breach of any provisions of the Certificate of Incorporation or Bylaws of the Company; (ii) violate, conflict with, result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination or in a right of termination of, accelerate the performance required by or benefit obtainable under, result in the triggering of any payment or other obligations pursuant to, result in the creation of any Encumbrance upon any of the properties of the Company or its Subsidiaries under, or result in there being declared void, voidable, or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust or any license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries or any of their respective properties is bound (each, a "CONTRACT" and collectively, "CONTRACTS"), except for any of the foregoing matters which individually or in the aggregate would not have a Material Adverse Effect; (iii) other than the filings provided for in SECTION 2.3 and the filings required under the Exchange Act and the Securities Act of 1933, as amended (the "SECURITIES ACT"), require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity, the lack of which individually or in the aggregate would have a Material Adverse Effect or by Law prevent the consummation of the transactions contemplated hereby; and (iv) violate any Laws applicable to the Company, any of its Subsidiaries or any of their respective assets, except for violations which individually or in the aggregate would not have a Material Adverse Effect or materially adversely affect the ability of the Company to consummate the transactions contemplated hereby. 6.7. COMPANY REPORTS; OFFER DOCUMENTS. (a) The Company has delivered to Purchaser each registration statement, report, proxy statement or information statement (as defined under the Exchange Act) prepared by it since January 1, 1993, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "COMPANY REPORTS"). As of their respective dates, (i) the Company Reports filed since December 31, 1994 complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations thereunder and (ii) the Company Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Each of the consolidated balance sheets of the Company included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents the consolidated financial position of the Company and its Subsidiaries as of its date, and each of the consolidated statements of income, retained earnings and cash flows of the Company included in or incorporated by 14 reference into the Company Reports (including any related notes and schedules) fairly presents the results of operations, retained earnings or cash flows, as the case may be, of the Company and its Subsidiaries for the periods set forth therein, in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein. Except as set forth in SCHEDULE 6.7, neither the Company nor any of its Subsidiaries has any liabilities or obligations, contingent or otherwise, except (i) liabilities and obligations in the respective amounts reflected or reserved against in the Company's consolidated balance sheet as of March 31, 1996 included in the Company Reports or (ii) liabilities and obligations incurred in the ordinary course of business since April 1, 1996 which individually or in the aggregate would not have a Material Adverse Effect. (b) None of the Schedule 14D-9, the information statement, if any, filed by the Company in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act (the "INFORMATION STATEMENT"), any schedule required to be filed by the Company with the SEC or any amendment or supplement thereto, at the respective times such documents are filed with the SEC or first published, sent or given to the Company's stockholders, will contain any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading except that no representation is made by the Company with respect to information supplied by the Purchaser or Merger Sub specifically for inclusion in the Schedule 14D-9 or Information Statement or any amendment or supplement. None of the information supplied or to be supplied by the Company in writing specifically for inclusion or incorporation by reference in the Offer Documents will, at the date of filing with the SEC, 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 were made, not misleading. If at any time prior to the Effective Time the Company shall obtain knowledge of any facts with respect to itself, any of its officers and directors or any of its Subsidiaries that would require the supplement or amendment to any of the foregoing documents in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or to comply with applicable Laws, such amendment or supplement shall be promptly filed with the SEC and, as required by Law, disseminated to the stockholders of the Company, and in the event Purchaser shall advise the Company as to its obtaining knowledge of any facts that would make it necessary to supplement or amend any of the foregoing documents, the Company shall promptly amend or supplement such document as required and distribute the same to its stockholders. 6.8. LITIGATION. Except as set forth in SCHEDULE 6.8 or in the Company Reports, (i) there are no claims, actions, suits, proceedings, arbitrations, investigations or audits (collectively, "LITIGATION") by a Governmental Entity pending 15 or, to the knowledge of the Company through receipt of written notice, threatened against the Company or any of its Subsidiaries, at law or in equity, other than those in the ordinary course of business which individually or in the aggregate would not have a Material Adverse Effect, and (ii) there are no claims, actions, suits, proceedings, or arbitrations by a non-Governmental Entity third party pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, at law or at equity, other than those in the ordinary course of business which individually or in the aggregate would not have a Material Adverse Effect. Except as set forth in the Company Reports, no Governmental Entity has indicated in writing an intention to conduct any audit, investigation or other review with respect to the Company or any of its Subsidiaries which investigation or review, if adversely determined, individually or in the aggregate would have a Material Adverse Effect. 6.9. ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 6.9 or in the Company Reports, since December 31, 1995, the Company and its Subsidiaries have conducted their business only in the ordinary course of such business consistent with past practices, and there has not been (i) any events or states of fact which individually or in the aggregate would have a Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock; (iii) (during the period following May 31, 1996) any repurchase, redemption or any other acquisition by the Company or its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or its Subsidiaries; (iv) any material change in accounting principles, practices or methods; (v) any entry into any employment agreement with, or any increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of compensation payable or to become payable by the Company or any of its Subsidiaries to, their respective directors, officers or employees, except increases occurring, and employment agreements entered into, which are substantially consistent with the revised 1996 budget of the Company taken as a whole previously provided to the Purchaser (the " REVISED 1996 BUDGET") (it being understood that the acquisition of employees as part of the acquisition of hospitals or other healthcare facilities is not covered by this clause (v) or clause (vi) below); or (vi) any increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of any bonus, insurance, pension or other employee benefit plan or arrangement covering any such directors, officers or employees, except increases which are consistent with the Revised 1996 Budget. 6.10. TAXES. Except as set forth in SCHEDULE 6.10, the Company and each of its Subsidiaries have timely filed all material Tax Returns required to be filed by any of them. All such Tax Returns are true, correct and complete, except for such instances which individually or in the aggregate would not have a Material Adverse Effect. All Taxes of the Company and its Subsidiaries which are (i) shown as due on such Returns, (ii) otherwise due and payable or (iii) claimed or asserted 16 by any taxing authority to be due, have been paid, except for those Taxes being contested in good faith and for which adequate reserves have been established in the financial statements included in the Company Reports in accordance with generally accepted accounting principles. The Company does not know of any proposed or threatened Tax claims or assessments which, if upheld, would individually or in the aggregate have a Material Adverse Effect. Except as set forth in SCHEDULE 6.10, the Company and each Subsidiary has withheld and paid over to the relevant taxing authority all Taxes required to have been withheld and paid in connection with payments to employees, independent contractors, creditors, stockholders or other third parties, except for such Taxes which individually or in the aggregate would not have a Material Adverse Effect. For purposes of this Agreement, (a) "TAX" (and, with correlative meaning, "TAXES") means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Entity, and (b) "TAX RETURN" means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. 6.11. EMPLOYEE BENEFIT PLANS. All employee benefit plans, compensation arrangements and other benefit arrangements covering employees of the Company or any of its Subsidiaries (the "COMPANY BENEFIT PLANS") and all employee agreements providing compensation, severance or other benefits to any employee or former employee of the Company or any of its Subsidiaries which are not disclosed in the Company Reports and which exceed $100,000 per annum are set forth in SCHEDULE 6.11. True and complete copies of the Company Benefit Plans have been made available to Purchaser. To the extent applicable, the Company Benefit Plans comply with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "CODE"), and any Company Benefit Plan intended to be qualified under Section 401(a) of the Code has received a determination letter and, to the knowledge of the Company continues to satisfy the requirements for such qualification. Neither the Company nor any of its Subsidiaries nor any ERISA Affiliate of the Company maintains, contributes to or has maintained or contributed in the past six years to any benefit plan which is covered by Title IV of ERISA or Section 412 of the Code. No Company Benefit Plan nor the Company nor any Subsidiary has incurred any liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA or, to the knowledge of the Company, engaged in any transaction that is reasonably likely to result in any such liability or penalty. Except as set forth on SCHEDULE 6.11, each Company Benefit Plan has been maintained and administered in compliance with its terms and with ERISA and the Code to the extent applicable thereto, except for such non-compliance which individually or in 17 the aggregate would not have a Material Adverse Effect. There is no pending or, to the knowledge of the Company, anticipated Litigation against or otherwise involving any of the Company Benefit Plans and no Litigation (excluding claims for benefits incurred in the ordinary course of Company Benefit Plan activities) has been brought against or with respect to any such Company Benefit Plan, except for any of the foregoing which individually or in the aggregate would not have a Material Adverse Effect. All contributions required to be made as of the date hereof to the Company Benefit Plans have been made or provided for. Except as described in the Company Reports or as required by Law, neither the Company nor any of its Subsidiaries maintains or contributes to any plan or arrangement which provides or has any liability to provide life insurance or medical or other employee welfare benefits to any employee or former employee upon his retirement or termination of employment, and neither the Company nor any of its Subsidiaries has ever represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided. Except as set forth in SCHEDULE 6.11, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any benefit plan, policy, arrangement or agreement or any trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. Except as set forth in Schedule 6.11, no payment or benefit which will or may be made by the Company, any of its Subsidiaries, any ERISA Affiliate or Purchaser or Merger Sub with respect to any employee will constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code. For purposes of this Agreement "ERISA AFFILIATE" means any business or entity which is a member of the same "controlled group of corporations," under "common control" or an "affiliated service group" with an entity within the meanings of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with the entity under Section 414(o) of the Code, or is under "common control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under any of the foregoing Sections. 6.12. LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE 6.12, neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement or other Contracts or understanding with a labor union or labor organization. Except for such matters which, individually or in the aggregate, would not have a Material Adverse Effect, there is no (i) unfair labor practice, labor dispute (other than routine individual grievances) or labor arbitration proceeding pending or, to the knowledge of the Company, threatened against the Company or its Subsidiaries relating to their business, (ii) to the knowledge of the Company, activity or proceeding by a labor union or representative thereof to organize any employees of the Company or any of its 18 Subsidiaries, or (iii) lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees. 6.13. BROKERS. Except for the Financial Advisor, Merrill Lynch & Co., no broker, finder or financial advisor is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company and (ii) the Company's fee arrangements with the Financial Advisor have been disclosed to the Purchaser. 6.14. LICENSES AND PERMITS. Except as set forth in SCHEDULE 6.14, the Company, its Subsidiaries and all of the hospitals and other healthcare facilities owned, leased or managed by the Company or any of its Subsidiaries (collectively, "HOSPITALS") have all necessary licenses, permits, certificates of need, approvals and authorizations (collectively, "PERMITS") required to lawfully conduct their respective businesses as presently conducted, except for those Permits the lack of which individually or in the aggregate would not have a Material Adverse Effect, and (a) no Permit is subject to revocation or forfeiture by virtue of any existing circumstances, (b) there is no Litigation pending or, to the knowledge of the Company, threatened to modify or revoke any Permit, and (c) no Permit is subject to any outstanding order, decree, judgment, stipulation, or, to the knowledge of the Company, investigation that would be likely to affect such Permit, where the effect of the foregoing individually or in the aggregate would have a Material Adverse Effect. Except as set forth in SCHEDULE 6.14, all of the Hospitals are accredited by the Joint Commission on Accreditation of Healthcare Organizations or the American Osteopathic Association, as indicated on such schedule. 6.15. MEDICARE PARTICIPATION/ACCREDITATION. All of the Hospitals are certified for participation or enrollment in the Medicare and Medicaid programs, have a current and valid provider contract with the Medicare and Medicaid programs, are in compliance with the conditions of participation of such programs and have received all approvals or qualifications necessary for capital reimbursement of the Company's assets, except where the failure to be in compliance individually or in the aggregate would not have a Material Adverse Effect. Except as set forth in SCHEDULE 6.15, neither the Company nor any of its Subsidiaries has received notice from any Governmental Entities or other regulatory authorities which enforce the statutory or regulatory provisions in respect of either the Medicare or the Medicaid program of any pending or threatened investigations, audits or surveys, and neither the Company nor any of its Subsidiaries has any reason to believe that any such investigations, audits or surveys are pending, threatened or imminent which, individually or in the aggregate, may have a Material Adverse Effect. 19 6.16. MEDICARE/MEDICAID COMPLIANCE. (a) Except as set forth in SCHEDULE 6.16, (a) neither the Company nor any of its Subsidiaries has filed any required terminating Medicare cost report on any facility which the Company or any of its Subsidiaries has sold or no longer operates, for which it has not received a Notice of Program Reimbursement, and (b) neither the Company nor any of its Subsidiaries has received any Notice of Program Reimbursement (or similar document for Medicaid) with respect to any such facility's cost reports, including cost reports for those facilities it has sold or no longer operates, which requires a refund to the Governmental Entity responsible for the Medicare or Medicaid program, except for such refunds which (i) have been paid, (ii) have been reflected as a liability in the consolidated balance sheet of the Company and its Subsidiaries at December 31, 1995 included in the Company Reports (the "1995 BALANCE SHEET") or (iii) individually or in the aggregate would not have a Material Adverse Effect. (b) The Company and each of its Subsidiaries have filed all other reports required to be filed in connection with all state and federal Medicare and Medicaid programs, which reports are complete and correct in all material respects. Except as set forth in SCHEDULE 6.16, there is no Litigation pending or threatened before any Governmental Entity, with respect to any Medicare or Medicaid claims filed by the Company or any of its Subsidiaries on or before the date hereof which individually or in the aggregate would have a Material Adverse Effect, and no validation review or program integrity review related to the Company or any of its Subsidiaries or any Hospitals has been conducted by any Governmental Entity in connection with the Medicare or Medicaid program, and to the knowledge of the Company, no such reviews are scheduled, pending or threatened against or affecting the Company or any of its Subsidiaries or any Hospitals. 6.17. ENVIRONMENTAL COMPLIANCE AND DISCLOSURE. (a) Except as set forth on SCHEDULE 6.17 or except for any matters which individually or in the aggregate would not have a Material Adverse Effect, (i) the Company and each of its Subsidiaries is in full compliance with all applicable Laws relating to Environmental Matters (as defined below); (ii) the Company and each of its Subsidiaries has obtained, and is in full compliance with, all Permits required by applicable Laws for the use, storage, treatment, transportation, release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the operations of any of them; (iii) to the Company's knowledge, there are no past or present events, conditions, activities or practices that would prevent compliance or continued compliance with any Law or give rise to any Environmental Liability (as defined below). (b) As used in this Agreement, the term "ENVIRONMENTAL MATTERS" means any matter arising out of or relating to pollution or protection of the environment, human safety or health, or sanitation, including matters relating to 20 emissions, discharges, releases, exposures, or threatened releases of pollutants, contaminants, or hazardous or toxic materials or wastes including petroleum and its fractions, radiation, biohazards and all toxic agents of whatever type or nature into ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants or hazardous or toxic materials or wastes including petroleum and its fractions, radiation, biohazards and all toxic agents of whatever type or nature. "ENVIRONMENTAL LIABILITY" shall mean any liability or obligation arising under any Law or under any other current theory of law or equity (including, without limitation, any liability for personal injury, property damage or remediation) that results from, or is based upon or related to, the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release, exposures or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste. 6.18. TITLE TO ASSETS. (a) Except as set forth in the 1995 Balance Sheet, the Company and each of its Subsidiaries have good and marketable title to all of their real and personal properties and assets reflected on the 1995 Balance Sheet (other than assets disposed of since December 31, 1995 in the ordinary course of business consistent with past practice) or acquired since December 31, 1995, in each case free and clear of all Encumbrances except for (i) Encumbrances which secure indebtedness which is properly reflected in the 1995 Balance Sheet; (ii) liens for Taxes accrued but not yet payable; (iii) liens arising as a matter of law in the ordinary course of business with respect to obligations incurred after the date of the 1995 Balance Sheet, provided that the obligations secured by such liens are not delinquent; and (iv) such imperfections of title and Encumbrances, if any, as individually or in the aggregate would not have a Material Adverse Effect. Except as set forth in SCHEDULE 6.18, the Company and each of its Subsidiaries either own, or have valid leasehold interests in, all properties and assets used by them in the conduct of their business except where the absence of such ownership or leasehold interest would not individually or in the aggregate have a Material Adverse Effect. (b) Except as set forth in SCHEDULE 6.18, neither the Company nor any of its Subsidiaries has any legal obligation, absolute or contingent, to any other person to sell or otherwise dispose of any interest in any of the Hospitals, or to sell or dispose of any of its other assets with an individual value of $1,000,000 or an aggregate value in excess of $5,000,000. 6.19. MATERIAL CONTRACTS. SCHEDULE 6.19 sets forth a list of all (i) Contracts for borrowed money or guarantees thereof involving a currently outstanding principal amount in excess of $1,000,000, (ii) Contracts to acquire or dispose of Hospitals, (iii) Contracts containing non-compete covenants by the Company or any Subsidiary and (iv) other Contracts (other than national supply and national purchasing Contracts for the purchase of supplies in the ordinary course of 21 business) which involve the payment or receipt of $1 million or more per year. All Contracts to which the Company or any of its Subsidiaries is a party or by which any of their respective assets is bound are valid and binding, in full force and effect and enforceable against the Company or any of its Subsidiaries, as the case may be, and to the knowledge of the Company, the other parties thereto in accordance with their respective terms, subject to applicable bankruptcy, insolvency or other similar laws relating to creditors' rights and general principles of equity, except where the failure to be so valid and binding, in full force and effect or enforceable would not individually or in the aggregate have a Material Adverse Effect. 6.20. REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger may be consummated in accordance with Section 253 of the DGCL, the only vote of the stockholders of the Company required to adopt this Agreement and approve the Merger is the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. 6.21. RIGHTS AGREEMENT. The Company has amended the Rights Agreement so that the Rights Agreement will not be applicable to this Agreement, the Offer, the announcement of the Offer, the purchase of shares of Common Stock by Parent or Merger Sub pursuant to the Offer, the Merger, or any other action contemplated hereby. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB Purchaser and Merger Sub hereby represent and warrant to the Company as follows: 7.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Purchaser and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, except where the failure to have such power and authority individually or in the aggregate would not materially adversely affect the Purchaser and Merger Sub, taken as a whole. 7.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of Purchaser and Merger Sub has the requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents and the consummation by Purchaser and Merger Sub of the transactions contemplated hereby and thereby have been duly and validly authorized by the respective Boards of Directors of 22 Purchaser and Merger Sub and by Purchaser as the sole stockholder of Merger Sub and no other corporate proceedings on the part of Purchaser or Merger Sub are necessary to authorize this Agreement and the Ancillary Documents or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and any Ancillary Documents at the time of execution will have been, duly and validly executed and delivered by Purchaser and Merger Sub, and (assuming this Agreement and such Ancillary Documents each constitutes a valid and binding obligation of the Company) constitutes and will constitute the valid and binding obligations of each of Purchaser and Merger Sub, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 7.3. OFFER DOCUMENTS. None of the Offer Documents, any schedule required to be filed by Purchaser or Merger Sub with the SEC or any amendment or supplement will contain, on the date of filing with the SEC, any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Purchaser or Merger Sub with respect to information supplied by the Company specifically for inclusion in the Offer Documents, any schedule required to be filed with the SEC or any amendment or supplement. None of the information supplied by the Purchaser or Merger Sub in writing specifically for inclusion or incorporation by reference in the Schedule 14D-9 will, at the date of filing with the SEC, 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 were made, not misleading. If at any time prior to the Effective Time either the Purchaser or Merger Sub shall obtain knowledge of any facts with respect to itself, any of its officers and directors or any of its Subsidiaries that would require the supplement or amendment to any of the foregoing documents in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or to comply with applicable Laws, such amendment or supplement shall be promptly filed with the SEC and, as required by Law, disseminated to the stockholders of the Company, and in the event the Company shall advise the Purchaser or Merger Sub as to its obtaining knowledge of any facts that would make it necessary to supplement or amend any of the foregoing documents, the Purchaser or Merger Sub shall promptly amend or supplement such document as required and distribute the same to the stockholders of the Company. 7.4. NO VIOLATION. Neither the execution and delivery of this Agreement or any of the Ancillary Documents by the Purchaser and Merger Sub nor the consummation by them of the transactions contemplated hereby or thereby will (i) violate, conflict with or result in any breach of any provision of the respective Certificates of Incorporation or By-Laws of the Purchaser or Merger Sub; (ii) other 23 than the filings provided for in SECTION 2.3 and the filings required under the Exchange Act and the Securities Act, require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity, the lack of which individually or in the aggregate would have a material adverse effect on the ability of the Purchaser or Merger Sub to consummate the transactions contemplated hereby, (iii) violate any Laws applicable to the Purchaser or the Merger Sub or any of their respective assets, except for violations which individually or in the aggregate would not have a material adverse effect on the ability of the Purchaser or Merger Sub to consummate the transactions contemplated hereby, and (iv) violate, conflict with or result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination or in a right of termination of, accelerate the performance required by or benefit obtainable under, result in the creation of any Encumbrance upon any of the properties of the Purchaser or Merger Sub under, or result in there being declared void, voidable, or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust or any license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which the Purchaser or Merger Sub is bound, except for any of the foregoing matters which would not individually or in the aggregate have a material adverse effect on the Purchaser and Merger Sub, taken as a whole. 7.5. FINANCING. At the consummation of the Offer and at the Effective Time, the Purchaser will cause the Merger Sub to have funds available to it sufficient to consummate the Offer and the Merger on the terms contemplated hereby. Affiliates of the Purchaser have, in the aggregate, committed capital of approximately $1.0 billion and the Purchaser intends to use a portion of those funds together with bank borrowings (together, the "FINANCING") in order to consummate the Offer and the Merger. The Purchaser has received from Chemical Bank and Chase Securities Inc. a commitment letter (the "COMMITMENT LETTER") confirming their commitments, subject to the terms and conditions thereof, to lend $900 million in senior debt financing. True and complete copies of the Commitment Letter have been delivered to the Company. To the extent that such bank borrowings are unavailable, the Purchaser will arrange for alternate financing for the transactions contemplated hereby. ARTICLE 8 COVENANTS 8.1. NO SOLICITATION. Neither the Company nor any of its Subsidiaries, nor any of their respective officers, directors, employees, representatives, agents or affiliates, shall, directly or indirectly, encourage, solicit, initiate or, except as is required in the exercise of the fiduciary duties of the Company's directors to the Company or its stockholders after consultation with 24 outside counsel (as hereinafter defined) to the Company, participate in any way in any discussions or negotiations with, or provide any information to, or afford any access to the properties, books or records of the Company or any of its Subsidiaries to, or otherwise assist, facilitate or encourage, any corporation, partnership, person or other entity or group (other than the Purchaser or any affiliate or associate of the Purchaser) concerning any merger, consolidation, business combination, liquidation, reorganization, sale of substantial assets, sale of shares of capital stock or similar transactions involving the Company or any Subsidiary or any division of any thereof (an "ALTERNATIVE PROPOSAL"), and shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing; provided, however, that nothing contained in this SECTION 8.1 shall prohibit the Company or its Board of Directors from complying with Rule 14e-2(a) promulgated under the Exchange Act or from making such disclosure to the Company's stockholders or from taking such action which, in the judgment of the Board of Directors with the advice of outside counsel, may be required under applicable law. The Company will promptly notify the Purchaser if any such information is requested from it or any such negotiations or discussions are sought to be initiated with the Company. 8.2. INTERIM OPERATIONS. (a) From the date of this Agreement to the Effective Time, except as set forth in SCHEDULE 8.2(a), unless Purchaser has consented in writing thereto, the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its operations according to its usual, regular and ordinary course of business consistent with past practice; (ii) use its reasonable best efforts to preserve intact their business organizations and goodwill, maintain in effect all existing qualifications, licenses, permits, approvals and other authorizations referred to in SECTIONS 6.1 and 6.14, keep available the services of their officers and employees and maintain satisfactory relationships with those persons having business relationships with them; (iii) promptly upon the discovery thereof notify Purchaser of the existence of any breach of any representation or warranty contained herein (or, in the case of any representation or warranty that makes no reference to Material Adverse Effect, any breach of such representation or warranty in any material respect) or the occurrence of any event that would cause any representation or warranty contained herein no longer to be true and correct (or, in the case of any representation or warranty that makes no reference to Material Adverse Effect, to no longer be true and correct in any material respect); and (iv) promptly deliver to Purchaser true and correct copies of any report, statement or schedule filed with the SEC subsequent to the date of this Agreement, any internal monthly reports prepared for or delivered to the Board of Directors after the date hereof and monthly financial statements for the Company and its Subsidiaries for and as of each month end subsequent to the date of this Agreement. 25 (b) From and after the date of this Agreement to the Effective Time, except as set forth on SCHEDULE 8.2(b), unless Purchaser has consented in writing thereto, the Company shall not, and shall not permit any of its Subsidiaries to, (i) amend its Certificate of Incorporation or Bylaws or comparable governing instruments; (ii) issue, sell or pledge any shares of its capital stock or other ownership interest in the Company (other than issuances of Common Stock in respect of any exercise of Options outstanding on the date hereof and disclosed in SCHEDULE 6.4) or any of the Subsidiaries, or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire or with respect to any such shares of capital stock, ownership interest, or convertible or exchangeable securities; or accelerate any right to convert or exchange or acquire any securities of the Company or any of its Subsidiaries for any such shares or ownership interest; (iii) effect any stock split or otherwise change its capitalization as it exists on the date hereof; (iv) grant, confer or award any option, warrant, convertible security or other right to acquire any shares of its capital stock or take any action to cause to be exercisable any otherwise unexercisable option under any existing stock option plan; (v) declare, set aside or pay any dividend or make any other distribution or payment with respect to any shares of its capital stock or other ownership interests (other than such payments by a wholly-owned Subsidiary); (vi) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital stock or capital stock of any of its Subsidiaries; (vii) sell, lease or otherwise dispose of any of its assets (including capital stock of Subsidiaries), except in the ordinary course of business, none of which dispositions individually or in the aggregate will be material; (viii) settle or compromise any pending or threatened Litigation, other than settlements which involve solely the payment of money (without admission of liability) not to exceed $500,000 in any one case; (ix) acquire by merger, purchase or any other manner, any business or entity or otherwise acquire any assets that are material, individually or in the aggregate, to the Company and its Subsidiaries taken as a whole, except for purchases of inventory, supplies or capital equipment in the ordinary course of business consistent with past practice; (x) incur or assume any long-term or short-term debt, except for working capital purposes in the ordinary course of business under the Company's existing credit agreement set forth in SCHEDULE 6.19; (xi) assume, guarantee or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except wholly owned Subsidiaries of the Company; (xii) make or forgive any loans, advances or capital continuations to, or investments in, any other person other than loans and advances to employees in the ordinary course of business which do not exceed $500,000 in the aggregate at any one time outstanding; (xiii) make any Tax election or settle any Tax liability other than settlements involving solely the payment of money, which settlement would be permitted by clause (viii); (xiv) grant any stock related or performance awards except for grants which are substantially consistent with the Revised 1996 Budget; (xv) enter into any new employment, severance, consulting or salary continuation agreements with any officers, directors or employees or grant any increases in compensation or benefits to employees 26 other than increases which are substantially consistent with the Revised 1996 Budget (it being understood that the acquisition of employees as part of the acquisition of hospitals or other healthcare facilities is not covered by this clause (xv)); (xvi) adopt, amend in any material respect or terminate any employee benefit plan or arrangement; (xvii) amend, change or waive (or exempt any person or entity from the effect of) the Rights Agreement, except in connection with the exercise of its fiduciary duties by the Board of Directors as set forth in SECTION 8.1 of this Agreement or as contemplated by SECTION 6.23; (xviii) permit any insurance policy naming the Company or any Subsidiary as a beneficiary or a loss payee to be cancelled or terminated other than in the ordinary course of business; and (xix) agree in writing or otherwise to take any of the foregoing actions. 8.3. COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT. (a) If approval or action in respect of the Merger by the stockholders of the Company is required by applicable law, the Company, acting through the Board of Directors, shall (i) call a meeting of its stockholders (the "STOCKHOLDERS MEETING") for the purpose of voting upon the Merger, (ii) hold the Stockholder Meeting as soon as practicable following the purchase of shares of Common Stock pursuant to the Offer, and (iii) subject to its fiduciary duties under applicable law as advised by outside counsel, recommend to its stockholders the approval of the Merger. The record date for the Stockholders Meeting shall be a date subsequent to the date Purchaser or Merger Sub becomes a record holder of Common Stock purchased pursuant to the Offer. (b) If required by applicable law, the Company will, as soon as practicable following the expiration of the Offer, prepare and file a preliminary Proxy Statement (such proxy statement, and any amendments or supplements thereto, the "PROXY STATEMENT") or, if applicable, an Information Statement with the SEC with respect to the Stockholders Meeting and will use its best efforts to respond to any comments of the SEC or its staff and to cause the Proxy Statement to be cleared by the SEC. The Company will notify Purchaser of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Purchaser with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. The Company shall give Purchaser and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Purchaser and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company and Purchaser agrees to use its best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC. As promptly as practicable after the Proxy Statement has been cleared by the SEC, the Company 27 shall mail the Proxy Statement to the stockholders of the Company. If at any time prior to the approval of this Agreement by the Company's stockholders there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company will prepare and mail to its stockholders such an amendment or supplement. (c) The Company represents and warrants that the Proxy Statement will comply as to form in all material respects with the Exchange Act and, at the respective times filed with the SEC and distributed to stockholders of the Company, will 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 the light of the circumstances under which they were made, not misleading; provided, that the Company makes no representation or warranty as to any information included in the Proxy Statement which was provided by Purchaser or Merger Sub. The Purchaser represents and warrants that none of the information supplied by Purchaser or Merger Sub for inclusion in the Proxy Statement will, at the respective times filed with the SEC and distributed to stockholders of the Company, 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 the light of the circumstances under which they were made, not misleading. (d) The Company shall use its best efforts to obtain the necessary approvals by its stockholders of the Merger, this Agreement and the transactions contemplated hereby. (e) Purchaser agrees, subject to applicable law, to cause all shares of Common Stock purchased by Merger Sub pursuant to the Offer and all other shares of Common Stock owned by Purchaser, Merger Sub or any other subsidiary or affiliate of Purchaser to be voted in favor of the approval of the Merger. (f) Notwithstanding anything in this Agreement to the contrary, Purchaser and Merger Sub, in their sole discretion, shall have the right to defer the closing of the Merger for a period of 135 days following the consummation of the Offer if, in Purchaser's and Merger Sub's sole judgment, such deferral is necessary in order to enable the Company to effect a covenant defeasance under the indenture (the "INDENTURE") related to the Company's 10 1/4% Senior Subordinated Debentures due 2003 (the "DEBENTURES"). 8.4. FILINGS; OTHER ACTION. (a) Subject to the terms and conditions herein provided, the Company, Purchaser, and Merger Sub shall: (a) use their best efforts to cooperate with one another in (i) determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits, authorizations or 28 waivers are required to be obtained prior to the Effective Time from, Governmental Entities or other third parties in connection with the execution and delivery of this Agreement and any other Ancillary Documents and the consummation of the transactions contemplated hereby and thereby and (ii) timely making all such filings and timely seeking all such consents, approvals, permits, authorizations and waivers; and (b) use their best efforts to take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions contemplated by this Agreement. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purpose of this Agreement, the proper officers and directors of Purchaser and the Surviving Corporation shall take all such necessary action. (b) Concurrently with the commencement of the Offer, the Company shall commence (i) an offer (the "DEBENTURE OFFER") to purchase all of the outstanding Debentures, and (ii) a solicitation as part of the Debenture Offer (the "SOLICITATION") of consents to amendments to the Indenture from the holders of not less than a majority in aggregate principal amount of the Debentures outstanding (the consents from such holders, the "REQUISITE CONSENTS"). The Debenture Offer and Solicitation (including the amendments) shall be on terms determined by Purchaser, provided that the Company shall not be required to purchase the Debentures pursuant to the Debenture Offer, and the proposed amendments, if approved, shall not become operative, unless (i) Purchaser has consummated the Offer and (ii) the Company has received the proceeds of financing arranged by Purchaser in an amount sufficient to (a) consummate the Debenture Offer and pay all fees and expenses associated therewith, and (b) refinance any indebtedness of the Company coming due by reason of the Debenture Offer and Solicitation and consummation thereof. The Company agrees that promptly following the date the Requisite Consents are obtained it will execute a supplemental indenture containing the proposed amendments that by their terms shall become operative only upon consummation of the Offer and the Debenture Offer. 8.5. ACCESS TO INFORMATION. (a) From the date of this Agreement to the Closing, the Company shall, and shall cause its Subsidiaries to, (i) give Purchaser and its authorized representatives and lender banks full access to all books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and their accountants and accountants' work papers, (ii) permit Purchaser to make such copies and inspections thereof as Purchaser may reasonably request and (iii) furnish Purchaser with such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as Purchaser may from time to time reasonably request; provided that no investigation or information furnished pursuant to this SECTION 8.5 shall affect any representations or warranties made by the Company herein or the conditions to the obligations of the Purchaser to consummate the transactions contemplated hereby. 29 (b) All such information and access shall be subject to the provisions of the letter agreement between an affiliate of Purchaser and the Company (the "CONFIDENTIALITY AGREEMENT") relating to the confidential treatment of "Proprietary Information" (as defined therein). 8.6. PUBLICITY. The initial press release relating to this Agreement shall be a joint press release and thereafter the Company and Purchaser shall, subject to their respective legal obligations, consult with each other before issuing any such press release or otherwise making public statements with respect to the transactions contemplated hereby and in making any filings with any Governmental Entity or with any national securities exchange with respect thereto. 8.7. FURTHER ACTION. Each party hereto shall, subject to the fulfillment at or before the Effective Time of each of the conditions of performance set forth herein or the waiver thereof, perform such further acts and execute such documents as may be reasonably required to effect the Merger. 8.8. INSURANCE; INDEMNITY. (a) The Purchaser will cause the Surviving Corporation to purchase a three-year pre-paid noncancellable directors and officers insurance policy expiring not earlier than October 7, 1999, covering the current and all former directors and officers with respect to acts or failures to act prior to the Effective Time, in a single aggregate amount over the period expiring not earlier than October 7, 1999 equal to the policy limit for the Company's current directors and officers insurance policy (the "CURRENT POLICY"). If such insurance is not obtainable at a cost not in excess of the annual premium paid by the Company for the Current Policy (the "CAP") times 3.25, then the Purchaser will cause the Surviving Corporation to purchase policies providing at least the same coverage as the Current Policy and containing terms and conditions no less advantageous to the current and former directors and officers of the Company than the Current Policy with respect to acts or failures to act prior to the Effective Time; provided, however, that the Purchaser and the Surviving Corporation shall not be required to obtain policies providing such coverage except to the extent that such coverage can be provided at an annual cost of no greater than the Cap; and if equivalent coverage cannot be obtained, or can be obtained only by paying an annual premium in excess of the Cap, the Purchaser or the Surviving Corporation shall only be required to obtain as much coverage as can be obtained by paying an annual premium equal to the Cap. (b) The Purchaser shall cause the Surviving Corporation to keep in effect in its By-Laws a provision for a period of not less than three years from the Effective Time (or, in the case of matters occurring prior to the Effective Time which have not been resolved prior to the third anniversary of the Effective Time, 30 until such matters are finally resolved) which provides for indemnification of the past and present officers and directors of the Company to the fullest extent permitted by the DGCL. (c) From and after the Effective Time, the Purchaser shall indemnify and hold harmless, to the fullest extent permitted under applicable law, each person who is, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, an officer or director of the Company or any Subsidiary against all losses, claims, damages, liabilities, costs or expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement (collectively, "LOSSES") in connection with any Litigation arising out of or pertaining to acts or omissions, or alleged acts or omissions, by them in their capacities as such, which acts or omissions existed or occurred at or prior to the Effective Time, whether commenced, asserted or claimed before or after the Effective Time, including, without limitation, liabilities arising under the Securities Act, the Exchange Act and state corporation laws in connection with the transactions contemplated hereby. Without limiting the foregoing, the Company and after the Effective Time the Purchaser shall periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. (d) If the Merger shall have been consummated, the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless the Purchaser and any person or entity who was a stockholder, officer, director or affiliate of Purchaser prior to the Effective Time against any Losses in connection with any Litigation arising out of or pertaining to any of the transactions contemplated by this Agreement or the Ancillary Documents. The Purchaser shall periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. (e) If any Litigation described in paragraph (c) or (d) of this SECTION 8.8 (each, an "ACTION") arises or occurs, the Surviving Corporation shall control the defense of such Action through its counsel, but counsel for the party seeking indemnification pursuant to paragraph (c) or (d) of this SECTION 8.8 (each, an "INDEMNIFIED PARTY") shall be selected by the Indemnified Party, which counsel shall be reasonably acceptable to the Surviving Corporation, and the Indemnified Parties shall be permitted to participate in the defense of such Action through such counsel at the Corporation's expense. If there is any conflict between the Surviving Corporation and any Indemnified Parties or there are additional defenses available to any Indemnified Parties, the Indemnified Parties shall be permitted to 31 participate in the defense of such Action with counsel selected by the Indemnified Parties, which counsel shall be reasonably acceptable to the Surviving Corporation; provided that the Surviving Corporation shall not be obligated to pay the reasonable fees and expenses of more than one counsel for all Indemnified Parties in any single Action except to the extent that, in the opinion of counsel for the Indemnified Parties, two or more of such Indemnified Parties have conflicting interests in the outcome of such Action. The Surviving Corporation shall not be liable for any settlement effected without its written consent, which consent shall not unreasonably be withheld. The Purchaser shall cause the Surviving Corporation to cooperate in the defense of any Action. (f) This Section 8.8 is intended to benefit each of the persons referred to herein and shall be binding on all successors and assigns of the Company and the Purchaser. 8.9. RESTRUCTURING OF MERGER. Upon the mutual agreement of Purchaser and the Company, the Merger shall be restructured in the form of a forward subsidiary merger of the Company into Merger Sub, with Merger Sub being the surviving corporation, or as a merger of the Company into Purchaser, with Purchaser being the surviving corporation. In such event, this Agreement shall be deemed appropriately modified to reflect such form of merger. 8.10. EMPLOYEE BENEFIT PLANS. (a) From and after the Effective Time, the Surviving Corporation and their respective subsidiaries will honor and assume, and Purchaser will cause the Surviving Corporation to honor and assume, in accordance with their terms, all existing employment and severance agreements between the Company or any of its Subsidiaries and any officer, director, or employee of the Company or any of its Subsidiaries and all benefits or other amounts earned or accrued to the extent vested or which becomes vested in the ordinary course, through the Effective Time under all employee benefit plans of the Company and any of its Subsidiaries. (b) The Purchaser confirms that it is the Purchaser's intention that, until the first anniversary of the Effective Time, the Surviving Corporation and its Subsidiaries will provide benefits to their employees (excluding employees covered by collective bargaining agreements, if any) which benefits will, in the aggregate, be substantially equivalent to those currently provided by the Company and its Subsidiaries to such employees (other than pursuant to stock option, stock purchase or other stock based plans). The Purchaser intends that, after the first anniversary of the Effective Time, the Surviving Corporation and its Subsidiaries will provide benefits to their employees (excluding employees covered by collective bargaining agreements, if any) which benefits are appropriate in the judgment of the Surviving Corporation, taking into account all relevant factors, including, without 32 limitation, the businesses in which the Surviving Corporation and its Subsidiaries are engaged. 8.11. NO LIABILITY FOR FAILURE TO OBTAIN CONSENT OF LENDERS. The Purchaser and Merger Sub hereby agree that neither the Company nor any of its Affiliates (as defined below) will incur any liability to Purchaser or Merger Sub if the transactions contemplated hereby are not consummated because of the failure or inability to obtain any consent, approval or waiver under the terms of the Amended and Restated Credit Agreements, dated as of May 12, 1995, by and among the Company, certain Subsidiaries, the lenders named therein, NationsBank of Tennessee, N.A., as Administrative Agent, and First Union National Bank of North Carolina, as Co-Agent and Issuing Bank. As used in this Section 8.11, the term "Affiliates" shall mean any person directly or indirectly controlling the Company (including all directors, officers and employees), directly or indirectly controlled by or under direct or indirect common control with the Company. ARTICLE 9 CONDITIONS 9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligation of each party to effect the Merger shall be subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) If approval of this Agreement and the Merger by the holders of Common Stock is required by applicable law, this Agreement and the Merger shall have been approved by the requisite vote of such holders. (b) There shall not have been issued any injunction or issued or enacted any Law which prohibits or has the effect of prohibiting the consummation of the Merger or makes such consummation illegal. 9.2. CONDITIONS TO OBLIGATION OF PURCHASER AND MERGER SUB TO EFFECT THE MERGER. The obligations of Purchaser and Merger Sub to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that Purchaser shall have accepted for payment and paid for shares of Common Stock tendered pursuant to the Offer; provided that this condition shall be deemed satisfied if the Purchaser's failure to accept for payment and pay for such shares breaches this Agreement or violates the terms and conditions of the Offer. 33 ARTICLE 10 TERMINATION; AMENDMENT; WAIVER 10.1. TERMINATION. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company, but prior to the Effective Time: (a) by mutual written consent of the Board of Directors of the Company (subject to SECTION 1.4) and the Purchaser; (b) by the Purchaser or the Company: (i) if the Effective Time shall not have occurred on or before December 31, 1996 (provided that the right to terminate this Agreement pursuant to this clause (i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Effective Time to occur on or before such date); (ii) if there shall be any statute, law, rule or regulation that makes consummation of the Offer or the Merger illegal or prohibited or if any court of competent jurisdiction in the United States or other Governmental Entity shall have issued an order, judgment, decree or ruling, or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, judgment, decree, ruling or other action shall have become final and non-appealable; (iii) after October 31, 1996 if, on account of the failure of any condition specified in EXHIBIT A, the Merger Sub has not purchased any shares of Common Stock in the Offer by that date (provided that the right to terminate this Agreement pursuant to this clause (iii) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of any such condition); or (iv) upon a vote at a duly held meeting or upon any adjournment thereof, the stockholders of the Company shall have failed to give any approval required by applicable law; (c) by the Company if there is an Alternative Proposal which the Board of Directors in good faith determines is more favorable from a financial point of view to the stockholders of the Company as compared to the Offer and the Merger, and the Board of Directors determines, after consultation with Skadden, Arps, Slate, Meagher & Flom ("OUTSIDE COUNSEL"), that failure to terminate this Agreement would be inconsistent with the compliance by the Board of Directors 34 with its fiduciary duties to stockholders imposed by law; provided, however, that the right to terminate this Agreement pursuant to this SECTION 10.1(c) shall not be available (i) if the Company has breached in any material respect its obligations under SECTION 8.1, or (ii) if the Alternative Proposal (x) is subject to a financing condition or (y) involves consideration that is not entirely cash or does not permit stockholders to receive the payment of the offered consideration in respect of all shares at the same time, unless the Board of Directors has been furnished with a written opinion of the Financial Advisor or other nationally recognized investment banking firm to the effect that (in the case of clause (x)) the Alternative Proposal is readily financeable and (in the case of clause (y)) that such offer provides a higher value per share than the consideration per share pursuant to the Offer or the Merger, or (iii) if, prior to or concurrently with any purported termination pursuant to this SECTION 10.1(c), the Company shall not have paid the fees and expenses contemplated by SECTION 11.5, or (iv) if the Company has not provided Purchaser and Merger Sub with prior written notice of its intent to so terminate this Agreement and delivered to the Purchaser and Merger Sub a copy of the written agreement embodying the Alternative Proposal in its then most definitive form concurrently with the earlier of (x) the public announcement of, or (y) filing with the SEC of any documents relating to, the Alternative Proposal; and (d) by the Purchaser if the Board of Directors shall have failed to recommend, or shall have withdrawn, modified or amended in any material respect, its approval or recommendation of the Offer or the Merger, or shall have recommended acceptance of any Alternative Proposal, or shall have resolved to do any of the foregoing. 10.2. EFFECT OF TERMINATION. If this Agreement is terminated and the Merger is abandoned pursuant to SECTION 10.1 hereof, this Agreement, except for the provisions of SECTIONS 1.3(c), 8.5(b), 8.6 and ARTICLE 11, shall terminate, without any liability on the part of any party or its directors, officers or stockholders. Nothing herein shall relieve any party to this Agreement of liability for breach of this Agreement or prejudice the ability of the non-breaching party to seek damages from any other party for any breach of this Agreement, including without limitation, attorneys' fees and the right to pursue any remedy at law or in equity. 10.3. AMENDMENT. To the extent permitted by applicable law, this Agreement may be amended by action taken by or on behalf of the Board of Directors of the Company (subject to SECTION 1.4) and the Purchaser at any time before or after adoption of this Agreement by the stockholders of the Company but, after any such stockholder approval, no amendment shall be made which decreases the Merger Consideration or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all of the parties. 35 10.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the Board of Directors of the Company (subject to SECTION 1.4) and the Purchaser, 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 by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE 11 GENERAL PROVISIONS 11.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. 11.2. NOTICES. Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission (with a confirmatory copy sent by overnight courier), by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows: If to Purchaser or Merger Sub: If to the Company: FLCH Holdings Corp. Community Health Systems, Inc. FLCH Acquisition Corp. 155 Franklin Road c/o Forstmann Little & Co. Suite 400 767 Fifth Avenue Brentwood, TN 37027-4600 New York, NY 10153 Attn: Chairman of the Board and Attn: Ms. Sandra Horbach Chairman of the Special Facsimile: (212) 759-9059 Committee Facsimile: (615) 377-1172 36 With a copy to: With a copy to: Stephen Fraidin, P.C. J. Michael Schell, Esq. Fried, Frank, Harris, Skadden, Arps, Slate, Meagher Shriver & Jacobson & Flom One New York Plaza 919 Third Avenue New York, New York 10004 New York, New York 10022 Facsimile: (212) 859-4000 Facsimile: (212) 735-2000 or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or mailed. 11.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties; provided, however, that either Purchaser or Merger Sub (or both) may assign its rights hereunder (including without limitation the right to make the Offer and/or to purchase shares of Common Stock in the Offer) to an affiliate but nothing shall relieve the assignor from its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of SECTION 8.8, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective heirs, successors, executors, administrators and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 11.4. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement, the Schedules, the Exhibits, the Ancillary Documents and any other documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. 11.5. FEES AND EXPENSES. (a) Except as provided in SECTION 11.5(b), whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. (b)(1) To compensate Forstmann Little & Co. and its affiliates for incurring the costs and expenses related to the transactions contemplated hereby 37 and the forgoing by Forstmann Little & Co. or its affiliates of the opportunity with respect to their investment in Purchaser in connection herewith, the Company agrees that it shall pay to Forstmann Little & Co. and its affiliates, in such manner as is designated by Forstmann Little & Co., an aggregate amount equal to $45,000,000 (the "COMMITMENT AMOUNT") if this Agreement is terminated (i) by the Company pursuant to SECTION 10.1(c); (ii) by the Purchaser (x) pursuant to SECTION 10.1(d) (unless the event described therein occurs solely as a result of the Purchaser's willful breach in any material respect of its representations, warranties or obligations contained herein) or (y) pursuant to SECTION 10.1(b)(iii) because of the failure of the condition set forth in paragraph (d) of EXHIBIT A as a result of the Company's willful breach or willful failure to comply in any material respect with any of its material obligations under this Agreement; or (iii) pursuant to SECTION 10.1(b)(iii) at a time when the Minimum Condition shall not have been satisfied and, either (x) during the term of this Agreement or within 12 months after the termination of this Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a majority of the outstanding shares of Common Stock is acquired by a third party (including a "group" as defined in the Exchange Act) (a "STOCK ACQUISITION") which Alternative Proposal (or another Alternative Proposal by the same or a related person or entity) was made prior to the termination of this Agreement, or (y) during the term of this Agreement or within two months after the termination of this Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a Stock Acquisition occurs. The Commitment Amount shall be payable (x) at the time of termination if such Amount becomes payable pursuant to clause (i) above, (y) on the next business day following termination if such Amount becomes payable pursuant to clause (ii) above, and (z) on the next business day following the earliest of the recommendation of an Alternative Proposal, the entering into of an agreement providing for an Alternative Proposal or the occurrence of an Alternative Proposal, if such Amount becomes payable pursuant to clause (iii) above. (2) The Company shall reimburse the Purchaser and its affiliates for the documented reasonable out-of-pocket expenses of the Purchaser and its affiliates, but not in excess of $15,000,000 in the aggregate, incurred in connection with or arising out of the Offer, the Merger, this Agreement and the Ancillary Documents and the transactions contemplated hereby (including, without limitation, amounts paid or payable to banks and investment bankers, fees and expenses of counsel, accountants and consultants, and printing expenses), regardless of when those expenses are incurred, if this Agreement is terminated (i) by the Company pursuant to SECTION 10.1(c); (ii) by the Purchaser (x) pursuant to SECTION 10.1(d) (unless the event described therein occurs solely as a result of the Purchaser's willful breach in any material respect of its representations, warranties or obligations contained herein) or (y) pursuant to SECTION 10.1(b)(iii) 38 because of the failure of the condition set forth in paragraph (d) of EXHIBIT A, or (iii) pursuant to SECTION 10.1(b)(iii) at a time when the Minimum Condition shall not have been satisfied and, either (x) during the term of this Agreement or within 12 months after the termination of this Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a Stock Acquisition occurs which Alternative Proposal (or another Alternative Proposal by the same or a related person or entity) was made prior to the termination of this Agreement, or (y) during the term of this Agreement or within two months after the termination of this Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a Stock Acquisition occurs. No amounts in reimbursement of expenses shall be payable pursuant to this paragraph (2) if the Commitment Amount has been paid. If the Company shall have reimbursed the Purchaser for expenses incurred by the Purchaser and its affiliates pursuant to this paragraph (2) and thereafter the Commitment Amount shall become payable pursuant to paragraph (1) of this Section 11.5(b), then the Commitment Amount shall be reduced by the amount of any reimbursed expenses. (3) The Company acknowledges that the agreements contained in this SECTION 11.5(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the Purchaser would not enter into this Agreement. Accordingly, if the Company fails to promptly pay any amounts owing pursuant to this SECTION 11.5(b) when due, the Company shall in addition thereto pay to the Purchaser and its affiliates all costs and expenses (including fees and disbursements of counsel) incurred in collecting such amounts, together with interest on such amounts (or any unpaid portion thereof) from the date such payment was required to be made until the date such payment is received by the Purchaser at the prime rate of Chemical Bank as in effect from time to time during such period; provided, however, that no costs, expenses, or interest shall be paid in respect of any payment owing under clause (y) of SECTION 11.5(b)(1)(ii). If the Company shall fail to pay the Commitment Amount when due, and the Purchaser shall notify the Company of such failure to pay, the Purchaser agrees that it will include in its notice to the Company a statement as to which clause of Section 11.5(b)(1) the Purchaser believes entitles it to payment. 11.6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws. Each of the Company, Purchaser and Merger Sub hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America located in the State of Delaware (the "DELAWARE COURTS") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the 39 Delaware Courts and agrees not to plead or claim in any Delaware Court that such litigation brought therein has been brought in an inconvenient forum. 11.7. HEADINGS. Headings of the Articles and Sections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever. 11.8. INTERPRETATION. In this Agreement, unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, and words denoting any gender shall include all genders and words denoting natural persons shall include corporations and partnerships and vice versa. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." As used in this Agreement, "Subsidiary" shall mean, when used with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which such party directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization. "Significant Subsidiaries" shall refer to Subsidiaries (as defined above) which constitute "significant subsidiaries" under Rule 12b-2 under the Exchange Act. As used in this Agreement, "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, results of operations, assets or financial condition of the Company and its Subsidiaries taken as a whole. 11.9. INVESTIGATIONS. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. 11.10. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 11.11. ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce 40 specifically the terms and provisions hereof in any Delaware Court, this being in addition to any other remedy to which they are entitled at law or in equity. 11.12. COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the parties hereto. 41 IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same to be duly delivered on their behalf on the day and year first written above. COMMUNITY HEALTH SYSTEMS, INC. By: -------------------------------------- Name: Title: FLCH HOLDINGS CORP. By: -------------------------------------- Name: Title: FLCH ACQUISITION CORP. By: -------------------------------------- Name: Title: 42 EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer, Merger Sub shall not be required to accept for payment or pay for, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) of the Exchange Act, any shares of Common Stock not theretofore accepted for payment or paid for and may terminate or amend the Offer as to such shares of Common Stock unless there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Common Stock which would represent at least a majority of the outstanding shares of Common Stock on a fully diluted basis (the "MINIMUM CONDITION"). Furthermore, notwithstanding any other term of the Offer or this Agreement, Merger Sub shall not be required to accept for payment or, subject as aforesaid, to pay for any shares of Common Stock not theretofore accepted for payment or paid for, and may terminate or amend the Offer if at any time on or after the date of this Agreement and before the acceptance of such shares of Common Stock for payment or the payment therefor, any of the following conditions exist or shall occur and remain in effect: (a) there shall have been instituted or pending any litigation by the Government of the United States of America or any agency or instrumentality thereof (i) which seeks to challenge the acquisition by Purchaser or Merger Sub (or any of its affiliates) of shares of Common Stock pursuant to the Offer or restrain, prohibit or delay the making or consummation of the Offer or the Merger, (ii) which seeks to make the purchase of or payment for some or all of the shares of Common Stock pursuant to the Offer or the Merger illegal, (iii) which seeks to impose limitations on the ability of Purchaser or Merger Sub (or any of their affiliates) effectively to acquire or hold, or to require the Purchaser, Merger Sub or the Company or any of their respective affiliates or subsidiaries to dispose of or hold separate, any material portion of their assets or business, (iv) which seeks to impose limitations on the ability of Purchaser, Merger Sub or their affiliates to exercise full rights of ownership of the shares of Common Stock purchased by it, including, without limitation, the right to vote the shares purchased by it on all matters properly presented to the stockholders of the Company, or (v) which seeks to limit or prohibit any future business activity by Purchaser, Merger Sub or any of their affiliates, including, without limitation, requiring the prior consent of any person or entity (including the Government of the United States of America or any agency or instrumentality thereof) to future transactions by Purchaser, Merger Sub or any of their affiliates; or A-1 (b) there shall have been promulgated, enacted, entered, enforced or deemed applicable to the Offer or the Merger, by any Governmental Entity, any Law or there shall have been issued any injunction that results in any of the consequences referred to in subsection (a) above; or (c) this Agreement shall have been terminated in accordance with its terms; or (d) (i) any of the representations and warranties made by the Company in this Agreement shall not have been true and correct in all material respects when made, or shall thereafter have ceased to be true and correct in all material respects as if made as of such later date (other than representations and warranties made as of a specified date) or (ii) the Company shall have breached or failed to comply in any material respect with any of its obligations under this Agreement; or (e) any corporation, entity, "group" or "person" (as defined in the Exchange Act), other than Purchaser or Merger Sub, shall have acquired beneficial ownership of more than 49% of the outstanding shares of Common Stock; or (f) except as set forth in the Company Reports or the Schedules to the Agreement, any change shall have occurred or be threatened which individually or in the aggregate has had or is continuing to have a material adverse effect on the prospects of the Company and its Subsidiaries, taken as a whole; or (g) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over the counter market in the United States, (ii) a declaration of any banking moratorium by federal or state authorities or any suspension of payments in respect of banks or any limitation (whether or not mandatory) imposed by federal or state authorities on the extension of credit by lending institutions in the United States, (iii) a commencement of a war, armed hostilities or any other international or national calamity directly or indirectly involving the United States, other than any war, armed hostilities or other international calamity involving the former Yugoslavia, (iv) any mandatory limitation by the federal government on the extension of credit by banks or other financial institutions generally, (v) any increase of 500 or more basis points in the prime rate as announced by Chemical Bank, measured from the date of this Agreement, or (vi) in the case of the foregoing clause (iii), if existing at the time of the commencement of the Offer, in the reasonable judgment of the Purchaser, a material acceleration or worsening thereof. A-2 The foregoing conditions are for the sole benefit of Purchaser and Merger Sub and may be asserted by Purchaser or Merger Sub regardless of the circumstances (including any action or inaction by the Purchaser or the Company) giving rise to any such condition and may be waived by Purchaser or Merger Sub, in whole or in part, at any time and from time to time, in the sole discretion of Purchaser. The failure by Purchaser or Merger Sub at any time to exercise any of the foregoing rights will not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right will be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered shares of Common Stock not theretofore accepted for payment shall forthwith be returned by the depositary to the tendering stockholders. A-3 -----END PRIVACY-ENHANCED MESSAGE-----