ITEM 8.01 Other Events
Contingent Value Rights
As previously disclosed, on September 25, 2018, Community Health Systems, Inc. (the “Company”) announced a global resolution and settlement agreements ending certain U.S. Department of Justice investigations and settling qui tam lawsuits that were initiated and pending, and known to the Company, before the Company’s acquisition of HMA, under which resolution the Company made a total payment of $266 million (including interest) during the fourth quarter of 2018. Based on the total costs incurred and settlements paid (including with respect to this global settlement), the Company anticipates that no payment will be due to the holders of the contingent value rights (“CVRs”) that were issued to shareholders of Health Management Associates, Inc. (“HMA”) as part of the consideration in the Company’s acquisition by merger of HMA in January 2014 and trade on the Nasdaq Global Market under the ticker symbol CYHHZ.
The Contingent Value Rights Agreement, dated January 27, 2014, by and between the Company and American Stock Transfer & Trust Company, LLC, as trustee (the “CVR Agreement”), entitled the holder to receive aone-time cash payment of up to $1.00 per CVR, subject to downward adjustment (but not below zero) based on the final resolution of certain litigation, investigations, or other actions or proceedings (the “HMA Legal Matters”) related to HMA or its affiliates which existed on or prior to July 29, 2013 (the date of the Company’s merger agreement with HMA). The adjustment reducing the amount ultimately paid to holders of the CVRs is determined based on the amount of losses incurred by the Company in connection with the HMA Legal Matters as more specifically provided in the CVR Agreement, which generally includes the amount paid for damages, costs, fees and expenses (including, without limitation, attorneys’ fees and expenses), and all fines, penalties, settlement amounts, indemnification obligations and other liabilities.
On December 5, 2018, The Nasdaq Stock Market LLC (“Nasdaq”) provided a notice to the Company confirming that the CVRs no longer satisfy Nasdaq Listing Rule 5730(b) because the aggregate market value or principal amount of the CVRs no longer exceeds $1,000,000, which is consistent with the Company’s prior disclosure that it anticipates no payment will be due to the CVR holders. This notice from Nasdaq does not relate to the Company’s common stock, which is traded separately on the New York Stock Exchange under the ticker symbol CYH. The Company expects to deliver a certificate to the trustee in accordance with the terms of the CVR Agreement within 30 days confirming that no amounts will be payable under the CVRs, at which time the CVR Agreement will terminate. Thereafter, the CVRs will be removed from listing with Nasdaq and deregistered with the Securities and Exchange Commission.
Forward-Looking Statements
This Current Report on Form8-K includes forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
