FILED PURSUANT TO RULE 424(b)(3)
FILE NUMBER 333-73730
PROSPECTUS
[GRAPHIC OMITTED]
OFFER TO EXCHANGE UP TO $200,000,000 AGGREGATE PRINCIPAL AMOUNT OF OUR
7 3/8% SENIOR NOTES DUE 2006 AND UP TO $400,000,000 AGGREGATE
PRINCIPAL AMOUNT OF OUR 8 3/8% SENIOR NOTES DUE 2011,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR AN EQUAL PRINCIPAL AMOUNT OF OUR OUTSTANDING
7 3/8% SENIOR NOTES DUE 2006 AND 8 3/8% SENIOR NOTES DUE 2011, RESPECTIVELY
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MATERIAL TERMS OF THE EXCHANGE OFFER
o The exchange offer expires at 5:00 p.m., New York City time, on January 17,
2002, unless extended.
o We will exchange all outstanding notes that are validly tendered and not
validly withdrawn for an equal principal amount of a new series of notes
which are registered under the Securities Act.
o You may withdraw tenders of outstanding notes at any time before the exchange
offer expires.
o The exchange of notes will not be a taxable event for U.S. federal income tax
purposes.
o We will not receive any proceeds from the exchange offer.
o The terms of the new series of notes are substantially identical to those of
the outstanding notes, except for transfer restrictions and registration
rights relating to the outstanding notes.
o You may tender outstanding notes only in denominations of $1,000 and
multiples of $1,000.
o Our affiliates may not participate in the exchange offer.
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PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DESCRIPTION OF THE
RISKS YOU SHOULD CONSIDER WHEN EVALUATING THIS INVESTMENT.
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER 17, 2001.
TABLE OF CONTENTS
PAGE
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WHERE YOU CAN FIND MORE INFORMATION ...................................................... 1
INCORPORATION BY REFERENCE OF SOME OF THE DOCUMENTS FILED BY US
WITH THE SEC ............................................................................ 2
FORWARD-LOOKING INFORMATION .............................................................. 2
SUMMARY OF PROSPECTUS .................................................................... 3
The Company ............................................................................. 3
The Exchange Offer ...................................................................... 3
The Exchange Notes ...................................................................... 6
RISK FACTORS ............................................................................. 9
You Must Follow Certain Procedures to Tender Your Private Notes ......................... 9
You Will Be Subject to Transfer Restrictions if You Fail to Exchange Your Private Notes . 9
A Public Market for the Exchange Notes May Not Develop .................................. 9
We Depend Upon Reimbursement by Third-Party Payors ...................................... 9
Our Operations Are Subject to Extensive Regulation ...................................... 10
Healthcare Reform Legislation May Affect Our Business ................................... 10
We Face National, Regional and Local Competition ........................................ 11
Our Results of Operations May Be Affected by Future Increases in Technology, Personnel
and Other Costs ......................................................................... 11
We Are Subject to Material Litigation ................................................... 11
You Should Take Into Account Certain Considerations ..................................... 11
RATIO OF EARNINGS TO FIXED CHARGES ....................................................... 13
THE EXCHANGE OFFER ....................................................................... 13
Purpose of the Exchange Offer ........................................................... 13
Resale of the Exchange Notes ............................................................ 13
Terms of the Exchange Offer ............................................................. 14
Expiration Date; Extensions; Amendments ................................................. 15
Interest on the Exchange Notes .......................................................... 15
Procedures for Tendering ................................................................ 15
Return of Private Notes ................................................................. 17
Book-Entry Transfer ..................................................................... 17
Guaranteed Delivery Procedures .......................................................... 18
Withdrawal of Tenders ................................................................... 18
Conditions .............................................................................. 19
Termination of Rights ................................................................... 19
Shelf Registration ...................................................................... 19
Liquidated Damages ...................................................................... 20
Exchange Agent .......................................................................... 21
Fees and Expenses ....................................................................... 21
Consequence of Failure to Exchange ...................................................... 21
USE OF PROCEEDS .......................................................................... 22
CAPITALIZATION ........................................................................... 23
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PAGE
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DESCRIPTION OF EXCHANGE NOTES ................................................ 24
General ..................................................................... 24
Optional Redemption of the Exchange Notes ................................... 24
Fall-Away Event ............................................................. 25
Change of Control ........................................................... 26
Certain Covenants of the Company Before the Fall-Away Event ................. 27
Certain Covenants of the Company After the Fall-Away Event .................. 33
Events of Default ........................................................... 34
Satisfaction and Discharge of Indenture; Defeasance ......................... 35
Transfer and Exchange ....................................................... 36
Amendment, Supplement and Waiver ............................................ 37
Concerning the Trustee ...................................................... 38
Governing Law ............................................................... 38
Book-Entry; Delivery and Form ............................................... 38
Certain Definitions ......................................................... 40
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE ................ 51
Consequences of the Exchange Offer to Exchanging and Nonexchanging Holders .. 51
Tax Considerations Applicable to United States Persons ...................... 51
Tax Considerations Applicable to Non-U.S. Holders............................ 52
Information Reporting and Backup Withholding ................................ 53
PLAN OF DISTRIBUTION ......................................................... 54
EXPERTS ...................................................................... 55
LEGAL MATTERS ................................................................ 55
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We have not authorized any dealer, salesperson or other person to give any
information or to make any representations to you other than the information
contained in this prospectus. You must not rely on any information or
representations not contained in this prospectus as if we had authorized it.
This prospectus does not offer to sell or solicit any offer to buy any
securities other than the registered notes to which it relates, nor does it
offer to buy any of these notes in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
The information contained in this prospectus is current only as of the date
on the cover page of this prospectus, and may change after that date. We do not
imply that there has been no change in the information contained in this
prospectus or in our affairs since that date by delivering this prospectus.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. This
information is available without charge to you upon written or oral request. If
you would like a copy of any of this information, please submit your request to
HEALTHSOUTH Corporation, One HealthSouth Parkway, Birmingham, Alabama 35243,
Attention: Legal Department, or call (205) 967-7116, and ask to speak to someone
in our Legal Department. In addition, to obtain timely delivery of any
information you request, you must submit your request no later than January 10,
2002, which is five business days before the date the exchange offer expires.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 (SEC File No. 1-10315), and file reports, proxy statements and other
information with the SEC. These reports, proxy statements and other information
may be inspected and copied at the Public Reference Room maintained by the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Information
regarding the operation of the SEC Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants (including us) that file electronically with the SEC (at
http://www.sec.gov). Our common stock is listed on the New York Stock Exchange.
Reports, proxy statements and other information relating to us can be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
Some of the documents we have filed with the SEC have been incorporated in
this prospectus by reference. See "Incorporation by Reference of Some of the
Documents Filed by Us with the SEC". Statements contained herein concerning the
provisions of any document do not purport to be complete and, in each instance,
are qualified in all respects by reference to the copy of such document filed
with the SEC. Each such statement is subject to and qualified in its entirety by
such reference.
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INCORPORATION BY REFERENCE
OF SOME OF THE DOCUMENTS FILED
BY US WITH THE SEC
There are hereby incorporated by reference in this prospectus the following
documents previously filed or to be filed by us with the SEC pursuant to the
Exchange Act (SEC File No. 1-10315):
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
2. Our Quarterly Reports on Form 10-Q for the periods ended March 31,
2001, June 30, 2001, and September 30, 2001.
3. Our Proxy Statement on Schedule 14A filed April 17, 2001, in
connection with our 2001 Annual Meeting of Stockholders.
4. Our Current Report on Form 8-K filed September 7, 2001, reporting
under Item 5 our proposed private placement of senior notes (excluding the
information furnished under Item 9 and the related Exhibit 99, which are not
incorporated in this prospectus).
All documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and before the termination of the
exchange offer, other than any portion of a Current Report on Form 8-K reporting
information under Item 9 (and any related exhibits), shall be deemed to be
incorporated by reference in this prospectus and to be made a part hereof from
the date of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for the purpose of this prospectus to the
extent that a statement contained herein (with respect to a previously filed
document) or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statements so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
FORWARD-LOOKING INFORMATION
Some of the matters discussed in this prospectus or in the information
incorporated by reference herein may constitute forward-looking statements. Some
of these forward-looking statements can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will",
"should", "seeks", "approximately", "intends", "plans", "estimates" or
"anticipates" or the negative thereof or other comparable terminology, or by
discussions of strategy, plans or intentions. Statements contained in this
prospectus which are not historical facts are forward-looking statements.
Without limiting the generality of the preceding statement, all statements in
this prospectus concerning or relating to estimated and projected earnings,
margins, costs, expenditures, cash flows, growth rates and financial results are
forward-looking statements. In addition, we, through our senior management, from
time to time make forward-looking public statements concerning our expected
future operations and performance and other developments. These forward-looking
statements are necessarily estimates which we believe reasonable based upon
current information and involve a number of risks and uncertainties. There can
be no assurance that other factors will not affect the accuracy of these
forward-looking statements or that our actual results will not differ materially
from the results anticipated in such forward-looking statements. While it is
impossible to identify all such factors, factors which could cause actual
results to differ materially from those estimated by us include, but are not
limited to, those factors identified under "Risk Factors" beginning on page 9
and other factors which may be identified from time to time in our SEC filings
and other public announcements.
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SUMMARY OF PROSPECTUS
This summary highlights information contained elsewhere in this prospectus.
It is not complete and may not contain all the information that you should
consider before tendering your Private Notes in the exchange offer. You should
read the entire prospectus carefully, including the "Risk Factors" section
beginning on page 9. As used in this prospectus: (1) the terms "HEALTHSOUTH",
"Company", "we", "our" and "us" refer to HEALTHSOUTH Corporation and, in some
cases, its subsidiaries; (2) the term "2006 Private Notes" refers to our 7 3/8%
senior notes due 2006 which were issued in a transaction exempt from
registration under the Securities Act; (3) the term "2011 Private Notes" refers
to our 8 3/8% senior notes due 2011 which were issued in a transaction exempt
from registration under the Securities Act; (4) the term "Private Notes" refers
to the 2006 Private Notes and the 2011 Private Notes, collectively; (5) the term
"2006 Exchange Notes" refers to our 7 3/8% senior notes due 2006 which have been
registered under the Securities Act pursuant to a registration statement of
which this prospectus is a part; (6) the term "2011 Exchange Notes" refers to
our 8 3/8% senior notes due 2011 which have been registered under the Securities
Act pursuant to a registration statement of which this prospectus is a part; (7)
the term "Exchange Notes" refers to the 2006 Exchange Notes and the 2011
Exchange Notes, collectively; (8) the term "Notes" refers to the Private Notes
and the Exchange Notes, collectively; and (9) the term "EBITDA" shall have the
meaning ascribed to the term "Consolidated EBITDA" set forth on page 42.
THE COMPANY
We are the largest provider of rehabilitative healthcare, outpatient
surgery and outpatient diagnostic services in the United States, with a national
network of over 1,900 locations in all 50 states, Puerto Rico, the United
Kingdom, Canada and Australia. We believe that we provide patients, physicians
and payors with high-quality healthcare services on a more cost-effective basis
than traditional acute-care hospitals. We provide these services through our
national network of modern, well-maintained healthcare facilities. We enjoy a
relatively favorable payor mix compared to other publicly traded healthcare
companies, in that most of our revenues (over 65% for the nine months ended
September 30, 2001) are derived from non-governmental sources. For the year
ended December 31, 2000, we had revenues of $4,195,115,000 and EBITDA of
$1,132,692,000. For the nine months ended September 30, 2001, we had revenues of
$3,265,324,000 and EBITDA, excluding unusual and non-recurring items, of
$904,324,000.
We were incorporated under the laws of Delaware in 1984. Our principal
executive offices are located at One HealthSouth Parkway, Birmingham, Alabama
35243, and our telephone number is (205) 967-7116.
THE EXCHANGE OFFER
The Exchange Offer ......... We are offering to exchange our Exchange Notes for our
outstanding Private Notes that are properly tendered and
accepted. You may tender outstanding Private Notes only
in denominations of $1,000 and multiples of $1,000. We
will issue the Exchange Notes on or promptly after the
expiration date of the exchange offer. As of the date of
this prospectus, $200,000,000 aggregate principal amount
of the 2006 Private Notes is outstanding and $400,000,000
aggregate principal amount of the 2011 Private Notes is
outstanding.
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Expiration Date .......................... The exchange offer will expire at 5:00 p.m., New York
City time, on January 17, 2002, unless extended, in which
case the expiration date will mean the latest date and time
to which we extend the exchange offer.
Conditions to the Exchange Offer ......... The exchange offer is not subject to conditions other than
that (1) it shall not violate applicable law or any
applicable interpretation of the staff of the SEC, (2) no
action or proceeding shall have been instituted or
threatened in any court or by any governmental agency
which might materially impair our ability to proceed with
the exchange offer, and no material adverse development
shall have occurred in any existing action or proceeding
with respect to us, and (3) all governmental approvals
deemed necessary by us for the completion of the
exchange offer shall have been obtained. The exchange
offer is not conditioned upon any minimum principal
amount of Private Notes being tendered for exchange.
Procedures for Tendering
Private Notes .......................... If you wish to tender your Private Notes for Exchange
Notes pursuant to the exchange offer, you must transmit
to National City Bank, as exchange agent, on or before
the expiration date, either:
o a computer-generated message transmitted through
The Depository Trust Company's Automated Tender
Offer Program system and received by the exchange
agent and forming a part of a confirmation of
book-entry transfer, in which you acknowledge and
agree to be bound by the terms of the letter of
transmittal; or
o a properly completed and duly executed letter of
transmittal, which accompanies this prospectus, or
a facsimile of the letter of transmittal, together
with your Private Notes and any other required
documentation, to the exchange agent at its
address listed in this prospectus and on the front
cover of the letter of transmittal.
If you cannot satisfy either of these procedures on a
timely basis, then you should comply with the guaranteed
delivery procedures described below. By executing the
letter of transmittal, you will make the representations to
us described under "The Exchange Offer-Procedures for
Tendering".
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Special Procedures for
Beneficial Owners .................... If you are a beneficial owner whose Private Notes are
registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you wish to
tender your Private Notes in the exchange offer, you
should contact the registered holder promptly and instruct
the registered holder to tender on your behalf. If you wish
to tender on your own behalf, you must either (1) make
appropriate arrangements to register ownership of the
Private Notes in your name or (2) obtain a properly
completed bond power from the registered holder, before
completing and executing the letter of transmittal and
delivering your Private Notes.
Guaranteed Delivery Procedures ......... If you wish to tender your Private Notes and time will not
permit the documents required by the letter of transmittal
to reach the exchange agent before the expiration date, or
the procedure for book-entry transfer cannot be
completed on a timely basis, you must tender your Private
Notes according to the guaranteed delivery procedure
described in this prospectus under "The Exchange
Offer-Guaranteed Delivery Procedures".
Acceptance of Private Notes and
Delivery of Exchange Notes ........... Subject to the satisfaction or waiver of the conditions to
the exchange offer, we will accept for exchange any and
all Private Notes which are validly tendered in the
exchange offer and not withdrawn before 5:00 p.m., New
York City time, on the expiration date.
Withdrawal Rights ...................... You may withdraw the tender of your Private Notes at
any time before 5:00 p.m., New York City time, on the
expiration date, by complying with the procedures for
withdrawal described in this prospectus under "The
Exchange Offer-Withdrawal of Tenders".
Material U.S. Federal Income Tax
Consequences ......................... The exchange of Private Notes for Exchange Notes will
not be a taxable event for United States federal income
tax purposes. For a discussion of the material federal
income tax considerations generally applicable to the
exchange offer that are relevant to holders of Private
Notes, see "Material U.S. Federal Income Tax
Consequences of the Exchange".
Exchange Agent ......................... National City Bank, the trustee under the indenture
governing the Private Notes and the Exchange Notes, is
serving as the exchange agent.
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Consequence of Failure to
Exchange Notes ...................... If you do not exchange your Private Notes for Exchange
Notes, you will continue to be subject to the restrictions
on transfer provided in the Private Notes and in the
indenture governing the Private Notes. In general, the
Private Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do
not currently plan to register the Private Notes under the
Securities Act.
Registration Rights Agreement ......... You are entitled to exchange your Private Notes for
Exchange Notes with substantially identical terms. The
exchange offer satisfies this right. After the exchange offer
is completed, you will no longer be entitled to any
exchange or registration rights with respect to your Private
Notes. Under the circumstances described in the
registration rights agreement, you may require us to file a
shelf registration statement under the Securities Act.
We explain the exchange offer in greater detail beginning on page 13.
THE EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes, except that the Exchange Notes will be registered under
the Securities Act and, therefore, the Exchange Notes will not be subject to the
transfer restrictions, registration rights and provisions providing for an
increase in the interest rate applicable to the Private Notes. The Exchange
Notes will evidence the same debt as the Private Notes, and both the Private
Notes and the Exchange Notes are governed by the same indenture.
Securities Offered .......... Up to $200,000,000 principal amount of our 73/8%
senior notes due 2006 and up to $400,000,000
principal amount of our 8 3/8% senior notes due 2011.
Issuer ...................... HEALTHSOUTH Corporation.
Maturity Dates .............. The 2006 Exchange Notes will mature on October 1,
2006, and the 2011 Exchange Notes will mature on
October 1, 2011.
Interest .................... Interest on the Exchange Notes will accrue from
September 28, 2001 and be payable, at the per
annum rates of 7 3/8% on the 2006 Exchange Notes
and 8 3/8% on the 2011 Exchange Notes, on April 1
and October 1 of each year, commencing April 1,
2002. The payment of interest on Exchange Notes
will be in lieu of payment of any accrued but unpaid
interest on Private Notes tendered for exchange.
Optional Redemption ......... We may redeem the Exchange Notes, in whole or in
part, at any time at a redemption price equal to the
principal amount thereof plus a make-whole premium
described in this prospectus and accrued interest.
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For more details, see "Description of Exchange
Notes-Optional Redemption of the Exchange
Notes".
Ranking ................... The Exchange Notes:
o are part of our general unsecured obligations;
o will rank equally in right of payment with all of
our existing and future senior unsecured
obligations;
o will rank senior to all of our existing and future
subordinated indebtedness; and
o will be effectively subordinated to all existing and
future liabilities of our subsidiaries.
Future Guaranties ......... None of our subsidiaries are required to guarantee
the Exchange Notes.
Change of Control ......... If we go through a Change of Control at any time
before the Exchange Notes receive an investment
grade rating from both Standard & Poor's Ratings
Service (at least BBB-) and Moody's Investors
Service, Inc. (at least Baa3) and certain other
conditions are satisfied (the "Fall-Away Event"), you
as a holder of the Exchange Notes have the right to
require that we purchase your Exchange Notes, in
whole or in part, at a purchase price in cash in an
amount equal to 101% of their principal amount,
plus accrued interest to the date of purchase.
For more details, see "Risk Factors-You Should
Take Into Account Certain Considerations" and
"Description of Exchange Notes-Change of
Control".
The term "Change of Control" is defined in
"Description of Exchange Notes".
Certain Covenants ......... The indenture contains covenants that, before the
occurrence of the Fall-Away Event, limit our ability
and the ability of our subsidiaries to:
o incur additional indebtedness and issue preferred
stock;
o make restricted payments, including dividends,
other distributions and investments;
o in the case of our subsidiaries, create or permit
to exist dividend or payment restrictions with
respect to us;
o engage in transactions with our affiliates; and
o sell assets and subsidiary stock.
After the occurrence of the Fall-Away Event, the
above limitations will not apply to the Exchange
Notes.
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The Indenture contains covenants that, among
other things, limit, before and after the occurrence
of the Fall-Away Event, our ability and the ability
of our subsidiaries to:
o incur or permit to exist certain liens;
o enter into sale and lease-back transactions; and
o sell all or substantially all of our assets or merge
with or into other companies.
The Indenture also, among other things, requires
us to provide reports to holders of the Exchange
Notes.
For more details, see "Description of Exchange
Notes".
Use of Proceeds ......... We will not receive any cash proceeds from the
exchange offer.
We explain the Exchange Notes in greater detail beginning on page 24.
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RISK FACTORS
Our business, operations and financial condition are subject to various
risks. Some of these risks are described below, and you should take these risks
into account in evaluating us or any investment decision involving us or in
deciding whether to tender your Private Notes in the exchange offer. This
section does not describe all risks applicable to us, our industry or our
business, and it is intended only as a summary of certain material factors. The
risk factors set forth below are generally applicable to the Private Notes as
well as the Exchange Notes.
YOU MUST FOLLOW CERTAIN PROCEDURES TO TENDER YOUR PRIVATE NOTES
The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the exchange agent of the Private Notes, a properly completed
and duly executed letter of transmittal and all other required documents.
Therefore, if you desire to tender your Private Notes in exchange for Exchange
Notes, you should allow sufficient time to ensure timely delivery. Your failure
to follow these procedures may result in delay in receiving Exchange Notes on a
timely basis or in your loss of the right to receive Exchange Notes. Neither we
nor the exchange agent is under any duty to give notification of defects or
irregularities with respect to tenders of Private Notes for exchange. If you
tender Private Notes in the exchange offer for the purpose of participating in a
distribution of the Exchange Notes, you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Private Notes, where the
Private Notes were acquired by the broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of the Exchange Notes. See
"The Exchange Offer-Procedures for Tendering" and "Plan of Distribution".
YOU WILL BE SUBJECT TO TRANSFER RESTRICTIONS IF YOU FAIL TO EXCHANGE YOUR
PRIVATE NOTES
If you do not exchange your Private Notes for Exchange Notes pursuant to
the exchange offer, you will continue to be subject to the restrictions on
transfer of the Private Notes as set forth in the legend on the Private Notes
and you will not be entitled to an increased interest rate on the Private Notes.
In general, the Private Notes may not be offered or sold unless registered under
the Securities Act, or pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. We do not
currently intend to register the Private Notes under the Securities Act. To the
extent that Private Notes are tendered and accepted in the exchange offer, the
trading market for untendered and tendered but unaccepted Private Notes could be
adversely affected. In addition, if a large amount of Private Notes are not
tendered or are tendered but not accepted, the limited amount of Exchange Notes
that would be issued and outstanding after we consummate the exchange offer
could lower the price of the Exchange Notes.
A PUBLIC MARKET FOR THE EXCHANGE NOTES MAY NOT DEVELOP
There can be no assurance that a public market for the Exchange Notes will
develop or, if such a market develops, as to the liquidity of the market. If a
market were to develop, the Exchange Notes could trade at prices that may be
higher or lower than their principal amount. We do not intend to apply for
listing of the Exchange Notes on any securities exchange or for quotation of the
Exchange Notes on any automated quotation system. The initial purchasers of the
Private Notes have previously made a market in the Private Notes, and we have
been advised that the initial purchasers currently intend to make a market in
the Exchange Notes, as permitted by applicable laws and regulations, after
consummation of the exchange offer. The initial purchasers are not obligated,
however, to make a market in the Private Notes or the Exchange Notes, and any
market-making activity may be discontinued at any time without notice at the
sole discretion of the initial purchasers. If an active public market does not
develop or continue, the market price and liquidity of the Exchange Notes may be
adversely affected.
WE DEPEND UPON REIMBURSEMENT BY THIRD-PARTY PAYORS
Substantially all of our revenues are derived from private and governmental
third-party payors. In 2000, approximately 29% of our revenues were derived from
Medicare, approximately 3% from Medicaid and approximately 68% from commercial
insurers, managed care plans, workers'
9
compensation payors and other private pay revenue sources. There are increasing
pressures from many payors to control healthcare costs and to reduce or limit
increases in reimbursement rates for medical services. In the recent past, we
have experienced a decrease in revenues primarily attributable to declines in
government reimbursement as a result of the Balanced Budget Act of 1997. There
can be no assurances that payments from government or private payors will remain
at levels comparable to present levels. In attempts to limit federal spending,
there have been, and we expect that there will continue to be, a number of
proposals to limit Medicare reimbursement for various services. We cannot now
predict whether any of these pending proposals will be adopted or what effect
the adoption of such proposals would have on us.
Further, Medicare reimbursement for inpatient rehabilitation services is
changing from a cost-based reimbursement system to a prospective payment system
("PPS"), with the phase-in of the PPS scheduled to begin January 1, 2002. While
we believe we are well-positioned and well-prepared for the transition, we
cannot be certain what effect the adoption of inpatient rehabilitation PPS will
have on us. In addition, changes in PPS reimbursement rates or our failure to
successfully execute our planned response to this change could have a material
adverse effect on our financial condition or results of operations.
OUR OPERATIONS ARE SUBJECT TO EXTENSIVE REGULATION
Our operations are subject to various other types of regulation by federal
and state governments, including licensure and certification laws, Certificate
of Need laws and laws relating to financial relationships among providers of
healthcare services, Medicare fraud and abuse and physician self-referral.
The operation of our facilities and the provision of healthcare services
are subject to federal, state and local licensure and certification laws. These
facilities and services are subject to periodic inspection by governmental and
other authorities to ensure compliance with the various standards established
for continued licensure under state law, certification under the Medicare and
Medicaid programs and participation in other government programs. Additionally,
in many states, Certificates of Need or other similar approvals are required for
expansion of our operations. We could be adversely affected if we cannot obtain
such approvals, by changes in the standards applicable to approvals and by
possible delays and expenses associated with obtaining approvals. Our failure to
obtain, retain or renew any required regulatory approvals, licenses or
certificates could prevent us from being reimbursed for our services or from
offering some of our services, or could materially adversely affect our results
of operations.
Our business is subject to extensive federal and state regulation with
respect to financial relationships among healthcare providers, physician
self-referral arrangements and other fraud and abuse issues. Penalties for
violation of federal and state laws and regulations include exclusion from
participation in the Medicare and Medicaid programs, asset forfeiture, civil
penalties and criminal penalties, any of which could have a material adverse
effect on our business, results of operations or financial condition. The Office
of Inspector General of the Department of Health and Human Services, the
Department of Justice and other federal agencies interpret healthcare fraud and
abuse provisions liberally and enforce them aggressively. We have recently
entered into a settlement agreement with the Department of Justice with respect
to alleged violations of certain Medicare regulations. See "Business --
Regulation" in our Annual Report on Form 10-K for the fiscal year ended December
31, 2000 and "Legal Proceedings" in our Quarterly Report on Form 10-Q for the
period ended June 30, 2001.
HEALTHCARE REFORM LEGISLATION MAY AFFECT OUR BUSINESS
In recent years, many legislative proposals have been introduced or
proposed in Congress and in some state legislatures that would effect major
changes in the healthcare system, either nationally or at the state level. Among
the proposals which are currently being, or which recently have been, considered
are cost controls on hospitals, insurance market reforms to increase the
availability of group health insurance to small businesses, requirements that
all businesses offer health insurance coverage to their employees and the
creation of a single government health insurance plan that would cover all
citizens. The costs of certain proposals would be funded in significant part by
reductions in payment by governmental programs, including Medicare and Medicaid,
to healthcare providers. There continue to
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be federal and state proposals that would, and actions that do, impose more
limitations on government and private payments to healthcare providers such as
us and proposals to increase copayments and deductibles from patients. At the
federal level, Congress has continued to propose or consider healthcare budgets
that substantially reduce payments under the Medicare and Medicaid programs. In
addition, many states are considering the enactment of initiatives designed to
reduce their Medicaid expenditures, to provide universal coverage or additional
levels of care and/or to impose additional taxes on healthcare providers to help
finance or expand the states' Medicaid systems. There can be no assurance as to
the ultimate content, timing or effect of any healthcare reform legislation, nor
is it possible at this time to estimate the impact of potential legislation on
us. That impact may be material to our financial condition or our results of
operations.
WE FACE NATIONAL, REGIONAL AND LOCAL COMPETITION
We operate in a highly competitive industry. Although we are the largest
provider of rehabilitative healthcare, outpatient surgery and outpatient
diagnostic services in the United States, in any particular market we may
encounter competition from local or national entities with longer operating
histories or other superior competitive advantages. There can be no assurance
that this competition, or other competition which we may encounter in the
future, will not adversely affect our financial condition or our results of
operations.
OUR RESULTS OF OPERATIONS MAY BE AFFECTED BY FUTURE INCREASES IN TECHNOLOGY,
PERSONNEL AND OTHER COSTS
Changes in medical technology, the labor market for nurses and other
clinical personnel and changes imposed by the requirements of payor contracts
and government reimbursement programs may require significant investments in
facilities, equipment, personnel and services. Although we believe that cash
generated from operations, amounts available under our bank credit facilities
and our ability to access capital markets will be sufficient to allow us to make
such investments, we cannot assure you that we will be able to obtain the funds
necessary to make such investments.
WE ARE SUBJECT TO MATERIAL LITIGATION
We are, and may in the future be, subject to litigation which, if
determined adversely to us, could have a material adverse effect on our business
or financial condition. In addition, some of the companies and businesses we
have acquired have been subject to similar litigation. There can be no assurance
that pending or future litigation, whether or not described in this prospectus,
will not have a material adverse effect on our financial condition or our
results of operations. See "Legal Proceedings" in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2000.
YOU SHOULD TAKE INTO ACCOUNT CERTAIN CONSIDERATIONS
Amount of Leverage; Structural Subordination
As of September 30, 2001, we had approximately $3,105,159,000 of
outstanding indebtedness (including the current portion of long-term debt and
excluding obligations to trade creditors) and approximately $3,719,482,000 of
stockholders' equity. Outstanding indebtedness was approximately 45.5% of our
total capitalization (including the current portion of long-term debt), which
was approximately $6,824,641,000 (including the current portion of long-term
debt). Approximately $2,088,000,000 of such total indebtedness (including the
Exchange Notes) consisted of senior unsecured obligations ranking pari passu in
right of payment. See "Capitalization". The Exchange Notes will be effectively
subordinated to all existing and future liabilities of our subsidiaries. A
substantial portion of our operations are conducted through these subsidiaries.
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Restrictive Covenants
Our $1,750,000,000 revolving credit facility with Bank of America, N.A.,
and other participating banks, contains various covenants that limit our ability
to engage in certain transactions. Those covenants, among other things:
o limit our and our subsidiaries' ability to borrow and to place liens on
our and their assets;
o limit our investments and the sale of all or substantially all of our
assets;
o require us to maintain a minimum consolidated net worth; and
o require us to comply with coverage ratio tests.
The indentures governing our debt securities, including the Exchange Notes
at any time before the occurrence of the Fall-Away Event, include covenants of a
similar nature. Our failure to comply with any of these covenants could result
in an event of default under our indebtedness, including the Exchange Notes.
That in turn could cause an event of default to occur under all or substantially
all of our other then-outstanding indebtedness. See "Description of Exchange
Notes -- Certain Covenants of the Company Before the Fall-Away Event".
Our Ability to Repurchase the Exchange Notes Upon a Change of Control May Be
Limited
In the event of a Change of Control at any time before the occurrence of
the Fall-Away Event, you will have the right, at your option, to require us to
repurchase all or a portion of the Exchange Notes you hold at a purchase price
equal to 101% of the aggregate principal amount of your Exchange Notes plus
accrued interest thereon to the repurchase date. See "Description of Exchange
Notes -- Change of Control". Our ability to repurchase the Exchange Notes upon a
Change of Control will be dependent on the availability of sufficient funds and
our ability to comply with applicable securities laws. Accordingly, there can be
no assurance that we will be in a position to repurchase the Exchange Notes upon
a Change of Control. The term "Change of Control" is limited to certain
specified transactions and may not include other events that might adversely
affect our financial condition or result in a downgrade of the credit rating (if
any) of the Exchange Notes, nor would the requirement that we offer to
repurchase the Exchange Notes upon a Change of Control necessarily afford
holders of the Exchange Notes protection in the event of a highly leveraged
reorganization.
Holders of Our Debentures Have a Repurchase Right in Certain Circumstances In
Which Holders of the Exchange Notes Do Not
In March 1998, we issued $567,750,000 of 3.25% Convertible Subordinated
Debentures due 2003. In general, the debentures are subordinated to the Exchange
Notes. However, the holders of the debentures have a right to require us to
repurchase the debentures at a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, in the event that our common stock is
neither listed for trading on a United States national securities exchange nor
approved for trading on an established automated over-the-counter trading market
in the United States. The Exchange Notes do not have similar repurchase rights.
Therefore, in the event that our common stock were not listed for trading as
described above, the holders of the debentures might be able to exercise a right
to require repurchase of the debentures by us ahead of the holders of the
Exchange Notes, even though the debentures are subordinate to the Exchange
Notes. Our common stock has been listed for trading on the New York Stock
Exchange since 1989, and we anticipate that this will continue to be the case.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed
charges for the periods shown.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 2000 2001
--------- --------- --------- --------- --------- --------------
Ratio of earnings to fixed charges ......... 3.6x 4.7x 2.2x 1.9x 2.8x 2.3x
The following table sets forth our consolidated ratio of earnings to fixed
charges after excluding the effect of any unusual and nonrecurring items for the
periods shown.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 2000 2001
--------- --------- --------- --------- --------- --------------
Ratio of earnings, excluding unusual and
nonrecurring items, to fixed charges ......... 4.1x 4.8x 4.7x 3.6x 2.8x 3.0x
The ratio of earnings to fixed charges was calculated by dividing (1)
earnings from continuing operations before income taxes, minority interests and
fixed charges (excluding the effect of any unusual and nonrecurring items for
purposes of the second table) by (2) fixed charges, which consist of interest
expense incurred, including amortization of debt expense and discount, and the
portion of rental expense under operating leases estimated to be representative
of the interest factor.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We issued the Private Notes on September 28, 2001, to UBS Warburg LLC,
Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., J.P. Morgan
Securities, Inc., Lehman Brothers Inc., Scotia Capital (USA) Inc., Jefferies &
Company, Inc., BNY Capital Markets, Inc., Fleet Securities, Inc. and NatCity
Investments, Inc., the initial purchasers, pursuant to a purchase agreement.
The initial purchasers subsequently sold the Private Notes to "qualified
institutional buyers", as defined in Rule 144A under the Securities Act, in
reliance on Rule 144A, and outside the United States under Regulation S under
the Securities Act. As a condition to the sale of the Private Notes, we entered
into a registration rights agreement with the initial purchasers on September
28, 2001. Pursuant to the registration rights agreement, we agreed that we
would:
(1) file a registration statement with the SEC with respect to the
Exchange Notes within 60 days after the date of initial issuance of the
Private Notes;
(2) use our reasonable best efforts to cause the registration statement
to be declared effective by the SEC on or prior to 120 days after the date
of initial issuance of the Private Notes;
(3) use our reasonable best efforts to consummate the exchange offer on
or prior to 150 days after the date of initial issuance of the Private
Notes; and
(4) keep the exchange offer open for not less than 20 business days.
Upon the effectiveness of the registration statement, we will offer the Exchange
Notes in exchange for the Private Notes.
RESALE OF THE EXCHANGE NOTES
Based upon an interpretation by the staff of the SEC contained in no-action
letters issued to third parties, we believe that you may exchange Private Notes
for Exchange Notes in the ordinary course of business. For further information
on the SEC's position, see Exxon Capital Holdings
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Corporation, available May 13, 1988, Morgan Stanley & Co. Incorporated,
available June 5, 1991 and Shearman & Sterling, available July 2, 1993, and
other interpretive letters to similar effect. You will be allowed to resell
Exchange Notes to the public without further registration under the Securities
Act and without delivering to purchasers of the Exchange Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act so long as you do
not participate, do not intend to participate, and have no arrangement with any
person to participate, in a distribution of the Exchange Notes. However, the
foregoing does not apply to you if you are:
o a broker-dealer who purchases the Private Notes directly from us to resell
pursuant to Rule 144A or any other available exemption under the
Securities Act; or
o an "affiliate" of ours within the meaning of Rule 405 under the Securities
Act.
In addition, if:
o you are a broker-dealer; or
o you acquire Exchange Notes in the exchange offer for the purpose of
distributing or participating in the distribution of the Exchange Notes,
you cannot rely on the position of the staff of the SEC contained in the
no-action letters mentioned above and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, which the broker-dealer acquired as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the Exchange Notes.
The letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. A broker-dealer may use
this prospectus, as it may be amended or supplemented from time to time, in
connection with resales of Exchange Notes received in exchange for Private Notes
which the broker-dealer acquired as a result of market-making or other trading
activities.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept any and all Private Notes
validly tendered and not withdrawn before the expiration date. We will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Private Notes surrendered pursuant to the exchange offer.
You may tender Private Notes only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that:
o we have registered the Exchange Notes under the Securities Act and,
therefore, the Exchange Notes will not bear legends restricting their
transfer; and
o holders of the Exchange Notes will not be entitled to any of the rights of
holders of Private Notes under the registration rights agreement, which
rights will terminate upon the completion of the exchange offer.
The Exchange Notes will evidence the same debt as the Private Notes and will be
issued under the same indenture, so the Exchange Notes and the Private Notes
will be treated as a single class of debt securities under the indenture.
As of the date of this prospectus, $200,000,000 aggregate principal amount
of the 2006 Private Notes and $400,000,000 aggregate principal amount of the
2011 Private Notes is outstanding and registered in the name of Cede & Co., as
nominee for The Depository Trust Company. Only
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registered holders of the Private Notes, or their legal representative or
attorney-in-fact, as reflected on the records of the trustee under the
indenture, may participate in the exchange offer. We will not set a fixed record
date for determining registered holders of the Private Notes entitled to
participate in the exchange offer.
You do not have any appraisal or dissenters' rights under the indenture in
connection with the exchange offer. We intend to conduct the exchange offer in
accordance with the provisions of the registration rights agreement and the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the SEC.
We will be deemed to have accepted validly tendered Private Notes when, as
and if we have given oral or written notice of acceptance to the exchange agent.
The exchange agent will act as your agent for the purposes of receiving the
Exchange Notes from us.
If you tender Private Notes in the exchange offer, you will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the exchange offer. We will pay all charges and expenses,
other than the applicable taxes described below, in connection with the exchange
offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" will mean 5:00 p.m., New York City time, on
January 17, 2002, unless we, in our sole discretion, extend the exchange offer,
in which case the term "expiration date" will mean the latest date and time to
which we extend the exchange offer.
To extend the exchange offer, we will:
o notify the exchange agent of any extension orally or in writing; and
o notify the registered holders of the Private Notes by means of a press
release or other public announcement,
each before 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our reasonable discretion:
o to delay accepting any Private Notes;
o to extend the exchange offer; or
o if any conditions listed below under "-Conditions" are not satisfied,
to terminate the exchange offer by giving oral or written notice of the
delay, extension or termination to the exchange agent.
We will follow any delay in acceptance, extension or termination as
promptly as practicable by oral or written notice to the registered holders. If
we amend the exchange offer in a manner we determine constitutes a material
change, we will promptly disclose the amendment in a prospectus supplement that
we will distribute to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will accrue interest from September 28, 2001 at the per
annum rates of 7 3/8% on the 2006 Exchange Notes and 8 3/8% on the 2011 Exchange
Notes. Such interest will be payable semi-annually in arrears on each April 1
and October 1, commencing April 1, 2002. The payment of interest on Exchange
Notes will be in lieu of payment of any accrued but unpaid interest on Private
Notes tendered for exchange.
PROCEDURES FOR TENDERING
You may tender Private Notes in the exchange offer only if you are a
registered holder of Private Notes. To tender in the exchange offer, you must:
o complete, sign and date the letter of transmittal or a facsimile of the
letter of transmittal;
o have the signatures guaranteed if required by the letter of
transmittal; and
15
o mail or otherwise deliver the letter of transmittal or the facsimile of
the letter of transmittal to the exchange agent at the address listed
below under "-Exchange Agent" for receipt before the expiration date.
In addition, either:
o the exchange agent must receive certificates for the Private Notes
along with the letter of transmittal into its account at the depositary
pursuant to the procedure for book-entry transfer described below
before the expiration date;
o the exchange agent must receive a timely confirmation of a book-entry
transfer of the Private Notes, if the procedure is available, into its
account at the depositary pursuant to the procedure for book-entry
transfer described below before the expiration date; or
o you must comply with the guaranteed delivery procedures described
below.
Your tender, if not withdrawn before the expiration date, will constitute
an agreement between you and us in accordance with the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.
The method of delivery of Private Notes and the letter of transmittal and
all other required documents to the exchange agent is at your election and risk.
We recommend that instead of delivery by mail, you use an overnight or hand
delivery service, properly insured. In all cases, you should allow sufficient
time to assure delivery to the exchange agent before the expiration date. You
should not send letters of transmittal or Private Notes to us. You may request
your respective brokers, dealers, commercial banks, trust companies or nominees
to effect the transactions described above for you.
If you are a beneficial owner of Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender your Private Notes, you should contact the
registered holder promptly and instruct the registered holder to tender on your
behalf. If you wish to tender on your own behalf, before completing and
executing the letter of transmittal and delivering the Private Notes you must
either:
o make appropriate arrangements to register ownership of the Private
Notes in your name; or
o obtain a properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable time. Unless the
Private Notes are tendered:
(1) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on the letter of transmittal; or
(2) for the account of:
o a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
o a commercial bank or trust company located or having an office or
correspondent in the United States; or
o an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act that is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal,
an eligible guarantor institution must guarantee the signatures on a letter
of transmittal or a notice of withdrawal described below under "-Withdrawal
of Tenders".
If the letter of transmittal is signed by a person other than the
registered holder, the Private Notes must be endorsed or accompanied by a
properly completed bond power, signed by the registered holder as the registered
holder's name appears on the Private Notes.
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If the letter of transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, they
should so indicate when signing, and unless waived by us, they must submit
evidence satisfactory to us of their authority to so act with the letter of
transmittal.
The exchange agent and the depositary have confirmed that any financial
institution that is a participant in the depositary's system may utilize the
depositary's Automated Tender Offer Program to tender Notes.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance and withdrawal of
tendered Private Notes, which determination will be final and binding. We
reserve the absolute right to reject any and all Private Notes not properly
tendered or any Private Notes our acceptance of which would, in the opinion of
our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, you must cure any defects or irregularities in
connection with tenders of Private Notes within the time we determine. Although
we intend to notify you of defects or irregularities with respect to tenders of
Private Notes, neither we, the exchange agent nor any other person will incur
any liability for failure to give you that notification. Unless waived, we will
not deem tenders of Private Notes to have been made until you cure the defects
or irregularities.
While we have no present plan to acquire any Private Notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any Private Notes that are not tendered in the exchange offer, we
reserve the right in our sole discretion to purchase or make offers for any
Private Notes that remain outstanding after the expiration date. We also reserve
the right to terminate the exchange offer, as described below under
"-Conditions", and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any of those purchases or offers could differ from the terms of the
exchange offer.
If you wish to tender Private Notes in exchange for Exchange Notes in the
exchange offer, we will require you to represent that:
o you are not an affiliate of ours;
o you will acquire any Exchange Notes in the ordinary course of your
business; and
o at the time of completion of the exchange offer, you have no
arrangement with any person to participate in the distribution of the
Exchange Notes.
In addition, in connection with the resale of Exchange Notes, any participating
broker-dealer who acquired the Private Notes for its own account as a result of
market-making or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes, other than a resale of an unsold allotment
from the original sale of the Private Notes, with the prospectus contained in
the registration statement.
RETURN OF PRIVATE NOTES
If we do not accept any tendered Private Notes for any reason described in
the terms and conditions of the exchange offer or if you withdraw any tendered
Private Notes or submit Private Notes for a greater principal amount than you
desire to exchange, we will return the unaccepted, withdrawn or non-exchanged
Private Notes without expense to you as promptly as practicable. In the case of
Private Notes tendered by book-entry transfer into the exchange agent's account
at the depositary pursuant to the book-entry transfer procedures described
below, we will credit the Private Notes to an account maintained with the
depositary as promptly as practicable.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the Private Notes at the depositary for purposes of the exchange offer within
two business days after the date of this prospectus, and any financial
institution that is a participant in the depositary's systems may make
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book-entry delivery of Private Notes by causing the depositary to transfer the
Private Notes into the exchange agent's account at the depositary in accordance
with the depositary's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the depositary, you
must transmit and the exchange agent must receive, the letter of transmittal or
a facsimile of the letter of transmittal, with any required signature guarantees
and any other required documents, at the address below under "-Exchange Agent"
on or before the expiration date or pursuant to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your Private Notes, but time will not permit a letter
of transmittal, certificates representing the Private Notes to be tendered or
other required documents to reach the exchange agent before the expiration date,
you may effect a tender if:
(a) the tender is made by or through an eligible guarantor institution;
(b) before the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly executed notice
of guaranteed delivery, substantially in the form provided by us, that:
o states the name and address of the holder of the Private Notes, the
name(s) in which the Private Notes are registered and the principal
amount of Private Notes tendered,
o states that the tender is being made by that notice of guaranteed
delivery, and
o guarantees that, within three New York Stock Exchange trading days after
the expiration date, the eligible guarantor institution will deposit
with the exchange agent the letter of transmittal, together with the
certificates representing the Private Notes in proper form for transfer
or a confirmation of a book-entry transfer, as the case may be, and any
other documents required by the letter of transmittal; and
(c) within three New York Stock Exchange trading days after the
expiration date, the exchange agent receives a properly executed letter of
transmittal, as well as the certificates representing all tendered Private
Notes in proper form for transfer and all other documents required by the
letter of transmittal.
Upon request, the exchange agent will send to you a notice of guaranteed
delivery if you wish to tender your Private Notes according to the guaranteed
delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw tenders
of Private Notes at any time before 5:00 p.m., New York City time, on the
expiration date.
To withdraw a tender of Private Notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address listed in this prospectus before the expiration date. Any notice of
withdrawal must:
o specify the name of the person who deposited the Private Notes to be
withdrawn;
o identify the Private Notes to be withdrawn, including the principal
amount of the Private Notes; and
o be signed in the same manner as the original signature on the letter of
transmittal by which the Private Notes were tendered, including any
required signature guarantees.
We will determine in our sole discretion all questions as to the validity,
form and eligibility of the notices, and our determination will be final and
binding on all parties. We will not deem any properly withdrawn Private Notes to
have been validly tendered for purposes of the exchange offer, and we will not
issue Exchange Notes with respect to those Private Notes, unless you validly
18
re-tender the withdrawn Private Notes. You may re-tender properly withdrawn
Private Notes by following one of the procedures described above under
"-Procedures for Tendering" at any time before the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange the Exchange Notes for, any Private
Notes, and may terminate the exchange offer as provided in this prospectus
before the acceptance of the Private Notes, if:
(1) the exchange offer violates applicable law, rules or regulations or
an applicable interpretation of the staff of the SEC;
(2) an action or proceeding has been instituted or threatened in any
court or by any governmental agency which might materially impair our
ability to proceed with the exchange offer;
(3) a material adverse development shall have occurred in any existing
action or proceeding with respect to us; or
(4) all governmental approvals which we deem necessary for the completion
of the exchange offer have not been obtained.
If we determine in our reasonable discretion that any of these conditions
are not satisfied, we may:
o refuse to accept any Private Notes and return all tendered Private Notes
to you;
o extend the exchange offer and retain all Private Notes tendered before
the exchange offer expires, subject, however, to your rights to withdraw
the Private Notes; or
o waive the unsatisfied conditions with respect to the exchange offer and
accept all properly tendered Private Notes that have not been withdrawn.
If the waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that we will
distribute to the registered holders of the Private Notes.
TERMINATION OF RIGHTS
All of your rights under the registration rights agreement will terminate
upon consummation of the exchange offer, except with respect to our continuing
obligations:
o to indemnify you and parties related to you against liabilities,
including liabilities under the Securities Act; and
o to provide, upon your request, the information required by Rule
144A(d)(4) under the Securities Act to permit resales of the Notes
pursuant to Rule 144A.
SHELF REGISTRATION
In the event that:
(1) any changes in law or SEC policy do not permit us to effect the
exchange offer;
(2) the exchange offer is not consummated within 150 days of the date of
initial issuance of the Private Notes;
(3) any holder of Private Exchange Notes (as defined in the registration
rights agreement) so requests; or
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(4) a holder participating in the exchange offer does not receive
Exchange Notes on the date of the exchange that may be sold without
restriction under the federal securities laws (other than due solely to the
status of the holder as our affiliate within the meaning of that term under
the Securities Act),
we will file with the SEC a shelf registration statement to register for public
resale the transfer-restricted securities held by you if you provide us with the
necessary information for inclusion in the shelf registration statement.
LIQUIDATED DAMAGES
If:
(1) we do not file the registration statement with the SEC on or prior to
the 60th day following the date of initial issuance of the Private Notes;
(2) we do not cause the registration statement to become effective on or
prior to the 120th day following the date of initial issuance of the Private
Notes;
(3) we do not complete the exchange offer on or prior to the 150th day
following the date of initial issuance of the Private Notes;
(4) we are obligated to file a shelf registration statement and we do not
file the shelf registration statement with the SEC on or prior to the 45th
day following the date on which we have notice of the filing obligation;
(5) we are obligated to file a shelf registration statement and the SEC
does not declare the shelf registration statement effective on or prior to
the later of the 60th day following the date on which we have notice of the
filing obligation or the 150th day following the date of initial issuance of
the Private Notes; or
(6) the registration statement or the shelf registration statement, as
the case may be, is declared effective but thereafter ceases to be effective
or useable in connection with resales of the Registrable Notes (as defined
in the registration rights agreement) for the time of non-effectiveness or
nonusability,
with each of items (1) through (6) constituting a "registration default", we
agree to pay you, as liquidated damages, additional interest on the Registrable
Notes in cash on each April 1 and October 1 in an amount equal to 0.25% per
annum of the aggregate principal amount of the Registrable Notes, with respect
to the first 90-day period immediately following the occurrence of the
registration default. The amount of the additional interest will increase by an
additional 0.25% to a maximum of 1.0% per annum of the aggregate principal
amount of the Registrable Notes for each subsequent 90-day period until the
registration default has been cured. We will not be required to pay additional
interest for more than one registration default at any given time. Following the
cure of all registration defaults, the accrual of additional interest will
cease.
20
EXCHANGE AGENT
We have appointed National City Bank as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or the letter of transmittal and requests
for a notice of guaranteed delivery to the exchange agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE: BY HAND/OVERNIGHT DELIVERY:
National City Bank (502) 581-4198 National City Bank
c/o Mellon Securities Trust Company c/o Mellon Securities Trust Company
120 Broadway, 13th Floor 120 Broadway, 13th Floor
New York, New York 10271 New York, New York 10271
Attention: Charles Lush Attention: Charles Lush
FOR INFORMATION CALL:
Charles Lush
(502) 581-7354
Delivery to an address other than the one stated above or transmission via
a facsimile number other than the one stated above will not constitute a valid
delivery.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are making the
principal solicitation by mail; however, our officers and regular employees may
make additional solicitations by facsimile, telephone or in person.
We have not retained any dealer manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange
offer, which we estimate to be approximately $200,000. These expenses include
registration fees, fees and expenses of the exchange agent and the trustee,
accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of Notes
pursuant to the exchange offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the Private Notes pursuant to the exchange
offer, then you must pay the amount of the transfer taxes. If you do not submit
satisfactory evidence of payment of the taxes or exemption from payment with the
letter of transmittal, we will bill the amount of the transfer taxes directly to
you.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. We urge you to consult
your financial and tax advisors in making your decisions on what action to take.
Private Notes that are not exchanged for Exchange Notes pursuant to the exchange
offer will remain restricted securities. Accordingly, those Private Notes may be
resold only:
o to a person whom the seller reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule 144A
under the Securities Act;
o in a transaction meeting the requirements of Rule 144 under the Securities
Act;
o outside the United States to a foreign person in a transaction meeting the
requirements of Rule 903 or 904 of Regulation S under the Securities Act;
o in accordance with another exemption from the registration requirements of
the Securities Act and based upon an opinion of counsel if we so request;
21
o to us; or
o pursuant to an effective registration statement.
In each case, the Private Notes may be resold only in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction.
USE OF PROCEEDS
There will be no cash proceeds payable to us from the issuance of the
Exchange Notes pursuant to the exchange offer. We used the proceeds from the
sale of the Private Notes to repay a portion of our existing indebtedness under
our existing bank credit agreements. In consideration for issuing the Exchange
Notes as contemplated in this prospectus, we will receive in exchange the
Private Notes in like principal amount, the terms of which are identical in all
material respects to the Exchange Notes. The Private Notes surrendered in
exchange for the Exchange Notes will be retired and cancelled and cannot be
reissued. Accordingly, the issuance of the Exchange Notes will not result in any
increase in our indebtedness.
22
CAPITALIZATION
The following table sets forth, as of September 30, 2001, our
capitalization, which reflects the sale of the Private Notes in September 2001
and the application of the net proceeds from the sale of the Private Notes to
repaying amounts under our existing bank credit agreements.
SEPTEMBER 30, 2001
-------------------
(IN THOUSANDS)
Cash and cash equivalents ............................................................ $ 190,876
==========
Current portion of long-term debt: 24,902
----------
Long-term debt (net of current maturities):
Advances under the $1,750,000,000 Revolving Credit Facility.......................... $ 613,000
3.25% Convertible Subordinated Debentures due 2003 .................................. 567,750
6.875% Senior Notes due 2005 ........................................................ 250,000
7.0% Senior Notes due 2008 .......................................................... 250,000
10-3/4% Senior Subordinated Notes due 2008 .......................................... 350,000
8 1/2% Senior Notes due 2008 ........................................................ 375,000
7 3/8% Senior Notes due 2006 ........................................................ 200,000
8 3/8% Senior Notes due 2011 ........................................................ 400,000
Other long-term debt ................................................................ 74,507
----------
Total long-term debt .............................................................. 3,080,257
----------
Stockholders' equity:
Preferred Stock, $.10 par value, 1,500,000 shares authorized; no shares outstanding.. --
Common Stock, $.01 par value, 600,000,000 shares authorized; 429,968,000 shares
outstanding (1) ................................................................... 4,300
Additional paid-in capital .......................................................... 2,652,854
Accumulated other comprehensive income .............................................. 12,130
Retained earnings ................................................................... 1,362,948
Treasury stock ...................................................................... (280,524)
Receivable from Employee Stock Ownership Plan ....................................... (2,699)
Notes receivable from stockholders, officers and management employees ............... (29,527)
----------
Total stockholders' equity ........................................................ 3,719,482
----------
Total capitalization ............................................................. $6,824,641
==========
----------
(1) Outstanding shares at September 30, 2001 do not include a total of
35,384,083 shares of Common Stock subject to options outstanding under our
stock option plans. An additional 736,824 shares of Common Stock are
reserved for future option grants under such plans. Outstanding shares also
do not include 65,457 shares of Common Stock reserved for issuance pursuant
to outstanding warrants, 2,425,000 shares of Common Stock reserved for
issuance under our 1998 Restricted Stock Plan and 15,501,707 shares of
Common Stock initially reserved for issuance upon conversion of our 3.25%
convertible subordinated debentures due 2003.
23
DESCRIPTION OF EXCHANGE NOTES
The Private Notes were issued, and the Exchange Notes offered hereby will
be issued, pursuant to an indenture, dated as of September 28, 2001 (the
"Indenture"), between us and National City Bank, as Trustee (the "Trustee"). The
following summary does not purport to be complete and such summary is subject to
the detailed provisions of the Indenture, to which reference is hereby made for
a full description of such provisions, including the definition of certain terms
used herein, and for other information regarding the Exchange Notes. Wherever
particular sections or defined terms of the Indenture are referred to, such
sections or defined terms are incorporated herein by reference as part of the
statement made, and the statement is qualified in its entirety by such
reference.
GENERAL
The Exchange Notes will be general unsecured obligations of the Company,
pari passu in right of payment to all existing and future senior Indebtedness of
the Company (including the Company's obligations under the Credit Agreements)
and senior to the Company's existing and future Subordinated Indebtedness. The
Company issued $200,000,000 aggregate principal amount of the 2006 Private Notes
and $400,000,000 aggregate principal amount of the 2011 Private Notes.
The Exchange Notes will bear interest from September 28, 2001 at the rate
of 7 3/8% on the 2006 Exchange Notes and 8 3/8% on the 2011 Exchange Notes,
payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on April 1, 2002, to holders of record at the close of business on
March 15 or September 15, as the case may be, immediately preceding the relevant
interest payment date. The payment of interest on Exchange Notes will be in lieu
of payment of any accrued but unpaid interest on Private Notes tendered for
exchange. Interest on the Exchange Notes will be calculated on the basis of a
360-day year of twelve 30-day months. The 2006 Exchange Notes will mature on
October 1, 2006, and the 2011 Exchange Notes will mature on October 1, 2011. In
each case, Exchange Notes will be issued in registered form, without coupons,
and in denominations of $1,000 and integral multiples thereof. The Exchange
Notes will be payable as to principal, premium, if any, and interest at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, by wire transfer of
immediately available funds or, in the case of certificated securities only, by
mailing a check to the registered address of the holders of the Exchange Notes.
See "-- Book-Entry; Delivery and Form". Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose.
Whether or not required by the rules and regulations of the Commission, so
long as any Exchange Notes are outstanding, the Company will file with the
Commission, to the extent such filings are accepted by the Commission, and will
furnish (within 15 days after such filing) to the Trustee and to the Holders all
quarterly and annual reports and other information, documents and reports that
would be required to be filed with the Commission pursuant to Section 13 of the
Exchange Act if the Company were required to file under such section. In
addition, the Company will make such information available to prospective
purchasers of the Exchange Notes, securities analysts and broker-dealers who
request it in writing.
OPTIONAL REDEMPTION OF THE EXCHANGE NOTES
The Exchange Notes will be redeemable, in whole or in part, at the option
of the Company at any time at a redemption price equal to 100% of the principal
amount of the Exchange Notes to be redeemed plus any applicable Make-Whole
Premium (as defined below) and accrued interest thereon to the date of
redemption. In the event of a partial redemption, the Company shall specify the
maturity or maturities, and the related principal amount or amounts, of the
Exchange Notes to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such redemption date, plus .50%.
24
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Exchange Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Exchange Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains three or fewer such Reference
Treasury Dealer Quotations, the average of all such quotations.
"Make-Whole Premium" means, for any Exchange Note to be redeemed, a premium
equal to the excess (if any) of (i) as determined by a Quotation Agent, the sum
of the present values of the remaining scheduled payments of principal and
interest on such Exchange Note discounted to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate over (ii) 100% of the unpaid principal amount of
such Exchange Note. If a redemption date does not fall on an interest payment
date, then, with respect to the interest payment immediately succeeding the
redemption date, only the unaccrued portion of such interest payment as of the
redemption date shall be included in the calculation pursuant to clause (i)
above.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) each of UBS Warburg LLC and Deutsche
Banc Alex. Brown Inc. and their respective successors; provided, however, that
if any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York, New York (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer; and (ii) any other Primary
Treasury Dealer selected by the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
If less than all of the Exchange Notes of a given maturity are to be
redeemed at any time, selection of the Exchange Notes to be redeemed will be
made by the Trustee from among the outstanding Exchange Notes of that maturity
on a pro rata basis, by lot or by any other method permitted in the Indenture.
Notice of redemption will be mailed at least 30 days but not more than 60 days
before the redemption date to each Holder whose Exchange Notes are to be
redeemed at the registered address of such Holder. On and after the redemption
date, interest will cease to accrue on the Exchange Notes or portions thereof
called for redemption.
The Exchange Notes will not be entitled to any sinking fund.
FALL-AWAY EVENT
In the event (i) the Exchange Notes are rated Investment Grade (as defined
below) and (ii) no Event of Default or Default shall have occurred and be
continuing, and upon delivery by the Company to the Trustee of an Officer's
Certificate certifying as to the foregoing events (the occurrence thereof being
collectively referred to as the "Fall-Away Event"), the covenants described
under "-- Certain Covenants of the Company Before the Fall-Away Event" and the
provisions of the Indenture described under "-- Change of Control" will no
longer be applicable to the Company and its Subsidiaries. After the occurrence
of the Fall-Away Event, the Company and its Subsidiaries will be subject to the
covenants described under "-- Certain Covenants of the Company After the
Fall-Away Event". As a result, upon the occurrence of the Fall-Away Event, the
Exchange Notes will
25
be entitled to substantially less covenant protection. If the Exchange Notes are
subsequently downgraded to, or otherwise become, non-Investment Grade, the
Indenture covenants previously released will not be reinstated.
CHANGE OF CONTROL
If a Change of Control shall occur, then each Holder will have the right to
require that the Company purchase such Holder's Exchange Notes, in whole or in
part in integral multiples of $1,000, at a purchase price (the "Change of
Control Purchase Price") in cash in an amount equal to 101% of the principal
amount thereof, plus accrued interest, if any, to the date of purchase (the
"Change of Control Purchase Date"), pursuant to the offer described below (the
"Change of Control Offer") and the other procedures set forth in the Indenture;
provided, however, that if the Fall-Away Event shall have occurred prior to the
time the Company shall otherwise be required to make such Change of Control
Offer, then the Company shall not be required to make such Change of Control
Offer.
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
Holder by first-class mail, postage prepaid, at the address of such Holder
appearing in the security register, stating, among other things:
(i) the offer to repurchase Exchange Notes at the Change of Control
Purchase Price and on the Change of Control Purchase Date, which shall
be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed;
(ii) that any Exchange Note not tendered will continue to accrue
interest;
(iii) that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any Exchange Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Purchase Date; and
(iv) certain other procedures that a Holder must follow to accept a
Change of Control Offer or to withdraw such acceptance.
The occurrence of certain of the events constituting a Change of Control
under the Indenture may result in an event of default in respect of the Credit
Agreements and other Indebtedness of the Company and its Subsidiaries and,
consequently, the lenders thereof will have the right to require repayment of
such Indebtedness in full. If a Change of Control Offer is made, there can be no
assurance that the Company will have available funds sufficient to pay the
Change of Control Purchase Price for all of the Exchange Notes that might be
delivered by Holders seeking to accept the Change of Control Offer and other
amounts that might become due and payable in respect of other Indebtedness of
the Company. The failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due would result
in an Event of Default and would give the Trustee and the Holders the rights
described under "-- Events of Default".
One of the events which constitutes a Change of Control under the Indenture
is the sale of "all or substantially all" of the Company's assets. This term has
not been interpreted under New York law (which is the governing law of the
Indenture) to represent a specific quantitative test. As a consequence, in the
event that the Holders believe that the Company is obligated to make a Change of
Control Offer as a result of a sale of all or substantially all of the Company's
assets and the Company does not believe it is so obligated, there can be no
assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a Holder's right to require the Company to purchase such
Holder's Exchange Notes upon a Change of Control may deter a third party from
acquiring the Company in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope
and applies only to the occurrence of events before the Fall-Away Event. The
provisions of the Indenture may not afford Holders the right to require the
Company to purchase such Exchange Notes in the event of a highly leveraged
transaction or a reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect Holders, if such transaction is
not a transaction defined as a Change of Control.
26
The Company will comply with any applicable securities laws and regulations
in connection with a Change of Control Offer.
This provision will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
CERTAIN COVENANTS OF THE COMPANY BEFORE THE FALL-AWAY EVENT
Set forth below are summaries of certain covenants contained in the
Indenture that, as is the case with the "Change of Control" provision of the
Indenture, will apply to the Exchange Notes only before the occurrence of the
Fall-Away Event.
Limitations on Additional Indebtedness and Subsidiary Preferred Stock.
(a) After the Issue Date,
(i) the Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee,
extend the Stated Maturity of, or otherwise become liable with respect
to (collectively, "incur"), any Indebtedness (including, without
limitation, Acquired Indebtedness) and
(ii) the Company will not permit any of its Subsidiaries to issue
(except to the Company or any of its Wholly Owned Subsidiaries) or
create any Preferred Stock or permit any Person (other than the Company
or a Wholly Owned Subsidiary) to own or hold any interest in any
Preferred Stock of any such Subsidiary;
provided, however, that the Company may incur Indebtedness and the Company may
permit its Subsidiaries to issue or create Preferred Stock if, after giving
effect thereto, the Company's EBITDA Coverage Ratio on the date thereof would be
at least 2.5 to 1, determined on a pro forma basis as if the incurrence of such
additional Indebtedness or the issuance of such Preferred Stock (declared to
have an aggregate principal amount equal to the aggregate liquidation value of
such Preferred Stock), as the case may be, and the application of the net
proceeds therefrom, had occurred at the beginning of the four-quarter period
used to calculate the Company's EBITDA Coverage Ratio.
(b) Notwithstanding the foregoing, and irrespective of the EBITDA
Coverage Ratio, in addition to Existing Indebtedness:
(i) the Company may incur Indebtedness pursuant to the Private Notes
issued on the Issue Date and the Exchange Notes issued in exchange for
Private Notes;
(ii) the Company and its Subsidiaries may incur Refinancing
Indebtedness in exchange for, or the net proceeds of which are applied
to refund, refinance or extend, Existing Indebtedness or other
Indebtedness that was permitted by the Indenture to be incurred under
this "Limitations on Additional Indebtedness and Subsidiary Preferred
Stock" covenant except for Indebtedness incurred under clause (iii) or
(iv) of this paragraph (b);
(iii) the Company may incur any Indebtedness to any Subsidiary or any
Subsidiary may incur any Indebtedness to the Company or to any
Subsidiary;
(iv) the Company and its Subsidiaries may incur any Indebtedness
evidenced by letters of credit which are used in the ordinary course of
business of the Company and its Subsidiaries to secure workers'
compensation and other insurance coverages;
(v) the Company and its Subsidiaries may incur Capitalized Lease
Obligations and Attributable Indebtedness, in each case excluding
Existing Indebtedness, but including all Refinancing Indebtedness
incurred in exchange for, or the net proceeds of which are applied to
refund, refinance or extend, any Indebtedness incurred pursuant to this
clause (v), in an aggregate principal amount at any one time outstanding
not to exceed 10% of Consolidated Tangible Assets at such time; and
(vi) the Subsidiaries of the Company may incur Indebtedness, including
all Refinancing Indebtedness incurred in exchange for, or the net
proceeds of which are applied to refund, refinance or extend, any
Indebtedness incurred pursuant to this clause (vi), in an aggregate
27
principal amount at any time outstanding not to exceed $250,000,000, in
addition to Existing Indebtedness and other Indebtedness permitted to be
incurred by Subsidiaries of the Company pursuant to the foregoing clauses
(ii)-(v).
(c) Notwithstanding the foregoing, the Company may permit any Subsidiary
which is a partnership formed to operate a single healthcare facility to
issue or create Preferred Stock, provided that the aggregate amount of all
such Preferred Stock outstanding after giving effect to such issuance or
creation shall not exceed 1% of Consolidated Tangible Assets as of the date
of such issuance or creation.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
Limitations on Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment if at the time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(ii) after giving effect to the proposed Restricted Payment, the
amount of such Restricted Payment, when added to the aggregate amount of
all Restricted Payments made after September 25, 2000, exceeds the sum
of:
(a) 50% of the Company's Consolidated Net Income accrued during the
period (taken as a single period) commencing on July 1, 1997 to and
including the fiscal quarter ended immediately prior to the date of such
Restricted Payment (or, if such aggregate Consolidated Net Income shall be a
deficit, minus 100% of such aggregate deficit),
(b) the net cash proceeds from the issuance and sale of the Company's
Capital Stock (other than to a Subsidiary of the Company) that is not
Disqualified Stock during the period (taken as a single period) commencing
with the Issue Date, and
(c) $50,000,000; or
(iii) the Company would not be able to incur an additional $1.00 of
Indebtedness under the EBITDA Coverage Ratio in the "-- Limitations on
Additional Indebtedness and Subsidiary Preferred Stock" covenant.
Notwithstanding the foregoing, the Company may:
(w) pay any dividend within 60 days after the date of declaration thereof
if the payment thereof would have complied with the limitations of this
"Limitations on Restricted Payments" covenant on the date of declaration;
(x) retire shares of the Company's Capital Stock or the Company's or a
Subsidiary of the Company's Indebtedness out of the proceeds of a
substantially concurrent sale (other than to a Subsidiary of the Company) of
shares of the Company's Capital Stock (other than Disqualified Stock);
(y) make Investments in Joint Ventures which, when added to the aggregate
amount of all such other Investments made pursuant to this clause (y) (or
such other Investments as would have been made pursuant to this clause (y)
had such clause been in effect) after September 25, 2000, do not exceed 5%
of Consolidated Tangible Assets at such time (with each such Investment
being valued as of the date made and without regard to subsequent changes in
value); and
(z) make Investments which, when added to the aggregate amount of all
such other Investments made pursuant to this clause (z) (or such other
Investments as would have been made pursuant to this clause (z) had such
clause been in effect) after September 25, 2000, do not exceed 2.5% of
Consolidated Tangible Assets at such time (with each such Investment being
valued as of the date made and without regard to subsequent changes in
value);
28
provided, however, that each Restricted Payment described in clause (w) or (x)
above shall be taken into account for purposes of computing the aggregate amount
of all Restricted Payments pursuant to clause (ii) of the immediately preceding
paragraph.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
Limitations on Restrictions on Distributions from Subsidiaries. The Company
will not, and will not permit any of its Subsidiaries to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction (other than encumbrances or restrictions imposed by law or by
judicial or regulatory action or by provisions in leases or other agreements
that restrict the assignability thereof) on the ability of any Subsidiary of the
Company to
(i) pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its profits,
owned by the Company or any of its other Subsidiaries, or pay interest
on or principal of any Indebtedness owed to the Company or any of its
other Subsidiaries,
(ii) make loans or advances to the Company or any of its other
Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any
of its other Subsidiaries,
in each case except for encumbrances or restrictions existing under or by
reason of
(a) applicable law,
(b) the Credit Agreements,
(c) Existing Indebtedness,
(d) any restrictions under any agreement evidencing any Acquired
Indebtedness that was permitted to be incurred pursuant to the Indenture and
which was not incurred in anticipation or contemplation of the related
acquisition, provided that such restrictions and encumbrances only apply to
assets that were subject to such restrictions and encumbrances prior to the
acquisition of such assets by the Company or its Subsidiaries,
(e) restrictions or encumbrances replacing those permitted by clause (b),
(c) or (d) above which, taken as a whole, are not materially more
restrictive,
(f) the Indenture,
(g) any restrictions and encumbrances arising in connection with
Refinancing Indebtedness; provided, however, that any restrictions or
encumbrances of the type described in this clause that arise under such
Refinancing Indebtedness are not, taken as a whole, materially more
restrictive than those under the agreement creating or evidencing the
Indebtedness being refunded or refinanced,
(h) any restrictions with respect to a Subsidiary of the Company imposed
pursuant to an agreement that has been entered into for the sale or other
disposition of all or substantially all of the Capital Stock or assets of
such Subsidiary,
(i) any agreement restricting the sale or other disposition of property
securing Indebtedness if such agreement does not expressly restrict the
ability of a Subsidiary of the Company to pay dividends or make loans or
advances and
(j) customary restrictions in purchase money debt or leases relating to
the property covered thereby.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
29
Limitations on Layering Indebtedness. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, incur any
Indebtedness that purports to be by its terms subordinated to any other
Indebtedness of the Company or such Subsidiary, as the case may be, unless such
Indebtedness is also expressly subordinated to the Exchange Notes to the same
extent and in the same manner as such Indebtedness is subordinated to such other
Indebtedness.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
Limitations on Transactions with Affiliates. Neither the Company nor any of
its Subsidiaries will, directly or indirectly, in one transaction or a series of
transactions, make any loan, advance, guarantee or capital contribution to, or
for the benefit of, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or for the benefit of, or purchase or lease any
property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, any Affiliate of the Company or any
of its Subsidiaries or any Person (or any Affiliate of such Person) holding 10%
or more of the Common Equity of the Company or any of its Subsidiaries, other
than transactions in the ordinary course between the Company and its
Subsidiaries or among Subsidiaries of the Company (an "Affiliate Transaction"),
unless
(i) the terms of such Affiliate Transaction are fair and reasonable to
the Company or such Subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties;
(ii) with respect to any such Affiliate Transaction involving
aggregate payments in excess of $5,000,000, the Company delivers an
Officers' Certificate to the Trustee certifying that such Affiliate
Transaction complies with clause (i) above and a Secretary's Certificate
which sets forth and authenticates a resolution that has been adopted by
a vote of a majority of the disinterested members of the Board of
Directors approving such Affiliate Transaction; and
(iii) with respect to any such Affiliate Transaction involving
aggregate payments in excess of $25,000,000, the Company delivers to the
Trustee the certificates specified in clause (ii) above and an opinion
of an independent investment banking firm of national standing in the
United States, stating that such Affiliate Transaction is fair from a
financial point of view to the Company or such Subsidiary, as the case
may be;
provided, however, that the foregoing clauses (ii) and (iii) shall not apply to
transactions between the Company or any of its Subsidiaries and
MedCenterDirect, Inc. or Source Medical Solutions, Inc.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
Limitations on Liens. The Company will not create or suffer to exist any
Lien (other than Permitted Liens) on any of its assets, unless contemporaneously
therewith:
(i) in the case of any Lien securing an obligation that ranks pari
passu with the Exchange Notes, effective provision is made to secure the
Exchange Notes at least equally and ratably with or prior to such
obligation with a Lien on the same collateral; and
(ii) in the case of any Lien securing an obligation that is
subordinated in right of payment to the Exchange Notes, effective
provision is made to secure the Exchange Notes with a Lien on the same
collateral that is prior to the Lien securing such subordinated
obligation.
Notwithstanding the above, the Company may, without securing the Exchange
Notes, create or assume any Indebtedness which is secured by a Lien which would
otherwise be subject to the foregoing restrictions, provided that after giving
effect thereto, the Exempted Debt then outstanding does not exceed 10% of the
total Consolidated Tangible Assets of the Company and its Subsidiaries at such
time.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
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Limitations on Asset Sales. (a) The Company will not, and will not permit
any of its Subsidiaries to, consummate any Asset Sale unless
(i) the Company or such Subsidiary receives consideration at the time
of such Asset Sale at least equal to the Fair Market Value of the assets
included in such Asset Sale,
(ii) immediately before and immediately after giving effect to such
Asset Sale, no Default or Event of Default shall have occurred and be
continuing and
(iii) at least 75% of the consideration received by the Company or
such Subsidiary therefor is in the form of cash paid at the closing
thereof; provided, however, that this clause (iii) shall not apply if,
after giving effect to such Asset Sale, the aggregate principal amount
of all notes or similar debt obligations and Fair Market Value of all
equity securities received by the Company from all Asset Sales since
September 25, 2000 (other than such notes or similar debt obligations
and such equity securities converted into or otherwise disposed of for
cash and applied in accordance with the second succeeding sentence)
would not exceed 2.5% of Consolidated Tangible Assets at such time.
The amount (without duplication) of any (x) Indebtedness (other than
Subordinated Indebtedness) of the Company or such Subsidiary that is expressly
assumed by the transferee in such Asset Sale and with respect to which the
Company or such Subsidiary, as the case may be, is unconditionally released by
the holder of such Indebtedness and (y) any notes, securities or similar
obligations or items of property received from such transferee that are
immediately converted, sold or exchanged by the Company or such Subsidiary for
cash (to the extent of the cash actually so received), shall be deemed to be
cash for purposes of this "Limitations on Asset Sales" covenant. If at any time
any non-cash consideration received by the Company or such Subsidiary, as the
case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to any
such non-cash consideration), then the date of such conversion or disposition
shall be deemed to constitute the date of an Asset Sale hereunder and the Net
Proceeds thereof shall be applied in accordance with this "Limitations on Asset
Sales" covenant. A transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned Subsidiary will not be deemed to be an Asset Sale and a transfer of assets
that constitutes a Restricted Payment and that is permitted under the covenant
described under "--Limitations on Restricted Payments" will not be deemed to be
an Asset Sale.
(b) If the Company or any Subsidiary engages in an Asset Sale, the
Company or such Subsidiary shall, no later than 360 days after such Asset
Sale,
(i) apply all or any of the Net Proceeds therefrom to repay
Indebtedness that ranks pari passu with the Exchange Notes and is
secured by the assets disposed of in the Asset Sale or to repay Bank
Debt in accordance with the applicable provisions thereof,
(ii) invest all or any part of the Net Proceeds therefrom in the lines
of business of the Company or any of its Subsidiaries immediately prior
to such investment or
(iii) any combination of clauses (i) and (ii) above.
The amount of such Net Proceeds not applied or invested as provided in this
paragraph will constitute "Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$5,000,000, the Company will be required to make an offer to purchase (an
"Asset Sale Offer") from all Holders, an aggregate principal amount of
Exchange Notes equal to the amount of such Excess Proceeds as follows:
(i) The Company will make an Asset Sale Offer to all Holders in
accordance with the procedures set forth in the Indenture to purchase
the maximum principal amount (expressed as a multiple of $1,000) of
Exchange Notes that may be purchased out of the amount (the "Asset Sale
Payment Amount") of such Excess Proceeds.
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(ii) The offer price for the Exchange Notes will be payable in cash in
an amount equal to 100% of the principal amount of the Exchange Notes
tendered pursuant to such Asset Sale Offer, plus accrued and unpaid
interest and Additional Interest, if any, to the date such Asset Sale
Offer is consummated (the "Asset Sale Purchase Price"), in accordance
with the procedures set forth in the Indenture. To the extent that the
aggregate Asset Sale Purchase Price of Exchange Notes tendered pursuant
to an Asset Sale Offer is less than the Asset Sale Payment Amount
relating thereto (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency, or a
portion thereof, for general corporate purposes.
(iii) If the aggregate Asset Sale Purchase Price of Exchange Notes
validly tendered and not withdrawn by holders thereof exceeds the Asset
Sale Payment Amount, Exchange Notes to be purchased will be selected on
a pro rata basis.
(iv) Upon completion of such Asset Sale Offer in accordance with the
foregoing provisions, the amount of Excess Proceeds with respect to
which such Asset Sale Offer was made shall be deemed to be zero.
In the event that any other Indebtedness of the Company which ranks pari
passu with the Exchange Notes ("Other Debt") requires an offer to purchase to be
made to repurchase such Other Debt upon the consummation of an Asset Sale, the
Company may apply the Excess Proceeds to both purchase such Other Debt and to
make an Asset Sale Offer, provided, that the purchase price of such other debt
does not exceed 100% of the aggregate principal amount or accreted value thereof
plus interest thereon. With respect to any Excess Proceeds, the Company shall
make the Asset Sale Offer in respect thereof at the same time as the analogous
offer to purchase is made pursuant to any Other Debt and the purchase date in
respect thereof shall be the same as the purchase date in respect thereof
pursuant to any Other Debt.
With respect to any Asset Sale Offer effected pursuant to this "Limitations
on Asset Sales" covenant, to the extent the aggregate principal amount of
Exchange Notes and Other Debt, if any, tendered pursuant to such Asset Sale
Offer and the concurrent offer to purchase with respect to such Other Debt,
exceeds the Excess Proceeds, such Exchange Notes and Other Debt, if any, shall
be purchased pro rata based on the aggregate principal amount of such Exchange
Notes and such Other Debt tendered by each holder thereof.
The Company will comply with any applicable securities laws and regulations
in connection with an Asset Sale Offer.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
Limitations on Mergers and Consolidations. The Company will not consolidate
or merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or assign any of its obligations under the
Exchange Notes or the Indenture, to any Person unless:
(i) the Person formed by or surviving such consolidation or merger (if
other than the Company), or to which such sale, lease, conveyance or
other disposition or assignment shall be made (collectively, the
"Successor"), is a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia, and
the Successor assumes by supplemental indenture in a form satisfactory
to the Trustee all of the obligations of the Company under the Exchange
Notes and the Indenture;
(ii) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, no Default or Event
of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Consolidated Net
Worth of the Company or the Successor, as the case may be, would be at
least equal to the Consolidated Net Worth of the Company immediately
prior to such transaction;
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(iv) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the EBITDA Coverage
Ratio of the Company or the Successor, as the case may be, would be such
that the Company or the Successor, as the case may be, would be entitled
to incur at least $1.00 of additional Indebtedness under the EBITDA
Coverage Ratio test in the "-- Limitations on Additional Indebtedness
and Subsidiary Preferred Stock" covenant; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, lease, conveyance or other disposition or
assignment complies with the provisions of the Indenture.
This covenant will not apply to the Exchange Notes after the occurrence of
the Fall-Away Event.
CERTAIN COVENANTS OF THE COMPANY AFTER THE FALL-AWAY EVENT
Set forth below are summaries of certain covenants contained in the
Indenture that will apply to the Exchange Notes only after the occurrence of the
Fall-Away Event.
Limitations on Liens. The Company will not, nor will it permit any
Subsidiary to, directly or indirectly, create or incur any Lien of any kind
securing Indebtedness for money borrowed upon any assets, whether now owned or
hereafter acquired, of the Company or any such Subsidiary without equally and
ratably securing the Exchange Notes by a Lien ranking ratably with and equally
to such secured Indebtedness, except that the foregoing restriction shall not
apply to: (i) Liens on assets of any corporation existing at the time such
corporation becomes a Subsidiary; (ii) Liens on assets existing at the time of
acquisition thereof, or to secure the payment of the purchase price of such
assets, or to secure Indebtedness incurred or guaranteed by the Company or a
Subsidiary for the purpose of financing the purchase price of such assets or
improvements or construction thereon, which Indebtedness is incurred or
guaranteed prior to, at the time of or within 360 days after such acquisition
(or in the case of real property, completion of such improvement or construction
or commencement of full operation of such property, whichever is later); (iii)
Liens on any assets of a corporation existing at the time such corporation is
merged into or consolidated with the Company or a Subsidiary or at the time of a
purchase, lease or other acquisition of the assets of a corporation or firm as
an entirety or substantially as an entirety by the Company or a Subsidiary; (iv)
Liens on any assets of the Company or a Subsidiary in favor of the United States
of America or any state thereof, or in favor of any other country, or in favor
of any political subdivision of any of the foregoing, to secure certain payments
pursuant to any contract or statute or to secure any Indebtedness incurred or
guaranteed for the purpose of financing all or any part of the purchase price
(or, in the case of real property, the cost of construction) of the assets
subject to such Liens (including, but not limited to, Liens incurred in
connection with industrial revenue or similar financing involving a political
subdivision, agency or authority thereof); (v) Liens relating to accounts
receivable of the Company or any of its Subsidiaries which have been sold,
assigned or otherwise transferred to another Person in a transaction classified
as a sale of accounts receivable in accordance with GAAP (to the extent the sale
by the Company or the applicable Subsidiary is deemed to give rise to a Lien in
favor of the purchaser thereof in such accounts receivable or the proceeds
thereof); or (vi) any other Permitted Lien. Notwithstanding the above, the
Company or any Subsidiary may, without securing the Exchange Notes, create or
assume any Indebtedness which is secured by a Lien that would otherwise be
subject to the foregoing restrictions, provided that after giving effect thereto
the Exempted Debt (other than Attributable Indebtedness in respect of Sale and
Leaseback Transactions involving leases not exceeding five years) then
outstanding does not exceed 10% of the total Consolidated Tangible Assets of the
Company and its Subsidiaries at such time.
Limitation on Sale and Leaseback Transactions. Sale and Leaseback
Transactions (except such transactions involving leases not exceeding five
years) by the Company or any Subsidiary of any assets are prohibited unless (i)
the Company or such Subsidiary would be entitled pursuant to clauses (i) through
(vi) contained in the covenant described under "-- Certain Covenants of the
Company After the Fall-Away Event -- Limitations on Liens", to create, incur or
permit to exist a lien on the assets to be leased in an amount at least equal to
the Attributable Debt in respect of such transaction
33
without equally and ratably securing the Exchange Notes, or (ii) the proceeds
from the sale of the assets to be leased are at least equal to their fair market
value and the proceeds are applied to the purchase or acquisition (or, in the
case of real property, the construction) of assets or to the retirement of
indebtedness.
Limitations on Mergers and Consolidations. The Company will not consolidate
with or merge into any other Person, or convey, transfer or lease its properties
and assets substantially as an entirety to any other Person, and the Company
shall not permit any other Person to consolidate with or merge into the Company
or convey, transfer or lease its properties and assets substantially as an
entirety to the Company, unless (a) either the Company shall be the continuing
corporation, or the successor entity (if other than the Company) formed by such
consolidation or merger or into which the properties and assets of the Company
substantially as an entirety are transferred or leased shall be a corporation,
partnership, limited liability company or trust organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in a form satisfactory to the Trustee, all the
obligations of the Company under the Exchange Notes and the Indenture, and (b)
immediately after giving effect to such transaction and treating any
Indebtedness that becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Default or Event of Default shall
have occurred and be continuing. Upon assumption of the Company's obligations by
an entity to whom such assets are transferred or leased, subject to certain
exceptions, the Company shall be discharged from all obligations under the
Exchange Notes and the Indenture.
There are no covenants or other provisions in the Indenture providing for a
put at the option of the holders of the Exchange Notes or an increase in the
rate of interest borne by the respective Exchange Notes or that would otherwise
afford holders of any of the Exchange Notes protection in the event of a
recapitalization transaction or a highly leveraged transaction.
EVENTS OF DEFAULT
An "Event of Default" means each one of the following events which shall
have occurred and be continuing with respect to the Notes of a single maturity
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in the payment of any installment of interest upon any of
such Notes as and when the same shall become due and payable, and
continuance of such default for a period of 30 days;
(ii) default in the payment of all or any part of the principal, or
premium, if any, on any of such Notes as and when the same shall become
due and payable either at its Stated Maturity, upon any redemption, by
declaration or otherwise;
(iii) failure by the Company to comply with its then applicable
obligations or covenants described under the captions "-- Change of
Control", "-- Certain Covenants of the Company Before the Fall-Away
Event -- Limitations on Asset Sales" or "-- Limitations on Mergers and
Consolidations";
(iv) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in such
Notes or the Indenture (other than the covenants referred to in clauses
(i), (ii) and (iii) above) for a period of 60 days after the date on
which written notice specifying such failure, stating that such notice
is a "Notice of Default" under the Indenture and demanding that the
Company remedy the same, shall have been given by registered or
certified mail, return receipt requested, to the Company by the Trustee,
or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of such outstanding Notes;
34
(v) default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company or any Subsidiary of the
Company or under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any Subsidiary of the
Company, whether such Indebtedness now exists or shall hereafter be
created, if (i) such default results in such Indebtedness becoming or
being declared due and payable prior to the date on which it would
otherwise become due and payable, (ii) the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness which has been so accelerated, aggregates $25,000,000 or
more at any one time outstanding and (iii) such Indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within a
period of 10 days after there shall have been given to the Company by
the Trustee or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of such outstanding Notes a written
notice specifying such default and requiring the Company to cause such
Indebtedness to be discharged or cause such acceleration to be rescinded
or annulled; or
(vi) certain events of bankruptcy, insolvency or reorganization
involving the Company or any Significant Subsidiary of the Company.
If an Event of Default (other than an Event of Default specified in clause
(vi) above relating to the Company) shall have occurred and be continuing under
the Indenture with respect to the Notes of a particular maturity, the Trustee,
by written notice to the Company, or the Holders of at least 25% in aggregate
principal amount of such Notes then outstanding by written notice to the Company
and the Trustee, may declare all amounts owing under such Notes to be due and
payable. Upon effectiveness of such acceleration, the aggregate principal of,
premium, if any, and interest on such outstanding Notes shall immediately become
due and payable. If an Event of Default specified in clause (vi) above relating
to the Company occurs, all outstanding Notes shall become due and payable
without any further action or notice.
In certain cases, the Holders of a majority in aggregate principal amount
of such Notes then outstanding may waive an existing Default or Event of Default
and its consequences, except a default in the payment of principal of, premium,
if any, and interest on the Notes.
The Holders may not enforce the provisions of the Indenture or such Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of such Notes then outstanding may direct the
Trustee in its exercise of any trust or power; provided, however, that such
direction does not conflict with the terms of the Indenture. The Trustee may
withhold from the Holders notice of any continuing Default or Event of Default
(except any Default or Event of Default in payment of principal of or premium,
if any, or interest on the Notes) if the Trustee determines that withholding
such notice is in the Holders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and, upon any Officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may, at its option by a resolution of the Board of Directors,
at any time, elect to have the obligations of the Company discharged with
respect to the outstanding 2006 Exchange Notes, the outstanding 2011 Exchange
Notes or all outstanding Exchange Notes ("Legal Defeasance") under the
Indenture. Such defeasance means that the Company will be deemed to have paid
and discharged the entire Indebtedness represented by such outstanding Exchange
Notes and to have satisfied all its other obligations under such Exchange Notes
and the Indenture insofar as such Exchange Notes are concerned except for
(i) the rights of Holders of such outstanding Exchange Notes to
receive payments in respect of the principal of, premium, if any, and
interest on such Exchange Notes when such payments are due on the Stated
Maturity thereof (or, upon redemption, if applicable) from the trust
fund established to effect such defeasance,
35
(ii) the Company's obligations to issue temporary Exchange Notes,
register the transfer or exchange of any such Exchange Notes, replace
mutilated, destroyed, lost or stolen Exchange Notes, maintain an office
or agency for payments in respect of such Exchange Notes and segregate
and hold such payments in trust,
(iii) the rights, powers, trusts, duties and immunities of the
Trustee and
(iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option by a resolution of the Board of
Directors, at any time, elect to have the obligations of the Company released
with respect to certain covenants set forth in the Indenture, and any omission
to comply with such obligations will not constitute a Default or an Event of
Default, with respect to such Exchange Notes ("Covenant Defeasance").
In order to exercise either Legal Defeasance or Covenant Defeasance under
the Indenture:
(i) the Company must irrevocably deposit or cause to be deposited with
the Trustee, as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders, cash in U.S.
dollars, or U.S. government obligations, or, in the case of Covenant
Defeasance, corporate obligations rated at least "A" by S&P or at least
"A" by Moody's or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of,
premium, if any, and interest on such outstanding Exchange Notes on the
Stated Maturity thereof (or upon redemption, if applicable) of such
principal, premium, if any, or installment of interest;
(ii) no Default or Event of Default with respect to such Exchange
Notes will have occurred and be continuing on the date of such deposit
or, insofar as an event of bankruptcy under clause (vi) of "-- Events of
Default" above is concerned, at any time during the period ending on the
91st day after the date of such deposit;
(iii) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under, the Indenture
or any material agreement or instrument to which the Company is a party
or by which it is bound;
(iv) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel stating that the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling, or since the Issue Date there has been a change in
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
outstanding Exchange Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had
not occurred;
(v) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such outstanding Exchange Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with.
TRANSFER AND EXCHANGE
A Holder will be able to register the transfer of or exchange Exchange
Notes only in accordance with the provisions of the Indenture. The Registrar may
require a Holder, among other things, to
36
furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. Without the prior
consent of the Company, the Registrar is not required
(i) to register the transfer of or exchange any Exchange Note
selected for redemption,
(ii) to register the transfer of or exchange any Exchange Note for a
period of 15 days before the mailing of a notice of redemption and
ending on the date of such mailing or
(iii) to register the transfer or exchange of an Exchange Note between
a record date and the next succeeding interest payment date.
The registered Holder will be treated as the owner of such Exchange Note for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes, as to a single
maturity of Notes or as to all of the Notes, may be amended or supplemented with
the consent (which may include consents obtained in connection with a tender
offer or exchange offer for such Notes) of the Holders of a majority in
principal amount of such Notes then outstanding, and any existing Default under,
or compliance with any provision of, the Indenture may be waived (other than any
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest on such Notes) with the consent (which may include
consents obtained in connection with a tender offer or exchange offer for such
Notes) of the Holders of a majority in principal amount of such Notes then
outstanding; provided that without the consent of each Holder affected, the
Company and the Trustee may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, such Note or alter the optional redemption
provisions thereof;
(ii) reduce the principal amount of, or premium, if any, or interest
on, such Note or extend the time of payments under the Notes;
(iii) modify the ranking of such Notes in a manner adverse to the
Holder;
(iv) change the place or currency of payment of principal of, or
premium, if any, or interest on, such Note;
(v) alter the provisions with respect to the obligation of the Company
to make a Change of Control Offer in accordance with "-- Change of
Control" above or to make an Asset Sale Offer in accordance with "--
Certain Covenants of the Company Before the Fall-Away Event --
Limitations on Asset Sales" above;
(vi) impair the right to institute suit for the enforcement of any
payment on or with respect to such Note; or
(vii) reduce the percentage in principal amount of such outstanding
Notes, the consent of whose Holders is required for modification or
amendment of the Indenture or for waiver of compliance with certain
provisions of the Indenture or for waiver of certain Defaults or Events
of Default.
Without the consent of any Holder, the Company and the Trustee may amend or
supplement the Indenture or the Notes, as to a single maturity of Notes or as to
all of the Notes:
(i) to cure any ambiguity, or to correct or supplement any provision
in the Indenture or the Notes or make any other provisions with respect
to matters or questions arising under the Indenture or the Notes;
provided that, in each case, such provisions shall not adversely affect
the interest of the Holders;
(ii) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(iii) to provide for the assumption by a successor corporation of the
Company's obligations under the Indenture;
37
(iv) to add guarantees with respect to the Notes;
(v) to secure the Notes;
(vi) to add to the covenants of the Company or the Events of Default
for the benefit of Holders;
(vii) to surrender any right or power conferred on the Company; or
(viii) to make any other change that does not adversely affect the
rights of any Holder or to comply with any requirement of the Commission
in connection with the qualification of the Indenture under the Trust
Indenture Act.
It will not be necessary under the Indenture for the consent of Holders to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment. The Company may, but
shall not be obligated to, fix a record date for the purpose of determining the
Holders entitled to consent to any amendment, supplement or waiver. If a record
date is fixed, then those Persons who were Holders at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to revoke
any consent previously given, whether or not such Persons shall continue to be
Holders after such record date.
CONCERNING THE TRUSTEE
National City Bank is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the
Exchange Notes. National City Bank is a lender under our $1,750,000,000
revolving credit facility with Bank of America, N.A., and other participating
banks. The Indenture contains certain limitations on the rights of the Trustee,
if it has or acquires a "conflicting interest" within the meaning of the Trust
Indenture Act, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other transactions; provided,
however, if the Trustee acquires any conflicting interest (as defined in the
Indenture), it must eliminate such conflict or resign.
The Holders of a majority in principal amount of the then outstanding 2006
Notes or 2011 Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee
with respect to such Notes, subject to certain exceptions. The Indenture
provides that, in case an Event of Default occurs and is not cured, the Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent person in similar circumstances in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to the Trustee.
GOVERNING LAW
The Indenture and the Exchange Notes provide that they will be governed by,
and construed in accordance with, the laws of the State of New York.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be represented by one or more global notes (the
"Global Notes") in definitive form. The Global Notes will be deposited, on or
promptly after the expiration date of the exchange offer, with, or on behalf of,
DTC and registered in the name of Cede & Co., as nominee of DTC (such nominee
being referred to herein as the "Global Note Holder"). DTC will maintain the
Exchange Notes in denominations of $1,000 and integral multiples thereof through
its book-entry facilities.
38
DTC has advised the Company as follows:
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations, including Euroclear Bank as operator of The
Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme
("Clearstream") (collectively, the "Participants" or the "Depositary's
Participants"), and to facilitate the clearance and settlement of transactions
in these securities between Participants through electronic book-entry changes
in accounts of its Participants. The Depositary's Participants include
securities brokers and dealers (including the initial purchasers), banks and
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of DTC
only through the Depositary's Participants or the Depositary's Indirect
Participants. Pursuant to procedures established by DTC, ownership of the
Exchange Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the interests
of the Depositary's Participants) and the records of the Depositary's
Participants (with respect to the interests of the Depositary's Indirect
Participants).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer the Exchange Notes will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Exchange
Notes, the Global Note Holder will be considered the sole holder of outstanding
Exchange Notes represented by such Global Notes under the Indenture. Except as
provided below, owners of Exchange Notes will not be entitled to have Exchange
Notes registered in their names and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions, or approvals to the Trustee thereunder.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
Exchange Notes by DTC, or for maintaining, supervising or reviewing any records
of DTC relating to such Exchange Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Exchange Notes registered in the name of a Global Note Holder on the
applicable record date will be payable by the Trustee to or at the direction of
such Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names any Exchange Notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the Company
nor the Trustee has or will have any responsibility or liability for the payment
of such amounts to beneficial owners of Exchange Notes (including principal,
premium, if any, and interest). The Company believes, however, that it is
currently the policy of DTC to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
beneficial interests in the relevant security as shown on the records of DTC.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Exchange Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depositary's Participants or the Depositary's Indirect Participants.
Exchange Notes in registered certificated form ("Certificated Notes") will
not generally be issued in exchange for beneficial interests in the Global
Notes. Subject to certain conditions, however, any person having a beneficial
interest in the Global Notes may, upon request to the Trustee and confirmation
of such beneficial interest by the Depositary or its Participants or Indirect
Participants, exchange such beneficial interest for Certificated Notes. Upon any
such issuance, the Trustee is required to register Certificated Notes in the
name of and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). In addition, if (1) the Company notifies the
39
Trustee in writing that DTC is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or (2)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in definitive form under the Indenture, then, upon
surrender by the relevant Global Note Holder of its Global Note, Exchange Notes
in such form will be issued to each person that such Global Note Holder and DTC
identifies as being the beneficial owner of the related Exchange Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or DTC in identifying the beneficial owners of Exchange
Notes, and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or DTC for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms used in the Indenture.
"Acquired Indebtedness" means (i) with respect to any Person that becomes a
Subsidiary of the Company after the Issue Date, Indebtedness of such Person and
its Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company and (ii) with respect to the Company or any of its Subsidiaries, any
Indebtedness assumed by the Company or any of its Subsidiaries in connection
with the acquisition of an asset from another Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For the purposes of this definition, "control" when
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger or consolidation, and
whether by operation of law or otherwise) of any of that Person's assets
(including, without limitation, the sale or other disposition of Capital Stock
of any Subsidiary of such Person, whether by such Person or by such Subsidiary),
whether owned on the Issue Date or subsequently acquired, in one transaction or
a series of related transactions, in which such Person and/or its Subsidiaries
sell, lease, convey or otherwise dispose of:
(i) all or substantially all of the Capital Stock of any of such
Person's Subsidiaries,
(ii) assets which constitute all or substantially all of any division
or line of business of such Person or any of its Subsidiaries, or
(iii) any other assets of such Person or any of its Subsidiaries,
other than in the ordinary course of business, provided, that the Fair
Market Value thereof shall be at least 1% of Consolidated Tangible
Assets at such time;
provided, however, that the following shall not constitute Asset Sales:
(a) transactions between the Company and any of its Wholly Owned
Subsidiaries or among such Wholly Owned Subsidiaries;
(b) any transaction not prohibited by the covenant described under "--
Certain Covenants of the Company Before the Fall-Away Event -- Limitations
on Restricted Payments" or that constitutes a Permitted Investment;
(c) any transfer of assets (including Capital Stock) that is governed by
and in accordance with the provisions described under "-- Certain Covenants
of the Company Before the Fall-Away Event -- Limitations on Mergers and
Consolidations" or the creation of any Lien not prohibited by the covenant
described under "-- Certain Covenants of the Company Before the Fall-Away
Event -- Limitations on Liens"; or
40
(d) sales of damaged, worn-out or obsolete equipment or assets that, in
the Company's reasonable judgment, are no longer either used or useful in the
business of the Company or its Subsidiaries.
"Attributable Indebtedness" when used with respect to any Sale and
Leaseback Transaction means, as at the time of determination, the present value
(discounted at a rate equivalent to the interest rate implicit in the lease,
compounded on a semiannual basis) of the total obligations of the lessee for
rental payments, after excluding all amounts required to be paid on account of
maintenance and repairs, insurance, taxes, utilities and other similar expenses
payable by the lessee pursuant to the terms of the lease, during the remaining
term of the lease included in any such Sale and Leaseback Transaction or until
the earliest date on which the lessee may terminate such lease without penalty
or upon payment of a penalty (in which case the rental payments shall include
such penalty); provided, that the Attributable Indebtedness with respect to a
Sale and Leaseback Transaction shall be no less than the fair market value of
the property subject to such Sale and Leaseback Transaction.
"Bank Debt" means all obligations of the Company and its Subsidiaries, now
or hereafter existing under (i) the Credit Agreements, whether for principal,
interest, reimbursement of amounts drawn under letters of credit issued pursuant
thereto, guarantees in respect thereof, fees, expenses, premiums, indemnities or
otherwise, and (ii) any Indebtedness incurred by the Company to extend, refund,
supplement, refinance or replace, in whole or in part, such Bank Debt, including
any interest and premium on any such Indebtedness.
"Capital Stock" of any Person means any and all shares, rights to purchase,
warrants or options (whether or not currently exercisable), participation or
other equivalents of or interest in (however designated) the equity (including
without limitation common stock, preferred stock and partnership, joint venture
and limited liability company interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
"Capitalized Lease Obligations" of any Person means the obligation of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
"Change of Control" means the occurrence at any time before the Fall-Away
Event of any of the following:
(i) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons;
(ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving
corporation (other than a consolidation or merger with a Wholly Owned
Subsidiary of the Company in which all shares of the Company's Common
Equity outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to
which the Company's Common Equity would be converted into cash,
securities or other property, in each case other than a consolidation or
merger of the Company in which the holders of the Company's Common Equity
immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the total voting power of all classes
of Capital Stock entitled to vote generally in the election of directors
of the continuing or surviving corporation immediately after such
consolidation or merger in substantially the same proportion as their
ownership of the Company's Common Equity immediately before such
transaction;
(iii) any person, or any persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act,
together with any affiliates thereof, shall beneficially own (as defined
in Rule 13d-3 under the Exchange Act) at least 50% of the total voting
power of all classes of Capital Stock of the Company entitled to vote
generally in the election of directors of the Company;
41
(iv) at any time during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of
the Company (together with any new directors whose election by such Board
of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the
Company then in office; or
(v) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, the body performing
such duties at the time.
"Common Equity" of any Person means all Capital Stock of such Person that
is generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Amortization Expense" of any Person for any period means the
amortization expense of such Person and its Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income of such Person),
determined on a consolidated basis in accordance with GAAP.
"Consolidated Depreciation Expense" of any Person means the depreciation
expense of such Person and its Subsidiaries for such period (to the extent
included in the computation of Consolidated Net Income of such Person),
determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" of any Person means, with respect to any
determination date, Consolidated Net Income, plus (i) Consolidated Income Tax
Expense, plus (ii) Consolidated Depreciation Expense, plus (iii) Consolidated
Amortization Expense, plus (iv) Consolidated Interest Expense, plus (v) all
other unusual non-cash items or non-recurring non-cash items reducing
Consolidated Net Income of such Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, and less all non-cash items
increasing Consolidated Net Income of such Person and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, in each case, for
such Person's prior four full fiscal quarters for which financial results have
been reported immediately preceding the determination date.
"Consolidated Income Tax Expense" means, for any Person for any period, the
provision for taxes based on income and profits of such Person and its
Subsidiaries to the extent such provision for income taxes was deducted in
computing Consolidated Net Income of such Person for such period, determined on
a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" of any Person for any period means, without
duplication, (i) the Interest Expense of such Person and its Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP, plus
(ii) (to the extent not otherwise included within the definition of Interest
Expense as imputed interest) one-third of the rental expense on Attributable
Indebtedness of such Person for such period determined on a consolidated basis,
plus (iii) the dividend requirements of such Person and its Subsidiaries with
respect to Disqualified Stock and with respect to all other Preferred Stock of
Subsidiaries of such Person (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock (other than Disqualified
Stock) of such Person or such Subsidiary)) paid, accrued or accumulated during
such period times a fraction the numerator of which is one and the denominator
of which is one minus the then effective consolidated Federal, state and local
tax rate of such Person, expressed as a decimal.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein),
without duplication:
42
(i) the net income (or loss) of any Person (other than a Subsidiary of
the referent Person) in which any Person other than the referent Person
has an ownership interest, except to the extent that any such income has
actually been received by the referent Person or any of its Wholly Owned
Subsidiaries in the form of dividends or similar distributions during
such period;
(ii) except to the extent includible in the consolidated net income of
the referent Person pursuant to the foregoing clause (i), the net income
(or loss) of any Person that accrues prior to the date that (a) such
Person becomes a Subsidiary of the referent Person or is merged into or
consolidated with the referent Person or any of its Subsidiaries or (b)
the assets of such Person are acquired by the referent Person or any of
its Subsidiaries;
(iii) the net income of any Subsidiary of the referent Person (other
than a Wholly Owned Subsidiary) to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of that
income is not permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary during such
period;
(iv) any gain (or loss), together with any related provisions for
taxes on any such gain, realized during such period by the referent
Person or any of its Subsidiaries upon (a) the acquisition of any
securities, or the extinguishment of any Indebtedness, of the referent
Person or any of its Subsidiaries or (b) any Asset Sale by the referent
Person or any of its Subsidiaries;
(v) any extraordinary gain or extraordinary loss, together with any
related provision for taxes or tax benefit resulting from any such
extraordinary gain or extraordinary loss, realized by the referent
Person or any of its Subsidiaries during such period; and
(vi) in the case of a successor to such Person by consolidation,
merger or transfer of its assets, any earnings of the successor prior to
such merger, consolidation or transfer of assets.
"Consolidated Net Worth" of any Person as of any date means the
stockholders' equity (including any preferred stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Subsidiaries
(excluding any equity adjustment for foreign currency translation for any period
subsequent to the Issue Date) on a consolidated basis at such date, as
determined in accordance with GAAP, less all write-ups subsequent to the Issue
Date in the book value of any asset owned by such Person or any of its
Subsidiaries.
"Consolidated Tangible Assets" of any Person as of any date means the total
assets of such Person and its Subsidiaries (excluding any assets that would be
classified as "intangible assets" under GAAP) on a consolidated basis at such
date, as determined in accordance with GAAP, less all write-ups subsequent to
the Issue Date in the book value of any asset owned by such Person or any of its
Subsidiaries.
"Credit Agreements" means (i) the Credit Agreement dated as of June 23,
1998 by and among the Company, as borrower, Bank of America, N.A. (as successor
to Nationsbank, National Association), as Administrative Agent and Arranger,
J.P. Morgan Securities Inc., Deutsche Bank AG and Scotiabanc, Inc., as
Syndication Agents and Co-Arrangers, and the other lenders party thereto from
time to time, together with the related documents thereto, including, without
limitation, any security documents, if any, and all exhibits and schedules
thereto, and (ii) any other credit agreement entered into by the Company or any
of its Subsidiaries for money borrowed from or guaranteed to persons, firms or
corporations which engage in the business of lending money, in order to provide
funding for the acquisition and development of healthcare facilities or to
provide for working capital needs and other corporate purposes, including, in
the case of clause (i) or (ii) above, any agreement or agreements relating to
any extension, refunding, refinancing, successor or replacement facility,
whether or not with the same lender, and whether or not the principal amount or
amount of letters of credit outstanding thereunder or the interest rate payable
in respect thereof shall be thereby increased, in each case as amended and in
effect from time to time.
43
"Default" means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
Stated Maturity date of the Exchange Notes.
"EBITDA Coverage Ratio" with respect to any period means the ratio of (i)
Consolidated EBITDA of the Company to (ii) the aggregate amount of Consolidated
Interest Expense of the Company for such period; provided, however, that if any
calculation of the Company's EBITDA Coverage Ratio requires the use of any
quarter prior to the Issue Date, such calculation shall be made on a pro forma
basis, giving effect to the issuance of the Private Notes and the use of the net
proceeds therefrom as if the same had occurred at the beginning of the
four-quarter period used to make such calculation; and provided further that if
any such calculation requires the use of any quarter prior to the date that any
Asset Sale was consummated, or that any Indebtedness was incurred, or that any
acquisition of a hospital or other healthcare facility or any assets purchased
outside the ordinary course of business was effected, by the Company or any of
its Subsidiaries, such calculation shall be made on a pro forma basis, giving
effect to each such Asset Sale, incurrence of Indebtedness or acquisition, as
the case may be, and the use of any proceeds therefrom, as if the same had
occurred at the beginning of the four-quarter period used to make such
calculation.
"Eligible Investments" of any Person means Investments of such Person in:
(i) direct obligations of, or obligations the payment of which is
guaranteed by, the United States of America or an interest in any trust
or fund that invests solely in such obligations or repurchase
agreements, properly secured, with respect to such obligations;
(ii) direct obligations of agencies or instrumentalities of the United
States of America having a rating of A or higher by S&P or A2 or higher
by Moody's;
(iii) a certificate of deposit issued by, or other interest-bearing
deposits with, a bank having its principal place of business in the
United States of America and having equity capital of not less than
$250,000,000;
(iv) a certificate of deposit issued by, or other interest-bearing
deposits with, any other bank organized under the laws of the United
States of America or any state thereof, provided that such deposit is
either (a) insured by the Federal Deposit Insurance Corporation or (b)
properly secured by such bank by pledging direct obligations of the
United States of America having a market value of not less than the face
amount of such deposits;
(v) prime commercial paper maturing within 270 days of the acquisition
thereof and, at the time of acquisition, having a rating of A-1 or
higher by S&P or P-1 or higher by Moody's or
(vi) eligible banker's acceptances, repurchase agreements and
tax-exempt municipal bonds having a maturity of less than one year, in
each case having a rating of, or evidencing the full recourse obligation
of a person whose senior debt is rated, A or higher by S&P or A2 or
higher by Moody's.
"Equity Offering" means a primary offering of Capital Stock of the Company
(other than Disqualified Stock or Preferred Stock) pursuant to a registration
statement filed with the Commission in accordance with the Securities Act and
declared effective by the staff of the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exempted Debt" means the sum of the following as of any date of
determination: (i) Indebtedness of the Company and its Subsidiaries incurred
after the Issue Date and secured by Liens not otherwise permitted by the then
applicable "-- Limitations on Liens" covenant and (ii) Attributable Indebtedness
of the Company and its Subsidiaries in respect of every Sale and Leaseback
Transaction entered into after the Issue Date.
44
"Existing Indebtedness" means all of the Indebtedness of the Company and
its Subsidiaries that is outstanding on the Issue Date.
"Fair Market Value" of any asset or items means the fair market value of
such asset or items as determined in good faith by the Board of Directors and
evidenced by a resolution of the Board of Directors.
"Fall-Away Event" means the Exchange Notes shall have been rated Investment
Grade and, if no Event of Default or Default shall have occurred and be
continuing at such time, the Company shall have delivered to the Trustee an
Officers' Certificate certifying as to the foregoing.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, as from time to time in effect.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement relating to interest rates or foreign exchange
rates.
"Indebtedness" of any Person at any date means, without duplication:
(i) all indebtedness of such Person for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof);
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (or reimbursement obligations with respect
thereto);
(iv) all obligations of such Person with respect to Hedging
Obligations (other than those that fix the interest rate on variable
rate indebtedness otherwise permitted by the Indenture or that protect
the Company and/or its Subsidiaries against changes in foreign exchange
rates);
(v) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, except trade payables and
accrued expenses incurred in the ordinary course of business;
(vi) all Capitalized Lease Obligations of such Person;
(vii) all Indebtedness of others secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
(viii) all Indebtedness of others guaranteed by such Person to the
extent of such guarantee;
(ix) all Attributable Indebtedness; and
(x) all Disqualified Stock of such Person and its Subsidiaries and all
other Preferred Stock of Subsidiaries of such Person valued at the
greater of (a) the voluntary or involuntary liquidation preference of
such Disqualified Stock or such Preferred Stock, as the case may be, and
(b) the aggregate amount payable upon purchase, redemption, defeasance
or payment of such Disqualified Stock or such Preferred Stock, as the
case may be.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations plus past due interest as
described above, the maximum liability of such Person for any such contingent
obligations at such date and, in the case of clause (vii), the amount of the
Indebtedness secured.
45
"Interest Expense" of any Person for any period means the aggregate amount
of interest which, in accordance with GAAP, would be set opposite the caption
"interest expense" or any like caption on an income statement for such Person
(including, without limitation or duplication, imputed interest included in
Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with Hedging Obligations, amortization of
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount and all other non-cash interest expense
other than interest amortized to cost of sales) plus the aggregate amount, if
any, by which such interest expense was reduced as a result of the amortization
of deferred debt restructuring credits for such period.
"Investment Grade" means (i) a rating of BBB- or above, in the case of S&P
(or its equivalent under any successor Rating Categories of S&P), and Baa3 or
above, in the case of Moody's (or its equivalent under any successor Rating
Categories of Moody's), or (ii) the equivalent in respect of the Rating
Categories of any other Rating Agencies; provided, however, that if such rating
is BBB- in the case of S&P, or Baa3 in the case of Moody's (or the equivalent in
respect of the Rating Categories of any other Rating Agencies), then such rating
also shall not be accompanied by a negative outlook, negative credit watch or
review for possible downgrade (or the equivalent thereof), as the case may be.
"Investments" of any Person means:
(i) all investments by such Person in any other Person in the form of
loans, advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary
course of business);
(ii) all guarantees of Indebtedness or other obligations of any other
Person by such Person;
(iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other
Person; and
(iv) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary
course of business) on a balance sheet of such Person prepared in
accordance with GAAP.
"Issue Date" means September 28, 2001, the date the Private Notes were
initially issued.
"Joint Venture" means any Person at least a majority of whose revenues
result from healthcare related businesses or facilities.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including, without limitation, any conditional sale or other
title retention agreement, and any financing lease in the nature thereof, any
agreement to sell, and any filing of, or agreement to give, any financing
statement (other than notice filings not perfecting a security interest) under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Proceeds" with respect to any Asset Sale means (i) cash (in U.S.
dollars or freely convertible into U.S. dollars) received by the Company or any
of its Subsidiaries from such Asset Sale (including, without limitation, cash
received as consideration for the assumption or incurrence of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale or the transfer of the proceeds of such Asset Sale to the Company or any of
its Subsidiaries, (b) payment of all commissions and other fees and expenses
related to such Asset Sale and (c) deduction of an appropriate amount to be
provided by the Company or any of its Subsidiaries as a reserve, in accordance
with GAAP, against any liabilities associated with the assets sold or otherwise
disposed of in such Asset Sale and retained by the Company or any of its
Subsidiaries after such Asset Sale (including, without limitation, pension and
other post-employment benefit liabilities and liabilities related to
environmental matters)
46
or against any indemnification obligations associated with the sale or other
disposition of the assets sold or otherwise disposed of in such Asset Sale and
(ii) all non-cash consideration received by the Company or any of its
Subsidiaries from such Asset Sales upon the liquidation or conversion of such
consideration into cash.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, any Vice Chairman of the Board, the Chief Executive Officer, the
President or any Vice President and by the Treasurer, any Assistant Treasurer,
the Secretary or any Assistant Secretary of the Company in their official (and
not individual) capacities; provided, however, that every Officers' Certificate
with respect to the compliance with a condition precedent to the taking of any
action under the Indenture shall include (i) a statement that the officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in the Indenture relating thereto and
(ii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"Opinion of Counsel" means a written opinion from legal counsel (such
counsel may be an employee of or counsel to the Company or the Trustee) that
complies with the requirements of the Indenture.
"Permitted Investments" means:
(i) capital contributions, advances or loans to the Company by any
Subsidiary or by the Company or any of its Subsidiaries to a Subsidiary
of the Company;
(ii) the acquisition and holding by the Company and each of its
Subsidiaries of receivables owing to the Company and such Subsidiary, if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(iii) the acquisition and holding by the Company and its Subsidiaries
of cash and Eligible Investments;
(iv) Investments in any Person as a result of which such other Person
becomes a Subsidiary of the Company or is merged into or consolidated
with or transfers all or substantially all of its assets to the Company
or any of its Subsidiaries; and
(v) the making of an Investment by the Company, directly or through a
Wholly Owned Subsidiary, in a Wholly Owned Subsidiary formed solely for
the purpose of insuring the healthcare business and facilities owned or
operated by the Company or a Subsidiary and any physician employed by or
on the staff of any such business or facility (the "Insurance
Subsidiary"), provided that the amount invested in such Insurance
Subsidiary does not exceed $15,000,000.
"Permitted Liens" means:
(i) Liens for taxes, assessments or governmental charges or claims
that either (a) are not yet delinquent or (b) are being contested in
good faith by appropriate proceedings;
(ii) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts
that either (a) are not yet delinquent or (b) are being contested in
good faith by appropriate proceedings and as to which appropriate
reserves or other provisions have been made in accordance with GAAP;
(iii) Liens (other than any Lien imposed by the Employee Retirement
Income Security Act of 1974, as amended) incurred or deposits due in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security;
(iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
progress payments, government contracts and other obligations of like
nature (exclusive of obligations for the payment of borrowed money), in
each case, incurred in the ordinary course of business;
47
(v) attachment or judgment Liens not giving rise to a Default or an
Event of Default;
(vi) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(vii) leases or subleases granted to others not interfering with the
ordinary conduct of the business of the Company or any of its
Subsidiaries;
(viii) Liens with respect to any Acquired Indebtedness; provided that
such Liens only extend to assets that were subject to such Liens prior
to the acquisition of such assets by the Company or its Subsidiaries
and, with respect to Indebtedness other than Indebtedness ranking pari
passu with the Exchange Notes, not incurred in anticipation or
contemplation of such acquisition;
(ix) Liens securing Bank Debt or Refinancing Indebtedness; provided,
in the case of Refinancing Indebtedness, that such Liens only extend to
the assets securing the Indebtedness being refinanced and such
refinanced Indebtedness was previously secured by such assets;
(x) purchase money mortgages (including Capitalized Lease
Obligations);
(xi) Liens existing on the Issue Date;
(xii) Liens on assets of any Subsidiary of the Company securing
Indebtedness of such Subsidiary, provided that such Indebtedness is
permitted to be incurred by the terms of the Indenture;
(xiii) bankers' liens with respect to the right of set-off arising in
the ordinary course of business against amounts maintained in bank
accounts or certificates of deposit in the name of the Company or any
Subsidiary;
(xiv) the interest of any issuer of a letter of credit in any cash or
Eligible Investment deposited with or for the benefit of such issuer as
collateral for such letter of credit; provided that the Indebtedness so
collateralized is permitted to be incurred by the terms of the
Indenture;
(xv) any Lien consisting of a right of first refusal or option to
purchase the Company's ownership interest in any Subsidiary or to
purchase assets of the Company or any Subsidiary of the Company, which
right of first refusal or option is entered into in the ordinary course
of business; and
(xvi) the Lien granted to the Trustee pursuant to the trust created
pursuant to "--Satisfaction and Discharge of Indenture; Defeasance"
above and any substantially equivalent Lien granted to the respective
trustees under the indentures for other debt securities of the Company.
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock" means with respect to any Person all Capital Stock of
such Person which has a preference in liquidation or a preference with respect
to the payment of dividends or distributions of operating profit or cash.
"Rating Agencies" means (i) S&P and Moody's or (ii) if S&P or Moody's or
both of them are not making ratings of the Exchange Notes publicly available, a
nationally recognized U.S. rating agency or agencies, as the case may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
48
"Rating Category" means (i) with respect to S&P, any of the following
categories (any of which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC,
CC, C and D (or equivalent successor categories); (ii) with respect to Moody's,
any of the following categories (any of which may include a "1", "2" or "3"):
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and (iii) the equivalent of any such categories of S&P or Moody's used by
another Rating Agency, if applicable.
"Refinancing Indebtedness" means Indebtedness incurred in exchange for, or
the net proceeds of which are applied to refund, refinance or extend, any
Indebtedness, provided that:
(i) the Refinancing Indebtedness is the obligation of the same Person
(or if the Indebtedness being refinanced is an obligation of one or more
Subsidiaries of the Company, such Refinancing Indebtedness may be
incurred by the Company or one or more other Subsidiaries of the
Company) and is subordinated to the Exchange Notes, if at all, to the
same extent as the Indebtedness being refunded, refinanced or extended;
(ii) the Refinancing Indebtedness is scheduled to mature no earlier
than the Indebtedness being refunded, refinanced or extended;
(iii) the Refinancing Indebtedness has a Weighted Average Life to
Maturity at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the Weighted Average Life to Maturity of the
portion of the Indebtedness being refunded, refinanced or extended;
(iv) the Refinancing Indebtedness is secured only to the extent, if at
all, and by the assets that the Indebtedness being refunded, refinanced
or extended is secured; and
(v) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or
extended (except for issuance costs and increases in Attributable
Indebtedness due solely to increases in the present value calculations
resulting from renewals or extensions of the terms of the underlying
leases in effect on the Issue Date).
"Restricted Payment" means with respect to any Person:
(i) the declaration of any dividend or the making of any other payment
or distribution of cash, securities or other property or assets in
respect of such Person's Capital Stock (except that a dividend payable
solely in Capital Stock (other than Disqualified Stock) of such Person
shall not constitute a Restricted Payment);
(ii) any payment on account of the purchase, redemption, retirement or
other acquisition for value of such Person's or such Person's
Subsidiaries' Capital Stock or any other payment or distribution made in
respect thereof, either directly or indirectly;
(iii) any payment on account of the purchase, redemption, retirement,
defeasance or other acquisition for value, prior to any scheduled
principal payment, sinking fund payment or Stated Maturity, of
Subordinated Indebtedness of the Company or its Subsidiaries;
(iv) the incurrence, creation or assumption of any guarantee of
Indebtedness of any Affiliate (other than a Subsidiary of the Company);
or
(v) the making of any Investment in any Person (other than Permitted
Investments);
provided, however, that with respect to the Company and its Subsidiaries,
Restricted Payments shall not include any payment described in clause (i), (ii)
or (iii) above made (1) to the Company or any of its Wholly Owned Subsidiaries
by any of the Company's Subsidiaries or (2) by the Company to any of its Wholly
Owned Subsidiaries or (3) by any Subsidiary, provided that the Company or
another Subsidiary receives its proportionate share thereof.
"S&P" means Standard & Poor's Rating Services, a division of McGraw-Hill
Companies, Inc., and its successors.
49
"Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Subsidiaries of any property or asset of such Person or any
of its Subsidiaries which has been or is being sold or transferred by such
Person or such Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such property or asset.
"Secretary's Certificate" means a certificate signed by the Secretary or
any Assistant Secretary of the Company in his or her official (and not
individual) capacity.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means a Subsidiary of the Company which at the
time of determination either (i) had tangible assets which, as of the Company's
most recent quarterly consolidated balance sheet, constituted at least 5% of
Consolidated Tangible Assets as of such date, or (ii) had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which constituted at least 5% of the Company's
total consolidated revenues for such period.
"Stated Maturity" when used with respect to any security or any installment
of interest thereon, means that date specified in such security as the fixed
date on which the principal of such security or such installment of interest is
due and payable.
"Subordinated Indebtedness" of any Person means any Indebtedness of such
Person that is subordinated in right of payment to the Exchange Notes.
"Subsidiary" of any Person means (i) any corporation of which Common Equity
having ordinary voting power to elect a majority of the directors of such
corporation is owned by such Person directly or through one or more other
Subsidiaries of such Person and (ii) any entity other than a corporation in
which such Person, directly or indirectly, owns at least 50% of the Common
Equity of such entity and has the authority to manage such entity on a
day-to-day basis.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or portion thereof at any date, the number of years obtained by dividing (i) the
then outstanding principal amount of such Indebtedness or portion thereof (if
applicable) into (ii) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means (i) a Subsidiary of which
100% of the Common Equity (except for director's qualifying shares or certain
minority interests owned by other Persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose) is owned directly by such Person or through
one or more other Wholly Owned Subsidiaries of such Person and (ii) any entity
other than a corporation in which such Person, directly or indirectly, owns all
of the Common Equity of such entity.
50
MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE EXCHANGE
The following is a discussion of the material United States federal income
tax considerations generally applicable to the exchange offer that are relevant
to holders of Private Notes. This discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service ("IRS") rulings, and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of Notes, and does not deal
with tax consequences arising under the laws of any foreign, state or local
jurisdiction. This discussion is for general information only, and does not
purport to address all tax consequences that may be important to particular
holders in light of their personal circumstances, or to certain types of holders
(such as certain financial institutions, insurance companies, tax-exempt
entities, dealers in securities or persons who hold the Exchange Notes in
connection with a straddle, hedge, conversion transaction or constructive sale
transaction or United States persons whose functional currency is not the U.S.
dollar) that may be subject to special rules. This discussion assumes that each
holder holds the Notes as a capital asset within the meaning of section 1221 of
the Code.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any
beneficial owner of a Note who is not a United States person. The term "United
States person" means a citizen or resident of the United States, a corporation
or partnership (including any entity taxed as a partnership for United States
federal income tax purposes) organized in the United States or any state
thereof, an estate, the income of which is includible in income for United
States federal income tax purposes regardless of its source, or a trust if (i) a
court within the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States persons have the
authority to control all substantial decisions of the trust. In addition, the
term "Non-U.S. Holder" does not include a trust which has elected under
applicable Treasury Regulations to retain its pre-August 20, 1996 classification
as a United States person.
HOLDERS OF THE PRIVATE NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
PARTICIPATING IN THE EXCHANGE OFFER AND OF OWNING AND DISPOSING OF EXCHANGE
NOTES AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX
CONSEQUENCES.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of a Private Note for an Exchange Note pursuant to the
exchange offer will not constitute a taxable exchange for United States federal
income tax purposes because the Exchange Note will not be considered to differ
materially in kind or extent from the Private Note exchanged therefor.
Accordingly, the Exchange Note will be treated for United States federal income
tax purposes as a continuation of the Private Note in your hands, with the
result that (i) you will not recognize any gain or loss on the exchange; (ii)
the holding period for the Exchange Note will include the holding period for the
Private Note for which it was exchanged; and (iii) the adjusted tax basis of the
Exchange Note immediately after the exchange will be the same as the adjusted
tax basis of the Private Note for which it was exchanged.
The exchange offer will not have any United States federal income tax
consequences to a nonexchanging holder of Private Notes.
TAX CONSIDERATIONS APPLICABLE TO UNITED STATES PERSONS
Interest on Exchange Notes. Interest paid on the Exchange Notes will be
taxable to a holder as ordinary interest income at the time that such interest
is accrued or (actually or constructively) received in accordance with the
holder's method of tax accounting and in the amount of each payment.
51
Sale or Exchange of Exchange Notes. In general, a holder of the Exchange
Notes will recognize gain or loss upon the sale, redemption, retirement or other
disposition of the Exchange Notes measured by the difference between the amount
of cash and the fair market value of any property received (except to the extent
attributable to the payment of accrued interest, which will be taxable as such)
and the holder's adjusted tax basis in the Exchange Notes. A holder's adjusted
tax basis in the Exchange Notes generally will equal the cost of the Private
Notes to the holder increased by the amount of market discount, if any,
previously taken into income by the holder or decreased by any bond premium
theretofore amortized by the holder with respect to the Notes. Subject to the
market discount rules discussed below, the gain or loss on the disposition of
the Exchange Notes will be capital gain or loss and will be long-term gain or
loss if the Exchange Notes have been held for more than one year at the time of
such disposition.
Market Discount. The resale of the Exchange Notes may be affected by the
"market discount" provisions of the Code. For this purpose, but subject to a de
minimis exception, the market discount on an Exchange Note will generally be
equal to the amount, if any, by which the stated redemption price at maturity of
the Private Note exceeds the holder's tax basis in the Private Note immediately
after its acquisition. Unless the election described below is made to include
accrued market discount in income currently, these provisions generally require
a holder of a Private Note acquired at a market discount to treat as ordinary
income any gain recognized on the disposition of the Exchange Note received in
the exchange offer to the extent of the "accrued market discount" on the
Exchange Note at the time of disposition. In general, market discount on a Note
will be treated as accruing on a straight-line basis over the term of the Note,
or, at the election of the holder, under a constant yield method. Holders may
elect to include accrued market discount in income currently with respect to all
market discount bonds acquired on or after the first day of the first taxable
year for which the election is effective and for any such bond on either a
straight-line or constant yield basis. In the absence of such election, a holder
of Notes acquired at a market discount may be required to defer the deduction of
a portion of the interest on any indebtedness incurred or maintained to purchase
or carry the Private Notes or the Exchange Notes until the Exchange Notes are
disposed of in a taxable transaction.
TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on Exchange Notes. Generally, and assuming certain certification
requirements are satisfied (which include identification of the beneficial owner
of Exchange Notes), interest paid on the Exchange Notes to a Non-U.S. Holder
will not be subject to United States federal income tax if: (i) such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-U.S. Holder and (ii) the Non-U.S. Holder does not
actually or constructively own 10% or more of the total voting power of all
classes of stock of the Company entitled to vote, is not a bank receiving
interest pursuant to a loan agreement entered into in the ordinary course of its
trade or business and is not a controlled foreign corporation with respect to
which the Company is a "related person" within the meaning of the Code.
The certification requirements mentioned above generally require that
either (i) the beneficial owner of an Exchange Note certify to us (or our paying
agent) that such beneficial owner is a Non-U.S. Holder and provide such owner's
name, address and taxpayer identification number, if any, or (ii) a securities
clearing organization, bank or other financial institution that holds customer
securities in the ordinary course of its trade or business and holds the
Exchange Note on behalf of the beneficial owner certifies that such certificate
has been received from the beneficial owner and a copy of such certificate is
furnished to us (or our paying agent). Applicable Treasury Regulations also
provide alternative methods for satisfying the certification requirements. These
regulations also require, in the case of Exchange Notes held by a foreign
partnership, that (i) the certification be provided by the partners rather than
by the foreign partnership and (ii) the partnership provide certain information,
including a U.S. taxpayer identification number (if required). A look-through
rule applies in the case of tiered partnerships.
A holder that is not exempt from tax under these rules will be subject to
United States federal income tax withholding at a rate of 30% unless the
interest is effectively connected with the conduct of a United States trade or
business, in which case the interest will be subject to the United States
federal
52
income tax on net income that applies to United States persons generally.
Corporate Non-U.S. Holders that receive interest income that is effectively
connected with the conduct of a trade or business within the United States may
also be subject to an additional "branch profits" tax on such income. Non-U.S.
Holders should consult applicable income tax treaties, which may provide
different rules.
Sale or Exchange of Exchange Notes. A Non-U.S. Holder generally will not be
subject to United States federal income tax on gain recognized upon the sale or
other disposition of the Exchange Notes unless (i) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Holder; (ii) in the case of a Non-U.S. Holder who is a nonresident
alien individual and holds the Exchange Notes as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year and
certain other circumstances are present; or (iii) the Non-U.S. Holder is subject
to tax pursuant to the provisions of United States federal income tax law
applicable to certain United States expatriates. Corporate Non-U.S. Holders
recognizing effectively connected gain may also be subject to an additional
"branch profits" tax on such gain. Non-U.S. Holders should consult applicable
income tax treaties, which may provide different rules.
Federal Estate Tax. An Exchange Note beneficially owned by an individual
who is not domiciled in the United States for United States federal estate tax
purposes at the time of his or her death generally will not be subject to United
States federal estate tax as a result of such individual's death, provided that
(i) such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote within the meaning of section 871(h)(3) of the Code and (ii) interest
payments with respect to such Exchange Note would not have been, if received at
the time of such individual's death, effectively connected with the conduct of a
United States trade or business by such individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States Persons. Information reporting and backup withholding may
apply to payments of interest on or the proceeds of the sale or other
disposition of the Exchange Notes with respect to certain non-corporate United
States persons. Such United States persons generally will be subject to backup
withholding unless the recipient of the payment supplies a taxpayer
identification number, certified under penalties of perjury, as well as certain
other information, or otherwise establishes, in the manner prescribed by law, an
exemption from backup withholding. Any amount withheld under backup withholding
is allowable as a credit against the United States person's federal income tax,
upon furnishing the required information to the IRS.
Non-U.S. Holders. Generally, information reporting and backup withholding
of United States federal income tax may apply to payments of principal, interest
and premium (if any) to Non-U.S. Holders if the payee fails to certify that the
holder is not a United States person or if the Company or its paying agent has
actual knowledge that the payee is a United States person. The backup
withholding tax generally will not apply to interest paid to Non-U.S. Holders
outside the United States that are subject to 30% withholding as discussed above
(see "Tax Considerations Applicable to Non-U.S. Holders-Interest on Exchange
Notes") or that perfect their eligibility for the benefits of a tax treaty that
reduces or eliminates such withholding.
The payment of the proceeds on the disposition of the Exchange Notes to or
through the United States office of a United States or foreign broker will be
subject to information reporting and backup withholding unless the owner
provides the certification described above or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder
of the Exchange Notes to or through a foreign office of a broker will not be
subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for United States tax purposes, a
foreign person 50% or more of whose gross income from all sources for certain
periods is from activities that are effectively connected with a United States
trade or business or a foreign partnership in which United States persons hold
more than 50% of the income or capital interests or which is engaged in a United
States trade or business at any time during its tax year, information reporting
will apply unless the broker has documentary evidence of the owner's foreign
status as a
53
Non-U.S. Holder and has no actual knowledge to the contrary or unless the owner
otherwise establishes an exemption. Both backup withholding and information
reporting may apply to the proceeds from the disposition if the broker has
actual knowledge that the payee is a United States person.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the Exchange Notes. Broker-dealers
may use this prospectus, as it may be amended or supplemented from time to time,
in connection with the resale of Exchange Notes received in exchange for Private
Notes where the broker-dealer acquired the Private Notes as a result of
market-making activities or other trading activities. We have agreed that for a
period of up to 180 days after the date on which the registration statement is
declared effective (subject to extension under certain circumstances), we will
make this prospectus, as amended or supplemented, available to any broker-dealer
that requests it in the letter of transmittal for use in connection with any
such resale.
We will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Broker-dealers may sell Exchange Notes
received by broker-dealers for their own account pursuant to the exchange offer
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to the prevailing market prices or negotiated
prices. Broker-dealers may resell Exchange Notes directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any broker-dealer and/or the purchasers of the
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the exchange offer and any broker or
dealer that participates in a distribution of the Exchange Notes may be deemed
to be "underwriters" within the meaning of the Securities Act, and any profit on
any resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify you
against liabilities under the Securities Act.
By its acceptance of the exchange offer, any broker-dealer that receives
Exchange Notes pursuant to the exchange offer agrees to notify us before using
the prospectus in connection with the sale or transfer of Exchange Notes. The
broker-dealer further acknowledges and agrees that, upon receipt of notice from
us of the happening of any event which makes any statement in the prospectus
untrue in any material respect or which requests the making of any changes in
the prospectus to make the statements in the prospectus not misleading or which
may impose upon us disclosure obligations that may have a material adverse
effect on us, which notice we agree to deliver promptly to the broker-dealer,
the broker-dealer will suspend use of the prospectus until we have notified the
broker-dealer that delivery of the prospectus may resume and have furnished
copies of any amendment or supplement to the prospectus to the broker-dealer.
54
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 2000, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the Exchange Notes to be issued pursuant to the exchange
offer will be passed upon by Haskell Slaughter Young & Rediker, L.L.C.,
Birmingham, Alabama.
55