AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TOTAL RENAL CARE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0354549
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
SUITE 800
21250 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90503-5517
(310) 792-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN E. KING
CHIEF FINANCIAL OFFICER
TOTAL RENAL CARE HOLDINGS, INC.
SUITE 800
21250 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90503-5517
(310) 792-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
CYNTHIA M. DUNNETT
RONN S. DAVIDS
RIORDAN & MCKINZIE
29TH FLOOR
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 629-4824
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY PRICE FEE(1)
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7% Convertible Subordinated Notes due
2009.................................... $345,000,000 100% $345,000,000 $95,915
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Common Stock, par value $0.001 per
share................................... (2) N/A(2) N/A(2) None(2)
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(1) Calculated pursuant to Rule 457(i) under the Securities Act of 1933, as
amended.
(2) An indeterminable number of shares of Common Stock issuable upon
conversion of the registrant's 7% Convertible Subordinated Notes due 2009
(the "Notes"), including such additional shares of Common Stock issuable
pursuant to the antidilution provisions of the Notes, are registered
hereunder. Pursuant to Rule 457(i), no registration fee is required for
these shares.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. THIS +
+PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR SOLICITATION OF +
+YOUR OFFER TO BUY THESE SECURITIES, NOR WILL WE SELL THEM OR ACCEPT YOUR +
+OFFER TO BUY THEM, IN ANY STATE OR OTHER JURISDICTION WHERE THAT WOULD NOT BE +
+PERMITTED OR LEGAL PRIOR TO REGISTRATION OR QUALIFICATION IN THAT STATE OR +
+OTHER JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DECEMBER 18, 1998
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PROSPECTUS
, 1999
[LOGO OF TOTAL RENAL CARE]
TOTAL RENAL CARE HOLDINGS, INC.
$345,000,000 PRINCIPAL AMOUNT
7% CONVERTIBLE SUBORDINATED NOTES DUE 2009
10,515,087 SHARES
COMMON STOCK, PAR VALUE $0.001 PER SHARE
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THE COMPANY:
. We are the second largest domestic, and largest independent worldwide,
provider of high-quality dialysis and related services for patients
suffering from chronic kidney failure, also known as end stage renal
disease.
. Total Renal Care Holdings, Inc.
Suite 800
21250 Hawthorne Boulevard
Torrance, California 90503-5517
(310) 792-2600
THE OFFERING:
. Notes: The resale of up to $345.0 million of our Notes.
. Common Stock: The resale of up to 10,515,087 shares of our Common Stock
initially issuable upon conversion of the Notes into shares of Common
Stock.
. Selling Securityholders: The Notes and any shares of Common Stock issued
upon conversion of the Notes may be offered for the accounts of certain
Selling Securityholders. As information regarding these Selling
Securityholders changes, we will supplement this prospectus.
. Proceeds: We will not receive any proceeds from the resale of the Notes
or any Common Stock issued upon conversion of the Notes.
THE NOTES:
. Maturity: May 15, 2009.
. Interest Payments: Semi-annually on May 15 and November 15 of each year,
commencing on May 15, 1999.
. Conversion Price: $32.81 per share, subject to adjustment (equal to an initial
conversion ratio of 30.4785 shares of Common Stock per $1,000 principal amount
of Notes).
. Conversion Right: Convertible at any time, in whole or in part.
. Redemption: We have the right to redeem the Notes on or after November 15,
2001.
. Ranking of Notes: General, unsecured obligations, junior to all of our
existing and future senior indebtedness and effectively behind all existing
and future liabilities of our subsidiaries.
TRADING FORMAT/NYSE SYMBOL:
. Notes: The PORTAL market.
. Common Stock: Trades on the New York Stock Exchange under the symbol "TRL." On
December , 1998, the last reported sales price was $ per share.
This investment involves risk. See "Risk Factors" beginning on page 4.
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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.
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TABLE OF CONTENTS
PAGE
Disclosure Regarding Forward-Looking
Statements.............................. i
Incorporation By Reference............... i
Summary.................................. 1
Risk Factors............................. 4
Use of Proceeds.......................... 7
Ratio of Earnings to Fixed Charges....... 7
Selling Securityholders.................. 8
PAGE
Description of Notes.................... 9
Description of Capital Stock............ 25
Description of Indebtedness............. 27
Plan of Distribution.................... 29
Legal Matters........................... 30
Experts................................. 30
Available Information................... 30
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We caution the readers that this prospectus includes and incorporates by
reference certain "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Litigation Reform Act")
that are based on management's beliefs, as well as on assumptions made by and
information currently available to management. All statements other than
statements of historical fact included in this prospectus, including without
limitation, certain statements under "Summary," and located elsewhere herein
regarding our financial position and business strategy, may constitute forward-
looking statements. In addition, forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe," "plan," "seek," or
"continue" or the negative thereof or variations thereon or similar
terminology. Such forward-looking statements involve known and unknown risks,
including, but not limited to, economic and market conditions, the regulatory
environment in which we operate, competitive activities or other business
conditions. Although we believe that our expectations with respect to the
forward-looking statements are based upon reasonable assumptions within the
bounds of our knowledge of our business and operations as of the date hereof,
there can be no assurance that our actual results, performance or achievements
will not differ materially from any future results, performance or achievements
expressed or implied from such forward-looking statements. Important factors
that could cause actual results to differ materially from our expectations
("Cautionary Statements") are disclosed in this prospectus, including without
limitation in conjunction with the forward-looking statements included and
incorporated by reference in this prospectus and under "Risk Factors." All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these
Cautionary Statements.
Market data used throughout this prospectus, including information relating
to our relative position in the dialysis industry, is based on the good faith
estimate of management, which estimates are based upon their review of internal
surveys, independent industry publications and other publicly available
information. Although we believe that such sources are reliable, the accuracy
and completeness of such information is not guaranteed and has not been
independently verified.
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INCORPORATION BY REFERENCE
The following documents have been filed with the Securities and Exchange
Commission (the "Commission" or the "SEC") and are incorporated by reference:
(1) our Annual Report on Form 10-K for the year ended December 31, 1997;
(2) Amendment No. 2 to our Annual Report on Form 10-K/A for the year
ended December 31, 1997;
(3) our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998;
(4) our Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998;
(5) our Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998;
(6) our Current Reports on Form 8-K dated January 22, 1998, February 18,
1998, February 27, 1998, April 1, 1998, April 30, 1998 and November 3,
1998; and
(7) all documents subsequently filed by us pursuant to sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the termination of this offering.
Any statement contained herein or in the documents incorporated by reference
herein are deemed to be modified or superseded for purposes of this prospectus
to the extent that a statement contained herein or which is incorporated by
reference herein modifies or supersedes that statement. Any statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute part of this prospectus.
We will provide without charge to each person, including any prospective
investor to whom this prospectus has been delivered, upon written or oral
request of such person, a copy of any and all of the documents referred to
above that have been or may be incorporated by reference herein other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference herein). Requests for such copies should be directed to Total
Renal Care Holdings, Inc., attention John E. King, Suite 800, 21250 Hawthorne
Boulevard, Torrance, California 90503-5517, telephone number (310) 792-2600.
i
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider. You should read the entire prospectus and the information
incorporated by reference carefully, including the "Risk Factors" section and
our consolidated financial statements (and related notes). Unless otherwise
indicated, "we," "us," "our" and similar terms, as well as references to the
"Company," refer to Total Renal Care Holdings, Inc. ("TRCH") and its
subsidiaries.
THE COMPANY
We are the second largest domestic, and largest independent worldwide,
provider of integrated dialysis services for patients suffering from chronic
kidney failure, also known as end stage renal disease ("ESRD"). We provide
dialysis and ancillary services to our patients through a network of outpatient
dialysis facilities. In addition, we provide inpatient dialysis services at
hospitals. We also offer ancillary services including ESRD laboratory and
pharmacy services, vascular access management, physician practice management,
pre- and post-transplant services and ESRD clinical research programs. On
February 27, 1998, we acquired Renal Treatment Centers, Inc. ("RTC"), the
fourth largest provider of integrated dialysis services in the United States,
in a stock-for-stock exchange transaction valued at approximately $1.3 billion
(the "Merger").
Our principal executive offices are located at Suite 800, 21250 Hawthorne
Boulevard, Torrance, California 90503-5517 and our telephone number is (310)
792-2600.
1
THE OFFERING
Total Amount of Notes
Offered..................... The resale of up to $345.0 million in principal
amount of 7% Convertible Subordinated Notes due
2009.
Common Stock Offered........ The resale of an indeterminable number of shares
of our Common Stock (the "Conversion Shares")
including any additional Conversion Shares
issuable pursuant to the antidilution provisions
of the Notes, issuable upon conversion of the
Notes into shares of Common Stock. For more
details, see the section "Description of Capital
Stock."
Issuer...................... Total Renal Care Holdings, Inc.
Maturity.................... May 15, 2009.
Interest.................... Annual rate: 7%.
Payment frequency: Every six months on May 15 and
November 15.
First payment: May 15, 1999.
Conversion Rights........... The Notes are convertible, at the holder's
option, at any time prior to May 15, 2009, into
the Conversion Shares, at a conversion price of
$32.81 per share of Common Stock, subject to
adjustment (the conversion ratio is 30.4785
shares of our Common Stock per $1,000 principal
amount of Notes).
Change of Control........... We will be required to offer to purchase the
Notes at 100% of their principal amount, plus
interest and liquidated damages, if any, if a
Change of Control (see page for a definition
of this term) occurs.
Optional Redemption......... On or after November 15, 2001, we may redeem some
or all of the Notes at any time at the redemption
prices listed in the section "Description of
Notes" under the heading "Optional Redemption."
Ranking..................... These Notes are subordinated, unsecured general
debts. They are junior to all of our existing and
future Senior Indebtedness (see page for a
definition of this term) and effectively behind
all existing and future liabilities of our
subsidiaries.
Use of Proceeds............. We will not receive any proceeds from the resale
of the Notes or any Conversion Shares issued upon
conversion of the Notes. For more details, see
the section "Use of Proceeds."
Selling Securityholders..... The Notes and any Conversion Shares issued upon
conversion of the Notes may be offered for the
accounts of certain selling securityholders (the
"Selling Securityholders"). As information
regarding these Selling Securityholders changes,
we will supplement this prospectus. For more
details, see the section "Selling
Securityholders."
2
Trading..................... The Notes are eligible for trading in the Private
Offerings, Resale and Trading through Automatic
Linkage ("PORTAL") market. Our Common Stock
trades on the New York Stock Exchange under the
symbol "TRL."
Risk Factors................ Investment in the Notes and/or the Conversion
Shares issuable upon conversion of the Notes
involves a high degree of risk. Therefore, you
should carefully consider the matters set forth
in the section "Risk Factors" which begins on
page .
3
RISK FACTORS
In addition to the other information set forth in this prospectus, you should
carefully consider the following factors and additional factors set forth in
the documents incorporated by reference in this prospectus.
SUBORDINATION
The Notes are subordinated in right of payment to all of our existing and
future Senior Indebtedness and, effectively, all existing and future
liabilities (including trade payables) of our subsidiaries. The Indenture (see
page 9 for a definition of this term) does not restrict the incurrence of
Senior Indebtedness or other liabilities by us or our subsidiaries. By reason
of the subordination of the Notes, in the event of the insolvency, bankruptcy,
liquidation, reorganization, dissolution or winding up of our business or
similar proceeding, or upon a default in payment with respect to any of our
indebtedness or an event of default with respect to this indebtedness resulting
in its acceleration, our assets will be available to pay the amounts due on the
Notes only after all Senior Indebtedness has been paid in full. The Notes rank
on the same level as all of our other unsecured, subordinated obligations, but
effectively will be subordinated to all obligations of our subsidiaries. An
acceleration of subsidiary debt or a failure to pay the same at the maturity
thereof will not constitute a default or event of default under the Indenture.
For more details, see the section "Description of Notes."
SUBSTANTIAL LEVERAGE, DEBT SERVICE OBLIGATIONS AND RESTRICTIVE DEBT COVENANTS
We are highly leveraged (which means that the amount of our outstanding debt
is large compared to the net book value of our assets) and have substantial
repayment obligations under our outstanding debt, including interest expense
associated with the Notes.
On April 30, 1998, we replaced our $1.05 billion credit facilities with an
aggregate of $1.35 billion of new credit facilities (the "Credit Facilities")
with various banks, DLJ Capital Funding, Inc., as Syndication Agent, and The
Bank of New York, as Administrative Agent. The Credit Facilities currently
contain numerous financial and operating covenants that limit our ability (and
the ability of most of our subsidiaries) to undertake certain transactions.
These covenants require that we meet certain interest coverage, net worth and
leverage tests. The Indenture and the Credit Facilities permit us and our
subsidiaries to incur or guarantee additional debt, subject to certain
limitations in the case of the Credit Facilities. For more details, see the
sections "Description of Indebtedness" under the heading "Credit Facilities"
and "Description of Notes."
Our level of debt and the limitations imposed on us by our debt agreements
could have other important consequences to you, including the following (for
more details, see the section "Description of Indebtedness"):
. We will have to use a portion of our cash flow from operations for debt
service, rather than for our operations;
. We may not be able to obtain additional debt financing for future working
capital, capital expenditures, acquisitions or other corporate purposes;
. The debt under the Credit Facilities is at a variable interest rate,
making us vulnerable to increases in interest rates; and
. We could be less able to take advantage of significant business
opportunities, such as acquisitions, and react to changes in market or
industry conditions.
HOLDING COMPANY STRUCTURE
TRCH is a holding company, and our only material assets are the stock of our
subsidiaries. All of our operations are conducted by our subsidiaries, which
own substantially all of our consolidated assets. Consequently, our operating
cash flow and our ability to service our debt, including the Notes, depends
upon
4
the operating cash flow of our subsidiaries and the payment of funds by them to
us in the form of loans, dividends or otherwise. These payments may not be
adequate to pay interest and principal on the Notes when due. In addition, the
ability of our subsidiaries to make payments to us depends on applicable law
and restrictions under the Credit Facilities and other present and future debt
instruments to which they are a party, which may include requirements to
maintain minimum levels of working capital and other assets.
POSSIBLE INABILITY TO PURCHASE NOTES UPON CHANGE OF CONTROL
Under the Indenture, upon the occurrence of a Change of Control a holder of
the Notes may require us to repurchase all or a portion of its Notes at 100% of
the principal amount of the Notes plus accrued and unpaid interest and any
Liquidated Damages (see page 21 for a definition of this term), if any, to the
date of purchase. If a Change of Control were to occur, we may not be able to
pay the repurchase price for all of the Notes submitted for repurchase. In
addition, the terms of some of our existing debt agreements, including the
Credit Facilities, prohibit us from purchasing any Notes until all debt under
such agreements is paid in full, except in limited circumstances. Our future
credit agreements or other agreements relating to debt may contain similar
provisions. If a Change of Control occurs while we are prohibited from
purchasing the Notes, we could seek the consent of our lenders to the purchase
of the Notes or could attempt to refinance the borrowings that contain the
prohibition. If we do not obtain a consent or repay the borrowings, we would
remain prohibited from purchasing the Notes. In such case, our failure to
purchase submitted Notes would constitute an event of default under the
Indenture, which would, in turn, constitute a further default under certain of
our existing or future debt agreements, including the Credit Facilities. In
such case, certain persons could declare all debt under the Notes or the Credit
Facilities due and payable.
Our inability to pay all debt under the Credit Facilities would constitute an
event of default under the Indenture, which could accelerate all debt under the
Indenture. In the event of a Change of Control, we might not be able to
refinance the Credit Facilities, which would allow us to repay all tendered
Notes, and we might not have sufficient assets to satisfy all of our
obligations under the Credit Facilities and the Notes. In addition to the
above, if we undergo a change of control (as defined in the particular debt
instrument), certain of our existing debt (such as the Credit Facilities) and
future debt may be accelerated or we may be required to repurchase such debt.
For more details, see the sections "Description of Indebtedness" under the
heading "Credit Facilities" and "Description of Notes" under the heading
"Repurchase of Notes at the Option of the Holder upon a Change of Control."
LACK OF PUBLIC MARKET FOR THE NOTES
There is currently no public market for the Notes. We cannot provide any
assurances that a public market will develop for the Notes or that you will be
able to sell your Notes. If a public market were to exist, the Notes might
trade at prices higher or lower than their initial offering price. The trading
price would depend on many factors, such as prevailing interest rates and the
market for similar securities, general economic conditions and our financial
condition, performance and prospects. Historically, the market for non-
investment grade debt has been subject to disruptions that have caused
substantial fluctuation in the prices of these securities. The market for the
Notes may be subject to such disruptions, which could have an adverse effect on
you. You should be aware that you may be required to bear the financial risk of
an investment in the Notes for an indefinite period of time. We do not intend
to apply for listing or quotation of the Notes; however, the Notes are eligible
for trading in the PORTAL market.
The Initial Purchasers (see page 8 for a definition of this term) have
advised us that they intend to make a market in the Notes. However, the Initial
Purchasers are not obligated to do so, and they may discontinue any market-
making activities with respect to the Notes at any time without notice. In
addition, such market-making activity would be subject to the limitations
imposed by the Securities Act of 1933, as amended (the "Securities Act") and
the Exchange Act, and may be limited during the pendency of a shelf
registration statement relating to the Notes. For more details, see the
sections "Description of Notes" and "Plan of Distribution."
5
POSSIBLE VOLATILITY OF STOCK PRICE
The trading price and volume of our Common Stock historically has been, and
could in the future be, subject to significant fluctuations in response to many
factors, including:
.Quarter-to-quarter variations in our results of operations;
.Changes in our earnings estimates by analysts;
.Changes in federal, state or foreign regulation of the dialysis service
industry;
.Changes in reimbursement rates for dialysis services;
.Loss of key personnel;
.Competition;
.Announcement and market acceptance of acquisitions; and
.General market conditions and other events or factors.
6
USE OF PROCEEDS
As the Notes and any Conversion Shares issued upon conversion of the Notes
are offered by the Selling Securityholders and not by us, we will not receive
any proceeds from the resale of the Notes or any Conversion Shares issuable
upon conversion of the Notes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for each of the periods indicated.
SEVEN MONTHS
YEAR ENDED MAY ENDED YEAR ENDED NINE MONTHS ENDED
31, DECEMBER 31,(1) DECEMBER 31, SEPTEMBER 30,
-------------- --------------- -------------- ---------------------------
1993 1994 1995 1994 1995 1995 1996 1997 1997 1998 1998
---- ---- ---- ------- ------- ---- ---- ---- ---- ---- -----------------
(supplemental)(2)
Ratio of Earnings to
Fixed Charges.......... 4.11 6.06 2.97 3.17 3.48 3.22 3.96 3.47 3.82 1.35 3.07
- ---------------------
(1) In 1995, we changed our fiscal year end to December 31 from May 31.
(2) A supplemental calculation of the ratio of earnings to fixed charges is
presented to exclude nonrecurring merger costs and interest rate swap
termination costs. During the nine months ended September 30, 1998, we
recorded $92.8 million of fees and expenses related to the Merger and to
the integration of the combined companies. In April 1998, we recorded $9.8
million related to interest rate swap termination costs.
The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings. Earnings is defined as pretax income from continuing operations
adjusted by adding fixed charges and excluding interest capitalized during the
period. Fixed charges means the total of interest expense and amortization of
financing costs, the estimated interest component of rental expense on
operating leases and preferred stock dividends.
7
SELLING SECURITYHOLDERS
We originally issued the Notes in a private placement to Donaldson, Lufkin
and Jenrette Securities Corporation, BNY Capital Markets, Inc., Credit Suisse
First Boston Corporation and Warburg Dillon Read LLC (the "Initial Purchasers")
on November 18, 1998, at a purchase price of 97% of face value. The Initial
Purchasers then sold the Notes in transactions exempt from the registration
requirements of the Securities Act to persons reasonably believed by the
Initial Purchasers to be Qualified Institutional Buyers and to institutional
"accredited investors" (each as defined in accordance with the Securities Act).
The Selling Securityholders may, from time to time, offer and sell any or all
of the Notes and the Conversion Shares under this prospectus. All of the Notes
and the Conversion Shares offered pursuant to this prospectus are offered by
the Selling Securityholders. Any sales of the Notes or the Conversion Shares
will be for the account of the Selling Securityholders and we will not receive
any of the proceeds from these sales.
United States Trust Company of New York (the "Trustee") provided us the
information contained in the following table with respect to the Selling
Securityholders and the respective principal amount of Notes that may be sold
by each of them under this prospectus. We have not independently verified this
information.
PRINCIPAL AMOUNT OF SHARES OF COMMON PERCENTAGE OF
NOTES OWNED THAT PERCENTAGE STOCK THAT MAY COMMON STOCK
NAME(1) MAY BE SOLD(1) OF NOTES BE SOLD(2)(3) OUTSTANDING(2)(4)
------- ------------------- ----------- ---------------- -----------------
- ---------------------
* Less than 1%.
(1) This information is as of , 1999.
(2) Assumes that no Selling Securityholder beneficially owns any shares of
Common Stock other than shares issuable pursuant to conversion of the
Notes.
(3) Assumes conversion of all Notes owned by the Selling Securityholder at the
initial conversion price of $32.81 per share. This initial conversion price
may be adjusted under certain circumstances. For more details, see the
section "Description of Notes." As a result, the number of Conversion
Shares issuable upon conversion of the Notes may increase or decrease.
Under the terms of the Indenture, cash will be paid instead of issuing
fractional shares upon conversion.
(4) As of December 31, 1998, we had of shares of Common Stock outstanding.
In accordance with the rules of the Commission, the percentage of Common
Stock outstanding owned by each Selling Securityholder is computed as
follows: (a) the numerator is the number of shares of Common Stock held by
that Selling Securityholder upon conversion of all Notes owned by that
Selling Securityholder and (b) the denominator includes the number of
shares of Common Stock outstanding and the number of shares of Common Stock
held by that Selling Securityholder upon conversion of all Notes owned by
that Selling Securityholder.
8
DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
were issued pursuant to an indenture (the "Indenture") dated as of November 18,
1998 by and between TRCH and United States Trust Company of New York, as
trustee (the "Trustee"). The following summary of the Notes, the Indenture and
the Registration Rights Agreement (as defined herein) does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Indenture and the Registration Rights Agreement,
including the definitions therein of certain terms. Copies of the Indenture and
the Registration Rights Agreement may be obtained from the Company upon
request. Capitalized terms used herein without definition have the meanings
ascribed to them in the Indenture or the Registration Rights Agreement, as
appropriate. As used in this section, the "Company" refers to TRCH, exclusive
of its subsidiaries. Wherever particular provisions or defined terms of the
Indenture (or the form of Note which is a part thereof) or the Registration
Rights Agreement are referred to in this summary, such provisions or defined
terms are incorporated by reference as a part of the statements made and such
statements are qualified in their entirety by such reference. Certain
definitions of terms used in the following summary are set forth under "Certain
Definitions."
GENERAL
The Notes are general, unsecured obligations of the Company, limited in
aggregate principal amount to $345.0 million. The Notes are subordinated in
right of payment to all existing and future Senior Indebtedness, as described
under "Subordination" below. The Notes were issued in fully registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
The Notes mature on May 15, 2009. The Notes bear interest at the rate of 7%
per annum from their date of issuance, or from the most recent Interest Payment
Date to which interest has been paid or provided for, payable semi-annually in
cash in arrears on May 15 and November 15 of each year, commencing May 15,
1999, to the persons in whose names such Notes are registered at the close of
business on May 1 and November 1 immediately preceding such Interest Payment
Dates. Principal of, premium on, if any, interest on, and Liquidated Damages,
if any, with respect to, the Notes will be payable, the Notes will be
convertible and the Notes may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose,
which office or agency shall be maintained in New York, New York. Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
At the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders of the Notes at the addresses
set forth upon the registry books of the Company. No service charge will be
made for any registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Until otherwise designated by the
Company, the Company's office or agency will be the corporate trust office of
the Trustee presently located at 114 West 47th Street, New York, New York
10036-1532.
The Indenture does not contain any financial covenants or any restrictions on
the payment of dividends, the issuance or repurchase of securities of the
Company or the incurrence of indebtedness, including Senior Indebtedness. The
Indenture contains no covenants or other provisions to afford protection to
holders of Notes (the "Holders") in the event of a highly leveraged transaction
or a change of control of the Company, except to the limited extent described
under "Repurchase of Notes at the Option of the Holder Upon a Change of
Control."
CONVERSION RIGHTS
Each Holder of Notes has the right at any time prior to the close of business
on the Stated Maturity of the Notes, unless previously redeemed or repurchased,
at the Holder's option, to convert any portion of the principal amount thereof
that is $1,000 or an integral multiple thereof into shares of Common Stock at
the
9
Conversion Price set forth on the cover page of this prospectus (subject to
adjustment as described below). The right to convert a Note called for
redemption or delivered for repurchase and not withdrawn will terminate at the
close of business on the Business Day immediately prior to the Redemption Date
or Repurchase Date, as applicable, for such Note, unless the Company
subsequently fails to pay the applicable Redemption Price or Repurchase Price,
as the case may be.
In the case of any Note that has been converted into Common Stock after any
Record Date, but on or before the next Interest Payment Date, interest, the
stated due date of which is on such Interest Payment Date, shall be payable on
such Interest Payment Date notwithstanding such conversion, and such interest
shall be paid to the Holder of such Note who is a Holder on such Record Date.
Any Note converted after any Record Date but before the next Interest Payment
Date (other than Notes called for redemption) must be accompanied by payment of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount of Notes being surrendered for conversion; provided that no
such payment shall be required with respect to interest payable on November 15,
2001. No fractional shares of Common Stock will be issued upon conversion but,
in lieu thereof, an appropriate amount will be paid in cash by the Company
based on the market price of Common Stock (determined in accordance with the
Indenture) at the close of business on the day of conversion. As a result of
the foregoing provisions, Holders who surrender Notes for conversion on a date
that is not an Interest Payment Date will not receive any interest for the
period from the Interest Payment Date next preceding the date of conversion to
the date of conversion or for any later period, except for Notes that are
called for redemption on a Redemption Date between a Record Date and the
corresponding Interest Payment Date as provided above.
The Conversion Price is subject to adjustment in certain events, including
(a) any payment of a dividend (or other distribution) payable in Common Stock
on any class of Capital Stock of the Company, (b) any issuance to all or
substantially all holders of Common Stock of rights, options or warrants
entitling them to subscribe for or purchase Common Stock at less than the then
Current Market Price of Common Stock (determined in accordance with the
Indenture): provided, however, that if such rights, options or warrants are
only exercisable upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur, (c)
certain subdivisions, combinations or reclassifications of the outstanding
Common Stock, (d) any distribution to all or substantially all holders of
Common Stock of evidences of indebtedness, shares of Capital Stock (other than
Common Stock), cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
distributions in connection with the liquidation, dissolution or winding up of
the Company and excluding dividends and distributions paid exclusively in cash
and in mergers and consolidations to which the second succeeding paragraph
applies), (e) any distribution consisting exclusively of cash (excluding any
cash portion of distributions referred to in (d) above, or cash distributed
upon a merger or consolidation to which the second succeeding paragraph
applies) to all or substantially all holders of Common Stock in an aggregate
amount that, combined together with (1) all other such all-cash distributions
made within the then preceding 12 months in respect of which no adjustments
have been made and (2) any cash and the fair market value of other
consideration paid or payable in respect of any tender offer by the Company or
any of its Subsidiaries for Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made exceeds 15.0% of the
Company's market capitalization (defined as being the product of the then
Current Market Price of the Common Stock multiplied by the number of shares of
Common Stock then outstanding) on the record date of such distribution, and (f)
the completion of a tender offer made by the Company or any of its Subsidiaries
for Common Stock to the extent that the aggregate consideration, together with
(1) any cash and other consideration payable in a tender offer by the Company
or any of its Subsidiaries for Common Stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which no adjustment
has been made and (2) the aggregate amount of any such all-cash distributions
referred to in (e) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 15.0% of the Company's market
capitalization on the expiration of such tender offer. In the event of a
distribution to all or substantially all of the holders of Common Stock of
rights, warrants or options to subscribe for or purchase any securities (other
than those
10
referred to in (b) above), the Company may instead of making an adjustment in
the Conversion Price, provide that each Holder of a Note, who converts the Note
after the record date for such distribution and prior to the expiration of such
rights, shall be entitled to receive upon such conversion of the Note, in
addition to shares of Common Stock, an appropriate number of such rights,
warrants or options. No adjustment of the Conversion Price is required to be
made until the cumulative adjustments amount to one percent or more of the
Conversion Price as last adjusted.
The Company, from time to time and to the extent permitted by law, may reduce
the Conversion Price by any amount for any period of at least 20 Business Days,
in which case the Company shall give at least 15 days notice of such reduction
to the Trustee and the Holders, if the Board of Directors has made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive. The Company may, at its
option, make such reductions in the Conversion Price, in addition to those set
forth above, as the Board of Directors deems advisable to avoid or diminish any
income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for United States Federal income tax purposes.
In case of any reclassification or change of outstanding shares of Common
Stock issuable upon conversion of the Notes (other than certain changes in par
value) or consolidation or merger of the Company with or into another Person or
any consolidation or merger of another Person with or into the Company (with
certain exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of the assets of the Company, each Note then outstanding
will, without the consent of any Holder of Notes, become convertible only into
the kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance
by a holder of the number of shares of Common Stock into which such Note was
convertible immediately prior thereto after giving effect to any adjustment
required to be made as set forth above; provided that if the kind or amount of
securities, cash and other property is not the same for each share of Common
Stock held immediately prior to such reclassification, change, consolidation,
merger, sale, transfer, or conveyance, any Holder who fails to exercise any
right of election shall receive per share the kind and amount of securities,
cash or other property received per share by a plurality of such shares.
The Company will use all reasonable efforts to cause all registrations to be
made with, and to obtain any approvals by, any governmental authority under any
Federal or state law of the United States that may be required on the part of
the Company in connection with the conversion of the Notes into Common Stock.
If at any time during the two-year period following the date of the original
issuance of the Notes a registration statement under the Securities Act
covering the shares of Common Stock issuable upon conversion of the Notes is
not effective or is otherwise unavailable for effecting resales of such shares,
shares of Common Stock issued upon conversion of the Notes may not be sold or
otherwise transferred except in accordance with or pursuant to an exemption
from, or otherwise in a transaction not subject to, the registration
requirements of the Securities Act.
SUBORDINATION
The Notes are general, unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness. Any borrowings
under the Credit Facilities will constitute Senior Indebtedness and the Credit
Facilities provide for aggregate borrowings of $1.35 billion. The Notes are
effectively subordinated in right of payment to all existing and future
liabilities (including trade payables) of the Company's subsidiaries. The
Indenture does not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or its Subsidiaries or the ability of the Company
to transfer assets or business operations to its Subsidiaries, subject to the
provisions described under "Repurchase of Notes at the Option of the Holder
Upon a Change of Control" and "Limitation on Merger, Sale or Consolidation."
11
The Indenture provides that no payment (by setoff or otherwise) may be made
by or on behalf of the Company, directly or through any Subsidiary, on account
of the principal of, premium, if any, or interest on and Liquidated Damages or
any other obligations under or with respect to, the Notes, or to acquire any of
the Notes (including repurchases of Notes at the option of the Holder) for cash
or property (other than Junior Securities), or on account of the redemption
provisions of the Notes (collectively, the "Subordinated Obligations"), (1)
upon the maturity of any Senior Indebtedness, by lapse of time, acceleration
(unless waived) or otherwise, unless and until all principal of, premium, if
any, and interest on, and fees, charges, expenses, indemnifications and all
other amounts payable in respect of Senior Indebtedness are first paid in full
in cash, or (2) in the event of default in the payment of any principal of,
premium, if any, or interest on, any Designated Senior Indebtedness when it
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise (collectively, a "Payment Default"), unless and
until such Payment Default has been cured or waived or otherwise has ceased to
exist. The payment of cash, property or securities (other than Junior
Securities) upon conversion of a Note will constitute payment on a Note and
therefore will be subject to the subordination provisions in the Indenture.
Upon (1) the happening of an event of default (other than a Payment Default)
that permits, or would permit with (a) the passage of time, (b) the giving of
notice, (c) the making of any payment of the Notes then required to be made or
(d) any combination thereof (collectively, a "Non-Payment Default"), the
holders of any Designated Senior Indebtedness or their representative
immediately to accelerate the maturity of such Designated Senior Indebtedness
and (2) written notice of such Non-Payment Default being given to the Company
and the Trustee by the holders of such Designated Senior Indebtedness or their
representative (a "Blockage Notice"), then, unless and until such Non-Payment
Default has been cured or waived or otherwise has ceased to exist, no payment
(by setoff or otherwise) may be made by or on behalf of the Company, directly
or through any Subsidiary, on account of the Subordinated Obligations.
Notwithstanding the foregoing, unless (1) the Designated Senior Indebtedness in
respect of which such Non-Payment Default exists has been declared due and
payable in its entirety within 179 days after the Blockage Notice is delivered
as set forth above (the "Payment Blockage Period"), and (2) such declaration
has not been rescinded or waived, at the end of the Payment Blockage Period,
the Company shall be required to pay to the Holders of the Notes all regularly
scheduled payments on the Notes that were not paid during the Payment Blockage
Period due to the foregoing prohibitions (and upon the making of such payments
any acceleration of the Notes made or other remedies commenced during the
Payment Blockage Period shall be of no further force or effect) and to resume
all other payments as and when due on the Notes. Not more than one Blockage
Notice may be given in any consecutive 365-day period, irrespective of the
number of defaults with respect to Senior Indebtedness during such period. In
no event, however, may the total number of days during which any Payment
Blockage Period is or Payment Blockage Periods are in effect exceed 179 days in
the aggregate during any consecutive 365-day period.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of the creditors or any
marshaling of assets or liabilities (1) the holders of all Senior Indebtedness
will first be entitled to receive payment in full before the Holders of the
Notes are entitled to receive any payment (other than Junior Securities) on
account of the Subordinated Obligations and (2) any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities (other than Junior Securities) to which the Holders of the Notes or
the Trustee on behalf of the Holders would be entitled (by setoff or
otherwise), except for the subordination provisions contained in the Indenture,
will be paid by the liquidating trustee or agent or other person making such a
payment or distribution directly to the holders of Senior Indebtedness or their
representative to the extent necessary to make payment in full in cash of all
such Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to the holders of
such Senior Indebtedness.
In the event that, notwithstanding the foregoing, any payment or distribution
of assets of the Company or any Subsidiary (other than Junior Securities as
aforesaid) shall be received by the Holders of the Notes or the Trustee on
behalf of the Holders or any Paying Agent at a time when such payment or
distribution is prohibited
12
by the foregoing provisions, such payment or distribution shall be held in
trust for the benefit of the holders of Senior Indebtedness, and shall be paid
or delivered by such Holders or the Trustee or such Paying Agent, as the case
may be, to the holders of the Senior Indebtedness remaining unpaid or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all such Senior Indebtedness in full in
cash after giving effect to any concurrent payment or distribution, or
provision therefor, to the holders of such Senior Indebtedness.
No provision contained in the Indenture or the Notes affects the obligation
of the Company, which is absolute and unconditional, to pay, when due,
principal of, premium, if any, and interest on the Notes. The subordination
provisions of the Indenture and the Notes do not prevent the occurrence of any
Default or Event of Default under the Indenture or limit the rights of the
Trustee or any Holder of any Notes, subject to the preceding paragraphs, to
pursue any other rights or remedies with respect to the Notes.
The Company conducts its operations through its Subsidiaries. Accordingly,
the Company's ability to meet its cash obligations in the future in part will
be dependent upon the ability of its Subsidiaries to make cash distributions to
the Company. The ability of its Subsidiaries to make distributions to the
Company is and will continue to be restricted by, among other limitations,
applicable provisions of the laws of national and state governments and may be
restricted by contractual provisions. The Indenture does not limit the ability
of the Company's Subsidiaries to incur such contractual restrictions in the
future. The right of the Company to participate in the assets of any Subsidiary
(and thus the ability of Holders of the Notes to benefit indirectly from such
assets) is generally subject to the prior claims of creditors, including trade
creditors, of that Subsidiary except to the extent that the Company itself is
recognized as a creditor of such Subsidiary, in which case the Company's claims
would still be subject to any security interest of other non-subordinated or
pari passu creditors of such Subsidiary. The Notes, therefore, are effectively
subordinated to obligations to creditors, including trade creditors, of
Subsidiaries of the Company with respect to the assets of the Subsidiaries
against which such creditors have a more direct claim. An acceleration of
Subsidiary debt or a failure to pay the same at the maturity thereof will not
constitute a Default or Event of Default under the Indenture.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshaling of assets or liabilities of the Company
and its Subsidiaries, Holders of Notes may receive ratably less than other
creditors.
REDEMPTION AT THE COMPANY'S OPTION
The Notes are not subject to redemption prior to November 15, 2001 and will
be redeemable on and after such date at the option of the Company, in whole or
in part, upon not less than 30 nor more than 60 days' notice to each Holder, at
the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing November 15 of the
years indicated below, in each case (subject to the right of Holders of record
on a Record Date to receive interest due on an Interest Payment Date that is on
or prior to such Redemption Date) together with accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Redemption Date:
YEAR PERCENTAGE
- ---- ----------
2001.................... 104.90%
2002.................... 104.20%
2003.................... 103.50%
2004.................... 102.80%
YEAR PERCENTAGE
---- ----------
2005.................... 102.10%
2006.................... 101.40%
2007.................... 100.70%
2008 and thereafter..... 100.00%
13
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption (the
"Redemption Date"), to the Holder of each Note to be redeemed to such Holder's
last address as then shown upon the registry books of the Registrar. The notice
of redemption must state the Redemption Date, the Redemption Price and the
amount of accrued interest and Liquidated Damages, if any, to be paid. Any
notice that relates to a Note to be redeemed in part only must state the
portion of the principal amount to be redeemed and must state that on and after
the Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued. On and
after the Redemption Date, interest will cease to accrue on the Notes or
portions thereof called for redemption, unless the Company defaults in its
obligations with respect thereto. The Notes do not have the benefit of any
sinking fund.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred (other than a Change of Control under clause (ii) of the definition
thereof which does not trigger prepayment rights for lenders under the change
of control provision of either of the Credit Facilities), the Company is
required to make an irrevocable and unconditional (except as described below)
offer (the "Repurchase Offer") to purchase all Notes on the date ("Repurchase
Date") that is no later than 45 Business Days (except as described below) after
the occurrence of such Change of Control at a cash price (the "Repurchase
Price") equal to 100% of the principal amount thereof, together with accrued
and unpaid interest and Liquidated Damages, if any, to (but excluding) the
Repurchase Date. A Holder of Notes may accept the Repurchase Offer with respect
to all or a portion of its Notes (provided that the principal amount of such
Notes must be $1,000 or an integral multiple thereof). The Repurchase Offer
shall be made within 25 Business Days following a Change of Control and shall
remain open for 20 Business Days following its commencement except to the
extent that a longer period is required by applicable law (the "Repurchase
Offer Period"). Upon expiration of the Repurchase Offer Period, the Company
shall purchase all Notes tendered in response to the Repurchase Offer. If
required by applicable law, the Repurchase Date and the Repurchase Offer Period
may be extended as so required.
The Indenture provides that a "Change of Control" means (i) the acquisition
by any Person (including any syndicate or group deemed to be a "person" under
Section 13(d)(3) of the Exchange Act) (excluding the Company or any wholly
owned Subsidiary thereof or any employee benefit plan of the Company or any
such Subsidiary) of beneficial ownership, directly or indirectly, through a
purchase, merger, or other acquisition transaction or series of transactions of
shares of capital stock of the Company entitling such Person to exercise more
than 50% of the total voting power of all shares of capital stock of the
Company entitling the holders thereof to vote generally in elections of
directors; or (ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company,
or any sale or transfer of all or substantially all of the assets of the
Company to another Person (other than a merger or sale of assets that (x) does
not result in a material reclassification, conversion, exchange, or
cancellation of outstanding shares of capital stock, (y) is effected solely to
change the jurisdiction of incorporation of the Company and results in a
reclassification, conversion, or exchange of outstanding shares of Common Stock
solely into shares of common stock, or (z) does not have the result that the
shareholders of the Company immediately before such transaction own, directly
or indirectly, immediately following such transaction, less than 50% of the
combined total voting power of all shares of Capital Stock of the Person
resulting from such transaction entitling the holders thereof to vote generally
in elections of directors); provided, however, that a Change of Control shall
not be deemed to have occurred if at least 90% of the consideration (excluding
cash payments for fractional shares) to be received by the holders of the
Common Stock in the transaction or transactions constituting the Change of
Control consists of shares of common stock or other equity securities traded on
a national securities exchange or quoted on the Nasdaq National Market, and, as
a result of such transaction or transactions, the Notes become convertible into
such common stock or other equity securities.
14
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent
on the facts and circumstances existing at such time. As a result, there may be
a degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
On or before the Repurchase Date, the Company will (1) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(2) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any) of
all Notes so tendered and (3) deliver to the Trustee the Notes so accepted,
together with an officers' certificate listing the Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to the
Holders of Notes so accepted payment in an amount equal to the Repurchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any), and
the Trustee will promptly authenticate and mail or deliver to such Holders a
new Note or Notes equal in principal amount to any unpurchased portion of the
Notes surrendered. Any Notes not so accepted will be promptly mailed or
delivered by the Company to the Holder thereof. The Company will announce
publicly the results of the Repurchase Offer on or as soon as practicable after
the Repurchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger, spin-off or similar
transaction that may adversely affect Holders, if such transaction does not
constitute a Change of Control. Moreover, certain events with respect to the
Company which may involve an actual change of control of the Company may not
constitute a Change of Control for purposes of the Indenture.
The right to require the Company to repurchase Notes as a result of the
occurrence of a Change of Control could create an event of default under Senior
Indebtedness as a result of which any repurchase could be blocked by the
subordination provisions of the Notes. Failure of the Company to repurchase the
Notes when required would result in an Event of Default with respect to the
Notes whether or not such repurchase is permitted by the subordination
provisions. See "--Subordination."
Except as described herein, no modification of the Indenture regarding the
provisions on repurchase at the option of any Holder of a Note upon a Change of
Control that adversely affects a Holder is permissible without the consent of
the Holder of the Note so affected. In the event of a Change of Control, if
Holders of in excess of two-thirds of the outstanding aggregate principal
amount of the Notes so determine at any time following the occurrence of such
Change of Control and before the close of business on the Business Day
immediately preceding the Repurchase Date, such event shall not be treated as a
Change of Control for purposes of the Indenture. In such event, (1) the Company
shall not be required to make the Repurchase Offer, (2) to the extent the
Repurchase Offer has already been made, such Repurchase Offer shall be deemed
revoked and (3) to the extent any Notes have been tendered in response to any
such revoked Repurchase Offer, such tender shall be rescinded and the Notes so
tendered shall be promptly returned to the Holders thereof. For purposes of any
such determination by the Holders of the outstanding Notes, Notes held by the
Company or an Affiliate of the Company (including any Person that would become
an Affiliate of the Company (or its successor) as a consequence of the event or
series of events that otherwise would be treated as a Change of Control for
purposes of the Indenture) shall be disregarded.
To the extent applicable, the Company will comply with the provisions of Rule
13e-4 and l4e-1 or any other tender offer rules under the Exchange Act and any
other securities laws, and will file a Schedule 13e-4 or any other schedule if
required under such rules, in connection with any offer by the Company to
repurchase Notes at the option of the Holders upon a Change of Control.
15
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into, or sell, lease or otherwise dispose of
all or substantially all of its assets (on a consolidated basis), whether in a
single transaction or a series of related transactions, to another Person or
group of affiliated Persons (other than to its wholly owned Subsidiaries),
unless (1) either (a) in the case of a merger or consolidation, the Company is
the surviving entity or (b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Notes and the Indentures;
and (2) no Default or Event of Default shall exist immediately before or after
giving effect on a pro forma basis to such transaction.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and the Company will be released from its obligations under the
Indenture and the Notes, except as to any obligations that arise from or as a
result of such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more subsidiaries, which properties and assets, if held by the Company instead
of such subsidiary, would constitute all or substantially all of the properties
and assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee, within 15 days after it is or would have been required to file such
with the Commission, annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
Commission and, in each case, together with a management's discussion and
analysis of financial condition and results of operations as such would be so
required. In addition, for so long as the Notes or the Common Stock into which
they are convertible are Transfer Restricted Securities (as defined), and if
the Company ceases to have a class of equity securities registered under
Section 12(b) or 12(g) of the Exchange Act, or ceases to be subject to Section
15(d) of the Exchange Act, the Company will continue to provide to Holders the
information specified by Rule 144A(d)(4).
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (1) the failure by the Company
to pay any installment of interest on the Notes as and when due and payable and
the continuance of any such failure for 30 days, (2) the failure by the Company
to pay all or any part of the principal of, or premium, if any, on the Notes
when and as the same become due and payable at maturity, redemption, by
acceleration or otherwise, including, without limitation, pursuant to any
Repurchase Offer, (3) the failure of the Company to perform its covenants and
agreements regarding any conversion of Notes required under the Indenture and
the continuance of any such failure for 30 days, (4) the failure by the Company
to observe or perform any other covenant or agreement contained in the Notes or
the Indenture and, subject to certain exceptions, the continuance of such
failure for a period of 60 days after written notice is 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 the Notes outstanding, (5) certain events of
bankruptcy, insolvency or reorganization in respect of the Company or any of
its Significant
16
Subsidiaries, (6) failure to make any payment at final stated maturity,
including any applicable grace period, in respect of Indebtedness of the
Company (other than non-recourse obligations) in an amount in excess of
$10 million, and continuance of such failure for 30 days after written notice
is 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 Notes outstanding, (7)
default with respect to any Indebtedness of the Company (other than non-
recourse obligations), which default results in the acceleration of
Indebtedness in an amount in excess of $10 million without such Indebtedness
having been discharged or such acceleration having been rescinded or annulled
for 30 days after written notice is 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 Notes outstanding and (8) final unsatisfied judgments not
covered by insurance aggregating in excess of $10 million, at any one time
rendered against the Company or any of its Significant Subsidiaries and not
stayed, bonded or discharged within 60 days. The Indenture provides that if a
Default occurs and is continuing, the Trustee must, within 90 days after the
Trustee's receiving actual notice of occurrence of such Default, give to the
Holders notice of such Default, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interest of the Holders, except in the case of a Default
in the payment of the principal of, premium, if any, or interest on any of the
Notes when due or in the payment of any redemption or repurchase obligation.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (5) above with respect to
the Company), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Notes then outstanding, by
notice in writing to the Company (and to the Trustee if given by Holders), may
declare all principal, premium, if any, accrued interest and Liquidated
Damages, if any, on or with respect to the Notes to be due and payable
immediately. If an Event of Default specified in clause (5) above with respect
to the Company occurs, all principal, premium, if any, accrued interest and
Liquidated Damages, if any, will be immediately due and payable on all
outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of Notes generally are authorized to rescind such acceleration
if all existing Events of Default, other than the non-payment of the principal
of, premium, if any, and interest on, and Liquidated Damages with respect to,
the Notes that have become due solely by such acceleration, have been cured or
waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of, interest on, or Liquidated Damages with
respect to, any Note not yet cured, or a default with respect to any covenant
or provision that cannot be modified or amended without the consent of the
Holder of each outstanding Note affected. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable security or indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the Notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
The Indenture provides that no Holder may pursue any remedy under the
Indenture, except for a default in the payment of principal, premium, if any,
or interest or Liquidated Damages, if any, on the Notes, unless the Holder
gives to the Trustee written notice of a continuing Event of Default, the
Holders of at least 25.0% in principal amount of the outstanding Notes make a
written request to the Trustee to pursue the remedy, such Holders offer to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense, the Trustee does not comply with the request within 60 days after the
receipt of the request and the offer of indemnity, and the Trustee shall not
have received a contrary direction from the Holders of a majority in principal
amount of the outstanding Notes.
17
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain purposes without the consent of
the Holders. With the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, the Company
and the Trustee are permitted to amend or supplement the Indenture or any
supplemental indenture or modify or waive the rights of the Holders; provided
that no such modification may, without the consent of each Holder affected
thereby: (1) change the Stated Maturity of any Note or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest thereon
or any premium payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, any Note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
conversion of any Note or the enforcement of any such payment on or after the
due date thereof (including, in the case of redemption, on or after the
Redemption Date), or reduce the Repurchase Price, or alter the Repurchase Offer
(other than as set forth herein) or redemption provisions in a manner adverse
to the Holders, or (2) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture or
(3) adversely affect the right of such Holder to convert Notes or alter, in a
manner that adversely affects the right of such Holder, the provisions relating
to anti-dilution protection in respect thereof. A supplemental indenture
entered into in compliance with the "Limitation on Merger, Sale or
Consolidation" covenant would not require the consent of the Holders of the
Notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture provides that no shareholder, employee, officer, director or
partner, as such, past, present or future, of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Indenture or the Notes by reason of his, her or its
status as such shareholder, employee, officer, director or partner.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the Indenture.
The Company or Trustee may require a Holder, among other things, to furnish
appropriate endorsements, legal opinions and transfer documents, and to pay any
taxes and fees required by law or permitted by the Indenture. The Company is
not required to transfer or exchange any Notes selected for redemption. Also,
the Company is not required to transfer or exchange any Notes for a period of
15 days before the mailing of a Repurchase Offer or notice of redemption.
The registered Holder of a Note may be treated as the owner of it for all
purposes.
BOOK ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, Notes initially resold to
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act ("QIBs"), are evidenced by one or more global Notes (the "Global Note"),
which were deposited on the date of the closing of the sale of the Notes (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co. ("Cede") as the
Depositary's nominee. Except as set forth below, the Global Note may be
transferred, in whole or in part, only to another nominee of the Depositary or
to a successor of the Depositary or its nominee.
Notes that were (1) originally issued to or transferred to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)) under
the Securities Act ("IAIs") who are not QIBs (the "Non-Global Purchasers"); or
(2) issued as described below under "Certificated Securities," were issued in
registered form (the "Certificated Securities"). Upon the transfer to a QIB of
Certificated Securities initially issued to a Non-Global Purchaser, such
Certificated Securities will, unless the Global Notes have previously been
18
exchanged for Certificated Securities, be exchanged for an interest in the
Global Notes representing the principal amount of Certificated Securities being
transferred.
QIBs may hold their interests in the Global Note directly through the
Depositary if such holders are participants in the Depositary, or indirectly
through organizations which are participants in the Depositary (the
"Participants"). Transfers between Participants will be effected in accordance
with the Depositary's rules and will be settled in same-day funds.
The Depositary has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its Participants and to
facilitate the clearance and settlement of transactions in such 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 the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. QIBs may elect to hold Notes purchased by them through the
Depositary. QIBs who are not Participants may beneficially own securities held
by or on behalf of the Depositary only through Participants or Indirect
Participants.
Ownership of the Notes evidenced by the Global Notes will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of Participants),
the Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes evidenced by the Global Notes will
be limited to such extent.
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Notes for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in a Global Note will not be entitled to have Notes represented by such Global
Note registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Notes, 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. As a result, the ability of a Person having a beneficial interest
in Notes represented by a Global Note to pledge such interest to Persons that
do not participate in the Depositary's system, or to otherwise take actions
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Neither the Company nor the Trustee have any responsibility or liability for
any aspect of the records relating to or payments made on account of Notes by
the Depositary, or for maintaining, supervising or reviewing any records of the
Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, interest on, and
Liquidated Damages with respect to, any Note represented by a Global Note
registered in the name of the Depositary or its nominee on the applicable
record date will be payable by the Trustee to or at the direction of the
Depositary or its nominee in its capacity as the registered Holder of the
Global Notes representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the Persons in whose names
the 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 Notes (including, principal, premium, if any, interest, or Liquidated
Damages with respect thereto), or immediately to credit the accounts of the
relevant Participants with such payment, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the Global
Notes as shown on the records of the Depositary. Payments by the Participants
and the Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants.
19
Holders who desire to convert their Notes into Common Stock pursuant to the
terms of the Notes should contact their brokers or other Participants or
Indirect Participants to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.
If (1) the Company notifies the Trustee in writing that the Depositary 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 Depositary
of the Global Notes, Certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by the
Global Notes. In addition, subject to certain conditions, any Person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of Certificated Notes. Upon any
such issuance, the Trustee is required to register such Certificated Notes in
the name of such Person or Persons (or the nominee of any thereof), and cause
the same to be delivered thereto. All such Certificated Notes shall bear
appropriate legends restricting their transferability.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Notes to be issued).
CERTIFICATED SECURITIES
If (1) the Company notifies the Trustee in writing that the Depositary 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 Global Note
Holder of the Global Note, Notes in such form will be issued to each Person
that the Global Note Holder and the Depositary identifies as the beneficial
owner of the related Notes. In addition, subject to certain conditions, any
Person having a beneficial interest in the Global Note may, upon request to the
Trustee, exchange such beneficial interest for Notes in definitive form. Upon
any such issuance, the Trustee is required to register such Notes in the name
of, and cause the same to be delivered to, such Person or Persons (or the
nominee of any thereof). Such Notes would be issued in fully registered form.
Neither the Company nor the Trustee shall be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners or
the related Notes and each such Person may conclusively rely on, and shall be
protected in relying on, instructions from the Global Note Holder or of the
Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Notes to be issued.)
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Registration Rights
Agreement on November 18, 1998 (the "Registration Rights Agreement"). Pursuant
to the Registration Rights Agreement, the Company has agreed to file with the
Commission on or prior to 90 days after the Closing Date a shelf registration
statement under the Securities Act (the "Shelf Registration Statement") on Form
S-3 or another appropriate form to cover resales of Transfer Restricted
Securities by the holders thereof who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration
Statement. Accordingly, the Company has filed the registration statement of
which this prospectus is a part. The Company will use its reasonable best
efforts to keep the Shelf Registration Statement effective until the earlier of
such date that is two years after the latest date of initial issuance of the
Notes or the date all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold or there cease to be outstanding any
Transfer Restricted Securities. For purposes of the foregoing, "Transfer
Restricted Securities" means each Note and share of Common Stock
20
issued upon conversion thereof until the earlier of the date on which such Note
or share of Common Stock has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or the
date on which such Note or share of Common Stock is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act (or any similar provisions then in force).
The Registration Rights Agreement provides that (1) the Company will file the
Shelf Registration Statement with the Commission on or prior to 90 days after
the Closing Date and (2) the Company will use its reasonable best efforts to
cause the Shelf Registration Statement to be declared effective by the
Commission on or prior to 180 days after the Closing Date (the "Effectiveness
Target Date"). If (1) the Shelf Registration Statement is not filed with the
Commission on or prior to 90 days after the Closing Date, (2) the Shelf
Registration Statement has not been declared effective by the Commission within
180 days after the Closing Date or (3) the Shelf Registration Statement is
filed and declared effective but shall thereafter cease to be effective or the
prospectus contained therein ceases to be usable for a period of time which
shall exceed 90 days in the aggregate during any 365-day period (each such
event referred to in clauses (1) through (3), a ("Registration Default"), the
Company will accrue liquidated damages ("Liquidated Damages") in favor of each
Holder of Transfer Restricted Securities, during the first 90-day period
immediately following the occurrence of such Registration Default in an amount
equal to $0.05 per week per $1,000 principal amount of Notes and, if
applicable, on an equivalent basis per share (subject to adjustment in the
event of stock splits, stock recombinations, stock dividends and the like) of
Common Stock constituting Transfer Restricted Securities held by such Holder.
The rate of accrual of the Liquidated Damages will increase by an additional
$0.05 per week per $1,000 principal amount of Notes and, if applicable, by an
equivalent amount per week per share (subject to adjustment as set forth above)
of Common Stock constituting Transfer Restricted Securities for each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages with respect to any Registration Default of $0.25
per week per $1,000 principal amount of Notes or, if applicable, an equivalent
amount per week per share (subject to adjustment as set forth above) of Common
Stock constituting Transfer Restricted Securities. All accrued Liquidated
Damages shall be paid to the Holders of Notes or shares of Common Stock (as
applicable) in the same manner as interest payments on the Notes on semi-annual
payment dates which correspond to interest payment dates for the Notes.
Following the cure of a Registration Default, Liquidated Damages will cease to
accrue with respect to such Registration Default. The use of the Shelf
Registration Statement for effecting resales of Transfer Restricted Securities
may be suspended in certain circumstances described in the Registration Rights
Agreement upon notice by the Company to the holders of the Transfer Restricted
Securities, subject to the rights of the holders of Transfer Restricted
Securities to receive Liquidated Damages if the aggregate number of days of
such suspensions in any 365-day period exceeds the period described above.
The Company will provide to each Holder of Transfer Restricted Securities
included in the Shelf Registration Statement copies of the prospectus contained
in the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit resales of the Transfer Restricted Securities. A Holder
who sells Transfer Restricted Securities pursuant to the Shelf Registration
Statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such Holder (including certain indemnification provisions).
Holders of the Transfer Restricted Securities will be required to make certain
representations to the Company (as described in the Registration Rights
Agreement) and will be required to deliver promptly information to be used in
connection with the Shelf Registration Statement in order to have their
Transfer Restricted Securities included in the Shelf Registration Statement. If
a Holder fails to provide such information within the prescribed time periods,
the Transfer Restricted Securities of such Holder will not be included in the
Shelf Registration Statement and the Holder will not be entitled to any
Liquidated Damages. A Holder's ability to sell such Transfer Restricted
Securities may be limited or the price at which such Transfer Restricted
Securities can be sold may be adversely affected if the Transfer Restricted
Securities are not included in the Shelf Registration Statement.
21
GOVERNING LAW
The Indenture and the Notes and the Registration Rights Agreement provide
that they are governed in accordance with the laws of the State of New York,
without regard to choice of laws provisions.
THE TRUSTEE
United States Trust Company of New York is the Trustee under the Indenture. A
successor Trustee may be appointed in accordance with the terms of the
Indenture.
The Indenture contains certain limitations on the rights of the Trustee, in
the event it becomes a creditor of the Company, 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 is permitted to engage in
other transactions with the Company and its Subsidiaries; provided, however,
that if it acquires any conflicting interest (as defined), it must eliminate
such conflict or resign.
In case an Event of Default shall occur (and shall not be cured or waived),
the Trustee will be required to use the degree of care of a prudent person in
the conduct of its own affairs in the exercise of its powers. 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 of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity.
ABSENCE OF PUBLIC MARKET
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes,
the ability of the Holders to sell their Notes or at what price Holders of the
Notes will be able to sell their Notes. Future trading prices of the Notes will
depend upon many factors including, among other things, prevailing interest
rates, the Company's operating results, the price of the Common Stock and the
market for similar securities. The Initial Purchasers have informed the Company
that they intend to make a market in the Notes offered hereby; however, the
Initial Purchasers are not obligated to do so and any such market making
activity may be terminated at any time without notice to the Holders of the
Notes. The Notes are eligible for trading on the PORTAL Market. The Company
does not intend to apply for listing of the Notes on any securities exchange.
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law or executive order to
close.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is
a party that is required to be classified and accounted for as a capital lease
obligation under GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participation or other equivalents of or
interests (however designated) in stock issued by that Person.
"Continuing Director" means at any date a member of the Company's Board of
Directors (1) who was a member of such board on the date of initial issuance of
the Notes or (2) who was nominated or elected by at least a majority of the
directors who were such Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was recommended
or endorsed by at least a majority of the directors who were such Continuing
Directors at the time of such nomination or election.
22
"Credit Facilities" means (1) the Amended and Restated Revolving Credit
Agreement, dated as of April 30, 1998, by and among the Company, the lenders
party thereto, DLJ Capital Funding, Inc., as Syndication Agent, First Union
National Bank, as Documentation Agent, and The Bank of New York, as
Administrative Agent, as amended prior to or on the Issue Date, and (2) the
Amended and Restated Term Loan Agreement, dated as of April 30, 1998, by and
among the Company, the lenders party thereto, DLJ Capital Funding, Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent, as
amended prior to or on the Issue Date, in each case including any notes,
guaranties, security or pledge agreements, letters of credit and other
documents or instruments executed pursuant thereto and any appendices, exhibits
or schedules to any of the foregoing, as the same may be in effect from time to
time, and in each case, as such agreements, notes, guaranties, security or
pledge agreements, letters of credit and other documents or instruments may be
amended, modified, supplemented, renewed, refunded, replaced, refinanced,
extended or restated from time to time (whether with the original agents and
lenders or other agents and lenders or otherwise, and whether provided under
the original credit or loan agreement or other credit or loan agreements or
otherwise), including any (1) extension of the maturity of any Indebtedness or
other obligation incurred thereunder or contemplated thereby, (2) addition or
deletion of borrowers or guarantors thereunder, so long as the borrowers
include one or more of the Company and its Subsidiaries and their respective
successors and assigns, (3) increase in the amount of Indebtedness or other
obligations incurred thereunder or available to be borrowed thereunder or
(4) other alteration of the terms and conditions thereof.
"Designated Senior Indebtedness" means (1) any Indebtedness outstanding under
any of the Credit Facilities and (2) any other Senior Indebtedness, the
principal amount of which is, or under which the lenders party thereto are
committed to lend or advance, $10 million or more, provided, that such other
Senior Indebtedness has been designated by the Company in the instrument or
agreement creating or evidencing the same as "Designated Senior Indebtedness."
"Indebtedness" of any Person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such Person, (1) in respect of
borrowed money (whether or not the lender has recourse to all or any portion of
the assets of such person), (2) evidenced by credit or loan agreements, bonds,
notes, debentures or similar instruments (including, without limitation, notes
or similar instruments given in connection with the acquisition of any
business, properties or assets of any kind), (3) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (4) for the
payment of money relating to a Capitalized Lease Obligation or (5) evidenced by
a letter of credit, bank guarantee or a reimbursement obligation of such Person
with respect to any letter of credit; (b) all obligations of such Person issued
or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business); (c) all net obligations of such Person under Interest Swap
and Hedging Obligations; (d) all liabilities of others of the kind described in
the preceding clauses (a),(b) or (c) that such Person has guaranteed or that is
otherwise its legal liability, or which is secured by a lien on property of
such Person (other than carriers', warehousemens', mechanics', repairmens' or
other like non-consensual statutory liens arising in the ordinary course of
business); and (e) any and all deferrals, renewals, extensions, modifications,
replacements, restatements, refinancings and refundings (whether direct or
indirect) of, or any indebtedness or obligation issued in exchange for, any
liability of the kind described in any of the preceding clauses (a), (b), (c)
or (d), or this clause (e), whether or not between or among the same parties.
"Interest Swap and Hedging Obligations" means the obligations of any Person
under any interest rate or currency protection agreement, future agreement,
option agreement, swap agreement, cap agreement or other interest rate or
currency hedge agreement, collar agreement or other similar agreement or
arrangement to which such Person is a party or beneficiary.
"Junior Securities" means Capital Stock in the Company and any Indebtedness
of the Company, in each case that (a) is authorized and issued pursuant to a
plan of reorganization of the Company (which authorization states that it gives
effect to the subordination of such Junior Securities to all Senior
Indebtedness), (b) is subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the
same extent as, or to a greater extent than, the Notes are subordinated to
Senior Indebtedness
23
pursuant to the Indenture, and (c) contains terms, provisions, covenants and
default provisions not more beneficial to the Holders of the Notes as compared
to the holders of the Senior Indebtedness on the issue date of the Notes.
"Senior Indebtedness" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowed as a claim in any such
proceeding) and rent payable on or in connection with, and all letters of
credit, reimbursement obligations and fees, costs, expenses and other amounts
and liabilities accrued or due on or in connection with, and Interest Swap and
Hedging Obligations issued by parties to and secured with, the Credit
Facilities and any other Indebtedness of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed, guaranteed
or in effect guaranteed by the Company, unless the instrument creating or
evidencing such Indebtedness expressly provides that such Indebtedness is not
senior or superior in right of payment to the Notes or is pari passu with, or
subordinated to, the Notes; provided that in no event shall Senior Indebtedness
include (a) Indebtedness of the Company owed to any Subsidiary of the Company,
(b) Indebtedness of the Company representing any trade account payable incurred
in the ordinary course of business, (c) any liability for taxes owed or owing
by the Company or any Subsidiary of the Company or (d) the Notes.
"Significant Subsidiary" means as of any date of determination, (i) any
Subsidiary of the Company that has aggregate total assets in an amount in
excess of 10% of the consolidated total assets of the Company and its
Subsidiaries at such date of determination and (ii) any Subsidiary of the
Company for which the net income of such Subsidiary and its Subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principals, during the four fiscal quarters most recently ended
preceding the date of determination, exceeded 10% of the net income of the
Company and its Subsidiaries during such period.
"Stated Maturity" when used with respect to any Note, means May 15, 2009.
"Subsidiary" with respect to any Person, means (1) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
Person, by such Person and one or more Subsidiaries of such Person or by one or
more Subsidiaries of such Person, (2) a partnership in which such Person or a
Subsidiary of such Person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such Person a majority of the
partnership interests, or (3) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries of such Person or such Person and
one or more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
24
DESCRIPTION OF CAPITAL STOCK
This summary highlights certain provisions of our Certificate of
Incorporation, as amended to date (the "Certificate of Incorporation") and our
Bylaws (the "Bylaws"). This summary is not complete and does not contain all
of the provisions of our Certificate of Incorporation or our Bylaws and is
qualified in its entirety by reference to these documents.
Our authorized capital stock is 200 million shares, consisting of 195
million shares of Common Stock, par value $0.001 per share, (the "Common
Stock") and 5 million shares of Preferred Stock, par value $0.001 per share
(the "Preferred Stock") in such series and with such voting powers,
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
may be fixed from time to time by our Board of Directors for each series.
COMMON STOCK
As of December 31, 1998, there were shares of Common Stock issued
and outstanding. We do not anticipate paying any cash dividends on the Common
Stock in the foreseeable future and we are subject to certain restrictions on
our ability to pay dividends on the Common Stock under the Credit Facilities.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights applicable to the Common Stock.
The rights, preferences and privileges of holders of our Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which we may designate and issue in
the future. Subject to the preferences applicable to shares of Preferred Stock
outstanding at any time, holders of shares of Common Stock are entitled to
receive dividends ratably, if, when and as declared by the Board of Directors,
from funds legally available therefor and are entitled, in the event of
liquidation, to share ratably in all assets remaining after payment of
liabilities and Preferred Stock preferences, if any. Holders of Common Stock
have no preemptive, subscription, redemption or conversion rights and there
are no sinking fund provisions relating to these shares.
The authorized but unissued shares of Common Stock are available for
issuance without further action by our stockholders, unless such action is
required by applicable law or the rules of any stock exchange on which the
Common Stock may be listed.
The outstanding shares of Common Stock are, and the Conversion Shares
issuable upon conversion of the Notes will be, when issued and paid for, fully
paid and non-assessable.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to
establish series of Preferred Stock and to determine, with respect to any
series of Preferred Stock, the voting powers, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof,
as are stated in the resolutions of the Board of Directors providing for such
series.
As of December 1, 1998, there were no shares of Preferred Stock issued and
outstanding. The authorized but unissued shares of Preferred Stock are
available for issuance without further action by our stockholders. This will
allow us to issue shares of Preferred Stock without the expense and delay of a
special stockholders' meeting, unless such action is required by applicable
law or the rules of any stock exchange on which our securities may be listed.
We believe that the Preferred Stock will provide flexibility in structuring
possible future financing and acquisitions, and in meeting other corporate
needs. Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock, the terms of which,
subject to certain limitations imposed by the securities laws, could impede
the completion of a merger, tender offer or
25
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to our best interests and the best
interests of our stockholders at the time of issuance. The Board of Directors,
in so acting, could issue Preferred Stock having terms that could discourage an
acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market price
of such stock.
CERTAIN CHARTER AND BYLAW PROVISIONS
Pursuant to the provisions of the Delaware General Corporation Law (the
"DGCL"), we have adopted provisions in our Certificate of Incorporation and
Bylaws which require us to indemnify our officers and directors to the fullest
extent permitted by law, and eliminate the personal liability of our directors
to us or our stockholders for monetary damages for breach of their duty of due
care except (1) for any breach of the duty of loyalty; (2) for acts or omission
not in good faith or which involve intentional misconduct or knowing violations
of law; (3) for liability under Section 174 of the DGCL (relating to certain
unlawful dividends, stock repurchases or stock redemptions); or (4) for any
transaction from which the director derived any improper personal benefit.
These provisions do not eliminate a director's duty of care. Moreover, the
provisions do not apply to claims against a director for violation of certain
laws, including federal securities laws. We believe that these provisions will
assist us in attracting or retaining qualified individuals to serve as
directors and officers.
Our Certificate of Incorporation includes a provision which allows our Board
of Directors to issue up to five million shares of Preferred Stock with voting,
liquidation and conversion rights that could be superior to and adversely
affect the voting power of holders of Common Stock. The issuance of Preferred
Stock could have the effect of delaying, deferring or preventing a change in
control. We have no present plans to issue any shares of Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW
We are a Delaware corporation that is subject to Section 203 of the DGCL
("Section 203"). Under Section 203 certain "business combinations" between a
Delaware corporation, whose stock generally is publicly traded or held of
record by more than 2,000 stockholders, and an "interested stockholder" are
prohibited for a three-year period following the date that such stockholder
became an interested stockholder, unless (1) the corporation has elected in its
certificate of incorporation not to be governed by Section 203 (the Company has
not made such election); (2) the business combination was approved by the board
of directors of the corporation before the other party to the business
combination became an interested stockholder; (3) upon consummation of the
transaction that made it an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender or vote stock held by the plan); or (4)
the business combination is approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors. The
term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an interested stockholder,
transactions with an interested stockholder involving the assets or stock of
the corporation or its majority-owned subsidiaries, and transactions which
increase an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as those stockholders who become
beneficial owners of 15% or more of a Delaware corporation's voting stock,
together with the affiliates or associates of that stockholder.
TRANSFER AGENT
The registrar and transfer agent for our Common Stock is The Bank of New
York.
26
DESCRIPTION OF INDEBTEDNESS
This summary highlights certain provisions of our debt instruments. This
summary is not complete and does not contain all of the provisions of our debt
instruments and is qualified in its entirety by reference to the documents.
CREDIT FACILITIES
On April 30, 1998, we replaced our $1.05 billion credit facilities with the
Credit Facilities, in an aggregate of $1.35 billion, with various banks, DLJ
Capital Funding, Inc. (an affiliate of the lead Initial Purchaser), as
Syndication Agent, and The Bank of New York (an affiliate of an Initial
Purchaser), as Administrative Agent. The following is a summary description of
the principal terms of the Credit Facilities.
STRUCTURE
The Credit Facilities provide for a ten-year $400.0 million senior term
facility (the "Term Facility") and a seven-year $950.0 million revolving senior
credit facility (the "Revolving Facility"). Under the Revolving Facility, up to
$100.0 million may be used in connection with letters of credit, and up to
$15.0 million in short-term funds may be borrowed the same day that notice is
given to the banks under a "Swing Line" facility.
SECURITY; GUARANTEES
The obligations under the Credit Facilities are guaranteed by each of our
existing direct and indirect material subsidiaries and future direct and
indirect material domestic subsidiaries. The Credit Facilities and the
guarantees thereof are, subject to certain exceptions, secured by all of the
capital stock (or similar equity interests) of our existing direct and indirect
material subsidiaries and future direct and indirect material domestic
subsidiaries.
INTEREST RATE
In general, borrowings under the Credit Facilities bear interest at one of
two floating rates selected by us: (1) the Alternate Base Rate (defined as the
higher of The Bank of New York's prime rate or the federal funds rate plus
0.5%) plus, for borrowings under the Term Facility only, a margin that ranges
from 0.5% to 0.75% depending on our leverage ratio; or (2) the Eurodollar Rate
(defined as the rate at which The Bank of New York is offering dollar deposits
in the interbank eurodollar market, adjusted for statutory reserves) plus a
margin that ranges from 0.45% to 1.75% in the case of the Revolving Facility
and 1.75% to 2.00% in the case of the Term Facility depending on our leverage
ratio. Swing Line borrowings bear interest at either a rate negotiated by us
and The Bank of New York, as the swing line lender, at the time of borrowing
or, if no rate is negotiated and agreed upon, the Alternate Base Rate.
MATURITY
We are required to repay the amount borrowed under the Term Facility in
yearly installments of $4.0 million beginning on September 30, 1998 and
continuing through September 30, 2007. The remaining balance of $360.0 million
is due when the Term Facility matures on March 31, 2008. The Term Facility may
be prepaid at any time upon proper notice, but the redemption price will be
101.5% of the outstanding balance if prepayment is made on or prior to April
30, 1999 and 100.75% of the outstanding balance if prepayment is made from May
1, 1999 to April 30, 2000. The Revolving Facility will terminate on March 31,
2005.
FEES
We are required to pay the banks which are party to the Credit Facilities a
commitment fee based on the daily average unused portion of the Revolving
Facility which accrues from the closing date of the Credit Facilities. We are
also obligated to pay letter of credit fees on the aggregate stated amount of
outstanding letters of credit.
27
COVENANTS
The Credit Facilities contain a number of covenants (in addition to the
financial covenants) that, among other things, restrict our ability and that of
our subsidiaries to (1) dispose of assets; (2) incur additional indebtedness;
(3) prepay other indebtedness (including the Notes, subject to certain
exceptions) or amend certain debt instruments (including the Indenture); (4)
pay dividends; (5) create liens on assets; (6) amend our Certificate of
Incorporation or Bylaws; (7) make investments, loans or advances; (8) make
acquisitions; (9) engage in mergers or consolidations; (10) change the business
conducted by us or our subsidiaries; (11) make capital expenditures or engage
in certain transactions with affiliates; and (12) otherwise restrict certain
corporate activities. In addition, the Credit Facilities contain financial
covenants that require us to maintain, on a consolidated basis, specified
financial tests including a minimum interest coverage ratio, a minimum net
worth test, a minimum cash flow ratio and maximum leverage ratio.
EVENTS OF DEFAULT
The Credit Facilities contain customary events of default, including (1)
nonpayment of principal, interest or fees; (2) material inaccuracy of
representations and warranties; (3) violation of covenants; (4) cross-defaults
to certain other indebtedness; (5) certain events of bankruptcy and insolvency;
(6) certain ERISA matters; (7) material judgments; (8) invalidity of any
guaranty or security interest; and (9) a change of control of us in certain
circumstances. In addition, if we or any of our subsidiaries become ineligible
for participation in, or are suspended from receiving reimbursement under,
Medicare or Medicaid programs resulting in a 5% decrease in our consolidated
net operating revenues, we will be in default under the Revolving Facility.
SWAP AGREEMENTS
In conjunction with the refinancing of our Credit Facilities, our two
existing forward interest rate swap agreements with notional amounts of $100.0
million and $200.0 million were canceled in April 1998. During the quarter
ended June 30, 1998, we entered into forward interest rate cancelable swap
agreements with a combined notional amount of $800.0 million. The lengths of
the agreements are between three and ten years with cancellation clauses at the
swap holders' option from one to seven years. The underlying blended interest
rate is fixed at approximately 5.65% plus an applicable margin based upon our
current leverage ratio. Currently, the effective interest rate for these swaps
is 7.15%.
5 5/8% CONVERTIBLE NOTES AND RELATED GUARANTY
We have guaranteed the $125.0 million outstanding 5 5/8% Convertible
Subordinated Notes due 2006 (the "5 5/8% Convertible Notes") of RTC, our
wholly-owned subsidiary. The 5 5/8% Convertible Notes are convertible into
shares of our Common Stock at an effective conversion price of $25.62 per
share. Although these notes do not mature until 2006, RTC may redeem them at
its option subsequent to July 16, 1999. The redemption price, expressed as a
percentage of the principal amount of the notes, is shown below for 12-month
periods beginning July 15:
YEAR PERCENTAGE YEAR PERCENTAGE
---- ---------- ---- ----------
1999.................... 103.94% 2003.................... 101.69%
2000.................... 103.38% 2004.................... 101.13%
2001.................... 102.81% 2005.................... 100.56%
2002.................... 102.25% 2006.................... 100.00%
Our guaranty of the 5 5/8% Convertible Notes is pari passu with trade
payables and is subordinate to the Credit Facilities and any future debt which
we may incur (unless it otherwise states). The Notes are effectively
subordinate to the 5 5/8% Convertible Notes.
28
PLAN OF DISTRIBUTION
This prospectus relates to the resale of $345.0 million of Notes issued in a
private placement on November 13, 1998 and the resale of an indeterminable
amount of Conversion Shares, including any additional Conversion Shares
issuable pursuant to the antidilution provisions of the Notes, which are
issuable upon conversion of the Notes. The Registration Statement (of which
this prospectus is a part) does not cover the issuance of shares of Common
Stock upon conversion of the Notes into the Conversion Shares.
The sale or distribution of the Notes and the Conversion Shares may be
effected directly to purchasers by the Selling Securityholders as principals or
through one or more underwriters, brokers, dealers or agents from time to time
in one or more transactions (which may involve crosses or block transactions)
(i) on any exchange or in the over-the-counter marker, (ii) in transactions
otherwise than in the over-the-counter market or (iii) through the writing of
options (whether such options are listed on an options exchange or otherwise)
on, or in settlement of short sale of the Notes or the Conversion Shares. The
Selling Securityholders may also loan or pledge the Notes or the Conversion
Shares to broker-dealers that in turn may sell such securities. Any of such
transactions may be effected at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at varying prices
determined at the time of sale or at negotiated or fixed prices, in each case
as determined by the Selling Securityholder or by agreement between the Selling
Securityholder and underwriters, brokers, dealers or agents, or purchasers. If
the Selling Securityholders effect such transactions by selling the Notes or
the Conversion Shares to or through underwriters, brokers, dealers or agents,
such underwriters, brokers, dealers or agents may receive compensation in the
form of discounts, concessions or commissions from the Selling Securityholders
or commissions from purchasers of the Notes or the Conversion Shares for whom
they may act as agent (which discounts, concessions or commissions as to
particular underwriters, brokers, dealers or agents may be in excess of those
customary in the types of transactions involved). The Selling Securityholders
and any brokers, dealers or agents that participate in the distribution of the
Notes or the Conversion Shares may be deemed to be underwriters, and any profit
on the sale of the Notes or the Conversion Shares by them and any discounts,
concessions or commissions received by any such underwriters, brokers, dealers
or agents may be deemed to be underwriting discounts and commissions under the
Securities Act.
To the extent required, the aggregate principal amount of Notes and number of
shares of Common Stock to be sold hereby, the names of the Selling
Securityholders, the purchase price, the name of any such agent, dealer or
underwriter and any applicable commissions, discounts or other terms
constituting compensation with respect to a particular offer will be set forth
in an accompanying prospectus supplement. The aggregate proceeds to the Selling
Securityholders from the sale of the Notes or shares of Common Stock offered by
them hereby will be the purchase price of such Notes or shares of Common Stock
less discounts and commissions, if any.
The Notes and the Conversion Shares which may be offered hereby may be sold
from time to time in one or more transactions at fixed offering prices, which
may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the holders of such
securities or by agreement between such holders and underwriters or dealers who
may receive fees or commissions in connection therewith.
The outstanding Common Stock is listed for trading on the New York Stock
Exchange, and the Conversion Shares issuable upon conversion of the Notes have
been authorized for listing on the New York Stock Exchange upon official notice
of issuance. There is no assurance as to the development or liquidity of any
trading market that may develop for the Notes.
In order to comply with the securities laws of certain states, if applicable,
the Notes and the Conversion Shares offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Notes and the Conversion Shares offered hereby
may not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and compliance with same is effected.
29
The Selling Securityholders and any brokers, dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or the Conversion Shares offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions or discounts received by such brokers, dealers, agents or
underwriters and any profit on the resale of the Notes or the Conversion Shares
offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
We will not receive any of the proceeds from the offering of Notes and the
Conversion Shares issuable upon conversion thereof by the Selling
Securityholders that are sold pursuant to the Registration Statement (of which
this prospectus is a part). The Selling Securityholders and we have agreed to
indemnify each other against certain liabilities arising under the Securities
Act. We have agreed to pay all expenses incident to the offer and sale of the
Notes and the Conversion Shares offered hereby by the Selling Securityholders
to the public, other than selling commissions and fees.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes offered
hereby will be passed upon for us by Barry C. Cosgrove, our General Counsel.
Mr. Cosgrove holds stock and options to purchase stock granted under our
employee stock plans which in the aggregate represent less than 1% of our
Common Stock.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
TRCH Annual Report on Form 10-K/A Amendment No. 2 for the years ended December
31, 1997 and 1996 and May 31, 1995 and the seven months ended December 31, 1995
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act, and in
accordance therewith we file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other documents and
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and from the Commission's Web Site
located at http://www.sec.gov. Such reports, proxy statements and other
documents and information concerning us are also available for inspection at
the office of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
30
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, 1999
[LOGO OF TOTAL RENAL CARE HOLDINGS, INC.]
TOTAL RENAL CARE HOLDINGS, INC.
$345,000,000
7% CONVERTIBLE SUBORDINATED NOTES DUE 2009
10,515,087 SHARES
COMMON STOCK, PAR VALUE $0.001 PER SHARE
-----------------------------------------------
PROSPECTUS
-----------------------------------------------
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We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the Company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
SEC registration fee................................................ $95,915
Printing fees....................................................... 50,000
Trustee's and transfer agent's fees................................. 5,000
Accounting fees and expenses........................................
Legal fees and expenses.............................................
Miscellaneous.......................................................
-------
Total............................................................... $
=======
None of the above expenses will be borne by the Selling Securityholders.
- ---------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL provides that a Delaware corporation may indemnify
any person against expenses, judgments, fines and settlements actually and
reasonably incurred by any such person in connection with a threatened, pending
or completed action, suit or proceeding in which he is involved by reason of
the fact that he is or was director, officer, employee or agent of such
corporation, provided that (i) such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests
of the corporation and (ii) with respect to any criminal action or proceeding,
such person had no reasonable cause to believe his conduct was unlawful. If the
action or suit is by or in the name of the corporation, the corporation may
indemnify any such person against expense actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the Delaware Court of Chancery
or the court in which the action or suit is brought determines upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expense as the court deems proper.
Article XI, Section I of our Bylaws provides for indemnification of our
directors and officers to the fullest extent permitted by the Delaware
Corporation Law. In accordance with the Delaware Corporation Law, our
Certificate of Incorporation, as amended, limits the personal liability of our
directors for violations of their fiduciary duty. The Certificate of
Incorporation eliminates each director's liability to us or our stockholders
for monetary damages or breach of fiduciary duty as a director except (i) for
any breach of the director's duty of loyalty to us or our stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under the section of the Delaware law
providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions, or (iv) for any transaction from which
a director derived any improper personal benefit. The effect of this provision
is to eliminate the personal liability of directors for monetary damages for
actions involving a breach of their fiduciary duty of care, including any such
actions involving gross negligence. This provision will not, however, limit in
any way the liability of directors for violations of the federal securities
laws. The Company has entered into indemnification agreements with each of its
directors and officers to indemnify them to the maximum extent permitted by
Delaware law.
The Purchase Agreement and the Registration Rights Agreement executed in
connection with the private placement of the Notes and filed as Exhibit 4.4 and
Exhibit 4.5, respectively, hereto provide for the indemnification of our
directors and certain of our officers by the Initial Purchasers and the Selling
Securityholders, respectively, against certain liabilities, including
liabilities under the Securities Act.
II-1
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Shareholders Agreement, dated August 11, 1994, between DLJ Merchant
Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., NME
Properties Corp., Continental Bank, as voting trustee, and the
Company.++
4.2 Agreement and Amendment, dated as of June 30, 1995, between DLJMBP,
DLJIP, DLJOP, DLJMBF, DLJ First Esc, LLC, Tenet Healthcare
Corporation, the Company, Victor M.G. Chaltiel, the Putnam
Purchasers, the Crescent Purchasers and the Harvard Purchasers,
relating to the Shareholders Agreement dated as of August 11, 1994
between DLJMB, DLJIP, DLJOP, DLJMBF, NME Properties, Continental
Bank, as voting trustee, and the Company.++
4.3 Indenture, dated as of November 18, 1998, between the Company and the
Trustee and Form of Note.+
4.4 Registration Rights Agreement, dated as of November 18, 1998, between
the Company and the Initial Purchasers.+
4.5 Purchase Agreement, dated as of November 12, 1998, between the Company
and the Initial Purchasers.+
5.1 Opinion of Barry C. Cosgrove.+
12.1 Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of PricewaterhouseCoopers LLP.+
23.2 Consent of Barry C. Cosgrove (included in Exhibit 5.1).+
24.1 Power of Attorney with respect to the Company (included on page II-
4).+
25.1 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1.+
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+ Filed herewith.
++ Filed on August 29, 1995 as an exhibit to the Company's Form 10-K for the
year ended May 31, 1995.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
II-2
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Torrance, State of
California, on December 16, 1998.
TOTAL RENAL CARE HOLDINGS, INC.
/s/ John E. King
By: _________________________________
John E. King
Senior Vice President, Finance
and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Victor M.G. Chaltiel, Barry C. Cosgrove and
John E. King, and each of them his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, including any post-effective
amendments as well as any related registration statement (or amendment
thereto) filed in reliance upon Rule 462(b) under the Securities Act, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Victor M.G. Chaltiel Chairman of the Board, Chief December 16, 1998
____________________________________ Executive Officer,
Victor M.G. Chaltiel President and Director
(Principal Executive
Officer)
/s/ John E. King Senior Vice President, December 16, 1998
____________________________________ Finance and Chief Financial
John E. King Officer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ Maris Andersons Director December 16, 1998
____________________________________
Maris Andersons
/s/ Peter T. Grauer Director December 16, 1998
____________________________________
Peter T. Grauer
/s/ Regina E. Herzlinger Director December 16, 1998
____________________________________
Regina E. Herzlinger
/s/ Shaul G. Massry Director December 16, 1998
____________________________________
Shaul G. Massry
II-4
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Shareholders Agreement, dated August 11, 1994, between DLJ Merchant
Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., NME
Properties Corp., Continental Bank, as voting trustee, and the
Company.++
4.2 Agreement and Amendment, dated as of June 30, 1995, between DLJMBP,
DLJIP, DLJOP, DLJMBF, DLJ First Esc, LLC, Tenet Healthcare
Corporation, the Company, Victor M.G. Chaltiel, the Putnam
Purchasers, the Crescent Purchasers and the Harvard Purchasers,
relating to the Shareholders Agreement dated as of August 11, 1994
between DLJMB, DLJIP, DLJOP, DLJMBF, NME Properties, Continental
Bank, as voting trustee, and the Company.++
4.3 Indenture, dated as of November 18, 1998, between the Company and the
Trustee and Form of Note.+
4.4 Registration Rights Agreement, dated as of November 18, 1998, between
the Company and the Initial Purchasers.+
4.5 Purchase Agreement, dated as of November 12, 1998, between the Company
and the Initial Purchasers.+
5.1 Opinion of Barry C. Cosgrove.+
12.1 Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of PricewaterhouseCoopers LLP.+
23.2 Consent of Barry C. Cosgrove (included in Exhibit 5.1).+
24.1 Power of Attorney with respect to the Company (included on page II-
4).+
25.1 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1.+
- ---------------------
+ Filed herewith.
++ Filed on August 29, 1995 as an exhibit to the Company's Form 10-K for the
year ended May 31, 1995.