Filed Pursuant to Rule 424(b)(3)
Registration No. 333-75646
PROSPECTUS
$172,500,000
[PROVINCE HEALTHCARE LOGO]
4-1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2008
We issued the notes at an issue price of $1,000.00 per note in a
private placement in October 2001. This prospectus will be used by selling
securityholders to resell their notes and our common stock into which the notes
are convertible.
The notes have the following terms:
- - Holders may convert their notes at any time prior to maturity into
shares of our common stock at a conversion price of $41.55, which is
equal to a conversion rate of 24.0648 shares per $1,000 principal
amount of notes, subject to adjustment.
- - We will pay interest on the notes on April 10 and October 10 of each
year, beginning April 10, 2002. The notes will mature on October 10,
2008.
- - We may redeem some or all of the notes at any time on or after October
10, 2004 at the redemption prices described in this prospectus, if the
closing price of our common stock has exceeded 120% of the conversion
price then in effect for at least 20 trading days within a period of 30
consecutive trading days ending on the trading day before the date of
mailing of the optional redemption notice.
- - The notes are unsecured and subordinated to our existing and future
senior indebtedness and senior subordinated indebtedness. In addition,
the notes effectively will rank junior to our subsidiaries'
liabilities.
- - The selling securityholders will receive all of the net proceeds from
the sale of the notes or the underlying common stock.
Our common stock is quoted on the Nasdaq National Market under the
symbol "PRHC."
INVESTING IN THE NOTES INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 12 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is January 16, 2002.
[PROVINCE HEALTHCARE COMPANY MAP]
TABLE OF CONTENTS
Page
ABOUT THIS PROSPECTUS............................................................. 3
WHERE YOU CAN FIND MORE INFORMATION............................................... 3
FORWARD-LOOKING STATEMENTS........................................................ 6
PROSPECTUS SUMMARY................................................................ 8
RISK FACTORS...................................................................... 12
USE OF PROCEEDS................................................................... 20
RATIO OF EARNINGS TO FIXED CHARGES................................................ 20
DIVIDEND POLICY................................................................... 20
DESCRIPTION OF THE NOTES.......................................................... 21
DESCRIPTION OF CAPITAL STOCK...................................................... 34
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES............................. 36
SELLING SECURITYHOLDERS........................................................... 44
PLAN OF DISTRIBUTION.............................................................. 47
LEGAL MATTERS..................................................................... 49
EXPERTS........................................................................... 50
You should rely on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have
changed since that date.
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration or
continuous offering process. Under this shelf prospectus, the selling
securityholders may, from time to time, sell the securities described in this
prospectus in one or more offerings. This prospectus provides you with a general
description of the securities the selling securityholders may offer. Each time a
selling securityholder sells securities, the selling securityholder is required
to provide you with this prospectus, and, in some cases, a prospectus supplement
containing specific information about the selling securityholder and the terms
of the securities being offered. That prospectus supplement may include a
discussion of any risk factors or other special considerations applicable to
those securities. Any prospectus supplement may also add, update or change
information in this prospectus. If there is any inconsistency between the
information in this prospectus and any prospectus supplement, you should rely on
the information in the prospectus supplement. You should read both this
prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
The registration statement containing this prospectus, including the
exhibits to the registration statement, provides additional information about us
and the securities offered under this prospectus. The registration statement,
including the exhibits, can be read at the Securities and Exchange Commission
website or at the Securities and Exchange Commission offices mentioned under the
heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended, under which we file periodic
reports, proxy statements and other information with the Securities and Exchange
Commission. Copies of the reports, proxy statements and other information may be
examined without charge at the Public Reference Section of the Securities and
Exchange Commission, 450 Fifth Street, N.W. Room 1024, Washington, D.C. 20549,
and the Securities and Exchange Commission's regional offices located at 233
Broadway, New York, NY 10279 or 500 West Madison Street, Suite 1400, Chicago, IL
60661 or on the Internet at http://www.sec.gov. Copies of all or a portion of
such materials can be obtained from the Public Reference Section of the
Securities and Exchange Commission upon payment of prescribed fees. Please call
the Securities and Exchange Commission at 800-SEC-0330 for further information
about the Public Reference Room. These reports, proxy and information statements
and other information may also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.
We have agreed that, at any time that the notes are "restricted
securities" within the meaning of the Securities Act of 1933 and we are not
subject to the information reporting requirements of the Securities Exchange Act
of 1934, we will furnish to holders of the notes and to prospective purchasers
designated by them the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act of 1933 to permit compliance with Rule 144A
in connection with resales of the notes.
We are "incorporating by reference" specified documents that we file
with the SEC, which means:
- incorporated documents are considered part of this prospectus;
- we are disclosing important information to you by referring
you to those documents; and
- information that we file in the future with the SEC
automatically will update and supersede this prospectus.
We incorporate by reference the documents listed below and any
documents that we file with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the
date of this prospectus and before the end of the offering of the notes:
- our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000;
3
- our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2001;
- our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2001;
- our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2001;
- our Current Report on Form 8-K, filed on January 8, 2001 (with
respect to the closing of the transaction to sell General
Hospital);
- our Current Report on Form 8-K, filed on May 25, 2001
(furnishing pursuant to Regulation F-D certain information
with respect to our announcement that Paul J. Feldstein was
appointed to the Company's Board of Directors and our
announcement of certain management changes);
- our Current Report on Form 8-K, filed on June 8, 2001 (with
respect to our announcement of a definitive agreement to
acquire Selma Baptist Hospital);
- our Current Report on Form 8-K, filed on July 9, 2001 (with
respect to the closing of the acquisition of Selma Baptist
Hospital and our announcement of a definitive agreement to
acquire Ashland Regional Medical Center and furnishing certain
additional information pursuant to Regulation F-D);
- our Current Report on Form 8-K, filed on August 24, 2001 (with
respect to the closing of the acquisition of Ashland Regional
Medical Center);
- our Current Report on Form 8-K, filed on September 4, 2001
(with respect to our announcement of a definitive agreement to
acquire Vaughan Regional Medical Center and furnishing certain
additional information pursuant to Regulation F-D);
- our Current Report on Form 8-K, filed on September 17, 2001
(with respect to the opening of Northeastern Nevada Regional
Hospital and the announcement of a definitive agreement to
acquire Lakewood Medical Center in Morgan City, Louisiana);
- our Current Report on Form 8-K, filed on October 4, 2001 (with
respect to the closing of the acquisition of Vaughan Regional
Medical Center in Selma, Alabama and the announcement of the
offering of $150.0 million aggregate amount of 4-1/4%
Convertible Subordinated Notes due 2008, plus an additional
$22.5 million principal amount to cover over-allotments);
- our Current Report on Form 8-K, filed on October 5, 2001 (with
respect to the closing of the acquisition of Medical Center of
Southern Indiana in Charlestown, Indiana);
- our Current Report on Form 8-K, filed on October 15, 2001
(with respect to the issuance and sale of $172,500,000
aggregate principal amount of 4-1/4% Convertible Subordinated
Notes due 2008);
- our Current Report on Form 8-K, filed on November 5, 2001
(with respect to the appointment of Stephen M. Ray to the
office of Executive Vice President, Finance and Chief
Financial Officer);
- our Current Report on Form 8-K, filed on November 20, 2001
(with respect to our announcement that we entered into an
amended and restated senior credit facility); and
- our Current Report on Form 8-K, filed on December 12, 2001
(with respect to the closing of the acquisition of Lakewood
Medical Center in Morgan City, Louisiana).
4
You may request a copy of these filings, at no cost, by writing or
telephoning our Corporate Secretary at the following address:
Province Healthcare Company
105 Westwood Place, Suite 400
Brentwood, Tennessee 37027
Attention: Corporate Secretary
(615) 370-1377
Exhibits to the filings will not be sent, unless those exhibits have
been specifically incorporated by reference in this prospectus.
5
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus contain some
forward-looking statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current facts. Such
statements may include words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe" and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. Any or all of our forward-looking statements in this prospectus may
turn out to be wrong. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Many factors mentioned in
our discussion in this prospectus will be important in determining future
results. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially. Factors that may cause our plans,
expectations, future financial condition and results to change include, but are
not limited to:
- the highly competitive nature of the health care business;
- the efforts of insurers, health care providers and others to
contain health care costs;
- the financial condition of managed care organizations that pay
us for health care services;
- possible changes in the levels and terms of reimbursement for
our charges by government programs, including Medicare and
Medicaid or other third-party payors;
- changes in or failure to comply with federal, state or local
laws and regulations affecting the health care industry;
- the possible enactment of federal or state health care reform;
- the departure of key members of our management;
- claims and legal actions relating to professional liability;
- our ability to implement successfully our acquisition and
development strategy;
- our ability to attract and retain qualified personnel and
recruit physicians;
- potential federal or state investigations;
- fluctuations in the market value of our common stock or the
notes;
- changes in accounting principles generally accepted in the
United States;
- use of proceeds;
- changes in demographic, general economic and business
conditions, both nationally and in the regions in which we
operate; and
- other risk factors described in this prospectus.
Except as required by law, we undertake no obligation to publicly
update any forward-looking statements, whether as a result of new information,
future events or otherwise. You are advised, however, to consult any additional
disclosures we make in our Form 10-K, 10-Q and 8-K reports to the Securities and
Exchange Commission. Also, note that we provide a cautionary discussion of risks
and uncertainties under "Risk Factors" beginning on page 12 of this
prospectus. These are factors that we think could cause our actual results to
differ
6
materially from expected results. Other factors besides those listed here could
affect us adversely. This discussion is provided as permitted by the Private
Securities Litigation Reform Act of 1995.
7
PROSPECTUS SUMMARY
This summary highlights selected information appearing elsewhere in
this prospectus or incorporated by reference in this prospectus and may not
contain all of the information that is important to you. This prospectus
includes the specific terms of the notes offered by the selling securityholders,
as well as information regarding our business, and detailed financial data. We
encourage you to read this prospectus in its entirety.
ABOUT OUR COMPANY
WHO WE ARE
We own and operate general acute care hospitals located in non-urban
markets. We currently own or lease 19 general acute care hospitals in 11 states
with a total of 2,136 licensed beds. Our objective is to be the primary provider
of quality health care services in the selected non-urban markets that we serve.
We target hospitals for acquisition that are the sole or a primary provider of
health care in the non-urban communities that they serve. After acquiring a
hospital, we implement a number of strategies designed to improve financial
performance. These strategies include improving hospital operations, expanding
the breadth of services and recruiting physicians to increase market share.
For the year ended December 31, 2000 and for the nine months ended
September 30, 2001, we had, on a pro forma basis to exclude full-year results
for hospitals we divested during such periods, net operating revenue of $424.2
million and $377.6 million, respectively, and EBITDA, the sum of income before
income taxes, interest, depreciation and amortization and minority interest, of
$77.4 million and $69.0 million, respectively.
WHAT WE DO
Our general acute care hospitals typically provide a full range of
services commonly available in hospitals, such as internal medicine, general
surgery, cardiology, oncology, orthopedics, obstetrics, rehabilitation, subacute
care, as well as diagnostic and emergency services. Our hospitals also generally
provide outpatient and ancillary health care services such as outpatient
surgery, laboratory, radiology, respiratory therapy, home health care and
physical therapy. In addition, certain of our general acute care hospitals have
a limited number of licensed psychiatric beds. We provide capital resources and
make available a variety of management services to our owned and leased
hospitals. In addition, we provide management services to 35 primarily non-urban
hospitals that we do not own or lease in 13 states with a total of 2,776
licensed beds. For the year ended December 31, 2000 and for the nine months
ended September 30, 2001, our owned and leased hospitals accounted for 96.0% and
97.0% of our net operating revenue, respectively.
RECENT DEVELOPMENTS
The following is a brief summary of certain developments since
September 30, 2001:
Effective October 1, 2001, we acquired Vaughan Regional Medical Center,
a 125-bed general acute care hospital located in Selma, Alabama. The aggregate
purchase price under the agreement was approximately $28.0 million. We have
begun the process of merging the operations of Vaughan Regional Medical Center
with our recently-acquired Selma Baptist Hospital, located approximately four
miles away.
Effective October 4, 2001, we acquired the Medical Center of Southern
Indiana, a 96-bed general acute care facility located in Charlestown, Indiana.
The aggregate purchase price under the agreement was approximately $16.0
million.
On November 13, 2001, we entered into an amended and restated senior
credit facility with a syndicate of banks led by First Union National Bank, as
Administrative Agent. The senior credit facility, as amended and restated,
extends the maturity of the previous senior credit facility to 2006 and includes
more favorable covenant and interest rate provisions. As amended, the senior
credit facility provides Province loans and letter of credit availability in an
aggregate amount of up to $250.0 million, consisting of a $203.0 million
revolving credit facility
8
and a $47.0 million end - loaded lease facility. The revolving credit facility
will be available to fund possible acquisitions and for general corporate
purposes.
On December 7, 2001, we acquired, through a long-term lease, Lakewood
Medical Center, a 168-bed general acute care hospital located in Morgan City,
Louisiana. The aggregate acquisition price was approximately $15.0 million. For
accounting purposes, the acquisition was effective December 1, 2001.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges is as follows. See "Ratio of
Earnings to Fixed Charges."
Nine Months
Year Ended December 31, Ended September
------------------------------------------- 30,
1997 1998 1999 2000 2001
---- ---- ---- ---- -----------------
Ratio of earnings to fixed charges (1)..... 1.77x 2.42x 2.55x 2.71x 4.81x
Pro forma ratio of earnings to
fixed charges (2).......................... 3.31x 5.49x
- ---------------------------
(1) The ratio of earnings to fixed charges is calculated by
dividing earnings by fixed charges. For this purpose,
"earnings" means income (loss) from continuing operations
before provision for income taxes and extraordinary items plus
fixed charges (other than capitalized interest). "Fixed
charges" means total interest whether capitalized or expensed
(including the portion of rent expense representative of
interest costs) on outstanding debt plus (i) debt related fees
and (ii) amortization of deferred financings costs. Earnings
were inadequate to cover fixed charges by $2,017,000 for the
period February 2, 1996 (date of incorporation of Province) to
December 31, 1996.
(2) The pro forma ratio of earnings to fixed charges gives effect
to the net decrease in the interest expense resulting from
the sale of the notes on October 10, 2001 and the application
of the estimated proceeds thereof to the repayment of existing
debt, as if such transactions had occurred at the beginning of
the periods presented; such ratio does not give effect to any
other pro forma events.
9
THE OFFERING
The following is a brief summary of the terms of this offering. For a
more complete description of the notes, see "Description of the Notes" in this
prospectus.
Notes offered............................... The resale by selling
securityholders of $172,500,000
aggregate principal amount of
4-1/4% Convertible Subordinated
Notes due 2008.
Maturity.................................... October 10, 2008.
Interest.................................... 4-1/4% per annum on the principal
amount, payable semiannually on
April 10 and October 10, beginning
on April 10, 2002.
Conversion rights........................... The notes are convertible at the
option of the holder at any time on
or prior to maturity into shares of
our common stock at a conversion
price of $41.55 per share, which is
equal to a conversion rate of
24.0648 shares per $1,000 principal
amount of notes. The conversion
price is subject to adjustment. See
"Description of the Notes --
Conversion Rights." For a
discussion of the U.S. federal
income tax treatment of the
conversion as well as of the
purchase, ownership and disposition
of the notes and our common stock,
see "Certain United States Federal
Income Tax Consequences."
Optional redemption......................... We may redeem all or a portion of
the notes on or after October 10,
2004 at the redemption prices
listed in this prospectus, plus
accrued and unpaid interest, if the
closing price of our common stock
has exceeded 120% of the conversion
price then in effect for at least
20 trading days within a period of
30 consecutive trading days ending
on the trading day before the
mailing of the optional redemption
notice.
Repurchase right............................ Holders of the notes may require us
to repurchase all of the holder's
notes at 100% of their principal
amount plus accrued and unpaid
interest in certain circumstances
involving a change of control. The
repurchase price is payable:
-in cash; or
-at our option, subject to the
satisfaction of certain conditions,
in common stock. The number of
shares of common stock will equal
the repurchase price divided by 95%
of the average closing sales price
for the five consecutive trading
days ending on and including the
third day prior to the repurchase
date.
See "Description of the Notes --
Repurchase at Option of Holders
Upon a Change of Control."
10
Ranking..................................... The notes are our unsecured
subordinated obligations. They rank
junior in right of payment to all
of our existing and future Senior
Indebtedness. We had approximately
$47.5 million of Senior
Indebtedness outstanding as of
November 30, 2001.
The notes will rank equal in right
of payment to our 4-1/2%
Convertible Subordinated Notes due
2005, of which there was
$150,000,000 aggregate principal
amount outstanding as of September
30, 2001.
In addition, we are structured as a
holding company, and we conduct
most of our business operations
through our subsidiaries. The notes
will be effectively subordinated to
all existing and future
indebtedness and other liabilities
and commitments of our
subsidiaries.
Our subsidiaries had aggregate
liabilities of approximately $11.8
million as of November 30, 2001.
See "Description of the Notes --
Subordination."
Form and denomination....................... The notes have been issued in fully
registered form and are represented
by one or more global notes,
deposited with a trustee as
custodian for The Depository Trust
Company ("DTC") and registered in
the name of Cede & Co., DTC's
nominee. Beneficial interests in
the global notes are shown on, and
any transfers are effected only
through, records maintained by DTC
and its participants. See
"Description of the Notes --
Book-Entry Form."
Use of proceeds............................. The selling securityholders will
receive all of the proceeds from
the sale of the notes and common
stock under this prospectus. We
will not receive any of the
proceeds from the sales by any
selling securityholder of notes or
the underlying common stock.
Trading..................................... We do not intend to list the notes
on any national securities exchange
or automated quotation system. The
notes issued in the initial private
placement are eligible for trading
in the PORTAL market. The notes
sold using this prospectus,
however, will no longer be eligible
for trading in the PORTAL market.
Nasdaq symbol for our common stock......... Our common stock is traded on the
Nasdaq National Market under the
symbol "PRHC."
Risk factors................................ See "Risk Factors" and other
information in this prospectus for
a discussion of factors you should
carefully consider before deciding
to invest in the notes.
11
RISK FACTORS
An investment in the securities offered by this prospectus
involves a high degree of risk. You should carefully consider the following
factors and other information in and incorporated by reference in this
prospectus before deciding to purchase the notes.
RISKS RELATED TO OUR COMPANY
IF GOVERNMENT PROGRAMS REDUCE THE PAYMENTS WE RECEIVE AS REIMBURSEMENT FOR OUR
SERVICES, OUR REVENUES MAY DECLINE.
In 1998, 1999, 2000 and for the nine-month period ended September 30,
2001, 68.9%, 68.7%, 74.0% and 73.3%, respectively, of our hospital patient days
were derived from the Medicare and Medicaid programs, which are highly regulated
and subject to frequent and substantial changes. The Federal Balanced Budget Act
of 1997, which established a plan to balance the federal budget by fiscal year
2002, includes significant reductions in spending levels for the Medicare and
Medicaid programs, including:
- payment reductions for inpatient and outpatient hospital
services;
- establishment of a prospective payment system for hospital
outpatient services, skilled nursing facilities and home
health agencies under Medicare; and
- repeal of the federal payment standard often referred to as
the "Boren Amendment" for hospitals and nursing facilities,
which could result in lower Medicaid reimbursement rates.
The financial impact of the Federal Balanced Budget Act of 1997,
however, has been lessened somewhat by the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000, although significant revisions
in how hospitals are paid for some services are still proceeding. We cannot
predict the impact of future legislative and regulatory actions which might be
taken to reduce Medicare and Medicaid payment levels.
In the future, Congress and state legislatures could introduce
proposals to make major changes in the health care system. If these proposals
are enacted, we may see a decline in the Medicare and Medicaid reimbursements we
receive for our services; however, at this time, we do not know what health care
reform legislation will be enacted or whether any changes in health care
programs will occur.
THE HEALTH CARE COST CONTAINMENT INITIATIVES BY AND THE FINANCIAL CONDITION OF
PURCHASERS OF HEALTH CARE SERVICES MAY LIMIT OUR REVENUE AND PROFITABILITY.
During the past several years, major purchasers of health care, such as
federal and state governments, insurance companies and employers, have
undertaken initiatives to revise payment methodologies and monitor health care
costs. As part of their efforts to contain health care costs, purchasers
increasingly are demanding discounted fee structures or the assumption by health
care providers of all or a portion of the financial risk through prepaid
capitation arrangements. We expect efforts to impose reduced allowances, greater
discounts and more stringent cost controls by government and other payors to
continue. In addition, we anticipate that organizations offering prepaid and
discounted medical services packages may represent an increasing portion of our
patient admissions. An increasing number of managed care organizations have
experienced financial difficulties in recent years, in some cases resulting in
bankruptcy or insolvency. In some instances, organizations with provider
agreements with certain of our hospitals have become insolvent, and the
hospitals have been unable to collect the full amounts due from such
organizations. Other managed care organizations with whom we do business may
encounter similar difficulties in paying claims in the future. We believe that
reductions in the payments we receive for our services, coupled with the
increased percentage of patient admissions from organizations offering prepaid
and discounted medical services and difficulty in collecting receivables from
managed care organizations, could reduce our overall revenue and profitability.
12
IF WE FAIL TO COMPLY WITH REGULATIONS REGARDING LICENSES, OWNERSHIP AND
OPERATION, WE COULD IMPAIR OUR ABILITY TO OPERATE OR EXPAND OUR OPERATIONS IN
ANY STATE.
All of the states in which we operate require hospitals and most health
care facilities to maintain a license. In addition, some states require prior
approval for the purchase, construction and expansion of health care facilities,
based upon a state's determination of need for additional or expanded health
care facilities or services. Such determinations, embodied in certificates of
need issued by governmental agencies with jurisdiction over health care
facilities, may be required for capital expenditures exceeding a prescribed
amount, changes in bed capacity or services and other matters. Four states in
which we currently own hospitals, Alabama, Florida, Mississippi and Nevada, have
certificate of need laws. The failure to obtain any required certificate of need
or the failure to maintain a required license could impair our ability to
operate or expand operations in any state.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION REGARDING CONDUCT OF OUR
OPERATIONS AND OUR RELATIONSHIPS WITH PHYSICIANS. IF WE FAIL TO COMPLY WITH
THESE REGULATIONS, WE COULD SUFFER PENALTIES OR BE REQUIRED TO MAKE SIGNIFICANT
CHANGES TO OUR OPERATIONS.
The health care industry must comply with many laws and regulations at
federal, state and local governmental levels. These laws and regulations are
extremely complex and, in many instances, the industry does not have the benefit
of significant regulatory or judicial interpretation. In particular, Medicare
and Medicaid anti-fraud and abuse provisions, known as the "anti-kickback
statute," prohibit some business practices and relationships related to items or
services reimbursable under Medicare, Medicaid and other federal health care
programs. For instance, the anti-kickback statute prohibits health care service
providers from paying or receiving remuneration to induce or arrange for the
referral of patients or items or services covered by a federal or state health
care program.
If regulatory authorities determine that any of our hospitals'
arrangements violate the anti-kickback statute, we could be subject to
liabilities under the Social Security Act, including:
- criminal penalties;
- civil monetary penalties; and/or
- exclusion from participation in Medicare, Medicaid or other
federal health care programs, any of which could impair our
ability to operate one or more of our hospitals or to operate
profitably.
The Health Insurance Portability and Accountability Act of 1996 added
new anti-fraud and abuse laws that include all health care services, whether or
not they are reimbursed under a federal or state program. These new anti-fraud
and abuse laws became effective January 1, 1997. In addition, the Health
Insurance Portability and Accountability Act of 1996 required the Department of
Health and Human Services to issue regulations requiring hospitals and other
providers to implement measures to ensure the privacy and security of patients'
medical records. Full compliance with this privacy standard is required by April
14, 2003. We may incur additional expenses in order to comply with the
standards. We cannot predict the extent of our costs for implementing the
requirements at this stage.
In addition, the portion of the Social Security Act commonly known as
the "Stark law" prohibits physicians from referring Medicare or Medicaid
patients to particular providers of designated health services if the physician
or a member of his immediate family has an ownership interest or compensation
arrangement with that provider. In January 2001, the Health Care Financing
Administration (now known as the Centers for Medicare and Medicaid Services, or
"CMS") released the first phase of the final Stark regulations, and Phase II of
the final Stark regulations are forthcoming. Sanctions for violating the Stark
law include civil money penalties and possible exclusion from the Medicare
program. Many states have adopted or are considering similar anti-kickback and
physician self-referral legislation. Some of the state physician self-referral
laws are more restrictive than the Stark law, in that they apply to services
reimbursed by all payors, not just by Medicaid or other government payors.
13
Moreover, the federal government has shown an increasing willingness to
prosecute providers under a variety of fraud laws, including laws that have not
traditionally been used for health care fraud, such as the federal civil false
claims law and the federal mail and wire fraud laws.
THERE ARE HEIGHTENED COORDINATED CIVIL AND CRIMINAL ENFORCEMENT EFFORTS BY
FEDERAL AND STATE GOVERNMENT AGENCIES RELATING TO THE HEALTH CARE INDUSTRY. WE
MAY BECOME THE SUBJECT OF AN INVESTIGATION IN THE FUTURE.
In recent years, the media and public attention have focused on the
hospital industry due to ongoing investigations related to:
- referral, cost reporting and billing practices;
- laboratory and home health care services; and
- physician ownership and joint ventures involving hospitals.
Both federal and state government agencies have announced heightened
and coordinated civil and criminal enforcement efforts. In addition, the Office
of the Inspector General of the U.S. Department of Health and Human Services and
the Department of Justice have established enforcement initiatives that focus on
specific billing practices or other suspected areas of abuse. Recent initiatives
include a focus on hospital billing for outpatient charges associated with
inpatient services, as well as hospital laboratory billing practices.
We cannot predict whether we or other hospital operators will be the
subject of future investigations or inquiries. In the event that we become the
subject of an investigation, we will be required to devote management and
financial resources to defending our company in the investigation. In addition,
any negative publicity surrounding the investigation could affect adversely the
price of our common stock and the notes. If we incur significant fines or
penalties or are forced to reimburse amounts as a result of the investigation,
our profitability may decline.
WE MAY NEED TO OBTAIN ADDITIONAL FINANCING IN ORDER TO FUND OUR ACQUISITION
PROGRAM AND CAPITAL EXPENDITURES, AND ADDITIONAL FINANCING MAY NOT BE AVAILABLE
WHEN NEEDED.
Our acquisition program requires substantial capital resources.
Likewise, the operations of our existing hospitals require ongoing capital
expenditures for renovation, expansion and the addition of medical equipment and
technology utilized in the hospitals.
For example, we are undertaking an expansion of Havasu Regional Medical
Center that we anticipate will cost approximately $29.6 million, of which $4.0
million has been expended to date. Further, if specified operating targets are
achieved, we have agreed to build replacement facilities for Eunice Community
Medical Center and Glades General Hospital. These two facilities are expected to
cost approximately $20.0 million and $25.0 million, respectively. We also have
committed to fund approximately $9.0 million of costs related to renovations of
the surgery, intensive care, laboratory, radiology and certain other ancillary
and service areas of Ashland Regional Medical Center.
We may need to incur additional indebtedness and may issue, from time
to time, debt or equity securities to fund these expenditures. We may not
receive financing on satisfactory terms. In addition, our existing level of
indebtedness may restrict our ability to borrow additional funds. If we are not
able to obtain financing, then we may not be in a position to consummate
acquisitions or undertake capital expenditures.
OUR GROWTH STRATEGY DEPENDS ON ACQUISITIONS, AND WE MAY NOT BE ABLE TO MANAGE
OUR GROWTH EFFECTIVELY OR ACQUIRE HOSPITALS THAT MEET OUR TARGET CRITERIA. WE
ALSO MAY HAVE DIFFICULTIES ACQUIRING HOSPITALS FROM NON-PROFIT ENTITIES DUE TO
REGULATORY SCRUTINY.
A key element of our growth strategy is expansion through the
acquisition of acute care hospitals in attractive non-urban markets. We face
competition for acquisitions primarily from other for-profit health care
companies. Some of our competitors have greater financial and other resources
than we do. Even though we may
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acquire additional hospitals, we may not be able to acquire a sufficient number
of hospitals that meet our target criteria in order to implement successfully
our growth strategy.
Hospital acquisitions generally require a longer period to complete
than acquisitions in many other businesses and are subject to additional
regulatory uncertainty. In recent years, the legislatures and attorneys general
of some states have shown a heightened level of interest in transactions
involving the sale of hospitals by not-for-profit entities. Although the level
of interest varies from state to state, the trend is to provide for increased
governmental review, and in some cases approval, of transactions in which
not-for-profit entities sell a health care facility. Attorneys general in some
states have been especially active in evaluating these transactions. Although we
have not yet been adversely affected as a result of these trends, such increased
scrutiny may increase the difficulty or prevent the completion of transactions
with not-for-profit organizations in some states in the future, and may affect
our ability to exercise existing purchase options for hospitals, including Palo
Verde Hospital in Blythe, California, where our lease expires in December 2002.
WE HAVE A CONCENTRATION OF REVENUE IN TEXAS AND ARIZONA, WHICH MAKES US
PARTICULARLY SENSITIVE TO REGULATORY AND ECONOMIC CHANGES IN THOSE STATES.
Three of our 19 owned or leased hospitals are located in Texas. As a
result of our acquisition of Trinity Valley Medical Center in Palestine, Texas,
in October 1999, the percentage of our net operating revenue originating from
our Texas facilities increased to an aggregate of 21.4% for the year ended
December 31, 2000 and 25.1% for the nine-month period ended September 30, 2001.
Furthermore, Trinity Valley Medical Center merged with Memorial Mother Frances
Hospital to form Palestine Regional Medical Center, which accounted for 14.8%
and 15.9% of our net operating revenue for the same periods, respectively. This
concentration makes us particularly sensitive to economic, competitive and
regulatory conditions in Texas. Any adverse change in these conditions could
reduce significantly our revenues and profitability.
We also own Havasu Regional Medical Center in Lake Havasu City,
Arizona, which accounted for approximately 15.4% and 15.9% of our net operating
revenue for the year ended December 31, 2000 and the nine-month period ended
September 30, 2001, respectively. Similarly, this concentration of revenue in
Arizona makes us particularly sensitive to economic, competitive and regulatory
conditions in Arizona. Any adverse change in these conditions could reduce
significantly our revenues and profitability.
OUR CALIFORNIA HOSPITALS MUST COMPLY WITH CALIFORNIA SEISMIC STANDARDS WHICH MAY
REQUIRE US TO MAKE SIGNIFICANT CAPITAL EXPENDITURES.
California has a statute and regulations that require hospitals to meet
seismic performance standards. Regulated hospitals that do not meet the
standards may be required to retrofit facilities. California law requires that
owners of regulated hospitals evaluate their facilities and develop a plan and
schedule for complying with the standards. We are required to conduct
engineering studies of our California facilities to determine whether and to
what extent modifications to our facilities will be required. We have
submitted compliance plans for our California facilities, which were
required to be filed with the State of California by January 1, 2002. Any
facilities not currently in compliance with the seismic regulations and
standards must be brought into compliance by 2008, or 2013 if the facility
obtains an extension. In the event that our California facilities are found not
to be in compliance with the seismic standards, we may be required to make
significant capital expenditures to bring the California facilities into
compliance, which could impact our earnings.
OUR PERFORMANCE DEPENDS ON OUR ABILITY TO RECRUIT AND RETAIN QUALITY PHYSICIANS,
NURSES AND OTHER HEALTH CARE PROFESSIONALS AT OUR HOSPITALS.
The success of our owned or leased hospitals depends on the following
factors:
- the number and quality of the physicians on the medical staff
of, or who admit patients to, our hospitals;
- the admissions practices of those physicians; and
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- the maintenance of good relations between our company and such
physicians.
Because physicians generally direct the majority of hospital
admissions, our success has been dependent, in part, upon recruiting quality
physicians and maintaining good relations with our physicians. We generally do
not employ physicians, and many of our staff physicians have admitting
privileges at other hospitals. Only a portion of physicians are interested in
practicing in the non-urban communities in which our hospitals are located, and
the loss of physicians in these communities, or inability to recruit physicians
to these communities, could make it more difficult to attract patients to our
hospitals and could affect our profitability. Also, if we are unable to maintain
good relationships with physicians, our hospitals' admissions may decrease and
our operating performance may decline. In addition, hospitals nationwide are
experiencing a shortage of nursing professionals, a trend which many industry
observers expect to continue over the next decade. If the supply of qualified
nurses or other health care professionals declines in the markets in which our
hospitals operate, it may result in increased labor expenses and lower operating
margins at those hospitals.
WE DEPEND HEAVILY ON KEY PERSONNEL, AND LOSS OF THE SERVICES OF ONE OR MORE OF
OUR KEY SENIOR OR A SIGNIFICANT PORTION OF OUR LOCAL MANAGEMENT PERSONNEL COULD
WEAKEN OUR MANAGEMENT TEAM AND OUR ABILITY TO DELIVER HEALTH CARE SERVICES
EFFICIENTLY.
Our success largely depends on the skills, experience and efforts of
our senior management. Our operations also are dependent on the efforts, ability
and experience of key members of our local management staff. The loss of
services of one or more members of our senior management or of a significant
portion of any of our local management staff could weaken significantly our
management expertise and our ability to deliver health care services
efficiently. We do not maintain key man life insurance policies on any of our
officers.
OTHER HOSPITALS PROVIDE SIMILAR SERVICES, WHICH MAY RAISE THE LEVEL OF
COMPETITION FACED BY OUR HOSPITALS.
In all geographical areas in which we operate, there are other
hospitals that provide comparable services to those offered by our hospitals,
some of which are owned by governmental agencies and supported by tax revenues,
and others of which are owned by not-for-profit corporations and may be
supported to a large extent by endowments and charitable contributions. Some of
these competitors are larger, may be more established and may have more capital
and other resources than we do. Many of our hospitals attempt to attract
patients from surrounding counties and communities, including communities in
which a competing hospital exists. If our competitors are able to finance
capital improvements and expand services at their facilities, we may be unable
to attract patients away from these hospitals.
IF WE FAIL TO IMPROVE THE OPERATIONS OF ACQUIRED HOSPITALS, WE MAY BE UNABLE TO
ACHIEVE OUR GROWTH STRATEGY.
Some of the hospitals we have acquired or will acquire had or may have
operating losses prior to the time we acquired them. We may be unable to operate
profitably any hospital or other facility we acquire, effectively integrate the
operations of any acquisitions, or otherwise achieve the intended benefit of our
growth strategy.
WE MAY BE SUBJECT TO LIABILITIES BECAUSE OF CLAIMS BROUGHT AGAINST OUR OWNED AND
LEASED HOSPITALS. IN ADDITION, IF WE ACQUIRE HOSPITALS WITH UNKNOWN OR
CONTINGENT LIABILITIES, WE COULD BECOME LIABLE FOR MATERIAL OBLIGATIONS.
In recent years, plaintiffs have brought actions against hospitals and
other health care providers, alleging malpractice, product liability or other
legal theories. Many of these actions involved large claims and significant
defense costs. We maintain professional malpractice liability insurance and
general liability insurance in amounts that management believes are sufficient
for its operations to cover claims arising out of the operations of its owned
and leased hospitals. Some of the claims, however, could exceed the scope of the
coverage in effect or coverage of particular claims could be denied. While our
professional and other liability insurance has been adequate in the past to
provide for liability claims, such insurance may not be available for us to
maintain adequate levels of insurance.
In addition, hospitals that we acquire may have unknown or contingent
liabilities, including liabilities for failure to comply with health care laws
and regulations. Although we obtain contractual indemnification from sellers
16
covering these matters, such indemnification may be insufficient to cover
material claims or liabilities for past activities of acquired hospitals.
WE MAY BE SUBJECT TO LIABILITIES BECAUSE OF CLAIMS ARISING FROM OUR HOSPITAL
MANAGEMENT ACTIVITIES.
We may be subject to liabilities from the acts, omissions and
liabilities of the employees of hospitals we manage or from the actions of our
employees in connection with the management of such hospitals. Our hospital
management contracts generally require the hospitals we manage to indemnify us
against certain claims and to maintain specified amounts of insurance. The
hospitals, however, may not maintain such insurance and indemnification may not
be available to us. Recently, other hospital management companies have been
subject to complaints alleging that these companies violated laws on behalf of
hospitals they managed. In some cases, plaintiffs brought actions against the
managing company instead of, or in addition to, their individually managed
hospital clients for these violations. Our managed hospitals or other third
parties may not hold us harmless for any losses we incur arising out of the
acts, omissions and liabilities of the employees of the hospitals we manage. If
the courts determine that we are liable for amounts exceeding the limits of any
insurance coverage or for claims outside the scope of that coverage or any
indemnity, or if any indemnity agreement is determined to be unenforceable, then
the resulting liability could affect adversely our business, results of
operations and financial condition.
RISKS RELATED TO THIS OFFERING
WE WILL HAVE AN INCREASED LEVEL OF INDEBTEDNESS, AND ACCESS TO ADDITIONAL
AMOUNTS UNDER OUR EXISTING FACILITIES, AND THE TERMS OF OUR INDEBTEDNESS MAY
RESTRICT OUR BORROWING CAPACITY AND CASH AVAILABILITY.
As a result of the offering of the notes, we have an increased level of
indebtedness. As of November 30, 2001, our consolidated debt was approximately
$330.8 million. We also have the ability to incur additional debt, subject to
limitations imposed by our senior credit facility. We currently have $208.6
million available under our senior credit facility which, if borrowed, will be
senior indebtedness. Leverage and debt service requirements could have important
consequences to holders of the notes, including the following:
- these requirements may make us more vulnerable to economic
downturns and to adverse changes in business conditions, such
as further limitations on reimbursement under Medicare and
Medicaid programs;
- our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired;
- a substantial portion of our cash flow from operations may
have to be dedicated to the payment of principal and interest
on our indebtedness, thereby reducing the funds available for
operations;
- some of our borrowings may be at variable rates of interest,
which will make us vulnerable to increases in interest rates;
and
- our existing agreements with lenders contain, and we expect
any future agreements with lenders to contain, numerous
financial and other restrictive covenants, including
restrictions on payments of dividends, incurrences of
indebtedness and the sale of assets. Any failure to comply
with these restrictions may result in an event of default,
which, if not cured or waived, could cause the indebtedness to
be declared immediately due and payable.
We may incur or assume additional indebtedness in connection with any
acquisitions or capital expenditures, which may affect our ability to pay
principal and interest on the notes. Any substantial increase in our debt levels
or our inability to borrow funds at favorable interest rates may restrict our
ability to finance future growth or operations.
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THE TERMS OF OUR SENIOR CREDIT FACILITY MAY CAUSE ACCELERATION OF INDEBTEDNESS.
Our senior credit facility includes covenants that require us to meet
certain financial ratios and financial conditions that may require us to reduce
debt or to act in a manner contrary to our business objectives. In addition, our
senior credit facility restricts, among other things, our ability to incur
additional indebtedness and make acquisitions and capital expenditures beyond a
certain level. If we fail to comply with the restrictions contained in our
senior credit facility, the lenders may be able to declare the entire amount
owed immediately due and payable, and prohibit us from making payments of
interest and principal on the notes until the default is cured or all senior
indebtedness is paid or otherwise satisfied in full. If we were unable to repay
our senior borrowings, the lenders could proceed against the collateral securing
the senior credit facility. If any senior indebtedness is accelerated, our
assets may not be sufficient to repay our senior indebtedness in full or our
other indebtedness, including the notes, in which event the interests of the
senior secured lenders may conflict with the interests of the holders of the
notes.
THE NOTES ARE SUBORDINATED TO ANY EXISTING AND FUTURE SENIOR INDEBTEDNESS.
The notes are contractually subordinated in right of payment to our
existing and future senior indebtedness (as the term is defined in the
indenture). As of November 30, 2001, we had approximately $47.5 million of
senior indebtedness. This liability ranks prior in right of payment to the
notes. The indenture does not limit the creation of additional indebtedness. Any
significant additional indebtedness incurred may impact adversely our ability to
service our debt, including the notes. Due to the subordination provisions, in
the event of our insolvency, funds which we would otherwise use to pay the
holders of the notes will be used to pay the holders of senior indebtedness to
the extent necessary to pay the senior indebtedness in full. As a result of
these payments, our general creditors may recover more, ratably, than the
holders of the notes. In addition, under certain circumstances described in our
senior credit agreement, the holders of our senior indebtedness may restrict or
prohibit us from making payments on the notes.
OUR ABILITY TO PAY THE NOTES DEPENDS UPON OUR SUBSIDIARIES, AND CREDITORS OF OUR
SUBSIDIARIES HAVE PRIORITY OVER NOTEHOLDERS.
We are structured as a holding company and hold most of our assets at,
and conduct most of our operations through, direct and indirect subsidiaries. As
a holding company, the results of our operations will depend on the results of
operations of our subsidiaries. Moreover, we are dependent on dividends or other
intercompany transfers of funds from our subsidiaries to meet our debt service
and other obligations, including payment of principal and interest on the notes.
The ability of our subsidiaries to pay dividends or make other payments or
advances to us will depend on their operating results and will be subject to
applicable laws and restrictions contained in agreements governing indebtedness
of such subsidiaries.
The claims of creditors of our subsidiaries generally will have
priority as to the assets of such subsidiaries over the claims of our creditors,
including the noteholders. As of November 30, 2001, our subsidiaries had
aggregate liabilities of approximately $11.8 million. Certain of our
subsidiaries have guaranteed the senior indebtedness under our senior credit
facility which permits obligations up to $250.0 million.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE. FLUCTUATIONS IN THE
MARKET PRICE FOR OUR COMMON STOCK MAY AFFECT THE PRICE OF THE NOTES.
The trading price of our common stock has been and may continue to be
subject to large fluctuations. Our stock price may increase or decrease in
response to a number of events and factors, including:
- quarterly variations in operating results;
- changes in financial estimates and recommendations by
securities analysts;
- the operating and stock price performance of other companies
that investors may deem comparable;
- news reports relating to trends in our industry and the
markets in which we operate;
18
- acquisitions and financings; and
- sales of blocks of stock by insiders.
The majority of this volatility, however, is attributable to the
current state of the stock market, in which wide price swings are common. This
volatility may adversely affect the price of our common stock, regardless of our
operating performance. Because the notes are convertible into common stock,
fluctuations on the trading price of our common stock may affect the price of
the notes.
WE MAY NOT BE ABLE TO REPURCHASE THE NOTES, IF REQUIRED.
In some circumstances involving a change in control, the holders of the
notes may require us to repurchase some or all of the notes. We may not have
sufficient financial resources at such time, or the ability to arrange financing
to pay the repurchase price of the notes. Our ability to repurchase the notes in
such event may be limited by law, the indenture, by the terms of other
agreements relating to our senior indebtedness and as such indebtedness and
agreements may be entered into, replaced, supplemented or amended from time to
time. We may be required to refinance our senior indebtedness in order to make
such payments.
ABSENCE OF AN EXISTING ACTIVE PUBLIC MARKET MAY NEGATIVELY AFFECT THE LIQUIDITY
OF THE NOTES.
Upon their original issuance, the notes became eligible for trading on
The PORTAL Market. The notes sold pursuant to this prospectus, however, will no
longer be eligible for trading on The PORTAL Market, and we do not intend to
apply for listing of the notes on any securities exchange or quotation system.
An active trading market for the notes may not develop. Moreover, even though a
market may develop, the demand for the notes may not be sufficient to allow
holders to sell their notes or sell the notes at an acceptable price. Future
trading prices of the notes will depend on many factors, including, among other
things, prevailing interest rates, our operating results, the price of our
common stock and the market for similar securities.
ANY RATING OF THE NOTES MAY CAUSE THEIR TRADING PRICE TO FALL.
If the rating agencies rate the notes, they may assign a lower rating
than expected by investors. Rating agencies also may lower ratings on the notes
in the future. If the rating agencies assign a lower than expected rating or
reduce their ratings in the future, the trading price of the notes could
decline.
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USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the
sale of the notes and common stock under this prospectus. We will not receive
any of the proceeds from the sales by any selling securityholders of notes or
the underlying common stock.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to
fixed charges for the periods shown:
Nine Months
Year Ended December 31, Ended September
------------------------------------------- 30,
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Ratio of earnings to fixed charges (1)..... 1.77x 2.42x 2.55x 2.71x 4.81x
Pro forma ratio of earnings to fixed
charges (2)................................ 3.31x 5.49x
- ---------------------------
(1) The ratio of earnings to fixed charges is calculated by
dividing earnings by fixed charges. For this purpose,
"earnings" means income (loss) from continuing operations
before provision for income taxes and extraordinary items plus
fixed charges (other than capitalized interest). "Fixed
charges" means total interest whether capitalized or expensed
(including the portion of rent expense representative of
interest costs) on outstanding debt plus (i) debt related fees
and (ii) amortization of deferred financings costs. Earnings
were inadequate to cover fixed charges by $2,017,000 for the
period February 2, 1996 (date of incorporation of Province to
December 31, 1996.
(2) The pro forma ratio of earnings to fixed charges gives effect
to the net decrease in the interest expense resulting from
the sale of the notes on October 10, 2001 and the application
of the estimated proceeds thereof to the repayment of existing
debt, as if such transactions had occurred at the beginning of
the periods presented; such ratio does not give effect to any
other pro forma events.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock.
We currently intend to retain our earnings for use in our business and therefore
do not anticipate declaring or paying any cash dividends in the foreseeable
future. Our senior credit facility prohibits us from paying dividends other than
dividends paid in our common stock. Any future determination to declare or pay
cash dividends will be made by our board of directors in light of our earnings,
financial position, capital requirements, credit agreements and such other
factors as our board of directors deems relevant at such time.
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DESCRIPTION OF THE NOTES
The notes were issued under an indenture between us and National City
Bank, as trustee, dated October 10, 2001. The terms of the notes include those
provided in the indenture and those provided in the registration rights
agreement between us and the initial purchasers, dated October 10, 2001. We will
make copies of the indenture, notes and registration rights agreement available
to prospective investors in the notes upon request to us. A copy of the
indenture is filed with the Securities and Exchange Commission as an exhibit to
the registration statement of which this prospectus forms a part.
The following description of provisions of the notes is not complete
and is subject to, and qualified in its entirety by reference to, the notes, the
indenture and the registration rights agreement. We urge you to read the
indenture because it defines your rights as a holder of the notes. Terms not
defined in this description have the meaning given them in the indenture. As
used in this description, the words "we," "us," "our" or "Province" do not
include any current or future subsidiary of Province Healthcare Company.
GENERAL
The notes are general unsecured obligations of Province and rank junior
in right of payment to all of our existing and future Senior Indebtedness and
equal in right of payment to our 4-1/2% Convertible Subordinated Notes due 2005,
and are convertible into our common stock as described under " -- Conversion
Rights" below. The notes are limited to $172,500,000 aggregate principal amount,
and will mature on October 10, 2008, unless earlier redeemed by us or
repurchased by us at the option of the holder upon the occurrence of a change of
control (as defined below).
The notes bear interest from October 10, 2001 at the rate of 4-1/4% per
year. Interest is payable semi-annually on April 10 and October 10 of each year
to holders of record at the close of business on the preceding March 26 and
September 25, respectively, beginning April 10, 2002. We may pay interest on
notes represented by certificated notes by check mailed to such holders.
However, a holder of notes with an aggregate principal amount in excess of
$5,000,000 will be paid by wire transfer in immediately available funds at the
election of such holder. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months.
Principal is payable, and the notes may be presented for conversion,
registration of transfer and exchange, without service charge, at our office or
agency in New York City, which shall initially be the office or agency of the
trustee in New York, New York.
The indenture does not contain any financial covenants or any
restrictions on the payment of dividends, the repurchase of our securities or
the incurrence of Senior Indebtedness or any other indebtedness. The indenture
also does not contain any covenants or other provisions that afford protection
to holders of notes in the event of a highly leveraged transaction or a change
of control of Province except to the extent described under " -- Repurchase at
Option of Holders Upon a Change of Control" below.
BOOK-ENTRY FORM
The notes were offered only to qualified institutional buyers as
defined in Rule 144A under the Securities Act. The notes were issued in the form
of a global security held in book-entry form. The Depository Trust Company, New
York, New York ("DTC") or its nominee is the sole registered holder of the notes
for all purposes under the indenture. Owners of beneficial interests in the
notes represented by the global security will hold such interests pursuant to
the procedures and practices of DTC. As a result, owners of beneficial interests
must exercise any rights in respect of their interests, including any right to
convert or require repurchase of their interests, in accordance with the
procedures and practices of DTC. Beneficial owners will not be holders and will
not be entitled to any rights under the global security or the indenture
provided to the holder of the notes. Province and the trustee, and any of their
respective agents, may treat DTC as the sole holder and registered owner of the
global security.
Certificated notes may be issued in exchange for beneficial interests
in notes represented by the global security only in the limited circumstances
set forth in the indenture.
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CONVERSION RIGHTS
The holders of notes may, at any time prior to the close of business on
the final maturity date of the notes, convert any outstanding notes (or portions
thereof) into our common stock, initially at the conversion price set forth on
the cover page of this prospectus, subject to adjustment as described below.
Holders may convert notes only in denominations of $1,000 and whole multiples of
$1,000. Except as described below, no adjustment will be made on conversion of
any notes for interest accrued thereon or dividends paid on any common stock.
If notes are converted after a record date for an interest payment but
prior to the next interest payment date, those notes, other than notes called
for redemption, must be accompanied by funds equal to the interest payable on
the next interest payment date on the principal amount so converted. No payment
will be required from a holder if we exercise our right to redeem such notes. We
are not required to issue fractional shares of common stock upon conversion of
notes and instead will pay a cash adjustment based upon the market price of our
common stock on the last business day before the date of the conversion. In the
case of notes called for redemption, conversion rights will expire at the close
of business on the business day preceding the date fixed for redemption, unless
we default in payment of the redemption price.
A holder may exercise the right of conversion by delivering the note to
be converted to the specified office of a conversion agent, with a completed
notice of conversion, together with any funds that may be required as described
in the preceding paragraph. The conversion date will be the date on which the
note, the notice of conversion and any required funds have been so delivered. A
holder delivering a note for conversion will not be required to pay any taxes or
duties relating to the issuance or delivery of the common stock for such
conversion, but will be required to pay any tax or duty which may be payable
relating to any transfer involved in the issuance or delivery of the common
stock in a name other than the holder of the note. Certificates representing
shares of common stock will be issued or delivered only after all applicable
taxes and duties, if any, payable by the holder have been paid. If any note is
converted within two years after its original issuance, the common stock
issuable upon conversion will not be issued or delivered in a name other than
that of the holder of the note unless the applicable restrictions on transfer
have been satisfied.
The initial conversion price will be adjusted for certain events,
including:
(1) the issuance of our common stock as a dividend or distribution
on our common stock;
(2) certain subdivisions and combinations of our common stock;
(3) the issuance to all holders of our common stock of certain
rights or warrants to purchase our common stock (or securities
convertible into our common stock) at less than (or having a
conversion price per share less than) the current market price
of our common stock;
(4) the dividend or other distribution to all holders of our
common stock of shares of our capital stock (other than common
stock) or evidences of our indebtedness or our assets
(including securities, but excluding: (A) those rights and
warrants referred to above and dividends, (B) distributions in
connection with a reclassification, change, consolidation,
merger, combination, sale or conveyance resulting in a change
in the conversion consideration pursuant to the second
succeeding paragraph or dividends, or (C) distributions paid
exclusively in cash);
(5) dividends or other distributions consisting exclusively of
cash to all holders of our common stock to the extent that
such distributions, combined together with (A) all other such
all-cash distributions made within the preceding 12 months for
which no adjustment has been made plus (B) any cash and the
fair market value of other consideration paid for any tender
offers by us or any of our subsidiaries for our common stock
concluded within the preceding 12 months for which no
adjustment has been made, exceeds 10% of our market
capitalization on the record date for such distribution;
market capitalization is the product of the then current
market price of our common stock and the number of shares of
our common stock then outstanding; and
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(6) the purchase of our common stock pursuant to a tender offer
made by us or any of our subsidiaries which involves an
aggregate consideration that, together with (A) any cash and
the fair market value of any other consideration paid in any
other tender offer by us or any of our subsidiaries for our
common stock expiring within the 12 months preceding such
tender offer for which no adjustment has been made plus (B)
the aggregate amount of any all-cash distributions referred to
in clause (5) above to all holders of our common stock within
12 months preceding the expiration of that tender offer for
which no adjustments have been made, exceeds 10% of our market
capitalization on the expiration of such tender offer.
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect at such time. Any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of our common stock or any securities convertible into or exchangeable
for our common stock or carrying the right to purchase any of the foregoing.
In the case of:
- any reclassification or change of our common stock (other than
changes resulting from a subdivision or combination) or
- a consolidation, merger or combination involving us or a sale
or conveyance to another corporation of all or substantially
all of our property and assets, in each case as a result of
which holders of our common stock are entitled to receive
stock, other securities, other property or assets (including
cash or any combination thereof) with respect to or in
exchange for our common stock, the holders of the notes then
outstanding will be entitled thereafter to convert those notes
into the kind and amount of shares of stock, other securities
or other property or assets (including cash or any combination
thereof) which they would have owned or been entitled to
receive upon such reclassification, change, consolidation,
merger, combination, sale or conveyance had such notes been
converted into our common stock immediately prior to such
reclassification, change, consolidation, merger, combination,
sale or conveyance. We may not become a party to any such
transaction unless its terms are consistent with the
foregoing.
If a taxable distribution to holders of our common stock or other
transaction occurs which results in any adjustment of the conversion price, the
holders of notes may, in certain circumstances, be deemed to have received a
distribution subject to U.S. income tax as a dividend. In certain other
circumstances, the absence of an adjustment may result in a taxable dividend to
the holders of common stock. See "Certain United States Federal Income Tax
Consequences."
We may from time to time, to the extent permitted by law, reduce the
conversion price of the notes by any amount for any period of at least 20 days.
In that case we will give at least 15 days' notice of such decrease. We may make
such reductions in the conversion price, in addition to those set forth above,
as our board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income tax
purposes.
OPTIONAL REDEMPTION BY PROVINCE
At any time on or after October 10, 2004, we may redeem some or all of
the notes on at least 30 but not more than 60 days' notice, at the following
prices (expressed in percentages of the principal amount), together with accrued
and unpaid interest to, but excluding, the date fixed for redemption, if the
closing price of our common stock has exceeded 120% of the conversion price then
in effect for at least 20 trading days within a period of 30 consecutive trading
days ending on the trading day prior to the date of mailing of the optional
redemption notice.
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REDEMPTION
DURING THE TWELVE MONTHS COMMENCING PRICE
---------------------------------- ----------
October 10, 2004..................................... 102.4286%
October 10, 2005..................................... 101.8214%
October 10, 2006..................................... 101.2143%
October 10, 2007..................................... 100.6071%
If we do not redeem all of the notes, the trustee will select the notes
to be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by
lot or on a pro rata basis. If any notes are to be redeemed in part only, a new
note or notes in principal amount equal to the unredeemed principal portion
thereof will be issued. If a portion of a holder's notes is selected for partial
redemption and the holder converts a portion of its notes, the converted portion
will be deemed to be taken from the portion selected for redemption.
No sinking fund is provided for the notes.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a change of control (as defined below) occurs, each holder of notes
will have the right to require us to repurchase all of that holder's notes not
previously called for redemption, or any portion of those notes that is equal to
$1,000 or a whole multiple of $1,000, on the date that is 45 days after the date
we give notice at a repurchase price equal to 100% of the principal amount of
the notes to be repurchased, together with interest accrued and unpaid to, but
excluding, the repurchase date.
Instead of paying the repurchase price in cash, we may pay the
repurchase price in common stock if we so elect in the notice referred to below.
The number of shares of common stock a holder will receive will equal the
repurchase price divided by 95% of the average of the closing sales prices of
our common stock for the five trading days immediately preceding and including
the third trading day prior to the repurchase date. However, we may not pay in
common stock unless we satisfy certain conditions prior to the repurchase date
as provided in the indenture.
Within 30 days after the occurrence of a change of control, we are
required to give notice to all holders of notes, as provided in the indenture,
of the occurrence of the change of control and of their resulting repurchase
right. We must also deliver a copy of our notice to the trustee. In order to
exercise the repurchase right, a holder of notes must deliver prior to or on the
30th day after the date of our notice written notice to the trustee of the
holder's exercise of its repurchase right, together with the notes with respect
to which the right is being exercised.
Under the indenture, a "change of control" of Province will be deemed
to have occurred at such time after the original issuance of the notes when the
following has occurred:
- the acquisition by any person, including any syndicate or
group deemed to be a "person" under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or
series of transactions of shares of our capital stock
entitling that person to exercise 50% or more of the total
voting power of all shares of our capital stock entitled to
vote generally in elections of directors, other than any
acquisition by us, any of our subsidiaries or any of our
employee benefit plans; or
- our consolidation or merger with or into any other person, any
merger of another person into us, or any conveyance, transfer,
sale, lease or other disposition of all or substantially all
of our properties and assets to another person, other than:
(1) any transaction (A) that does not result in any
reclassification, conversion, exchange or
cancellation of outstanding shares of our capital
stock and (B) pursuant to which holders of our
capital stock immediately prior to the transaction
have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of
all shares of our capital stock entitled to vote
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generally in the election of directors of the
continuing or surviving person immediately after the
transaction; and
(2) any merger solely for the purpose of changing our
jurisdiction of incorporation and resulting in a
reclassification, conversion or exchange of
outstanding shares of common stock solely into shares
of common stock of the surviving entity.
The beneficial owner shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" includes any
syndicate or group which would be deemed to be a "person" under Section 13(d)(3)
of the Exchange Act.
Rule 13e-4 under the Exchange Act, as amended, requires the
dissemination of information to security holders if an issuer tender offer
occurs and may apply if the repurchase option becomes available to holders of
the notes. We will comply with this rule to the extent applicable at that time.
The foregoing provisions would not necessarily protect holders of the
notes if highly leveraged or other transactions involving us occur that may
adversely affect holders.
Our ability to repurchase notes upon the occurrence of a change of
control is subject to important limitations. The occurrence of a change in
control could cause an event of default under, or be prohibited or limited by,
the terms of existing or future senior debt. As a result, any repurchase of the
notes would, absent a waiver, be prohibited under the subordination provisions
of the indenture until the senior debt is paid in full. Further, we cannot
assure you that we would have the financial resources, or would be able to
arrange financing, to pay the repurchase price for all the notes that might be
delivered by holders of notes seeking to exercise the repurchase right. Any
failure by us to repurchase the notes when required following a change of
control would result in an event of default under the indenture, whether or not
such repurchase is permitted by the subordination provisions of the indenture.
Any such default may, in turn, cause a default under existing or future senior
debt. See " -- Subordination" below.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the notes
will be subordinated in right of payment, as set forth in the indenture, to the
prior payment in full in cash or cash equivalents of all Senior Indebtedness
whether outstanding on the date of the indenture or thereafter incurred and will
rank equal in right of payment to our 4-1/2% Convertible Subordinated Notes due
2005.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to Province or to its assets, or any liquidation,
dissolution or other winding-up of Province, whether voluntary or involuntary,
or any assignment for the benefit of creditors or other marshaling of assets or
liabilities of Province (except in connection with the consolidation or merger
of Province or its liquidation or dissolution following the conveyance, transfer
or lease of its properties and assets substantially as an entirety upon the
terms and conditions described under " -- Merger and Sales of Assets" below),
the holders of Senior Indebtedness will be entitled to receive payment in full
in cash or cash equivalents of all Senior Indebtedness, or provision shall be
made for such payment in full, before the holders of notes will be entitled to
receive any payment or distribution of any kind or character (other than any
payment or distribution in the form of equity securities or subordinated
securities of Province or any successor obligor that, in the case of any such
subordinated securities, are subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding to at least the same extent as
the notes are so subordinated (such equity securities or subordinated securities
hereinafter being "Permitted Junior Securities")) on account of principal of, or
premium, if any, or interest on the notes; and any payment or distribution of
assets of Province of any kind or character, whether in cash, property or
securities (other than a payment or distribution in the form of Permitted Junior
Securities), by set-off or otherwise, to which the holders of the notes or the
trustee would be entitled but for the provisions of the indenture relating to
subordination shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the holders of Senior
Indebtedness or their representatives ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness to the extent necessary
to make payment in full of all Senior Indebtedness remaining unpaid, after
giving effect to any current payment or distribution to the holders of such
Senior Indebtedness.
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No payment or distribution of any assets of Province of any kind or
character, whether in cash, property or securities (other than Permitted Junior
Securities), may be made by or on behalf of Province on account of principal of,
premium, if any, or interest on the notes or on account of the purchase,
redemption or other acquisition of notes upon the occurrence of any default in
payment (whether at scheduled maturity, upon scheduled installment, by
acceleration or otherwise) of principal of, premium, if any, or interest on
Designated Senior Indebtedness (as defined below) beyond any applicable grace
period (a "Payment Default") until such Payment Default shall have been cured or
waived in writing or shall have ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full in cash or cash
equivalents.
No payment or distribution of any assets of Province of any kind or
character, whether in cash, property or securities (other than Permitted Junior
Securities), may be made by or on behalf of Province on account of principal of,
premium, if any, or interest on the notes or on account of the purchase,
redemption or other acquisition of notes for the period specified below (a
"Payment Blockage Period") upon the occurrence of any default or event of
default with respect to any Designated Senior Indebtedness other than any
Payment Default pursuant to which the maturity thereof may be accelerated (a
"Non-Payment Default") and receipt by the trustee of written notice thereof from
the trustee or other representative of holders of Designated Senior
Indebtedness.
The Payment Blockage Period will commence upon the date of receipt by
the trustee of written notice from the trustee or such other representative of
the holders of the Designated Senior Indebtedness in respect of which the
Non-Payment Default exists and shall end on the earliest of:
- 179 days thereafter (provided that any Designated Senior
Indebtedness as to which notice was given shall not
theretofore have been accelerated);
- the date on which such Non-Payment Default is cured, waived or
ceases to exist;
- the date on which such Designated Senior Indebtedness is
discharged or paid in full; or
- the date on which such Payment Blockage Period shall have been
terminated by written notice to the trustee or Province from
the trustee or such other representative initiating such
Payment Blockage Period,
after which Province will resume making any and all required payments in respect
of the notes, including any missed payments. In any event, not more than one
Payment Blockage Period may be commenced during any period of 365 consecutive
days. No Non-Payment Default that existed or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be made, the basis
for the commencement of a subsequent Payment Blockage Period, unless such
Non-Payment Default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment Blockage
Period.
In the event that, notwithstanding the provisions of the preceding four
paragraphs, any payment or distribution shall be received by the trustee or any
holder of the notes which is prohibited by such provisions, then and in such
event such payment shall be paid over and delivered by such trustee or holder to
the trustee or any other representative of holders of Senior Indebtedness, as
their interest may appear, for application to Senior Indebtedness. After all
Senior Indebtedness is paid in full and until the notes are paid in full,
holders of the notes shall be subrogated (equally and ratably with all other
indebtedness that is equal in right of payment to the notes) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the holders
of the notes have been applied to the payment of Senior Indebtedness.
Failure by Province to make any required payment in respect of the
notes when due or within any applicable grace period, whether or not occurring
during a Payment Blockage Period, will result in an Event of Default and,
thereafter, holders of the notes will have the right to accelerate the maturity
thereof. See " -- Events of Default."
By reason of such subordination, in the event of liquidation,
receivership, reorganization or insolvency of Province, our general creditors
may
26
recover less, ratably, than holders of senior debt and such general creditors
may recover more, ratably, than holders of notes. Moreover, the notes will be
structurally subordinated to the liabilities of subsidiaries of Province.
At November 30, 2001:
- outstanding Senior Indebtedness of Province was approximately
$47.5 million; and
- Province had no subordinated indebtedness other than (i) the
notes and (ii) $150,000,000 aggregate principal amount of
Province's 4-1/2% Convertible Subordinated Notes due 2005.
"Designated Senior Indebtedness" means:
- all Senior Indebtedness under the Senior Credit Agreement; and
- any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding
of at least $25.0 million and that has been specifically
designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" of Province.
"Indebtedness" (or "indebtedness") means, with respect to any person,
without duplication:
- all liabilities of such person for borrowed money (including
overdrafts) or for the deferred purchase price of property or
services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations,
contingent or otherwise, of such person in connection with any
letters of credit and acceptances issued under letter of
credit facilities, acceptance facilities or other similar
facilities;
- all obligations of such person evidenced by bonds, notes,
debentures or other similar instruments;
- indebtedness of such person created or arising under any
conditional sale or other title retention agreement with
respect to property acquired by such person (even if the
rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession
or sale of such property), but excluding trade payables
arising in the ordinary course of business;
- all capitalized lease obligations of such person;
- all obligations of such person under or in respect of interest
rate agreements or currency agreements;
- all indebtedness referred to in (but not excluded from) the
preceding clauses of other persons and all dividends of other
persons, the payment of which is secured by (or for which the
holder of such indebtedness has an existing right, contingent
or otherwise, to be secured by) any lien or with respect to
property (including, without limitation, accounts and contract
rights) owned by such person, even though such person has not
assumed or become liable for the payment of such indebtedness
(the amount of such obligation being deemed to be the lesser
of the value of such property or asset or the amount of the
obligation so secured);
- all guarantees by such person of indebtedness referred to in
this definition or of any other person;
- all Redeemable Capital Stock of such person valued at the
greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends; and
- the present value of the obligation of such person as lessee
for net rental payments (excluding all amounts required to be
paid on account of maintenance and repairs, insurance, taxes,
assessments, water, utilities and similar charges to the
extent included in such rental payments) during the remaining
27
term of the lease included in such sale and leaseback
transaction including any period for which such lease has been
extended or may, at the option of the lessor, be extended.
Such present value shall be calculated using a discount rate
equal to the rate of interest implicit in such transaction,
determined in accordance with accounting principles generally
accepted in the United States.
"Redeemable Capital Stock" means any class of our capital stock that,
either by its terms, by the terms of any securities into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed (whether by sinking
fund or otherwise) prior to the date that is 91 days after the final scheduled
maturity of the notes or is redeemable at the option of the holder thereof at
any time prior to such date, or is convertible into or exchangeable for debt
securities at any time prior to such date (unless it is convertible or
exchangeable solely at our option).
"Senior Credit Agreement" means collectively, (i) the Third Amended and
Restated Credit Agreement dated as of November 13, 2001, the Participation
Agreement dated as of March 30, 1998, as amended by Amendment No. 1 dated as of
September 10, 1999 and Amendment No. 2, dated as of March 20, 2001, among
Province, certain guarantors, First Security Bank, National Association, as
Owner Trustee and First Union National Bank as agent for the lenders and holders
providing for an end-loaded lease facility, as such agreements may be amended,
renewed, extended, substituted, refinanced, restructured, replaced, supplemented
or otherwise modified from time to time, including, without limitation, any
increase in the principal amount of debt thereunder.
"Senior Indebtedness" means:
- all obligations of Province, now or hereafter existing, under
or in respect of the Senior Credit Agreement and the documents
and instruments executed in connection therewith, whether for
principal, premium, if any, interest (including interest
accruing after the filing of, or which would have accrued but
for the filing of, a petition by or against Province under
bankruptcy law, whether or not such interest is allowed as a
claim after such filing in any proceeding under such law) and
other amounts due in connection therewith (including, without
limitation, any fees, premiums, expenses, reimbursement
obligations with respect to letters of credit and
indemnities), whether outstanding on the date of the indenture
or thereafter created, incurred or assumed; and
- the principal of, premium, if any, and interest on all other
indebtedness of Province (other than the notes), whether
outstanding on the date of the indenture or thereafter
created, incurred or assumed, unless, in the case of any
particular indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding
expressly provides that such indebtedness shall not be senior
in right of payment to the notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include:
- indebtedness evidenced by the notes;
- indebtedness of Province evidenced by the 4-1/2% Convertible
Subordinated Notes due 2005;
- indebtedness of Province that is expressly subordinated in
right of payment to any other indebtedness of Province;
- indebtedness of Province that by operation of law is
subordinate to any general unsecured obligations of Province;
- any liability for federal, state or local taxes or other
taxes, owed or owing by Province;
- accounts payable or other liabilities owed or owing by
Province to trade creditors (including guarantees thereof or
instruments evidencing such liabilities);
- amounts owed by Province for compensation to employees or for
services rendered to Province;
28
- indebtedness of Province to any subsidiary or any other
affiliate of Province or any of such affiliate's subsidiaries;
- capital stock of Province;
- indebtedness evidenced by any guarantee of any indebtedness
ranking equal or junior in right of payment to the notes; and
- indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11 of the United
States Code, is without recourse to Province.
EVENTS OF DEFAULT
Each of the following constitutes an event of default under the
indenture:
(1) our failure to pay when due the principal of or premium, if
any, on any of the notes at maturity, upon redemption or
exercise of a repurchase right or otherwise, whether or not
such payment is prohibited by the subordination provisions of
the indenture;
(2) our failure to pay an installment of interest (including
liquidated damages, if any) on any of the notes that continues
for 30 days after the date when due, whether or not such
payment is prohibited by the subordination provisions of the
indenture;
(3) our failure to deliver shares of common stock, together with
cash in lieu of fractional shares, when such common stock or
cash in lieu of fractional shares is required to be delivered
upon conversion of a note that continues for ten days after
such delivery date;
(4) our failure to perform or observe any other term, covenant or
agreement contained in the notes or the indenture for a period
of 60 days after written notice of such failure, requiring us
to remedy the same, shall have been given to us by the trustee
or to us and the trustee by the holders of at least 25% in
aggregate principal amount of the notes then outstanding;
(5) (A) one or more defaults in the payment of principal of or
premium, if any, on any of our indebtedness aggregating $5.0
million or more, when the same becomes due and payable at the
scheduled maturity thereof, and such default or defaults shall
have continued after any applicable grace period and shall not
have been cured or waived within a thirty day period after the
date of such default or (B) any of our indebtedness
aggregating $5.0 million or more shall have been accelerated
or otherwise declared due and payable, or required to be
prepaid or repurchased (other than by regularly scheduled
required prepayment) prior to the scheduled maturity thereof
and such acceleration is not rescinded or annulled within a
thirty day period after the date of such acceleration;
(6) certain events of our bankruptcy, insolvency or reorganization
or that of any significant subsidiaries; and
(7) our filing of a voluntary petition seeking liquidation,
reorganization arrangement, readjustment of debts or for any
other relief under the federal bankruptcy code.
The indenture provides that the trustee shall, within 90 days of the
occurrence of a default, give to the registered holders of the notes notice of
all uncured defaults known to it, 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 best interest of such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the notes when due or in the payment of any redemption or
repurchase obligation.
If an event of default specified in clause (6) or clause (7) above
occurs and is continuing, then automatically the principal of all the notes and
the interest thereon shall become immediately due and payable. If an event of
default shall occur and be continuing, other than with respect to clause (6) or
clause (7) above (the default
29
not having been cured or waived as provided under " -- Modifications and Waiver"
below), the trustee or the holders of at least 25% in aggregate principal amount
of the notes then outstanding may declare the notes due and payable at their
principal amount together with accrued interest, and thereupon the trustee may,
at its discretion, proceed to protect and enforce the rights of the holders of
notes by appropriate judicial proceedings. Such declaration may be rescinded or
annulled with the written consent of the holders of a majority in aggregate
principal amount of the notes then outstanding upon the conditions provided in
the indenture.
The indenture contains a provision entitling the trustee, subject to
the duty of the trustee during default to act with the required standard of
care, to be indemnified by the holders of notes before proceeding to exercise
any right or power under the indenture at the request of such holders. The
indenture provides that the holders of a majority in aggregate principal amount
of the notes then outstanding through their written consent may direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred upon the trustee.
We are required to furnish annually to the trustee a statement as to
the fulfillment of our obligations under the indenture.
MERGERS AND SALES OF ASSETS
We may, without the consent of the holders of notes, consolidate with,
merge into or transfer all or substantially all of our assets to any other
corporation organized under the laws of the United States or any of its
political subdivisions provided that:
- the surviving corporation assumes all our obligations under
the indenture and the notes;
- at the time of such transaction, no event of default, and no
event which, after notice or lapse of time, would become an
event of default, shall have happened and be continuing; and
- certain other conditions are met.
MODIFICATIONS AND WAIVER
The indenture (including the terms and conditions of the notes) may be
modified or amended by us and the trustee, without the consent of the holder of
any note, for the purposes of, among other things:
- adding to our covenants for the benefit of the holders of
notes;
- surrendering any right or power conferred upon us;
- providing for conversion rights of holders of notes if any
reclassification or change of our common stock or any
consolidation, merger or sale of all or substantially all of
our assets occurs;
- providing for the assumption of our obligations to the holders
of notes in the case of a merger, consolidation, conveyance,
transfer or lease;
- reducing the conversion price, provided that the reduction
will not adversely affect the interests of holders of notes in
any material respect;
- complying with the requirements of the SEC in order to effect
or maintain the qualification of the indenture under the Trust
Indenture Act of 1939, as amended;
- making any changes or modifications to the indenture necessary
in connection with the registration of the notes under the
Securities Act as contemplated by the registration rights
agreement, provided that this action does not adversely affect
the interests of the holders of the notes in any material
respect;
30
- curing any ambiguity or correcting or supplementing any
defective provision contained in the indenture; provided that
such modification or amendment does not, in the good faith
opinion of our board of directors and the trustee, adversely
affect the interests of the holders of the notes in any
material respect; or
- adding or modifying any other provisions which we and the
trustee may deem necessary or desirable and which will not
adversely affect the interests of the holders of notes in any
material respect.
Modifications and amendments to the indenture or to the terms and
conditions of the notes may also be made, and past default by us may be waived,
with the written consent of the holders of at least a majority in aggregate
principal amount of the notes at the time outstanding.
However, no such modification, amendment or waiver may, without the
written consent of the holder of each note affected:
- change the maturity of the principal of or any installment of
interest on any note (including any payment of liquidated
damages);
- reduce the principal amount of, or any premium or interest on
(including any payment of liquidated damages), any note;
- change the currency of payment of such note or interest
thereon;
- impair the right to institute suit for the enforcement of any
payment on or with respect to any note;
- modify our obligations to maintain an office or agency in New
York City;
- except as otherwise permitted or contemplated by provisions
concerning corporate reorganizations, adversely affect the
repurchase option of holders upon a change of control or the
conversion rights of holders of the notes;
- modify the subordination provisions of the notes in a manner
adverse to the holders of notes; or
- reduce the percentage in aggregate principal amount of notes
outstanding necessary to modify or amend the indenture or to
waive any past default.
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding, subject to certain conditions, if:
- all outstanding notes will become due and payable at their
scheduled maturity within one year; or
- all outstanding notes are scheduled for redemption within one
year,
- and, in either case, we have deposited with the trustee an
amount sufficient to pay and discharge all outstanding notes
on the date of their scheduled maturity or the scheduled date
of redemption; provided that we shall remain obligated to
issue shares upon conversion of the notes.
GOVERNING LAW
The indenture and the notes are governed by, and construed in
accordance with, the law of the State of New York.
31
INFORMATION CONCERNING THE TRUSTEE
National City Bank, as trustee under the indenture, has been appointed
by us as paying agent, conversion agent, registrar and custodian with regard to
the notes. First Union National Bank is the transfer agent and registrar for our
common stock. The trustee is also the trustee under the indenture pursuant to
which our 4-1/2% Convertible Subordinated Notes due 2005 were issued, and it or
its affiliates may from time to time in the future provide banking and other
services to us in the ordinary course of their business.
REGISTRATION RIGHTS
When we issued the notes, we entered into a registration rights
agreement with the initial purchasers of the notes. As required under that
agreement, we have filed with the Securities and Exchange Commission, at our
expense, a shelf registration statement, of which this prospectus forms a part,
covering the resale by holders of the notes and the common stock issuable upon
conversion of the notes. Under the terms of the registration rights agreement,
we have agreed to use our best efforts to:
- cause such registration statement to become effective as
promptly as is practicable, but in no event later than 150
days after the earliest date of original issuance of any of
the notes; and
- keep the registration statement effective until the earlier of
(A) such date that is two years after the last date of
original issuance of any of the notes; (B) the date when the
holders of the notes and the common stock issuable upon
conversion of the notes are able to sell all such securities
immediately without restriction pursuant to the volume
limitation provisions of Rule 144 under the U.S. Securities
Act of 1933 or any successor rule thereto or otherwise; or (C)
the sale pursuant to the shelf registration statement of all
securities registered thereunder.
We have agreed to provide to each registered holder copies of this
prospectus, notify each registered holder when the shelf registration statement
has become effective and take certain other actions as are required to permit
unrestricted resales of the notes and the common stock issuable upon conversion
of the notes. A holder who sells those securities pursuant to the shelf
registration statement generally will be required to be named as a selling
stockholder in this prospectus (or a supplement to this prospectus) and to
deliver this prospectus (together with any prospectus supplement) to purchasers.
The holder also is bound by the provisions of the registration rights agreement
that is applicable to that holder (including certain indemnification
provisions).
We will be permitted to suspend the use of the prospectus that is part
of the shelf registration statement under certain circumstances relating to
pending corporate developments, public filings with the SEC and similar events
for a period not to exceed 45 days in any three-month period and not to exceed
an aggregate of 90 days in any 12-month period.
If,
- on the 90th day following the earliest date of original
issuance of any of the notes, the shelf registration statement
of which this prospectus is a part has not been filed with the
SEC; or
- on the 150th day following the earliest date of original
issuance of any of the notes, the shelf registration statement
is not declared effective; or
- the registration statement shall cease to be effective or fail
to be usable without being succeeded within five business days
by a post-effective amendment or a report filed with the SEC
pursuant to the Exchange Act that cures the failure of the
registration statement to be effective or usable; or
- the prospectus has been suspended as described in the
preceding paragraph longer than the period permitted by such
paragraph (each, a "registration default"),
32
then additional interest as liquidated damages will accrue on the notes, from
and including the day following the registration default to but excluding the
day on which the registration default has been cured. Liquidated damages will be
paid semi-annually in arrears, with the first semi-annual payment due on the
first interest payment date, as applicable, following the date on which such
liquidated damages begin to accrue, and will accrue at a rate per year equal to:
- an additional 0.25% of the principal amount to and including
the 90th day following such registration default; and
- an additional 0.5% of the principal amount from and after the
91st day following such registration default.
In no event will liquidated damages accrue at a rate per year exceeding
0.5%. If a holder has converted some or all of its notes into common stock, the
holder will be entitled to receive equivalent amounts based on the principal
amount of the notes converted.
The summary herein of certain provisions of the registration rights
agreement between Province and the initial purchasers is subject to, and is
qualified in its entirety by reference to, all the provisions of the
registration rights agreement, a copy of which has been filed as an exhibit to
the registration statement of which this prospectus is a part or is available
upon request to Province.
Upon their original issuance, the notes became eligible for trading on
the PORTAL market. The notes sold pursuant to this prospectus, however, will no
longer be eligible for trading on the PORTAL market, and we do not intend to
apply for listing of the notes on any securities exchange or quotation system.
We can not assure you that an active trading market for the notes will develop
or as to the liquidity or sustainability of any such market, the ability of the
holders to sell their notes or the price at which holders of the notes will be
able to sell their notes. Future trading prices of the notes will depend on many
factors, including, among other things, prevailing interest rates, our operating
results, the price of our common stock and the market for similar securities.
33
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $0.01 per share and 100,000 shares of preferred stock. As of
January 14, 2002 there were 31,658,593 shares of common stock outstanding held
of record by 509 stockholders, and no shares of preferred stock outstanding. The
following description of our capital stock and provisions of our certificate of
incorporation and bylaws are only summaries, and we encourage you to review
complete copies of our certificate of incorporation and bylaws, which we have
filed previously with the Securities and Exchange Commission.
COMMON STOCK
Holders of our common stock are entitled to receive, as, when and if
declared by our board of directors, dividends and other distributions in cash,
stock or property from our assets or funds legally available for those purposes
subject to any dividend preferences that may be attributable to preferred stock.
Holders of common stock are entitled to one vote for each share held of record
on all matters on which stockholders may vote. Holders of common stock are not
entitled to cumulative voting for the election of directors. There are no
preemptive, conversion, redemption or sinking fund provisions applicable to our
common stock. All outstanding shares of common stock are fully paid and
non-assessable. In the event of our liquidation, dissolution or winding up,
holders of common stock are entitled to share ratably in the assets available
for distribution, subject to any prior rights of any holders of preferred stock
then outstanding.
PREFERRED STOCK
Our board of directors may from time to time, without stockholder
approval, designate one or more series of preferred stock with dividend rates,
redemption prices, preferences on liquidation or dissolution, conversion rights,
voting rights and any other preferences, which rights and preferences could
adversely affect the voting power of the holders of common stock. Issuances of
preferred stock could:
- restrict the payment of dividends on common stock if dividends
on the preferred stock have not been paid in full;
- dilute the voting power and equity interests of holders of
common stock to the extent the preferred stock is convertible
into common stock or has voting rights; or
- prevent the holders of common stock from participating in the
distribution of our assets upon liquidation until any
liquidation preferences held by the holders of preferred stock
are satisfied.
In addition, issuances of preferred stock could make it harder for a
third party to acquire, or could discourage or delay a third party from
acquiring, a majority of our outstanding common stock.
CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Provisions in our certificate of incorporation, bylaws and Delaware law
could make it harder for someone to acquire us through a tender offer, proxy
contest or otherwise. We are governed by the provisions of Section 203 of the
Delaware General Corporate Law, which provides that a person who owns (or within
three years, did own) 15% or more of a company's voting stock is an "interested
stockholder." Section 203 prohibits a public Delaware corporation from engaging
in a business combination with an interested stockholder for a period commencing
three years from the date in which the person became an interested stockholder
unless:
- the board of directors approved the transaction which resulted
in the stockholder becoming an interested stockholder;
- upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the
corporation (excluding shares owned by officers, directors, or
certain employee stock purchase plans); or
34
- at or subsequent to the time the transaction is approved by
the board of directors, there is an affirmative vote of at
least 66.66% of the outstanding voting stock.
Section 203 could prohibit or delay mergers or other takeover attempts
against us, and accordingly, may discourage attempts to acquire us through
tender offer, proxy contest or otherwise.
Our certificate of incorporation and bylaws include certain
restrictions on who may call a special meeting of stockholders and prohibit
certain actions by written consent of the holders of common stock. These
provisions could delay, deter or prevent a future takeover or acquisition of us
unless such takeover or acquisition is approved by the board of directors.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation limits the liability of directors to
the fullest extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability for:
- breach of the director's duty of loyalty;
- acts or omissions not in good faith, intentional misconduct or
a knowing violation of the law;
- the unlawful payment of a dividend or unlawful stock purchase
or redemption; and
- any transaction from which the director derives an improper
personal benefit.
This provision, however, has no effect on the availability of equitable
remedies such as an injunction or recision. Additionally, this provision will
not limit liability under state or federal securities laws.
The certificate of incorporation also provides that we shall indemnify
our officers and directors to the fullest extent permitted by such law. We
believe that these provisions will assist us in attracting and retaining
qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is First Union
National Bank. Its address is 1525 West W.T. Harris Boulevard, Building 3C3,
Charlotte, NC 28262-1153, and its telephone number at this location is (704)
590-7385.
35
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income
tax consequences to a holder with respect to the purchase, ownership and
disposition of the notes and our common stock acquired upon conversion of a note
as of the date hereof. This summary is generally limited to holders who will
hold the notes and the shares of common stock as capital assets and does not
deal with special situations including those that may apply to particular
holders such as tax-exempt organizations, holders subject to the U.S. federal
alternative minimum tax, dealers in securities, commodities or foreign
currencies, financial institutions, insurance companies, regulated investment
companies, certain former citizens or former long-term residents of the United
States, partnerships or other pass-through entities, holders whose "functional
currency" is not the U.S. dollar and persons who hold the notes or shares of
common stock in connection with a "straddle," "hedging," "conversion" or other
risk reduction transaction.
The U.S. federal income tax considerations set forth below are based
upon the Internal Revenue Code of 1986, as amended, Treasury regulations
promulgated thereunder, court decisions, and rulings and pronouncements of the
Internal Revenue Service, referred to as the "IRS," now in effect, all of which
are subject to change. Prospective investors should particularly note that any
such change could have retroactive application so as to result in U.S. federal
income tax consequences different from those discussed below. We have not sought
any ruling from the IRS with respect to statements made and conclusions reached
in this discussion and there can be no assurance that the IRS will agree with
such statements and conclusions.
As used herein, the term "U.S. holder" means a beneficial owner of a
note (or our common stock acquired upon conversion of a note) that is for U.S.
federal income tax purposes:
- an individual who is a citizen or resident of the United
States;
- a corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in or
under the laws of the United States, any state thereof or the
District of Columbia;
- an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
- a trust, if a court within the United States is able to
exercise primary jurisdiction over its administration and one
or more U.S. persons have authority to control all of its
substantial decisions, or if the trust has a valid election in
effect under applicable Treasury regulations to be treated as
a U.S. person.
As used herein, a "non-U.S. holder" means a holder that is not a U.S. holder.
Non-U.S. holders are subject to special U.S. federal income tax considerations,
some of which are discussed below.
If a partnership is a beneficial owner of a note (or our common stock
acquired upon conversion of a note), the tax treatment of a partner in the
partnership will generally depend upon the status of the partner and the
activities of the partnership. A beneficial owner that is a partnership and
partners in such a partnership should consult their tax advisors about the U.S.
federal income tax consequences of the ownership and disposition of the notes
(or our common stock acquired upon conversion of a note).
While the following does not purport to discuss all tax matters
relating to the notes or the common stock acquired upon conversion of a note,
the following are the material tax consequences associated with the purchase,
ownership and disposition of the notes and common stock acquired upon conversion
of a note, subject to the qualifications set forth below. This discussion does
not address the tax consequences arising under any state, local or foreign law.
In addition, this summary does not consider the effect of the U.S. federal
estate or gift tax laws (except as set forth below with respect to non-U.S.
holders).
Based on currently applicable authorities, we will treat the notes as
indebtedness for U.S. federal income tax purposes. However, since the notes have
certain equity characteristics, it is possible that the IRS will contend that
the notes should be treated as an equity interest in, rather than indebtedness
of, Province. In the unlikely event that the notes are recharacterized as equity
for such purposes, this treatment could have adverse tax consequences to certain
holders. For example, income to non-U.S. holders generally would be subject to
U.S. withholding tax rather
36
than qualify for their "portfolio interest" exemption discussed below.
Prospective investors should consult their tax advisors about the particular tax
consequences of any recharacterization of the notes as equity. Except as
otherwise noted, the remainder of this discussion assumes that the notes will
constitute indebtedness for U.S. federal income tax purposes.
INVESTORS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
U.S. HOLDERS
Payments of Interest
U.S. holders will be required to recognize as ordinary income any
interest paid or accrued on the notes, in accordance with their regular method
of tax accounting. In certain circumstances, we may be obligated to pay holders
of the notes amounts in excess of stated interest or principal. For example, as
more fully described under "Description of the Notes -- Registration Rights,"
the interest rate on the notes is subject to increase by the payment of
liquidated damages if the notes are not registered with the SEC within
prescribed time periods and as described in "Description of the Notes --
Repurchase at Option of Holders Upon a Change of Control," our shares of common
stock will be valued at 95% of their average closing prices for the specified
measurement period if we elect to pay the repurchase price in common stock. We
intend to treat the possibility that we will pay any such excess amounts as a
remote or incidental contingency, within the meaning of applicable Treasury
regulations and, therefore, in the unlikely event an additional amount becomes
due on the notes, we believe U.S. holders will be taxable on such amount at the
time it accrues or is received in accordance with each such holder's method of
tax accounting. Our determination that these amounts are incidental and that
there is a remote likelihood of paying additional amounts on the notes is
binding on each U.S. holder unless the holder explicitly discloses in the manner
required by applicable Treasury regulations that its determination is different
from ours. Our determination is not, however, binding on the IRS.
Conversion or Repurchase for Common Stock
A U.S. holder should not recognize income, gain or loss upon conversion
of the notes solely into our common stock (except with respect to any amounts
attributable to accrued interest on the notes, which will be treated as interest
for U.S. federal income tax purposes), and except with respect to cash received
in lieu of fractional shares, and with respect to market discount, as described
below under " -- Market Discount." If we repurchase a note in exchange for
common stock pursuant to exercise of the repurchase right upon a change in
control, although the matter is not entirely clear, such exchange should be
treated in the same manner as a conversion of the note as described in the
preceding sentence. The U.S. holder's tax basis in the common stock received on
conversion or repurchase of a note for common stock pursuant to the repurchase
right should be the same as the U.S. holder's adjusted tax basis in the notes
exchanged therefore at the time of conversion or repurchase (reduced by any
basis allocable to a fractional share), and the holding period for the common
stock received on conversion or repurchase should include the holding period of
the notes that were converted or repurchased.
Cash received in lieu of a fractional share of common stock upon
conversion of the notes into common stock or upon a repurchase for common stock
of a note pursuant to exercise of the repurchase right will generally be treated
as a payment in exchange for the fractional share of common stock. Accordingly,
the receipt of cash in lieu of a fractional share of common stock generally will
result in capital gain or loss measured by the difference between the cash
received for the fractional share and the U.S. holder's adjusted tax basis in
the fractional share.
Dividends on Common Stock
We have not paid any dividends on our common stock and do not
anticipate paying any dividends in the foreseeable future. However, if we do
make distributions on our common stock, the distributions will constitute
37
dividends for U.S. federal income tax purposes to the extent of our current or
accumulated earnings and profits as determined under U.S. federal income tax
principles. To the extent that a U.S. holder receives distributions on shares of
common stock that would otherwise constitute dividends for U.S. federal income
tax purposes but that exceed our current and accumulated earnings and profits,
such distributions will be treated first as a non-taxable return of capital
reducing the holder's basis in the shares of common stock. Any such
distributions in excess of the holder's basis in the shares of common stock will
generally be treated as capital gain. Subject to applicable limitations,
dividends paid to holders that are U.S. corporations will qualify for the
dividends-received deduction so long as there are sufficient earnings and
profits.
Sale, Redemption or Repurchase for Cash
Except as set forth above under " -- Conversion or Repurchase for
Common Stock," and below under " -- Market Discount," U.S. holders generally
will recognize capital gain or loss upon the sale, redemption, including a
repurchase by us for cash pursuant to the repurchase right upon a change in
control, or other taxable disposition of the notes or common stock in an amount
equal to the difference between:
- the U.S. holder's adjusted tax basis in the notes or common
stock (as the case may be); and
- the sum of the cash plus the fair market value of any property
received from such disposition (other than amounts
attributable to accrued but unpaid interest on the notes not
previously included in income, which will be treated as
interest for U.S. federal income tax purposes).
A U.S. holder's adjusted tax basis in a note generally will equal the
cost of the note to such U.S. holder, increased by market discount previously
included in income by the U.S. holder and reduced by any amortized premium. (For
a discussion of the holder's basis in shares of our common stock, see " --
Conversion or Repurchase for Common Stock").
Prospective investors should consult their tax advisers regarding the
treatment of capital gains (which may be taxed at lower rates than ordinary
income for taxpayers who are individuals, trusts or estates and have held their
notes for more than one year) and losses (the deductibility of which is subject
to limitations).
Market Discount
The resale of notes may be affected by the impact on a purchaser of the
"market discount" provisions of the Internal Revenue Code. For this purpose, the
market discount on a note generally will be equal to the amount, if any, by
which the stated redemption price at maturity of the note immediately after its
acquisition exceeds the U.S. holder's adjusted tax basis in the note. Subject to
a de minimis exception, these provisions generally require a U.S. holder who
acquires a note at a market discount to treat as ordinary income any gain
recognized on the disposition of the note to the extent of the "accrued market
discount" on the note at the time of disposition, unless the U.S. holder elects
to include accrued market discount in income currently. This election to include
market discount in income currently, once made, applies to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS. In general, market discount will be treated as accruing on a straight-line
basis over the remaining term of the note at the time of acquisition, or, at the
election of the U.S. holder, under a constant yield method. A U.S. holder who
acquires a note at a market discount and who does not elect to include accrued
market discount in income currently may be required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to purchase
or carry the note until the note is disposed of in a taxable transaction. If a
U.S. holder acquires a note with market discount and receives common stock upon
conversion of the note, the amount of accrued market discount not previously
included in income with respect to the converted note through the date of
conversion will be treated as ordinary income upon the disposition of the common
stock.
Amortizable Premium
A U.S. holder who purchases a note at a premium over its stated
principal amount, plus accrued interest, generally may elect to amortize such
premium, referred to as "Section 171 premium," from the purchase date to the
38
note's maturity date under a constant-yield method that reflects semiannual
compounding based on the note's payment period. Amortizable premium, however,
will not include any premium attributable to a note's conversion feature. The
premium attributable to the conversion feature is the excess, if any, of the
note's purchase price over what the note's fair market value would be if there
were no conversion feature. Amortized Section 171 premium is treated as an
offset to interest income on a note and not as a separate deduction. A U.S.
holder who elects to amortize the note premium must reduce his tax basis in the
note as described above under " -- Sale, Redemption or Repurchase for Cash."
Bond premium on a note held by a U.S. holder that does not make the election to
amortize will decrease the gain or increase the loss otherwise recognized upon a
taxable disposition of the note. The election to amortize premium on a constant
yield method, once made, applies to all debt obligations held or subsequently
acquired by the electing U.S. holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
Adjustment of Conversion Price
The conversion price of the notes is subject to adjustment under
certain circumstances, see "Description of the Notes -- Conversion Rights."
Certain adjustments to (or the failure to make such adjustments to) the
conversion price of the notes that increase the proportionate interest of a U.S.
holder in our assets or earnings and profits may result in a taxable
constructive distribution to the U.S. holders of the notes, whether or not the
U.S. holders ever convert the notes. Such constructive distribution will be
treated as a dividend, resulting in ordinary income (and a possible dividends
received deduction in the case of corporate holders), to the extent of our
current or accumulated earnings and profits, with any excess treated first as a
tax-free return of capital which reduces the U.S. holder's tax basis in the
notes to the extent thereof and thereafter as gain from the sale or exchange of
the notes. Generally, a U.S. holder's tax basis in a note will be increased to
the extent any such constructive distribution is treated as a dividend.
Moreover, if there is an adjustment (or a failure to make an adjustment) to the
conversion price of the notes that increases the proportionate interest of the
holders of outstanding common stock in our assets or earnings and profits, then
such increase in the proportionate interest of the holders of the common stock
generally will be treated as a constructive distribution to such holders,
taxable as described above. As a result, U.S. holders of notes could have
taxable income as a result of an event pursuant to which they receive no cash or
property.
Backup Withholding and Information Reporting
Certain noncorporate U.S. holders may be subject to IRS information
reporting and backup withholding on payments of interest on the notes, dividends
on common stock and proceeds from the sale or other disposition of the notes or
common stock. Backup withholding will only be imposed where the noncorporate
U.S. holder:
- fails to furnish its taxpayer identification number, referred
to as a "TIN";
- furnishes an incorrect TIN;
- is notified by the IRS that he or she has failed to properly
report payments of interest or dividends; or
- under certain circumstances, fails to certify, under penalties
of perjury, that he or she has furnished a correct TIN and has
not been notified by the IRS that he or she is subject to
backup withholding.
Under recently enacted legislation, the backup withholding rate of 31%
was reduced as of August 7, 2001 to 30.5% and is scheduled for further
reductions in future years. The amount of any backup withholding from a payment
to a U.S. holder will be allowed as a credit against the U.S. holder's federal
income tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the IRS.
39
NON-U.S. HOLDERS
Payments of Interest
Generally, payments of interest on the notes to, or on behalf of, a
non-U.S. holder will be considered "portfolio interest" and will not be subject
to U.S. federal income or withholding tax where such interest is not effectively
connected with the conduct of a trade or business within the United States by
such non-U.S. holder if:
- such non-U.S. holder does not actually or constructively own
10% or more of the total combined voting power of all classes
of our stock entitled to vote;
- such non-U.S. holder is not (a) a controlled foreign
corporation for U.S. federal income tax purposes that is
related to us through stock ownership or (b) a bank receiving
interest on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of its trade or
business; and
- the certification requirements, as described below, are
satisfied.
Interest on notes not effectively connected with a U.S. trade or
business and not excluded from U.S. federal withholding tax generally will be
subject to withholding at a 30% rate, except where a non-U.S. holder can claim
the benefits of an applicable tax treaty to reduce or eliminate such withholding
tax and demonstrates such eligibility to the IRS.
To satisfy the certification requirements referred to above, either (i)
the beneficial owner of a note must certify, under penalties of perjury, to us
or our paying agent, as the case may be, that such owner is a non-U.S. person
and must provide such owner's name and address, and TIN, if any, or (ii) a
securities clearing organization, bank or other financial institution that holds
customer securities in the ordinary course of its trade or business, referred to
as a "Financial Institution," and holds the note on behalf of the beneficial
owner thereof must certify, under penalties of perjury, to us or our paying
agent, as the case may be, that such certificate has been received from the
beneficial owner and must furnish the payor with a copy thereof. Such
requirement will be fulfilled if the beneficial owner of a note certifies on IRS
Form W-8BEN, under penalties of perjury, that it is a non-U.S. holder and
provides its name and address or any Financial Institution holding the note on
behalf of the beneficial owner files a statement with the withholding agent to
the effect that it has received such a statement from the beneficial owner (and
furnishes the withholding agent with a copy thereof). Special certification
rules apply for notes held by a foreign partnership and other intermediaries.
If a non-U.S. holder of a note is engaged in a trade or business in the
United States and if interest on the note is effectively connected with the
conduct of such trade or business (and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the non-U.S. holder
in the United States), the non-U.S. holder, although exempt from U.S. federal
withholding tax (provided that the certification requirements discussed in the
next sentence are met), will generally be subject to U.S. federal income tax on
such interest on a net income basis in the same manner as if it were a U.S.
holder. Such a non-U.S. holder will be required to provide us with a properly
executed IRS Form W-8ECI in order to claim an exemption from withholding tax. In
addition, if such non-U.S. holder so engaged is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or such lower rate provided by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments.
Conversion of Notes
A non-U.S. holder generally will not be subject to U.S. federal
withholding tax on the conversion of a note into common stock. To the extent a
non-U.S. holder receives cash in lieu of a fractional share of common stock upon
conversion, such cash may give rise to gain that would be subject to the rules
described below with respect to the sale or exchange of a note or common stock.
See " -- Sale or Exchange of Notes or Common Stock" below.
40
Adjustment of Conversion Price
The conversion price of the notes is subject to adjustment in certain
circumstances. Any such adjustment could, in certain circumstances, give rise to
a deemed distribution to non-U.S. holders of the notes. See "U.S. Holders --
Adjustment of Conversion Price" above. In such case, the deemed distribution
would be subject to the rules below regarding withholding of U.S. federal tax on
dividends in respect of common stock. See " -- Distributions on Common Stock"
below.
Distributions on Common Stock
We have not paid any dividends on our common stock and do not
anticipate paying any dividends in the foreseeable future. However, if we do
make distributions on our common stock, the distributions will constitute a
dividend for U.S. federal income tax purposes to the extent of our current or
accumulated earnings and profits as determined under U.S. federal income tax
principles. Except as described below, dividends paid on common stock held by a
non-U.S. holder will be subject to U.S. federal withholding tax at a rate of 30%
(or lower treaty rate, if applicable). A non-U.S. holder generally will be
required to satisfy certain IRS certification requirements in order to claim a
reduction of or exemption from withholding under a tax treaty by filing IRS Form
W-8BEN upon which the non-U.S. holder certifies, under penalties of perjury, its
status as a non-U.S. person and its entitlement to the lower treaty rate with
respect to such payments.
If dividends paid to a non-U.S. holder are effectively connected with
the conduct of a U.S. trade or business by the non-U.S. holder and, if required
by a tax treaty, the dividends are attributable to a permanent establishment
maintained in the United States, we and other payors generally are not required
to withhold tax from the dividends, provided that the non-U.S. holder furnishes
to us or another payor a valid IRS Form W-8ECI certifying, under penalties of
perjury, that the holder is a non-U.S. person, and the dividends are effectively
connected with the holder's conduct of a U.S. trade or business and are
includible in the holder's gross income. Effectively connected dividends will be
subject to U.S. federal income tax on net income that applies to U.S. persons
generally (and, with respect to corporate holders under certain circumstances,
the branch profits tax).
Sale or Exchange of Notes or Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income
or withholding tax on gain realized on the sale or other taxable disposition
(including a cash redemption) of a note or common stock received upon conversion
thereof unless:
- the holder is an individual who was present in the United
States for 183 days or more during the taxable year and (a)
such holder has a "tax home" in the United States or (b) the
gain is attributable to an office or other fixed place of
business maintained in the United States by such holder;
- the gain is effectively connected with the conduct of a U.S.
trade or business by the non-U.S. holder and, if required by a
tax treaty, the gain is attributable to a permanent
establishment maintained in the United States; or
- we are or have been a U.S. real property holding corporation
at any time within the shorter of the five-year period
preceding such disposition or such holder's holding period.
If we were to become a U.S. real property holding corporation, a
non-U.S. holder might be subject to U.S. federal income tax with respect to gain
realized on the disposition of notes or shares of common stock. In that case,
any withholding tax withheld pursuant to the rules applicable to dispositions of
a U.S. real property interest would be creditable against such non-U.S. holder's
U.S. federal income tax liability and might entitle such non-U.S. holder to a
refund upon furnishing required information to the IRS. However, in the case of
a sale of our common stock or notes, such gain would not be subject to U.S.
federal income or withholding tax if (1) our common stock is regularly traded on
an established securities market and (2) the non-U.S. holder disposing of our
common stock or notes did not own, actually or constructively (through exercise
of the conversion feature in the case of the notes), at any time during the
five-year period preceding the disposition, more than 5% of our common stock.
41
Backup Withholding and Information Reporting
A non-U.S. holder will generally not be subject to information
reporting or backup withholding with respect to payments of interest on the
notes or dividends on common stock and proceeds from the sale or other
disposition of the notes or common stock to or through a U.S. office of a
broker, as long as the income associated with such payments is otherwise exempt
from U.S. federal income tax, and the payor or broker does not have actual
knowledge or reason to know that the holder is a U.S. person and the holder has
furnished to the payor or broker:
- a valid IRS Form W-8BEN certifying, under penalties of
perjury, its status as a non-U.S. person;
- other documentation upon which it may rely to treat the
payments as made to a non-U.S. person in accordance with
Treasury regulations; or
- otherwise establishes an exemption.
The payment of the proceeds from the sale or other disposition of the
notes or common stock to or through a foreign office of a broker generally will
not be subject to information reporting or backup withholding. However, a sale
or disposition of the notes or common stock will be subject to information
reporting, but not backup withholding, if it is to or through a foreign office
of a broker that is a "U.S. related broker" unless the broker does not have
actual knowledge or reason to know that the holder is a U.S. person and the
documentation requirements described above are met or the holder otherwise
establishes an exemption. A broker is a "U.S. related broker" if the broker is:
- a U.S. person;
- a controlled foreign corporation for U.S. federal income tax
purposes;
- a foreign person 50% or more of whose gross income is
effectively connected with the conduct of a U.S. trade or
business for a specified three-year period; or
- a foreign partnership, if at any time during its tax year one
or more of its partners are U.S. persons, as defined in
Treasury regulations, who in the aggregate hold more than 50%
of the income or capital interest in the partnership, or such
foreign partnership is engaged in the conduct of a U.S. trade
or business.
Any amounts withheld under the backup withholding rules from a payment
to a non-U.S. holder will be allowed as a credit against such holder's U.S.
federal income tax liability, if any, or will otherwise be refundable, provided
that the requisite procedures are followed and the proper information is filed
with the IRS on a timely basis. Non-U.S. holders of the notes or common stock
should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption, if applicable.
U.S. Estate Tax
Notes owned or treated as owned by an individual who is not a citizen
or resident (as specifically defined for U.S. federal estate tax purposes) of
the United States at the time of death, referred to as a "nonresident decedent,"
will not be includible in the nonresident decedent's gross estate for U.S.
federal estate tax purposes as a result of such nonresident decedent's death,
provided that, at the time of death, the nonresident descendant does not own,
actually or constructively, 10% or more of the total combined voting power of
all classes of our stock entitled to vote and payments with respect to such
notes would not have been effectively connected with the conduct of a U.S. trade
or business by the nonresident decedent. Common stock owned or treated as owned
by a nonresident decedent will be includible in the nonresident decedent's gross
estate for U.S. federal estate tax purposes as a result of the nonresident
decedent's death. Subject to applicable treaty limitations, if any, a
nonresident decedent's estate may be subject to U.S. federal estate tax on
property includible in the estate for U.S. federal estate tax purposes.
42
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
YOU SHOULD CONSULT YOUR OWN TAX ADVISER AS TO PARTICULAR TAX CONSEQUENCES TO YOU
OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
43
SELLING SECURITYHOLDERS
The notes originally were issued by us and sold by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, First Union Securities, Inc., UBS Warburg
LLC and Banc of America Securities LLC as the initial purchasers in transactions
exempt from the registration requirements of the Securities Act to persons
reasonably believed by the initial purchasers to be qualified institutional
buyers. Selling securityholders, including their transferees, pledgees or donees
or their successors, may from time to time offer and sell any or all of the
notes and the common stock into which the notes are convertible pursuant to this
prospectus. The selling securityholders may offer all, some or none of the notes
and the common stock into which the notes are convertible.
The table below sets forth the name of each selling securityholder, the
principal amounts of notes that may be offered by each selling securityholder
under this prospectus and the number of shares of common stock into which the
notes are convertible. The information is based on information provided to us by
or on behalf of the selling securityholders on or prior to January 14, 2002.
The selling securityholders identified below may have sold, transferred or
otherwise disposed of all or a portion of their notes or common stock since the
date on which they provided this information in transactions exempt from the
registration requirements of the Securities Act.
Because the selling securityholders may offer all or some portion of
the notes or the common stock to be offered by them, we cannot estimate the
amount of notes or common stock that may be held by the selling securityholders
upon the completion of any sales.
Some of the initial purchasers of the notes and Deutsche Bank Alex.
Brown Inc. or their affiliates have engaged in, and may in the future engage in,
investment banking and other commercial dealings in the ordinary course of
business with us. They have received customary fees and commissions for these
transactions. Merrill Lynch, Pierce, Fenner & Smith Incorporated, First Union
Securities, Inc., UBS Warburg LLC and Banc of America Securities LLC, each of
which was an initial purchaser of the notes, are affiliates of lenders under our
senior credit facility. In addition, affiliates of First Union Securities, Inc.
and Banc of America Securities LLC were lenders under our previous revolving
credit facility and received their proportionate share of the repayment by us of
amounts outstanding under that facility from the proceeds of the sale of the
notes to the initial purchasers. To our knowledge, none of the other selling
securityholders has had any position, office or other material relationship with
us or our affiliates within the past three years.
PRINCIPAL AMOUNT OF PERCENTAGE OF NUMBER OF SHARES
NAME OF SELLING SECURITYHOLDER NOTES NOTES OF COMMON STOCK
------------------------------- OWNED AND OFFERED OUTSTANDING THAT MAY BE SOLD
----------------- ------------ -----------------
1976 Distribution Trust FBO A.R. Lauder/Zinterhofer... $6,000 * % 144
1976 Distribution Trust FBO Jane A. Lauder............ 13,000 * 312
2000 Revocable Trust FBO A.R. Lauder/ Zinterhofer..... 6,000 * 144
Advent Convertible Master Cayman L.P.................. 2,770,000 1.60 66,659
Allstate Insurance Company............................ 1,875,000 1.09 45,121
Allstate Life Insurance Company....................... 625,000 * 15,040
Alpine Associates..................................... 6,250,000 3.62 150,405
Alpine Partners, L.P.................................. 1,000,000 * 24,064
American Motorist Insurance Company................... 484,000 * 11,647
Arapahoe County Colorado.............................. 48,000 * 1,155
Aristeia International Limited........................ 2,340,000 1.36 56,311
Aristeia Trading LLC.................................. 660,000 * 15,882
Bancroft Convertible Fund, Inc........................ 1,000,000 * 24,064
Bank Austria Cayman Islands Ltd....................... 6,710,000 3.89 161,474
British Virgin Islands Social Security Board.......... 37,000 * 890
BTES-Convertible ARB.................................. 1,000,000 * 24,064
BTPO-Growth Vs Value.................................. 4,000,000 2.32 96,259
CALAMOS(R)Market Neutral Fund - CALAMOS(R) Investment
Trust................................................. 3,725,000 2.16 89,641
Chrysler Corporation Master Retirement Trust.......... 2,690,000 1.56 64,734
CIBC World Markets.................................... 5,000,000 2.90 120,324
(table continued on following page)
44
PRINCIPAL AMOUNT OF PERCENTAGE OF NUMBER OF SHARES
NAME OF SELLING SECURITYHOLDER NOTES NOTES OF COMMON STOCK
------------------------------- OWNED AND OFFERED OUTSTANDING THAT MAY BE SOLD
------------------- ----------- ----------------
City of New Orleans................................... 194,000 * 4,668
City University of New York........................... 117,000 * 2,815
Consulting Group Capital Markets Funds................ 400,000 * 9,625
De AM Convertible Arbitrage FD........................ 4,500,000 2.61 108,291
Delta Air Lines Master Trust (c/o Oaktree Capital
Management, LLC).................................. 445,000 * 10,708
Delta Pilots D & S Trust.............................. 230,000 * 5,534
Deutsche Banc Alex. Brown, Inc........................ 7,000,000 4.06 168,453
Ellsworth Convertible Growth and Income Fund, Inc..... 1,000,000 * 24,064
First Union Securities, Inc........................... 11,500,000 6.67 276,745
Global Bermuda Limited Partnership.................... 600,000 * 14,438
Goldman Sachs and Company............................. 25,000 * 601
Grady Hospital Foundation............................. 102,000 * 2,454
Granville Capital Corporation......................... 3,000,000 1.74 72,194
Hadron Fund, LP....................................... 500,000 * 12,032
HBK Master Fund, L.P.................................. 2,000,000 1.16 48,129
HFR Convertible Arbitrage Account..................... 100,000 * 2,406
HFR Master Fund, LTD.................................. 50,000 * 1,203
JMG Triton Offshore Fund, Ltd......................... 2,250,000 1.30 54,145
Lakeshore International, Ltd.......................... 2,400,000 1.39 57,755
Lancer Securities Cayman.............................. 500,000 * 12,032
LDG Limited........................................... 250,000 * 6,016
Lincoln National Convertible Securities Fund.......... 500,000 * 12,032
Lipper Convertibles, L.P.............................. 13,000,000 7.54 312,842
Lipper Offshore Convertibles, L.P..................... 7,000,000 4.06 168,453
Merrill Lynch, Pierce, Fenner & Smith, Inc............ 489,000 * 11,767
Microsoft Corporation................................. 240,000 * 5,775
Minnesota Power and Light............................. 130,000 * 3,128
Motion Picture Industry Health Plan- Active
Member Fund....................................... 260,000 * 6,256
Motion Picture Industry Health Plan- Retiree
Member Fund....................................... 110,000 * 2,647
Municipal Employees................................... 117,000 * 2,815
New Orleans Firefighters Pension/ Relief Fund......... 106,000 * 2,550
Occidental Petroleum Corporation...................... 196,000 * 4,716
OCM Convertible Trust................................. 1,135,000 * 27,313
Onex Industrial Partners Limited...................... 1,870,000 1.08 45,001
Palladin Securities, LLC.............................. 1,500,000 * 36,097
Partner Reinsurance Company Ltd....................... 445,000 * 10,708
Pebble Capital, Inc................................... 360,000 * 8,663
Policeman and Fireman Retirement System of
the City of Detroit............................... 501,000 * 12,056
Pro-mutual............................................ 575,000 * 13,837
Ramius Capital Group.................................. 350,000 * 8,422
Raytheon Master Pension Trust......................... 191,000 * 4,596
RCG Latitude Master Fund Ltd.......................... 1,590,000 * 38,263
RCG Multi Strategy LP................................. 350,000 * 8,422
Royal Bank of Canada.................................. 1,500,000 * 36,097
S.G. Cowen Securities Corp............................ 2,500,000 1.45 60,162
Shell Pension Trust................................... 305,000 * 7,339
Silvercreek II Limited................................ 2,170,000 1.26 52,220
Silvercreek Limited Partnership....................... 600,000 * 14,438
Sunrise Partners, LLC................................. 18,475,000 10.71 444,597
State Employees' Retirement Fund of the State
of Delaware....................................... 1,105,000 * 26,591
(table continued on following page)
45
PRINCIPAL AMOUNT OF PERCENTAGE OF NUMBER OF SHARES
NAME OF SELLING SECURITYHOLDER NOTES NOTES OF COMMON STOCK
------------------------------ OWNED AND OFFERED OUTSTANDING THAT MAY BE SOLD
------------------- ------------ ----------------
State of Connecticut Combined Investment Funds........ 2,340,000 1.36 56,311
State of Maryland Retirement Agency................... 2,460,000 1.43 59,199
The Grable Foundation................................. 92,000 * 2,213
TQA Master Fund, Ltd.................................. 2,750,000 1.59 66,178
TQA Master Plus Fund, Ltd............................. 1,750,000 1.01 42,113
Tribeca Investments L.L.C............................. 3,000,000 1.74 72,194
UBC Financial Products USA, Inc....................... 1,000,000 * 24,064
UBS AG London Branch.................................. 5,500,000 3.19 132,356
Vanguard Convertible Securities Fund, Inc............. 1,650,000 * 39,706
Victory Capital Management as Agent for the
Victory Convertible Securities Fund............... 500,000 * 12,032
ZCM Asset Holding Company (Bermuda) Ltd............... 250,000 * 6,016
Any other holder of notes or future transferee, pledgee,
donee or successor of any holder (1).............. 16,136,000 9.35 388,309
---------- ----- -------
TOTAL (2)............................................. $172,500,000 100% 4,151,136
- ------------------
* Less than 1%.
1. Information about other selling securityholders will be set forth in
prospectus supplements or in other documents that we file from time to
time with the SEC that are incorporated by reference in this
prospectus, if required (see "Where You Can Find More Information"
above).
2. Total shares of common stock differs from the amount registered due to
the rounding down of fractional shares of common stock issuable to each
selling securityholder upon conversion of the notes.
46
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all securities
offered and sold under this prospectus. We will not receive any of the proceeds
on these sales of these securities. In connection with the initial offering of
the notes, we entered into a registration rights agreement, dated October 10,
2001, with the initial purchasers of the notes. Securities may only be offered
or sold under this prospectus pursuant to the terms of the registration rights
agreement. However, selling securityholders may resell all or a portion of the
securities in open market transactions in reliance upon Rule 144 or Rule 144A
under the Securities Act, provided they meet the criteria and conform to the
requirements of one of these rules.
WHO MAY SELL AND APPLICABLE RESTRICTIONS
The securities may be sold from time to time directly by the selling
securityholders or alternatively through underwriters or broker-dealers or
agents. The selling securityholders may decide not to sell any of the securities
offered under this prospectus, and selling securityholders could transfer,
devise or give these securities by other means. If the securities are sold
through underwriters or broker-dealers or agents, the selling securityholders
will be responsible for underwriting discounts or commissions or agent's
commissions.
The securities may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve block transactions)
- on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale;
- in the over-the-counter market; or
- through the writing of options.
In connection with sales of the securities or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the securities, and deliver the securities
to close out such short positions, or loan or pledge securities to
broker-dealers that in turn may sell such securities.
To the extent the selling securityholders may be deemed to be
underwriters, the selling securityholders may be subject to statutory
liabilities, including, but not limited to, liability under Sections 11, 12 and
17 of the Securities Act and Rule 10b-5 under the Exchange Act.
PROSPECTUS DELIVERY
The selling securityholders and any participating underwriters,
broker-dealers or agents may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. Any discounts, commissions, concessions
or profit they earn on any resale of such securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Because they
may be deemed to be underwriters, the selling securityholders will be subject to
the prospectus delivery requirements of the Securities Act. At any time a
particular offer of the securities is made, a revised prospectus or prospectus
supplement, if required, will be distributed which will disclose:
- the name of the selling securityholders and of any
participating underwriters, broker-dealers or agents;
- the aggregate amount and type of securities being offered;
- the price at which the securities were sold and other material
terms of the offering;
47
- any discounts, commissions, concessions or other items
constituting compensation from the selling securityholders and
any discounts, commissions or concessions allowed or reallowed
or paid to dealers; and
- that the participating broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated in this prospectus by reference.
The prospectus supplement or a post-effective amendment will be filed
with the SEC to reflect the disclosure of additional information with respect to
the distribution of the securities.
MANNER OF SALES
The selling securityholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. Sales may be
made through the Nasdaq National Market (in the case of our common stock) or in
the over-the-counter market. The securities may be sold at then prevailing
market prices, at fixed prices or at negotiated prices.
The securities may be sold according to one or more of the following
methods:
- a block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- purchases by a broker or dealer as principal and resale by the
broker or dealer for its account as allowed under this
prospectus;
- ordinary brokerage transactions and transaction in which the
broker solicits purchasers;
- an exchange distribution under the rules of the exchange;
- face-to-face transactions between sellers and purchasers
without a broker-dealer; and
- by writing options.
Some persons participating in the offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the securities
including the entry of stabilizing bids or syndicate covering transactions or
the imposition of penalty bids.
The selling securityholders and any other person participating in a
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934 and the rules and regulations thereunder, including Regulation M.
This regulation may limit the timing of purchases and sales of any of the
securities by the selling securityholders and any other person. The
anti-manipulation rules under the Securities Exchange Act may apply to sales of
securities in the market and to the activities of the selling securityholders
and their affiliates. Furthermore, Regulation M of the Securities Exchange Act
may restrict the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to the particular
securities being distributed for a period of up to five business days before the
distribution. All of the foregoing may affect the marketability of the
securities and the ability of any person or entity to engage in market-making
activities with respect to the securities.
HEDGING AND OTHER TRANSACTIONS WITH BROKER-DEALERS
In connection with distributions of the securities, the selling
securityholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the registered securities in the course of hedging the positions they assume
with selling securityholders. The selling securityholders may also sell
securities short and redeliver the securities to close short positions. The
selling securityholders may also enter into options or other transactions with
broker-dealers which require the delivery to the broker-dealer of the registered
securities. The broker-dealer may then resell or transfer these securities under
48
this prospectus. A selling securityholder may also loan or pledge the registered
securities to a broker-dealer and the broker-dealer may sell the securities so
loaned or, upon a default, the broker-dealer may effect sales of the pledged
securities under this prospectus.
EXPENSES ASSOCIATED WITH REGISTRATION
We have agreed to pay substantially all of the expenses of registering
the securities under the Securities Act and of compliance with blue sky laws,
including registration and filing fees, printing and duplicating expenses, legal
fees of our counsel, fees for one legal counsel retained by the selling
securityholders and fees of the trustee under the indenture pursuant to which we
originally issued the notes and of the registrar and transfer agent of the
common stock. If the notes or the common stock into which the notes may be
converted are sold through underwriters or broker-dealers, the selling
securityholders will be responsible for underwriting discounts, underwriting
commissions and agent commissions.
INDEMNIFICATION AND CONTRIBUTION
In the registration rights agreement, we and the selling
securityholders have agreed to indemnify or provide contribution to each other
and specified other persons against some liabilities in connection with the
offering of the securities, including liabilities arising under the Securities
Act. The selling securityholders may also agree to indemnify any broker-dealer
or agent that participates in transactions involving sales of the securities
against some liabilities, including liabilities that arise under the Securities
Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers of persons controlling us
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
SUSPENSION OF THIS OFFERING
We may suspend the use of this prospectus if we learn of any event that
causes this prospectus to include an untrue statement of a material fact
required to be stated in the prospectus or necessary to make the statements in
the prospectus not misleading in light of the circumstances then existing. If
this type of event occurs, a prospectus supplement or post-effective amendment,
if required, will be distributed to each selling securityholder. Each selling
securityholder has agreed not to trade securities from the time the selling
securityholder receives notice from us of this type of event until the selling
securityholder receives a prospectus supplement or amendment. This time period
will not exceed 45 days in any 3-month period and 90 days in any 12-month
period.
TERMINATION OF THIS OFFERING
Under the registration rights agreement, we are obligated to use
reasonable efforts to keep the registration statement effective until, and
therefore this offering will terminate on, the earlier of: (i) two years from
the date on which this registration statement is declared effective by the SEC,
(ii) the date on which all securities offered under this prospectus have been
sold pursuant to this prospectus, and (iii) the date on which all outstanding
securities held by non-affiliates of Province may be resold without
registration under the Securities Act pursuant to Rule 144(k) under the
Securities Act.
LEGAL MATTERS
The validity of the notes offered hereby and the shares of common stock
issuable upon conversion will be passed upon for us by Waller Lansden Dortch &
Davis, A Professional Limited Liability Company, Nashville, Tennessee.
49
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 2000, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
50
$172,500,000
[PROVINCE HEALTHCARE LOGO]
4-1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2008
PROSPECTUS
January 16, 2002