<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1995
REGISTRATION NO. 33-63451
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TENET HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 95-2557091
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
2700 COLORADO AVENUE
SANTA MONICA, CALIFORNIA 90404
(310) 998-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SCOTT M. BROWN, ESQ.
SENIOR VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
TENET HEALTHCARE CORPORATION
2700 COLORADO AVENUE
SANTA MONICA, CALIFORNIA 90404
(310) 998-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
Copies of all communications to:
<TABLE>
<S> <C>
BRIAN J. MCCARTHY, ESQ. RICHARD D. TRUESDELL, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM DAVIS POLK & WARDWELL
300 SOUTH GRAND AVENUE, SUITE 3400 450 LEXINGTON AVENUE
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10017
(213) 687-5000 (212) 450-4000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE(1) PRICE(1)(2) FEE(3)
<S> <C> <C> <C> <C>
% Exchangeable Subordinated Notes
due 2005.................................. $350,000,000 100% $350,000,000 $120,689.66
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(a) promulgated under the Securities Act of
1933, as amended, based on an estimate of the maximum offering price.
(3) Of which $106,897 was previously paid and $13,792.66 is paid herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 12, 1995
PROSPECTUS
, 1995
[LOGO]
TENET HEALTHCARE CORPORATION
$350,000,000
% EXCHANGEABLE SUBORDINATED NOTES DUE 2005
EXCHANGEABLE FOR SHARES OF COMMON STOCK OF
VENCOR, INC.
--------------
The Exchangeable Subordinated Notes (the "Notes") to be issued by Tenet
Healthcare Corporation, a Nevada corporation ("Tenet" or the "Company"), will be
exchangeable at the option of the holder for shares of common stock, $.25 par
value, of Vencor, Inc. (the "Vencor Common Stock") owned by the Company, at any
time on or after November 6, 1997 and prior to maturity, unless previously
redeemed, at an exchange rate (the "Exchange Rate") of shares per $1,000
principal amount of Notes (equivalent to an exchange price of $ per share),
subject to adjustment in certain events and subject to the Company's right to
pay an amount in cash equal to the Market Price (as defined herein) of the
shares of Vencor Common Stock for which such Notes are exchangeable in lieu of
delivery of such shares. The Notes will be exchangeable prior to November 6,
1997 only in the event of a merger, consolidation or liquidation of Vencor, Inc.
pursuant to which the shares of Vencor Common Stock held by the Escrow Agent (as
defined herein) are converted into or exchanged for cash or other securities
registered under the Securities Act of 1933. Interest on the Notes is payable
semiannually on and of each year, commencing on ,
1996. On December 8, 1995, the last reported sale price for Vencor Common Stock
on the New York Stock Exchange (where it trades under the symbol "VC") was
$33.375 per share. The Notes have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange under the symbol "THC D 05."
The Notes will be redeemable, in whole or in part, at the option of the
Company, at any time on or after , 1998, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption.
The Notes are unsecured general obligations of the Company, subordinated in
right of payment to all existing and future Senior and Senior Subordinated Debt
(as defined herein) of the Company. The indenture governing the Notes will not
restrict the incurrence of Senior and Senior Subordinated Debt or other
indebtedness by the Company or its subsidiaries. As of August 31, 1995, on a pro
forma basis after giving effect to the issuance and sale of the Notes and
certain other transactions described herein under "Pro Forma Financial
Information," the aggregate outstanding principal amount of Senior and Senior
Subordinated Debt would have been approximately $3.1 billion. In addition, the
Notes will be effectively subordinated to all indebtedness and other obligations
of the Company's subsidiaries, which on a pro forma basis as described above
would have been approximately $1.4 billion at August 31, 1995 (excluding trade
payables of $257.6 million at August 31, 1995).
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC (1) COMMISSIONS (2) COMPANY (3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.................. % % %
Total..................... $ $ $
- --------------------------------------------------------------------------------
<FN>
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $800,000.
</TABLE>
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by the Underwriters, and subject to various prior
conditions. The Underwriters reserve the right to withdraw, cancel or modify any
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York on or about ,
1995, against payment therefor in immediately available funds.
DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
SECURITIES CORPORATION
<PAGE>
AVAILABLE INFORMATION
Tenet has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
for the registration of the Notes (as defined herein) offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in exhibits and schedules to the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Notes, reference is made
to the Registration Statement, including the exhibits thereto, and the financial
statements and notes filed as a part thereof. Statements made in this Prospectus
concerning the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed with the Commission as an exhibit, reference
is made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Pacific Stock Exchange (the "PSE") under the symbol "THC."
Reports, proxy statements and other information filed by the Company may be
inspected at the offices of the NYSE at 20 Broad Street, New York, New York
10005 and at the offices of the PSE at 301 Pine Street, San Francisco,
California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-7293) are incorporated in this Prospectus by
reference and are made a part hereof: (i) Annual Report on Form 10-K for the
fiscal year ended May 31, 1995, filed with the Commission on August 25, 1995
(the "Tenet 10-K"); (ii) Quarterly Report on Form 10-Q for the quarterly period
ended August 31, 1995 filed with the Commission on October 13, 1995; (iii)
Current Reports on Form 8-K filed with the Commission on July 7, 1995 and
October 2, 1995; (iv) the portions of Tenet's Proxy Statement for the Annual
Meeting of Shareholders held on September 27, 1995, filed with the Commission on
August 25, 1995 that have been incorporated by reference into the Tenet 10-K;
and (v) the portions of Tenet's Annual Report to Shareholders for the fiscal
year ended May 31, 1995 filed with the Commission on October 30, 1995 that have
been incorporated by reference into the Tenet 10-K.
The following documents filed by American Medical Holdings, Inc. ("AMH")
(File No. 1-10511) and American Medical International, Inc. ("AMI") (File No.
1-7612) with the Commission pursuant to the Exchange Act are incorporated in
this Prospectus by reference and are made a part hereof: (i) Annual Report on
Form 10-K for the fiscal year ended August 31, 1994, filed with the Commission
on November 22, 1994 (the "AMH/AMI 10-K"); (ii) Amendments to the AMH/AMI 10-K
on Form 10-K/A filed with the Commission on December 20, 1994, January 5, 1995
and January 6, 1995; and (iii) Quarterly Reports on Form 10-Q for the quarterly
periods ended November 30, 1994 and February 28, 1995 filed with the Commission
on January 18, 1995 and April 14, 1995, respectively.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities made
hereby shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated herein by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon oral or written
request, a copy of any or all of the documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Written or telephone requests
should be directed to Tenet Healthcare Corporation, 2700 Colorado Avenue, Santa
Monica, California 90404, Attention: Scott M. Brown, Esq., Senior Vice
President, Secretary and General Counsel (telephone (310) 998-8000).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. UNLESS THE CONTEXT OTHERWISE
REQUIRES, THE TERMS "TENET" OR "COMPANY" REFER TO TENET HEALTHCARE CORPORATION
(FORMERLY KNOWN AS NATIONAL MEDICAL ENTERPRISES, INC.) AND ITS SUBSIDIARIES AND
THEIR RESPECTIVE OPERATIONS.
THE COMPANY
Tenet is an investor-owned healthcare company that operates general
hospitals and related healthcare facilities serving primarily urban areas in 13
states and holds investments in other healthcare companies. At November 30,
1995, Tenet operated 75 domestic general hospitals, with a total of 16,834
licensed beds, located in Alabama, Arkansas, California, Florida, Georgia,
Indiana, Louisiana, Missouri, Nebraska, North Carolina, South Carolina,
Tennessee and Texas. Tenet grew from an operator of 35 general hospitals at May
31, 1994, to an operator of 75 general hospitals and related healthcare
facilities at November 30, 1995, principally through its acquisition of American
Medical Holdings, Inc. ("AMH"). That acquisition was accomplished on March 1,
1995, when a subsidiary of Tenet was merged into AMH, leaving AMH as a wholly
owned subsidiary of Tenet (the "Merger").
At November 30, 1995, Tenet also operated six rehabilitation hospitals,
seven long-term care facilities and five psychiatric facilities located on the
same campus as, or nearby, Tenet's general hospitals, in addition to various
ancillary healthcare operations.
Tenet also held investments in the following other healthcare companies at
November 30, 1995: (i) an approximately 11.8% voting interest in Vencor, Inc.
("Vencor"), a publicly traded company listed on the New York Stock Exchange (the
"NYSE") that, according to its publicly available documents, operates an
integrated network of healthcare services primarily focused on the needs of the
elderly, (ii) an approximately 42% interest in Westminster Health Care Holdings
PLC, a publicly traded company listed on the London Stock Exchange that operated
78 long-term care facilities and was the second-largest long-term care provider
in the United Kingdom at November 30, 1995, (iii) an approximately 13% interest
in Total Renal Care Holdings, Inc. ("TRC"), a publicly traded company listed on
the NYSE that operated 65 free-standing kidney dialysis units in 10 states at
November 30, 1995, and (iv) an approximately 23% interest in Health Care
Property Partners, a partnership originally formed by the Company and Health
Care Property Investors, Inc. The Company acquired its interest in Vencor as a
result of the September 28, 1995, merger between Vencor and The Hillhaven
Corporation ("Hillhaven"). Prior to that transaction, the Company owned an
approximately 26% interest in Hillhaven. As a result of that transaction, the
Company's shares of common stock, $.75 par value, of Hillhaven (the "Hillhaven
Common Stock") were exchanged for Vencor Common Stock. See "Recent
Developments."
The Company's principal executive offices are located at 2700 Colorado
Avenue, Santa Monica, California 90404, and its telephone number is (310)
998-8000.
VENCOR
According to Vencor's publicly available documents, Vencor, a Delaware
corporation, operates an integrated network of healthcare services primarily
focused on the needs of the elderly. Vencor is subject to the informational
requirements of the Exchange Act. Accordingly, Vencor files reports, proxy
statements and other information with the Commission. Copies of such reports,
proxy statements and other information may be inspected and copied at the
Commission locations listed under "Available Information" and at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
At November 30, 1995, the Company owned 8,301,067 shares of Vencor Common
Stock which represented approximately 11.8% of the outstanding Vencor Common
Stock, with sole voting and investment power over all such shares. The Company
believes that it is not an affiliate of Vencor. The Company currently holds
certain registration rights in connection with the shares of Vencor Common Stock
that it owns. Pursuant to the terms of the indenture governing the Notes,
however, the Notes are not exchangeable,
3
<PAGE>
except under certain circumstances, into shares of Vencor Common Stock owned by
Tenet until November 6, 1997. Accordingly, as a subsequent sale of Vencor Common
Stock would then be permitted under certain exemptions to registration, the
Company does not anticipate exercising such rights. In the event that a
registration statement were required to effectuate a conversion of the Notes
offered hereby into Vencor Common Stock, and the Company elects not to exercise
its option to satisfy the exchange right in cash, the Company would then
exercise such registration rights. See "Relationship Between the Company and
Vencor."
THIS PROSPECTUS RELATES ONLY TO THE NOTES OFFERED HEREBY AND DOES NOT RELATE
TO THE VENCOR COMMON STOCK OR TO THE EXCHANGE OF THE NOTES INTO THE VENCOR
COMMON STOCK. ALTHOUGH THE COMPANY HAS NO REASON TO BELIEVE THE INFORMATION
CONCERNING VENCOR INCLUDED HEREIN OR IN VENCOR'S PUBLICLY AVAILABLE DOCUMENTS IS
NOT RELIABLE, IT HAS NOT VERIFIED EITHER ITS ACCURACY OR ITS COMPLETENESS.
NEITHER THE COMPANY NOR THE UNDERWRITERS WARRANT THAT THERE HAVE NOT OCCURRED
EVENTS, NOT YET PUBLICLY DISCLOSED BY VENCOR, THAT WOULD AFFECT EITHER THE
TRADING PRICE OF THE VENCOR COMMON STOCK OR THE ACCURACY OR THE COMPLETENESS OF
ANY STATEMENTS CONCERNING VENCOR INCLUDED HEREIN OR IN VENCOR'S PUBLICLY
AVAILABLE DOCUMENTS.
RECENT DEVELOPMENTS
GENERAL HOSPITAL ACQUISITIONS AND DEVELOPMENTS
In July 1995, Tenet acquired a one-third interest in St. Clair Hospital, a
not-for-profit general hospital with 82 licensed beds located outside of
Birmingham, Alabama. In August 1995, Tenet acquired for approximately $222.6
million in cash the Mercy+Baptist Medical Center ("Mercy+Baptist"), a
not-for-profit system of two general hospitals with an aggregate of 759 licensed
beds located in New Orleans, Louisiana, and a related physician practice. In
September 1995, Tenet acquired for approximately $80.3 million in cash
(including the purchase or assumption of working capital) the Providence
Memorial Hospital ("Providence"), a not-for-profit general hospital located in
El Paso, Texas. Providence is licensed for 471 general hospital beds (34 of
which may be used as skilled nursing beds) and is licensed for 30 additional
rehabilitation and subacute care beds. In October 1995, the Company entered into
a long-term lease of the 49-bed Medical Center of Manchester ("Manchester") in
central Tennessee, and Manchester's home health business. In November 1995,
Healthstar Ultima - The Arkansas Health System, a joint venture in which the
Company owns an 80% interest, acquired the 104-bed not-for-profit Methodist
Hospital In Jonesboro, a general hospital located in Jonesboro, Arkansas. The
Company utilized its Senior Revolving Debt (as defined herein) to finance these
acquisitions. In August 1995, Tenet also entered into an agreement with the
Cleveland Clinic Florida to develop a new 150-bed general hospital in western
Broward County, Florida. Completion of that project is subject to governmental
approvals.
DIVESTITURE OF INTERNATIONAL OPERATIONS
During fiscal 1995, Tenet's management concluded that it would be in the
best interests of Tenet's shareholders for the Company to focus on its core
business of operating domestic general hospitals. Consequently, the Company has
sold or has reached an agreement to sell substantially all of its international
operations.
On June 28, 1995, Tenet sold its two Singapore hospitals to Parkway Holdings
Limited ("Parkway"). The net cash consideration Tenet received in the Singapore
transaction was approximately $243.3 million, net of approximately $78.3 million
of debt of Tenet assumed by Parkway. On October 15, 1995, Tenet tendered its 52%
interest in Australian Medical Enterprises Limited ("AME") to Mayne Nickless
Limited ("Mayne Nickless") for net cash consideration of approximately $68.3
million, pursuant to Mayne Nickless's tender offer for all of AME's shares. In
addition, on October 3, 1995, Tenet sold its 30% interest in the Subang Jaya
Medical Centre in Malaysia to Tenet's Malaysian partner for net cash
consideration of approximately $12.0 million. The Company used the net proceeds
from these sales to repay secured bank loans under its Credit Agreement (as
defined herein).
Tenet also has reached an agreement to sell its 40% interest in the
Bumrungrad Medical Center in Thailand to its Thai partner. Tenet expects to
receive net cash consideration of approximately $20.8 million from the sale of
its holdings in Thailand during the third quarter of fiscal 1996.
4
<PAGE>
VENCOR'S ACQUISITION OF HILLHAVEN
On September 28, 1995, Vencor acquired Hillhaven pursuant to a transaction
approved by the shareholders of each of Vencor and Hillhaven on September 27,
1995. As a result of the transaction, the 8,878,147 shares of Hillhaven Common
Stock that had been owned by Tenet were exchanged for 8,301,067 shares of Vencor
Common Stock (at an exchange ratio of 0.935 Vencor shares for each Hillhaven
share). In addition, Tenet received approximately $91.8 million for its
Hillhaven Series C Preferred Stock and Hillhaven Series D Preferred Stock. The
proceeds from the redemption of the Hillhaven preferred stock were applied to
repay secured bank loans under the Company's Credit Agreement.
SENIOR NOTES OFFERING
On October 16, 1995, the Company consummated an offering of $500.0 million
of 8 5/8% Senior Notes due 2003 (the "Senior Notes Offering"). The net proceeds
to the Company from the Senior Notes Offering of approximately $486.7 million
(after deducting estimated expenses and underwriting discounts and commissions)
were used to repay secured bank loans under the Company's Credit Agreement.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Notes Offered..................... $350,000,000 principal amount of % Exchangeable
Subordinated Notes.
Maturity Date..................... , 2005.
Interest Payment Dates............ and , commencing , 1996.
Exchange Rights................... The Notes will be exchangeable for shares of Vencor
Common Stock owned by Tenet at any time on or after
November 6, 1997 and prior to maturity, unless
previously redeemed, at an exchange rate of
shares of Vencor Common Stock per $1,000 principal
amount of Notes, subject to adjustment and subject to
the Company's right to pay an amount in cash equal to
the Market Price of the shares of Vencor Common Stock
for which such Notes are exchangeable in lieu of
delivery of such shares. Accordingly, each $1,000
principal amount of Notes is exchangeable for
shares of Vencor Common Stock, subject to adjustment,
for an aggregate of 8,301,067 shares. The Notes will be
exchangeable prior to November 6, 1997 only in the event
of a merger, consolidation or liquidation of Vencor
pursuant to which the shares of Vencor Common Stock held
by the Escrow Agent are converted into or exchanged for
cash or other securities registered under the Securities
Act.
Mandatory Redemption.............. None.
Optional Redemption............... The Notes will be redeemable, in whole or in part, at
the option of the Company at any time on or after
, 1998 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the
date of redemption.
Change of Control of Tenet........ Upon a Change of Control Triggering Event (as defined
herein), each holder of Notes will have the right to
require Tenet to repurchase such holder's Notes at 100%
of the principal amount thereof, plus accrued and unpaid
interest to the date of repurchase. The terms of the
Company's Credit Agreement effectively will prohibit and
the indentures governing certain Senior and Senior
Subordinated Debt of the Company may prohibit the
Company from repurchasing Notes upon the occurrence of a
Change of Control Triggering Event. There can be no
assurance that Tenet will have the financial resources
to repurchase the Notes in the event of a Change of
Control Triggering Event, particularly if such Change of
Control Triggering Event requires Tenet to refinance, or
results in the acceleration of, other indebtedness. See
"Description of the Credit Agreement" and "Description
of Notes--Repurchase at the Option of Holders."
Subordination..................... The Notes will be general unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior and Senior Subordinated Debt
of the Company. The Indenture (as defined herein) will
not restrict the incurrence of Senior and Senior
Subordinated Debt or other indebtedness by the Company
or any of its subsidiaries. As of August 31, 1995, on a
pro forma basis after giving effect to the issuance and
sale of the Notes and certain other transactions
described herein under "Pro Forma Financial
Information," the aggregate outstanding principal amount
of Senior and Senior Subordinated Debt would have
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
been approximately $3.1 billion. In addition, the Notes
will be effectively subordinated to all indebtedness and
other obligations of the Company's subsidiaries, which
on a pro forma basis would have been approximately $1.4
billion at August 31, 1995 (excluding trade payables of
$257.6 million at August 31, 1995). See "Pro Forma
Financial Information."
Use of Proceeds................... The net proceeds to the Company from the sale of the
Notes are estimated to be approximately $ million
(after deducting estimated expenses and underwriting
discounts and commissions). The Company intends to use
all of such net proceeds to repay secured bank loans
under the Company's Credit Agreement. See "Use of
Proceeds."
Vencor Common Stock............... The Vencor Common Stock is listed on the NYSE where it
trades under the symbol "VC."
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective purchasers in connection with an investment in the
Notes offered hereby.
7
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following table presents summary pro forma financial information derived
from the Unaudited Pro Forma Condensed Combined Financial Statements included
elsewhere in this Prospectus. The Unaudited Pro Forma Condensed Combined
Financial Statements give effect to the following transactions and events as if
they had occurred as of June 1, 1994 for purposes of the pro forma statement of
operations and other operating information and on August 31, 1995 for purposes
of the pro forma balance sheet data: (i) the August 1994 sale of approximately
75% of the common stock of TRC; (ii) the elimination of restructuring charges
recorded by Tenet; (iii) the elimination of nonrecurring gains on disposals of
facilities and long-term investments recorded by Tenet; (iv) the elimination of
nonrecurring merger costs recorded by AMH prior to the Merger; (v) the Merger
and related transactions, applying the purchase method of accounting; (vi) the
acquisitions of Mercy+Baptist and Providence; (vii) the June 28, 1995 sale of
the Company's Mount Elizabeth Hospital, East Shore Hospital and related
healthcare businesses in Singapore as well as the October 3, 1995 sale of the
Company's holding in Malaysia, the October 15, 1995 sale of the Company's
holdings in Australia and the probable sale of the Company's holdings in
Thailand, which sale currently is pending; (viii) Vencor's acquisition of
Hillhaven; (ix) the consummation of the Senior Notes Offering and (x) the
consummation of this Offering.
The Unaudited Pro Forma Condensed Combined Financial Statements do not
purport to present the financial position or results of operations of Tenet had
the transactions and events assumed therein occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future.
The following Summary Pro Forma Financial Information for the quarter ended
August 31, 1994 and the year ended May 31, 1995 do not reflect certain cost
savings that management believes may be realized as a result of the Merger,
currently estimated to be approximately $60.0 million annually beginning in
fiscal 1996 (before any severance or other costs of implementing certain
efficiencies). These savings are expected to be realized primarily through the
elimination of duplicative corporate overhead expenses, reduced supplies expense
through the incorporation of the acquired AMH facilities into the Company's
group purchasing program, and improved collection of the acquired AMH
facilities' accounts receivable. No assurances can be made as to the amount of
cost savings, if any, that actually will be realized.
The Unaudited Pro Forma Condensed Combined Financial Statements are based on
certain assumptions and adjustments described in the Notes to Unaudited Pro
Forma Condensed Combined Financial Statements included in the Prospectus and
should be read in conjunction therewith and with Management's Discussion and
Analysis and the Consolidated Financial Statements of Tenet and the related
Notes thereto incorporated by reference herein.
Tenet reports its financial information on the basis of a May 31 fiscal
year. AMH reported its financial information on the basis of an August 31 fiscal
year.
8
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
FISCAL THREE MONTHS ENDED
YEAR AUGUST 31,
ENDED --------------------
MAY 31, 1995 1994 1995
------------ --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenues.................................................... $ 5,406.7 $ 1,327.4 $ 1,337.2
Operating expenses:
Salaries and benefits................................................... 2,167.2 533.7 527.1
Supplies................................................................ 779.4 189.6 195.4
Provision for doubtful accounts......................................... 298.6 78.9 72.9
Other operating expenses................................................ 1,159.5 279.2 283.4
Depreciation............................................................ 239.7 59.0 62.0
Amortization............................................................ 77.5 19.2 19.2
------------ --------- ---------
Operating income.......................................................... 684.8 167.8 177.2
Interest expense, net of capitalized portion.............................. (320.0) (79.1) (77.5)
Investment earnings....................................................... 19.3 4.2 5.4
Equity in earnings of unconsolidated affiliates........................... 11.8 2.9 2.9
Minority interest expense................................................. (5.9) (0.8) (4.1)
------------ --------- ---------
Income from continuing operations before income taxes..................... 390.0 95.0 103.9
Taxes on income........................................................... (172.8) (42.5) (46.5)
------------ --------- ---------
Income from continuing operations......................................... $ 217.2 $ 52.5 $ 57.4
------------ --------- ---------
------------ --------- ---------
Earnings per common share from continuing operations, fully diluted....... $ 1.05 $ 0.25 $ 0.27
Weighted average number of shares outstanding (in 000's).................. 214,938 213,310 215,839
Ratio of earnings to fixed charges (1).................................... 2.0x 2.0x 2.1x
OTHER OPERATING INFORMATION:
EBITDA (2)................................................................ $ 1,002.0 $ 246.0 $ 258.4
EBITDA margin............................................................. 18.5% 18.5% 19.3%
Ratio of EBITDA to net interest expense (3)............................... 3.3x 3.3x 3.6x
Ratio of total debt to EBITDA (4)......................................... 3.4x -- --
Capital expenditures...................................................... $ 325.4 $ 25.1 $ 85.0
</TABLE>
<TABLE>
<CAPTION>
AS OF
AUGUST 31,
1995
--------------
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................................. $ 63.7
Total assets.................................................................................... 8,023.4
Long-term debt, net of current portion.......................................................... 3,155.1
Shareholders' equity............................................................................ 2,207.6
<FN>
- ------------------------
(1) The ratio of earnings to fixed charges is calculated by dividing income
from continuing operations before income taxes plus fixed charges by fixed
charges. Fixed charges consist of interest expense, including amortization
of financing costs, and that portion of rental expense deemed to be
representative of the interest component of rental expense.
(2) EBITDA represents operating income before depreciation and amortization.
While EBITDA should not be construed as a substitute for operating income
or a better indicator of liquidity than cash flows from operating
activities, which are determined in accordance with generally accepted
accounting principles. See the Consolidated Statements of Cash Flows of
Tenet and AMH and the related Notes thereto incorporated by reference in
this Prospectus. EBITDA, however, is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements and
because management believes that certain investors find it to be useful.
EBITDA is not necessarily a measure of the Company's ability to fund its
cash needs.
(3) Net of capitalized portion and net of pro forma investment earnings.
(4) Represents pro forma combined total debt outstanding at August 31, 1995 of
$3,433.8 million divided by pro forma combined EBITDA of $1,002.0 million
for the fiscal year ended May 31, 1995.
</TABLE>
9
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, THE
FOLLOWING FACTORS BEFORE PURCHASING THE NOTES OFFERED HEREBY.
LIMITED OPPORTUNITY FOR EQUITY APPRECIATION; COMPARISON TO OTHER DEBT SECURITIES
The terms of the Notes differ from those of ordinary debt securities in that
the value that a holder of the Notes would receive should they elect to exercise
their exchange rights is not fixed, but is based on the price of the Vencor
Common Stock.
The opportunity for equity appreciation afforded by an investment in the
Notes is less than the opportunity for equity appreciation afforded by an
investment in the Vencor Common Stock because the amount receivable by holders
of the Notes upon exchange will only exceed the principal amount of such Notes
if the price of the Vencor Common Stock appreciates % from the date of the
Notes' issuance. Because the price of the Vencor Common Stock is subject to
market fluctuations, the exchange of the Notes into Vencor Common Stock may
never be in the economic best interest of the holder.
FLUCTUATION OF MARKET VALUE OF VENCOR COMMON STOCK
It is impossible to predict whether the price of Vencor Common Stock will
rise or fall. Trading prices of Vencor Common Stock will be influenced by
Vencor's operational results and by complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the New York Stock Exchange (on which Vencor Common Stock is traded)
and the market segment of which Vencor is a part.
NO OBLIGATION ON THE PART OF VENCOR WITH RESPECT TO THE NOTES
Vencor has no obligation with respect to the Notes or amounts to be paid to
the holders of the Notes, including any obligation to take into consideration
for any reason the needs of the Company or the holders, other than normal
fiduciary duties to Tenet as a shareholder. Vencor will not receive any of the
proceeds of the Offering of the Notes and is not responsible for the
determination of the time of, prices for or quantities of the Notes to be issued
or the optional redemption of such Notes.
REDEMPTION AT THE COMPANY'S OPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company, at any time on or after , 1998, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption.
RESTRICTED ABILITY TO PARTICIPATE IN CERTAIN TRANSACTIONS
The Company will not be obligated to exchange on a voluntary basis (for
example, in the context of a cash tender offer) any of the Vencor Common Stock
for cash, securities or other property. In certain situations, this could be
detrimental to the interests of the holders of the Notes and might require such
holders to exchange their Notes for shares of Vencor Common Stock in order to
participate in any such voluntary exchange. In certain circumstances including,
without limitation, a cash merger of Vencor, it is possible that the shares of
Vencor Common Stock which theretofore might have been received in exchange for
the Notes will no longer be available for exchange. In such event, only the
cash, securities or other property received upon the exchange of the shares of
Vencor Common Stock (exclusive of any interest or dividends payable with respect
thereto) will be available upon exchange of the Notes to the holders thereof,
unless the Company were to elect to satisfy an exchange with cash.
EVENT OF BANKRUPTCY; EFFECT ON HOLDERS' ABILITY TO EXERCISE EXCHANGE RIGHTS FOR
VENCOR COMMON STOCK
The right of a holder to exchange its Notes for shares of Vencor Common
Stock (or other securities, property or cash) could be adversely affected in the
event of the bankruptcy, insolvency or liquidation of the Company. In such
event, the shares of Vencor Common Stock (or other securities, property or cash)
could be deemed to be an asset of the Company subject to the claims of its
general creditors. See "Description of Notes -- Exchange Rights."
10
<PAGE>
REGISTRATION OF VENCOR COMMON STOCK UNDER THE SECURITIES ACT
The Company has agreed that at any time that a Holder of Notes exchanges
such Notes for shares of Vencor Common Stock owned by Tenet and an effective
registration statement of Vencor filed with the Commission (or related
qualification under state blue sky or securities laws) would be required in
order for the Escrow Agent to deliver such shares of Vencor Common Stock in the
United States or to a United States Person, the Company will use its reasonable
best efforts to ensure that an effective registration statement of Vencor is on
file with the Commission covering the delivery of such shares of Vencor Common
Stock and any qualification under state blue sky or securities laws required for
such delivery is maintained and, in the event such registration statement is not
effective or such qualification is not maintained, will direct the Escrow Agent
to pay such Holder cash, in lieu of delivering such shares of Vencor Common
Stock, in accordance with the provisions of the Indenture.
RISKS AND UNCERTAINTIES ASSOCIATED WITH VENCOR'S BUSINESS
Prospective investors should review Vencor's publicly available documents
for a discussion of the risks and uncertainties associated with Vencor. See
"Vencor."
ABSENCE OF COVENANT PROTECTION
The Indenture will not limit the Company's ability to incur additional
indebtedness, or to grant liens on its assets to secure indebtedness, to pay
dividends or to repurchase shares of its capital stock. The Indenture does not
contain any provisions specifically intended to protect holders of the Notes in
the event of a future highly leveraged transaction involving the Company.
SUBORDINATION; SUBSIDIARY OPERATIONS
The Notes will be subordinated in right of payment to all existing and
future Senior and Senior Subordinated Debt and will be structurally subordinated
to all liabilities (including trade payables) of the Company's subsidiaries. The
Indenture will not restrict the incurrence of Senior and Senior Subordinated
Debt or other indebtedness by the Company or its subsidiaries. As of August 31,
1995, on a pro forma basis after giving effect to the issuance and sale of the
Notes and certain other transactions, the aggregate outstanding principal amount
of Senior and Senior Subordinated Debt would have been approximately $3.1
billion. See "Pro Forma Financial Information." By reason of such subordination
of the Notes, in the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of the Company or upon
a default in payment with respect to any indebtedness of the Company or an event
of default with respect to such indebtedness resulting in the acceleration
thereof, the assets of the Company will be available to pay the amounts due on
the Notes only after all Senior and Senior Subordinated Debt has been paid in
full. The Notes will rank PARI PASSU in all respects with other unsecured
subordinated obligations of the Company. See "Description of
Notes--Subordination."
Since substantially all of the Company's operations are conducted, and
substantially all of the assets of Tenet are owned, by its subsidiaries, the
Notes (which are obligations of Tenet but not its subsidiaries) effectively will
be subordinated to all existing and future obligations and other liabilities
(including trade payables) of Tenet's subsidiaries. Any right of Tenet to the
assets of any of its subsidiaries upon the liquidation, reorganization or
insolvency of such subsidiary (and the consequent right of the holders of the
Notes to participate in those assets) will be subject to the claims of the
creditors (including trade creditors) and preferred stockholders, if any, of
such subsidiary, except to the extent Tenet has a claim against such subsidiary
as a creditor of such subsidiary. In addition, in the event that claims of Tenet
as a creditor of a subsidiary are recognized, such claims would be subordinate
to any security interest in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by Tenet. The ability of Tenet and its
subsidiaries to incur certain obligations is limited by certain of the
restrictive covenants contained in the Credit Agreement. Additionally,
borrowings under the Credit Agreement are secured by a first priority lien on
the capital stock of the Company's direct subsidiaries, all intercompany
indebtedness owed to the Company and one of the Company's subsidiaries' equity
investments, and have priority as to such collateral over the Notes. The
Indenture will not limit the ability of subsidiaries of Tenet to incur
additional indebtedness.
11
<PAGE>
In addition, Tenet's ability to make required principal and interest
payments with respect to Tenet's indebtedness, including the Notes, depends on
the earnings of its subsidiaries. Since the Notes are obligations of Tenet only,
Tenet's subsidiaries are not obligated or required to pay any amounts due
pursuant to the Notes or to make funds available therefor in the form of
dividends or advances to Tenet.
CERTAIN FINANCING CONSIDERATIONS; LEVERAGE
As of August 31, 1995, Tenet's total indebtedness was $3.5 billion,
constituting 62.5% of its total capitalization, including short-term debt.
Approximately 33.7% of Tenet's total assets as of such date were intangible
assets. The excess of Tenet's liabilities over its tangible assets as of such
date was $549.1 million at August 31, 1995. See "Historical and Pro Forma
Capitalization."
Tenet's Credit Agreement includes covenants prohibiting or limiting, among
other things, the sale of assets, the making of acquisitions and other
investments, capital expenditures, the incurrence of additional debt and liens
and the payment of dividends, in addition to a minimum consolidated net worth
requirement and certain ratio coverage tests including debt ratios and
fixed-charge ratios. In addition, the indentures governing certain Senior and
Senior Subordinated Debt include, among other things, covenants limiting the
incurrence of additional debt and liens and the payment of dividends. Tenet's
failure to comply with any of these covenants could result in an event of
default under its indebtedness, including the Notes, which in turn could have a
material adverse effect on Tenet.
The degree to which Tenet is leveraged and the covenants described above may
adversely affect Tenet's ability to finance its future operations and could
limit its ability to pursue business opportunities that may be in the interests
of Tenet and its securityholders. In particular, changes in medical technology,
existing, proposed and future legislation, regulations and the interpretation
thereof, and the increasing importance of managed care contracts and integrated
healthcare delivery systems may require significant investment in facilities,
equipment, personnel or services. There can be no assurance that Tenet will be
able to obtain the funds necessary to make such investments. Furthermore,
tax-exempt or government-owned competitors have certain financial advantages
such as endowments, charitable contributions, tax-exempt financing and exemption
from sales, property and income taxes not available to Tenet, providing them
with a potential competitive advantage in making such investments.
COMPETITION
The healthcare industry has been characterized in recent years by increased
competition for patients and staff physicians, excess capacity at general
hospitals, a shift from inpatient to outpatient settings and increased
consolidation. The principal factors contributing to these trends are advances
in medical technology, cost-containment efforts by managed care payors,
employers and traditional health insurers, changes in regulations and
reimbursement policies, increases in the number and type of competing healthcare
providers and changes in physician practice patterns. Tenet's future success
will depend, in part, on the ability of the Company's hospitals to continue to
attract staff physicians, to enter into managed care contracts and to organize
and structure integrated healthcare delivery systems with other healthcare
providers and physician practice groups. There can be no assurance that Tenet's
hospitals will continue to be able, on terms favorable to the Company, to
attract physicians to their staffs, to enter into managed care contracts or to
organize and structure integrated healthcare delivery systems, for which other
healthcare companies with greater financial resources or a wider range of
services may be competing.
Tenet's ability to continue to compete successfully for such contracts or to
form or participate in such systems also may depend upon, among other things,
Tenet's ability to increase the number of its facilities and services offered
through the acquisition of hospitals, groups of hospitals, other healthcare
businesses, ancillary healthcare providers, physician practices and physician
practice assets and Tenet's ability to finance such acquisitions. There can be
no assurance that suitable acquisitions, for which other healthcare companies
with greater financial resources than Tenet may be competing, can be
accomplished on terms favorable to Tenet or that financing, if necessary, can be
obtained for such acquisitions. See "--Certain Financing Considerations;
Leverage." There can be no assurance that Tenet will be able to operate
profitably any hospitals, facilities, businesses or other assets it may acquire,
effectively integrate the operations of such acquisitions or otherwise achieve
the intended benefits of such acquisitions.
12
<PAGE>
LIMITS ON REIMBURSEMENT
Tenet derives a substantial portion of its net operating revenues from
third-party payors, including the Medicare and Medicaid programs. Changes in
government reimbursement programs have resulted in limitations on increases in,
and in some cases in reduced levels of, reimbursement for healthcare services,
and additional changes are anticipated. Such changes are likely to result in
further limitations on reimbursement levels. In addition, private payors,
including managed care payors, increasingly are demanding discounted fee
structures or the assumption by healthcare providers of all or a portion of the
financial risk through prepaid capitation arrangements. Inpatient utilization,
average lengths of stay and occupancy rates continue to be negatively affected
by payor-required pre-admission authorization and utilization review and by
payor pressure to maximize outpatient and alternative healthcare delivery
services for less acutely ill patients. In addition, efforts to impose reduced
allowances, greater discounts and more stringent cost controls by government and
other payors are expected to continue. Although Tenet is unable to predict the
effect these changes will have on its operations, as the number of patients
covered by managed care payors increases, significant limits on the scope of
services reimbursed and on reimbursement rates and fees could have a material
adverse effect on the financial results of such operations.
EXTENSIVE REGULATION
The healthcare industry is subject to extensive Federal, state and local
regulation relating to licensure, conduct of operations, ownership of
facilities, addition of facilities and services and prices for services. In
particular, Medicare and Medicaid antifraud and abuse amendments codified under
Section 1128B(b) of the Social Security Act (the "Antifraud Amendments")
prohibit certain business practices and relationships that might affect the
provision and cost of healthcare services reimbursable under Medicare and
Medicaid, including the payment or receipt of remuneration for the referral of
patients whose care will be paid for by Medicare or other government programs.
Sanctions for violating the Antifraud Amendments include criminal penalties and
civil sanctions, including fines and possible exclusion from the Medicare and
Medicaid programs. Pursuant to the Medicare and Medicaid Patient and Program
Protection Act of 1987, the Department of Health and Human Services ("HHS") has
issued regulations that describe some of the conduct and business relationships
permissible under the Antifraud Amendments ("Safe Harbors"). The fact that a
given business arrangement does not fall within a Safe Harbor does not render
the arrangement per se illegal. Business arrangements of healthcare service
providers that fail to satisfy the applicable Safe Harbor criteria, however,
risk increased scrutiny by enforcement authorities. Because Tenet may be less
willing than some of its competitors to enter into business arrangements that do
not clearly satisfy the Safe Harbors, it could be at a competitive disadvantage
in entering into certain transactions and arrangements with physicians and other
healthcare providers.
In addition, Section 1877 of the Social Security Act, which restricts
referrals by physicians of Medicare and other government-program patients to
providers of a broad range of designated health services with which they have
ownership or certain other financial arrangements, was amended effective January
1, 1995, to significantly broaden the scope of prohibited physician referrals
under the Medicare and Medicaid programs to providers with which they have
ownership or certain other financial arrangements (the "Self-Referral
Prohibitions"). Many states have adopted or are considering similar legislative
proposals, some of which extend beyond the Medicaid program to prohibit the
payment or receipt of remuneration for the referral of patients and physician
self-referrals regardless of the source of the payment for the care. Tenet's
participation in and development of joint ventures and other financial
relationships with physicians could be adversely affected by these amendments
and similar state enactments.
Certificates of Need, which are issued by governmental agencies with
jurisdiction over healthcare facilities, are at times required for capital
expenditures exceeding a prescribed amount, changes in bed capacity or services
and certain other matters. Following a number of years of decline, the number of
states requiring Certificates of Need is once again on the rise as state
legislators once again are looking at the Certificate of Need process as a way
to contain rising healthcare costs. At August 31, 1995, Tenet operated hospitals
in eight states that require state approval under Certificate of Need programs.
Tenet is unable to predict whether it will be able to obtain any Certificates of
Need in any jurisdiction where such Certificates of Need are required.
13
<PAGE>
Tenet is unable to predict the future course of Federal, state and local
regulation or legislation, including Medicare and Medicaid statutes and
regulations. Further changes in the regulatory framework could have a material
adverse effect on the financial results of Tenet's operations.
HEALTHCARE REFORM LEGISLATION
Healthcare, as one of the largest industries in the United States, continues
to attract much legislative interest and public attention. Medicare, Medicaid,
mandatory and other public and private hospital cost-containment programs,
proposals to limit healthcare spending, proposals to limit prices and industry
competitive factors are highly significant to the healthcare industry.
There continue to be Federal and state proposals that would, and actions
that do, impose more limitations on government and private payments to providers
such as Tenet and proposals to increase co-payments and deductibles from program
and private patients. In addition, a number of states are considering the
enactment of managed care initiatives designed to provide universal low-cost
coverage and/or additional taxes on hospitals to help finance or expand the
states' Medicaid systems. Tenet's facilities also are affected by controls
imposed by government and private payors designed to reduce admissions and
lengths of stay. Such controls, including what is commonly referred to as
"utilization review," have resulted in fewer of certain treatments and
procedures being performed. Utilization review entails the review of the
admission and course of treatment of a patient by a third party. Utilization
review by third-party peer review organizations ("PROs") is required in
connection with the provision of care paid for by Medicare and Medicaid.
Utilization review by third parties also is a requirement of many managed care
arrangements. Tenet cannot predict whether any of the above proposals or any
other proposals will be adopted, and if adopted, no assurance can be given that
the implementation of such reforms will not have a material adverse effect on
Tenet's business.
CERTAIN LEGAL PROCEEDINGS
Tenet has been involved in certain significant legal proceedings and
investigations related principally to its discontinued psychiatric business.
These proceedings and investigations include class action and derivative
lawsuits by certain stockholders, psychiatric patient litigation alleging fraud
and conspiracy, certain lawsuits filed by third-party private-payor insurance
companies and investigations by various state and Federal agencies. Tenet (i)
has reached agreements with the United States Department of Justice (the "DOJ"),
HHS and the Securities and Exchange Commission (the "Commission") resolving all
Federal healthcare and related disclosure investigations of the Company (but
various government agencies are continuing to pursue investigations against
certain individuals), (ii) has reached an agreement with the District of
Columbia and all states where Tenet's psychiatric facilities received Medicaid
payments, settling all potential state claims related to the matters that were
the subject of the Federal investigations, (iii) has resolved the litigation
between Tenet and the insurers, (iv) has reached an agreement, pending court
approval, to resolve the shareholder derivative lawsuit, (v) has reached an
agreement to settle one of the class action lawsuits, and (vi) continues efforts
to resolve the cases brought by individual psychiatric patients. Tenet continues
to experience a greater than normal level of litigation relating to its former
psychiatric operations. The majority of the lawsuits filed contain allegations
of fraud and conspiracy against the Company and certain of its subsidiaries and
former employees. Among the suits filed during fiscal 1995 were two lawsuits in
Texas aggregating approximately 760 individual plaintiffs who are purported to
have been patients in certain Texas psychiatric facilities and a number of
lawsuits filed in the District of Columbia. In addition, a purported class
action was filed in Texas state court in May 1995. Tenet expects that additional
lawsuits of this nature will be filed, particularly because certain lawyers are
advertising seeking former psychiatric patients in order to ascertain whether
potential claims exist against the Company. Tenet's reserves for unusual
litigation costs represent management's estimate of the costs of the defense of
these matters. There can be no assurance, however, that the ultimate liability
will not exceed such estimates. In the event such reserves are not adequate, the
adverse determination of these matters could have a material adverse effect on
Tenet's financial condition and results of operations. See also "-- Professional
and General Liability Insurance."
14
<PAGE>
In its agreements with the DOJ and HHS, Tenet agreed to maintain its
previously established ethics program and ethics hotline and also agreed to
implement certain additional compliance-related oversight procedures. Should the
hotline or oversight procedures reveal, after investigation by Tenet, credible
evidence of violations of criminal, or material violations of civil, laws, rules
or regulations governing Federally funded programs, Tenet is required to report
any such violation to the DOJ and HHS. As a result of the existing agreements
with the DOJ and HHS and the recent legal proceedings and investigations in
which Tenet has been involved, Tenet is subject to increased Federal and state
regulatory scrutiny and, in the event that Tenet violates such decrees or
engages in conduct that violates Federal or state laws, rules or regulations,
Tenet may be subject to a risk of increased sanctions or penalties, including,
but not limited to, partial or complete disqualification as a provider of
Medicare or Medicaid services.
INCOME TAX EXAMINATIONS
The Internal Revenue Service (the "IRS") currently is examining Tenet's
Federal income tax returns for fiscal years 1986 through 1990 and has not yet
begun examining any returns for subsequent years (collectively, the "Open
Years"). Although the IRS has not proposed any material adjustments to Tenet's
returns in the Open Years, there can be no assurance that significant issues
will not be raised. While Tenet has no reason to believe that the tax
liabilities it has recorded will be inadequate, if audits of the Open Years or
fiscal 1995, for which Tenet has not yet filed a tax return, result in
determinations significantly in excess of such reserves, Tenet's financial
condition could be materially adversely affected.
DEPENDENCE ON KEY PERSONNEL AND PHYSICIANS
Tenet's operations are dependent on the efforts, ability and experience of
its key executive officers. Tenet's continued growth depends on its ability to
attract and retain skilled employees, on the ability of its officers and key
employees to manage growth successfully and on Tenet's ability to attract and
retain physicians at its hospitals. In addition, the success of Tenet is, in
part, dependent upon the number, specialties and quality of physicians on its
hospitals' medical staffs, most of whom have no long-term contractual
relationship with Tenet and may terminate their association with Tenet's
hospitals at any time. The loss of some or all of these key executive officers
or an inability to attract or retain sufficient numbers of qualified physicians
could have a material adverse impact on Tenet's future results of operations.
PROFESSIONAL AND GENERAL LIABILITY INSURANCE
The Company insures substantially all of its professional and comprehensive
general liability risks in excess of self-insured retentions, which vary by
hospital from $500,000 to $3.0 million per occurrence, through an insurance
company owned by several healthcare companies and in which the Company has an
approximately 77% equity interest. A significant portion of these risks is, in
turn, reinsured with major independent insurance companies. Through May 31,
1994, the Company insured its professional and comprehensive general liability
risks related to its psychiatric and physical rehabilitation hospitals through
its wholly owned insurance subsidiary that reinsured risks in excess of $500,000
with major independent insurance companies. The Company has reached the policy
limits provided by this insurance subsidiary related to the psychiatric
hospitals in certain years. In addition, damages, if any, arising from fraud and
conspiracy claims in psychiatric malpractice cases may not be insured. If actual
payments of claims with respect to Tenet's self-insured liabilities exceed
projected payments of claims, the financial results of Tenet's operations could
be materially adversely affected.
POSSIBLE INABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL OF TENET
Under the terms of the Credit Agreement, the prepayment of debt (other than
debt under the Credit Agreement) will result in a default under the Credit
Agreement and, accordingly, Tenet effectively is prohibited from repurchasing
Notes upon the occurrence of a Change of Control Triggering Event. The
indentures governing certain Senior and Senior Subordinated Debt contain similar
terms that may effectively prohibit the repurchase of Notes upon the occurrence
of a Change of Control Triggering Event. Accordingly, Tenet may not be able to
satisfy its obligations to repurchase the Notes unless Tenet is able to
refinance or obtain waivers with respect to the Credit Agreement and certain
other indebtedness. There can
15
<PAGE>
be no assurance that Tenet will have the financial resources to repurchase the
Notes in the event of a Change of Control Triggering Event, particularly if such
Change of Control Triggering Event requires Tenet to refinance, or results in
the acceleration of, other indebtedness. See "Description of Notes."
The change of control provisions of the Indenture will obligate the Company
to repurchase Notes at the option of the holder thereof in the event Tenet
incurs additional leverage through certain types of recapitalizations, leveraged
buy-outs or similar transactions that could increase the indebtedness of the
Company or decrease the value of the Notes; PROVIDED, HOWEVER, that, if the
Company does not experience a Rating Decline (as defined herein) after the
public notice of its intent to enter into such a transaction, the Company will
not be obligated to undertake a Change of Control Offer (as defined herein).
Substantially all of the Senior and Senior Subordinated Debt of the Company,
approximately $3.1 billion in aggregate principal amount on a pro forma basis as
of August 31, 1995, has similar change of control or cross-default provisions
which effectively would decrease the amount of funds available for the Company
to purchase the Notes pursuant to a Change of Control Offer.
NO PRIOR PUBLIC MARKET
Although the Notes have been approved for listing, subject to official
notice of issuance, on the NYSE, the Notes will constitute a new issue of
securities with no established trading market. The Company has been advised by
the Underwriters that, following the completion of this Offering, the
Underwriters presently intend to make a market in the Notes as permitted by
applicable laws and regulations. The Underwriters, however, are under no
obligation to do so and may discontinue any market-making activities at any time
at the sole discretion of the Underwriters. There can be no assurance as to the
liquidity of the market that may develop for the Notes, the ability of holders
of the Notes to sell their Notes or the prices at which holders would be able to
sell their Notes. The Notes could trade at prices that may be higher or lower
than the initial offering price thereof depending on many factors, including
prevailing interest rates, the Company's operating results and the markets for
similar securities. See "Underwriting."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to Tenet from the sale of the Notes in this Offering are
estimated to be approximately $ million (after deducting estimated expenses
and underwriting discounts and commissions). Tenet intends to use all of such
net proceeds to repay secured indebtedness outstanding under the Company's
Credit Agreement with the approximate amounts, interest rates and maturity dates
set forth below. Approximately $62.0 million will be used to repay indebtedness
that currently bears interest at 7.25% and is due in 2001; approximately $60.8
million will be used to repay indebtedness that currently bears interest at
7.125% and is due in 2001; and the remainder will be used to repay indebtedness
that currently bears interest at 7.125% and is due in 2000.
HISTORICAL AND PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of Tenet at August 31,
1995 and as adjusted to give effect to the consummation of this Offering and to
the application of the net proceeds therefrom as described under "Use of
Proceeds" and certain other transactions described herein under "Pro Forma
Financial Information."
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1995
------------------------
PRO FORMA
HISTORICAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Current portion of long-term debt............................................... $ 276.6 $ 276.6
Short-term borrowings and notes................................................. 2.1 2.1
----------- -----------
Total current debt.......................................................... $ 278.7 $ 278.7
----------- -----------
----------- -----------
Long-term debt, net of current portion:
Credit Agreement.............................................................. $ 1,765.0 $ 844.0
Senior Notes due 2002......................................................... 300.0 300.0
Senior Notes due 2003......................................................... -- 500.0
Other debt (1)................................................................ 261.1 261.1
Senior Subordinated Notes due 2005............................................ 900.0 900.0
Exchangeable Subordinated Notes due 2005...................................... -- 350.0
----------- -----------
Total long-term debt ....................................................... 3,226.1 3,155.1
----------- -----------
Shareholders' equity:
Common stock, par value $0.075, authorized 450,000,000 shares; issued
218,713,406 shares (2)....................................................... 16.4 16.4
Other shareholders' equity.................................................... 2,359.5 2,461.2(3)
Less treasury stock, at cost, 18,660,394 shares............................... (270.0) (270.0)
----------- -----------
Total shareholders' equity.................................................. 2,105.9 2,207.6
----------- -----------
Total capitalization.......................................................... $ 5,332.0 $ 5,362.7
----------- -----------
----------- -----------
<FN>
- --------------------------
(1) Includes several series of medium-term notes, certain other secured and
unsecured notes payable, mortgage notes and capitalized lease obligations,
net of the unamortized discount on the Company's Senior Notes due 2002 and
Senior Subordinated Notes due 2005.
(2) Does not include 36,405,015 shares of Tenet Common Stock reserved for
issuance at August 31, 1995, upon exchange of Tenet options and conversion
of outstanding securities of Tenet.
(3) The increase in other shareholders' equity on a pro forma basis consists of
a net gain of $101.7 million recognized in connection with the exchange of
Hillhaven Common Stock for Vencor Common Stock in connection with Vencor's
acquisition of Hillhaven and the redemption for cash of the Hillhaven
Series C and Series D Preferred Stock. See "Pro Forma Financial
Information."
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company on an historical basis for the year ended May 31, 1995, each of the
preceding four years ended May 31, and for the three-month periods ended August
31, 1994 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MAY 31, AUGUST 31,
-------------------------------- ------------------
1991 1992 1993 1994 1995 1994 1995
---- ---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (1)....... 2.3x 3.5x 4.3x 4.2x 2.7x 5.0x 3.4x
<FN>
- --------------------------
(1) For the purpose of calculating such ratios, "earnings" consist of income
from continuing operations before income taxes plus fixed charges, and
"fixed charges" consist of interest expense, net of capitalized portion;
capitalized interest; amortization of debt offering expenses and discount
or premium and that portion of rents representative of interest.
</TABLE>
17
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Statements give effect
to the following transactions and events as if they had occurred as of June 1,
1994 for purposes of the pro forma statement of operations and other operating
information and on August 31, 1995 for purposes of the pro forma balance sheet
data: (i) the August 1994 sale of approximately 75% of the common stock of TRC;
(ii) the elimination of restructuring charges recorded by Tenet; (iii) the
elimination of nonrecurring gains on disposals of facilities and long-term
investments recorded by Tenet; (iv) the elimination of nonrecurring merger costs
recorded by AMH prior to the Merger; (v) the Merger and related transactions,
applying the purchase method of accounting; (vi) the acquisitions of
Mercy+Baptist and Providence; (vii) the June 28, 1995 sale of the Company's
Mount Elizabeth Hospital, East Shore Hospital and related healthcare businesses
in Singapore as well as the October 3, 1995 sale of the Company's holdings in
Malaysia, the October 15, 1995 sale of the Company's holdings in Australia and
the probable sale of the Company's holdings in Thailand, which sale currently is
pending; (viii) Vencor's acquisition of Hillhaven; (ix) the consummation of the
Senior Notes Offering and (x) the consummation of this Offering.
The Unaudited Pro Forma Condensed Combined Financial Statements do not
purport to present the financial position or results of operations of Tenet had
the transactions and events assumed therein occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future.
The following Unaudited Pro Forma Condensed Combined Financial Statements
for the quarter ended August 31, 1994 and the year ended May 31, 1995 do not
reflect certain cost savings that management believes may be realized as a
result of the Merger, currently estimated to be approximately $60.0 million
annually beginning in fiscal 1996 (before any severance or other costs of
implementing certain efficiencies). These savings are expected to be realized
primarily through the elimination of duplicative corporate overhead expenses,
reduced supplies expense through the incorporation of the acquired AMH
facilities into the Company's group purchasing program, and improved collection
of the acquired AMH facilities' accounts receivable. No assurances can be made
as to the amount of cost savings, if any, that actually will be realized.
The Unaudited Pro Forma Condensed Combined Financial Statements are based on
certain assumptions and adjustments described in the Notes to Unaudited Pro
Forma Condensed Combined Financial Statements included in the Prospectus and
should be read in conjunction therewith and with Management's Discussion and
Analysis and the Consolidated Financial Statements of Tenet and the related
Notes thereto incorporated by reference herein.
Tenet reports its financial information on the basis of a May 31 fiscal
year. AMH reported its financial information on the basis of an August 31 fiscal
year.
18
<PAGE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1995
-----------------------------------------------------------------------
INTERNATIONAL VENCOR'S
PROVIDENCE OPERATIONS ACQUISITION
HISTORICAL ACQUISITION DIVESTED OF HILLHAVEN THE PRO FORMA
TENET (A) (B) (C) OFFERINGS AS ADJUSTED
----------- ------------- --------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 106.4 $ -- $ -- $ 91.8 $ -- $ 106.4
(91.8)
Short-term investments, at cost which
approximates market........................ 135.6 135.6
Accounts and notes receivable, less
allowance for doubtful accounts............ 601.8 601.8
Inventories of supplies, at cost............ 119.9 1.5 121.4
Deferred income taxes....................... 303.1 303.1
Assets held for sale........................ 124.5 (95.6) 28.9
Prepaid expenses and other current assets... 50.4 1.9 52.3
----------- ------ ------ ------ ----------- -----------
Total current assets...................... 1,441.7 3.4 (95.6) 1,349.5
Investments and other assets.................. 370.0 92.6 462.6
Property, plant and equipment, net............ 3,418.0 87.0 3,505.0
Intangible assets, at cost less accumulated
amortization................................. 2,655.0 28.0 13.3(d) 2,706.3
10.0(e)
----------- ------ ------ ------ ----------- -----------
$ 7,884.7 $ 118.4 $ (95.6) $ 92.6 $ 23.3 $ 8,023.4
----------- ------ ------ ------ ----------- -----------
----------- ------ ------ ------ ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........... $ 276.6 $ -- $ -- $ -- $ -- $ 276.6
Short-term borrowings and notes............. 2.1 2.1
Accounts payable............................ 258.2 9.7 267.9
Employee compensation and benefits.......... 161.2 161.2
Reserves related to discontinued
operations................................. 66.3 66.3
Income taxes payable........................ 2.1 2.1
Other current liabilities................... 490.7 13.4 5.5 509.6
----------- ------ ------ ------ ----------- -----------
Total current liabilities................. 1,257.2 23.1 5.5 1,285.8
Long-term debt, net of current portion........ 3,226.1 80.3 (101.1) (73.5) 500.0(d) 3,155.1
(486.7)(d)
350.0(e)
(340.0)(e)
Other long-term liabilities and minority
interests.................................... 988.5 15.0 1,003.5
Deferred income taxes......................... 307.0 64.4 371.4
Shareholders' equity:
Common stock................................ 16.4 16.4
Other shareholders' equity.................. 2,359.5 101.7 2,461.2
Less common stock in treasury, at cost...... (270.0) (270.0)
----------- ------ ------ ------ ----------- -----------
Total shareholders' equity................ 2,105.9 -- -- 101.7 -- 2,207.6
----------- ------ ------ ------ ----------- -----------
$ 7,884.7 $ 118.4 $ (95.6) $ 92.6 $ 23.3 $ 8,023.4
----------- ------ ------ ------ ----------- -----------
----------- ------ ------ ------ ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
19
<PAGE>
TENET HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1995
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
HISTORICAL
TENET YEAR HISTORICAL
ENDED AMH NINE TENET AMH TENET/AMH
MAY 31, MONTHS ENDED ADJUSTMENTS ADJUSTMENTS MERGER
1995 FEBRUARY 28, 1995 (F) (G) ADJUSTMENTS
---------- ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net operating revenues....................... $3,318.4 $1,938.3 $(16.6) $-- $ --
Operating expenses:
Salaries and benefits...................... 1,366.8 716.2 (5.9)
Supplies................................... 431.5 280.3
Provision for doubtful accounts............ 137.5 138.5 (0.4)
Other operating expenses................... 759.2 492.6 (6.8) (73.9)
Depreciation............................... 164.4 93.9 (0.6) (16.9)(j)
Amortization............................... 30.6 29.5 (0.2) 17.3(l)
Restructuring charges...................... 36.9 -- (36.9)
---------- -------- ----------- ----------- -----------
Operating income............................. 391.5 187.3 34.2 73.9 (0.4)
Interest expense, net of capitalized
portion..................................... (138.1) (120.2) -- (76.6)(n)
Investment earnings.......................... 27.5 2.6 -- (3.2)(r)
Equity in earnings of unconsolidated
affiliates.................................. 28.4 -- (0.1)
Minority interest in income of consolidated
subsidiaries................................ (9.4) (3.3) 0.4
Net gain on disposals of facilities and long-
term investments............................ 29.5 -- (29.5)
---------- -------- ----------- ----------- -----------
Income from continuing operations before
income taxes................................ 329.4 66.4 5.0 73.9 (80.2)
Taxes on income.............................. (135.0) (41.3) (2.0) (18.7) 24.5(s)
---------- -------- ----------- ----------- -----------
Income from continuing operations............ $ 194.4 $ 25.1 $ 3.0 $ 55.2 $ (55.7)
---------- -------- ----------- ----------- -----------
---------- -------- ----------- ----------- -----------
Earnings per common share from continuing
operations, fully diluted................... $ 1.06
----------
----------
Weighted average number of shares
outstanding, fully diluted (in 000's)....... 190,139 24,799(u)
---------- -----------
---------- -----------
Ratio of earnings to fixed charges........... 2.7x
----------
----------
<CAPTION>
VENCOR'S
GENERAL INTERNATIONAL ACQUISITION
HOSPITAL OPERATIONS OF
TENET/AMH ACQUISITIONS DIVESTED HILLHAVEN PRO FORMA PRO FORMA
COMBINED (H) (I) (C) ADJUSTMENTS COMBINED
--------- ------------ ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues....................... $5,240.1 $370.0 $(203.4) $-- $ -- $5,406.7
Operating expenses:
Salaries and benefits...................... 2,077.1 170.8 (80.7) 2,167.2
Supplies................................... 711.8 85.4 (17.8) 779.4
Provision for doubtful accounts............ 275.6 23.9 (0.9) 298.6
Other operating expenses................... 1,171.1 39.5 (51.1) 1,159.5
Depreciation............................... 240.8 26.5 (14.0) (13.6)(k) 239.7
Amortization............................... 77.2 -- (1.9) 2.2(m) 77.5
Restructuring charges...................... -- -- -- --
--------- ------ ------------- ---------- ----------- ---------
Operating income............................. 686.5 23.9 (37.0) 11.4 684.8
Interest expense, net of capitalized
portion..................................... (334.9) (7.1) 5.8 7.1(o) (320.0)
29.4(p)
(20.3)(q)
Investment earnings.......................... 26.9 -- (0.8) (6.8) 19.3
Equity in earnings of unconsolidated
affiliates.................................. 28.3 -- (0.6) (15.9) 11.8
Minority interest in income of consolidated
subsidiaries................................ (12.3) -- 6.4 (5.9)
Net gain on disposals of facilities and long-
term investments............................ -- -- -- --
--------- ------ ------------- ---------- ----------- ---------
Income from continuing operations before
income taxes................................ 394.5 16.8 (26.2) (22.7) 27.6 390.0
Taxes on income.............................. (172.5) 10.4 6.6 (17.3)(t) (172.8)
--------- ------ ------------- ---------- ----------- ---------
Income from continuing operations............ $ 222.0 $ 16.8 $ (15.8) $(16.1) $ 10.3 $ 217.2
--------- ------ ------------- ---------- ----------- ---------
--------- ------ ------------- ---------- ----------- ---------
Earnings per common share from continuing
operations, fully diluted................... $ 1.05
---------
---------
Weighted average number of shares
outstanding, fully diluted (in 000's)....... 214,938
---------
---------
Ratio of earnings to fixed charges........... 2.0x
---------
---------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
20
<PAGE>
TENET HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED AUGUST 31, 1994
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
TENET QUARTER AMH QUARTER
ENDED ENDED TENET TENET/AMH
AUGUST 31, AUGUST 31, ADJUSTMENTS MERGER
1994 1994 (F) ADJUSTMENTS
------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Net operating revenues....................... $ 662.8 $ 638.2 $(16.6) $--
Operating expenses:
Salaries and benefits...................... 283.2 234.0 (5.9)
Supplies................................... 80.6 92.1
Provision for doubtful accounts............ 26.1 47.4 (0.4)
Other operating expenses................... 150.1 137.8 (6.8)
Depreciation............................... 34.3 30.9 (0.6) (5.6)(j)
Amortization............................... 3.6 10.0 (0.2) 5.7(l)
------------- ------ ----------- -----------
Operating income............................. 84.9 86.0 (2.7) (0.1)
Interest expense, net of capitalized
portion..................................... (17.7) (40.0) (25.5)(n)
Investment earnings.......................... 6.0 0.8 (1.1)(r)
Equity in earnings of unconsolidated
affiliates.................................. 6.3 (0.1)
Minority interest expense in income of
consolidated subsidiaries................... (2.0) (0.9) 0.4
Net gain on disposals of facilities and
long-term investments....................... 29.5 (29.5)
------------- ------ ----------- -----------
Income from continuing operations before
income taxes................................ 107.0 45.9 (31.9) (26.7)
Taxes on income.............................. (43.0) (19.0) 12.4 8.2(s)
------------- ------ ----------- -----------
Income from continuing operations............ $ 64.0 $ 26.9 $(19.5) $(18.5)
------------- ------ ----------- -----------
------------- ------ ----------- -----------
Earnings per common share from continuing
operations, fully diluted................... $ 0.36
-------------
-------------
Weighted average number of shares
outstanding, fully diluted (in 000's)....... 180,153 33,157(u)
------------- -----------
------------- -----------
Ratio of earnings to fixed charges........... 5.0x
-------------
-------------
<CAPTION>
VENCOR'S
GENERAL INTERNATIONAL ACQUISITION
HOSPITAL OPERATIONS OF
TENET/AMH ACQUISITIONS DIVESTED HILLHAVEN PRO FORMA PRO FORMA
COMBINED (H) (I) (C) ADJUSTMENTS COMBINED
--------- ------------ ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues....................... $1,284.4 $ 92.5 $ (49.5) $-- $ -- $1,327.4
Operating expenses:
Salaries and benefits...................... 511.3 42.7 (20.3) 533.7
Supplies................................... 172.7 21.4 (4.5) 189.6
Provision for doubtful accounts............ 73.1 6.0 (0.2) 78.9
Other operating expenses................... 281.1 9.9 (11.8) 279.2
Depreciation............................... 59.0 6.6 (3.2) (3.4)(k) 59.0
Amortization............................... 19.1 (0.5) 0.6(m) 19.2
--------- ----- ------ ----- ----- ---------
Operating income............................. 168.1 5.9 (9.0) 2.8 167.8
Interest expense, net of capitalized
portion..................................... (83.2) (1.8) 1.9 1.8(o) (79.1)
7.3(p)
(5.1)(q)
Investment earnings.......................... 5.7 (0.3) (1.2) 4.2
Equity in earnings of unconsolidated
affiliates.................................. 6.2 (0.1) (3.2) 2.9
Minority interest expense in income of
consolidated subsidiaries................... (2.5) 1.7 (0.8)
Net gain on disposals of facilities and
long-term investments.......................
--------- ----- ------ ----- ----- ---------
Income from continuing operations before
income taxes................................ 94.3 4.1 (5.8) (4.4) 6.8 95.0
Taxes on income.............................. (41.4) 1.9 1.3 (4.3)(t) (42.5)
--------- ----- ------ ----- ----- ---------
Income from continuing operations............ $ 52.9 $ 4.1 $ (3.9) $ (3.1) $ 2.5 $ 52.5
--------- ----- ------ ----- ----- ---------
--------- ----- ------ ----- ----- ---------
Earnings per common share from continuing
operations, fully diluted................... $ 0.26 $ 0.25
--------- ---------
--------- ---------
Weighted average number of shares
outstanding, fully diluted (in 000's)....... 213,310 213,310
--------- ---------
--------- ---------
Ratio of earnings to fixed charges........... 2.0x
---------
---------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
21
<PAGE>
TENET HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED AUGUST 31, 1995
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
HISTORICAL VENCOR'S
TENET QUARTER GENERAL INTERNATIONAL ACQUISITION
ENDED TENET HOSPITAL OPERATIONS OF
AUGUST 31, ADJUSTMENTS ACQUISITIONS DIVESTED HILLHAVEN PRO FORMA
1995 (F) (H) (I) (C) ADJUSTMENTS
------------- ----------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues....................... $ 1,283.9 $-- $ 87.2 $ (33.9) $-- $ --
Operating expenses:
Salaries and benefits...................... 502.2 39.9 (15.0)
Supplies................................... 178.7 20.6 (3.9)
Provision for doubtful accounts............ 67.3 5.7 (0.1)
Other operating expenses................... 281.6 9.2 (7.4)
Depreciation............................... 61.4 6.2 (2.2) (3.4)(k)
Amortization............................... 18.8 (0.2) 0.6(m)
------------- ----------- ----- ------ ----- -----
Operating income............................. 173.9 5.6 (5.1) 2.8
Interest expense, net of capitalized
portion..................................... (77.1) (1.8) 0.3 1.8(o)
4.4(p)
(5.1)(q)
Investment earnings.......................... 7.3 (0.2) (1.7)
Equity in earnings of unconsolidated
affiliates.................................. 6.9 (0.1) (3.9)
Minority interest in income of consolidated
subsidiaries................................ (5.6) 1.5
Net gain on disposals of facilities and
long-term investments....................... 123.5 (123.5)
------------- ----------- ----- ------ ----- -----
Income from continuing operations before
income taxes................................ 228.9 (123.5) 3.8 (3.6) (5.6) 3.9
Taxes on income.............................. (110.6) 64.1 0.1 1.3 1.6 (3.0)(t)
------------- ----------- ----- ------ ----- -----
Income from continuing operations............ $ 118.3 $(59.4) $ 3.9 $ (2.3) $ (4.0) $ 0.9
------------- ----------- ----- ------ ----- -----
------------- ----------- ----- ------ ----- -----
Earnings per common share from continuing
operations, fully diluted................... $ 0.56
-------------
-------------
Weighted average number of shares
outstanding, fully diluted (in 000's)....... 215,839
-------------
-------------
Ratio of earnings to fixed charges........... 3.4x
-------------
-------------
<CAPTION>
PRO FORMA
---------
<S> <C>
Net operating revenues....................... $1,337.2
Operating expenses:
Salaries and benefits...................... 527.1
Supplies................................... 195.4
Provision for doubtful accounts............ 72.9
Other operating expenses................... 283.4
Depreciation............................... 62.0
Amortization............................... 19.2
---------
Operating income............................. 177.2
Interest expense, net of capitalized
portion..................................... (77.5)
Investment earnings.......................... 5.4
Equity in earnings of unconsolidated
affiliates.................................. 2.9
Minority interest in income of consolidated
subsidiaries................................ (4.1)
Net gain on disposals of facilities and
long-term investments.......................
---------
Income from continuing operations before
income taxes................................ 103.9
Taxes on income.............................. (46.5)
---------
Income from continuing operations............ $ 57.4
---------
---------
Earnings per common share from continuing
operations, fully diluted................... $ 0.27
---------
---------
Weighted average number of shares
outstanding, fully diluted (in 000's)....... 215,839
---------
---------
Ratio of earnings to fixed charges........... 2.1x
---------
---------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Combined Statements of Operations for the
quarter ended August 31, 1994 and the year ended May 31, 1995 do not give effect
to certain cost savings that may be realized as a result of the Merger,
estimated by Tenet management to be approximately $60.0 million annually
beginning in fiscal 1996 (before any severance or other costs of implementing
such efficiencies). The anticipated savings are based on estimates and
assumptions made by Tenet that are inherently uncertain, though considered
reasonable by Tenet, and are subject to significant business, economic and
competitive uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond the control of management. There can be no
assurance that such savings, if any, will be achieved.
The adjustments to arrive at the Unaudited Pro Forma Condensed Combined
Financial Statements are as follows:
<TABLE>
<S> <C> <C>
To reflect the September 29, 1995 acquisition of certain assets and liabilities of
Providence under the purchase method of accounting. The assets acquired and liabilities
assumed in this transaction are recorded at their estimated fair values. The excess of
the aggregate purchase price of $80.3 million (including the purchase or assumption of
working capital) over the estimated fair values of the net assets acquired is $28.0
(a) million, which will be amortized on a straight-line basis over 40 years. The acquisition
of Providence was financed using a portion of the Company's Senior Revolving Debt.
To reflect the divestiture of the Company's holdings in Australia and Malaysia and the
probable sale of the Company's holdings in Thailand, which sale currently is pending.
These holdings are classified as assets held for sale at August 31, 1995. The Company
realized net proceeds of approximately $68.3 million from the sale of its holdings in
Australia, approximately $12.0 million from the sale of its holdings in Malaysia and
expects to realize net cash consideration of approximately $20.8 million from the
probable sale of its holdings in Thailand. Pursuant to the terms of the Credit
Agreement, 75% of the net proceeds from the divestiture of these assets must be applied
to the prepayment of the Senior Term Debt and the balance applied to reduce the amount
(b) outstanding under the Company's Senior Revolving Debt.
To reflect Vencor's acquisition of Hillhaven, pursuant to which each Hillhaven common
share was exchanged for 0.935 share of Vencor Common Stock. Tenet had held 8,878,147
shares of Hillhaven Common Stock and had accounted for its interest in Hillhaven using
the equity method of accounting. As a result of Vencor's acquisition of Hillhaven, Tenet
received 8,301,067 shares of Vencor Common Stock in exchange for its interest in
Hillhaven. Because Tenet owns less than 20% of Vencor and does not have the ability to
exercise significant influence over Vencor, Tenet will account for its interest in
Vencor using the cost method of accounting for investments in unconsolidated affiliates.
In addition, as part of Vencor's acquisition of Hillhaven, Tenet received cash
consideration of approximately $91.8 million upon the redemption of its Hillhaven Series
C Preferred Stock and Hillhaven Series D Preferred Stock. These proceeds, net of certain
expenses related to the transaction, were applied to repay secured bank loans under the
Company's Credit Agreement. In connection with Vencor's acquisition of Hillhaven, Tenet
recognized a net gain on the exchange of securities of approximately $101.7 million,
which gain has not been reflected in the Unaudited Pro Forma Condensed Combined
(c) Statements of Operations. The Unaudited Pro Forma Condensed Combined Statements of
Operations reflect adjustments made to eliminate the dividends on the Hillhaven Series C
and Series
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C>
D Preferred Stock as well as the Company's equity in the earnings of Hillhaven that had
been recognized by Tenet using the equity method of accounting for investments in
unconsolidated affiliates. A summary of this adjustment follows:
Fair value of Vencor Common Stock on exchange date......................... $ 257.3
Carrying value of Hillhaven Common and Preferred Stock..................... (164.7)
---------
Net increase in investments and other assets............................... 92.6
Cash consideration received upon the redemption of Hillhaven Preferred
Stock.................................................................... 91.8
Transaction fees and expenses.............................................. (10.0)
---------
Pretax gain on exchange.................................................... 174.4
Provision for income taxes ($64.4 million of which is deferred)............ (72.7)
---------
Increase in other shareholders' equity..................................... $ 101.7
---------
---------
To reflect the October 1995 Senior Notes Offering, which notes were priced to yield
8.68%, and the application of the net proceeds therefrom to repay secured bank loans
under the Company's Credit Agreement, which loans had an average historical interest
rate of 7.3%. Debt issuance costs of $13.3 million incurred with respect to the Senior
(d) Notes Offering will be amortized over the life of the notes. See "Historical and Pro
Forma Capitalization."
To reflect the consummation of this Offering and the application of the net proceeds
therefrom as described under "Use of Proceeds." Debt issuance costs of $10.0 million
(e) incurred with respect to this Offering will be amortized over the life of the Notes. See
"Historical and Pro Forma Capitalization."
To adjust the results of operations of Tenet to reflect: (i) the August 1994 sale of
approximately 75% of the common stock of TRC; (ii) the elimination of restructuring
charges recorded by Tenet of $36.9 million; and (iii) the elimination of nonrecurring
gains on disposals of facilities and long-term investments recorded by Tenet of $29.5
(f) million in the quarter ended August 31, 1994 and $123.5 million in the quarter ended
August 31, 1995.
To eliminate nonrecurring costs recorded by AMH in connection with the Merger,
(g) principally related to the buy-out of employee stock options, employee benefit costs,
and professional fees.
To reflect the historical operations of Mercy+Baptist prior to its acquisition by the
Company in August 1995 as well as the historical operations of Providence, which was
(h) acquired by the Company in September 1995.
To reflect the divestiture of the Company's Mount Elizabeth Hospital, East Shore
Hospital and related healthcare businesses in Singapore, and a related net gain of
approximately $123.5 million, as well as the sale of the Company's holdings in Australia
and Malaysia and the probable sale of the Company's holdings in Thailand, which sale
currently is pending. In fiscal 1995, the divested international operations of the
Company generated net operating revenues and EBITDA of $203.4 million and $52.9 million,
respectively. In fiscal 1994, these operations generated net operating revenues and
(i) EBITDA of $175.2 million and $46.3 million, respectively. Capital expenditures related
to these operations were $50.0 million in fiscal 1995 and $28.7 million in fiscal 1994.
(j) To adjust AMH depreciation expense for the nine months ended February 28, 1995 as
follows:
To reflect additional depreciation on the stepped-up values of AMH's
buildings and equipment.................................................. $ 2.3
To conform the estimated useful lives of the acquired buildings and
equipment to the lives used by Tenet..................................... (19.2)
---------
Net decrease in depreciation expense..................................... $ (16.9)
---------
---------
The adjustments made for the quarter ended August 31, 1994 are equal to one third of the
amounts above.
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
To adjust depreciation expense to reflect the estimated fair value of the buildings and
equipment acquired in the purchases of Mercy+Baptist and Providence, and to conform the
(k) estimated useful lives of the acquired buildings and equipment to those used by Tenet.
To reflect amortization of the excess of the purchase price of AMH over the fair values
(l) of the net assets acquired using the straight-line method over 40 years.
To reflect the amortization of the excess of the purchase price of Mercy+Baptist and
(m) Providence over the estimated fair values of the net assets acquired, using the
straight-line method over 40 years.
To adjust interest expense, including the amortization of deferred financing costs over
(n) the term of the related indebtedness, for the nine months ended February 28, 1995, as
follows:
Secured bank loans under the Credit Facility (aggregate principal of
$2,021.6 million)........................................................ $ 113.2
9 5/8% Senior Notes due 2002 (aggregate principal of $300.0 million)....... 22.3
10 1/8% Senior Notes due 2005 (aggregate principal of $900.0 million)...... 70.1
To reduce interest expense to give effect to the refinancing and the
repayment of certain indebtedness in connection with the Merger
(aggregate principal of $1,701.9 million at a weighted average historical
interest rate of 9.6%)................................................... (124.4)
To reduce interest expense to reflect the amortization of the adjustment to
fair value of AMH indebtedness not refinanced............................ (4.6)
---------
Net increase in interest expense......................................... $ 76.6
---------
---------
The adjustments made for the quarter ended August 31, 1994 are equal to one third of the
amounts above.
To reflect the elimination of historical interest expense incurred by Mercy+Baptist and
(o) by Providence in connection with indebtedness not assumed by Tenet.
To reflect the reduction in interest expense from the application of an aggregate of
$402.2 million in net proceeds from (y) the sale of certain of the Company's
international assets, as described in notes (b) and (i) above, and (z) the redemption of
the Company's Series C and Series D Preferred Stock of Hillhaven, as described in (c)
(p) above, to repay secured bank loans under its Credit Agreement with an average historical
interest rate of 7.3%.
To reflect interest expense on borrowings under the Senior Revolving Debt, with an
assumed interest rate of 7.3%, used to finance the acquisitions of Mercy+Baptist and
(q) Providence, as well as to reflect the consummation of the Senior Notes Offering and this
Offering.
To reflect an estimated reduction of interest income related to a lower balance of cash
(r) and cash equivalents available for investment.
To reflect income taxes at an assumed rate of 39% on the pro forma adjustments described
(s) in (j), (n) and (r) above. Amortization of goodwill in the Merger is not deductible for
tax purposes.
To reflect income taxes at an assumed rate of 39% on the pro forma adjustments described
(t) in (h), (k), (m), (o), (p) and (q) above.
Represents the additional weighted average common shares that would have been
(u) outstanding upon consummation of the Merger.
</TABLE>
25
<PAGE>
VENCOR
According to Vencor's publicly available documents, Vencor operated an
integrated network of healthcare services primarily focused on the needs of the
elderly, including 311 nursing centers, a contract services business which
provides respiratory therapy and subacute services primarily to nursing centers,
56 institutional pharmacy outlets and 23 retirement communities with 3,122
apartments. The Vencor Common Stock is described in Vencor's Registration
Statement on Form 8-A, filed with the Commission on January 22, 1992, and
Vencor's Preferred Stock Purchase Rights are described in Vencor's Registration
Statement on Form 8-A, filed with the Commission on July 21, 1993, and in a
Current Report on Form 8-K filed with the Commission on August 12, 1995.
Vencor is subject to the informational requirements of the Exchange Act.
Accordingly, Vencor files reports, proxy statements and other information with
the Commission under file number 1-10989. Copies of such reports, proxy
statements and other information may be inspected and copied at the Commission
locations listed under "Available Information" and at the offices of the NYSE,
20 Broad Street, New York, New York 10005. The following are the reports filed
by Vencor with the Commission since December 31, 1994: (1) Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (the "Vencor 10-K") filed with
the Commission on March 29, 1995; (2) Amendment to the Vencor 10-K on Form
10-K/A filed with the Commission on August 12, 1995; (3) the portions of the
Vencor Proxy Statement for the Annual Meeting of Shareholders held on May 9,
1995, filed with the Commission on March 31, 1995, that have been incorporated
by reference into the Vencor 10-K; (4) the portions of the Vencor Annual Report
to Shareholders for the fiscal year ended December 31, 1994, filed with the
Commission on March 30, 1995, that have been incorporated by reference into the
Vencor 10-K; (5) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995; (6) Amendment to the Quarterly
Report for the quarter ended March 31, 1995 on Form 10-Q/A filed with the
Commission on August 12, 1995 filed with the Commission on May 11, 1995, August
15, 1995 and November 15, 1995, respectively; and (7) Current Reports on Form
8-K filed with the Commission on April 24, 1995, May 5, 1995, August 12, 1995,
August 23, 1995, September 1, 1995 and November 29, 1995.
RELATIONSHIP BETWEEN THE COMPANY AND VENCOR
At November 30, 1995, the Company owned 8,301,067 shares of Vencor Common
Stock which represented approximately 11.8% of the outstanding Vencor Common
Stock, with sole voting and investment power over all such shares. In addition,
the Company and Vencor have entered into various intercompany transactions and
arrangements. The Company believes that it is not an affiliate of Vencor. The
Company currently holds certain registration rights in connection with the
shares of Vencor Common Stock that it owns. Pursuant to the terms of the
indenture governing the Notes, however, the Notes are not exchangeable, except
in certain circumstances, into the underlying shares of Vencor Common Stock
until November 6, 1997. Accordingly, as a subsequent sale of Vencor Common Stock
would be permitted at that time under certain exemptions to registration, at
this time the Company does not anticipate exercising such rights. In the event
that a registration statement is required to effectuate a conversion of the
Notes offered hereby into Vencor Common Stock, the Company may then attempt to
exercise such registration rights or may exercise its obligation to satisfy the
exchange right in cash.
Vencor has no obligation with respect to the Notes or amounts to be paid to
the holders of the Notes, including any obligation to take into consideration
for any reason the needs of the Company or the holders, other than normal
fiduciary duties to Tenet as a shareholder. Vencor will not receive any of the
proceeds of the Offering of the Notes made hereby and is not responsible for the
determination of the time of, prices for or quantities of the Notes to be issued
or the optional redemption of such Notes.
Pursuant to an agreement, dated as of August 22, 1995, between the Company,
Hillhaven and Vencor (the "Three Party Agreement"), Vencor agreed to provide the
Company with registration rights for all of the Vencor Common Stock received by
the Company pursuant to Vencor's acquisition of Hillhaven. The Three Party
Agreement provides that Vencor will bear certain costs and expenses incurred in
connection with up to three registrations requested by the Company of the
Company's shares of Vencor Common Stock, and, in connection with any offering
pursuant to such a request, that Vencor will indemnify the Company, its
26
<PAGE>
affiliates, its officers and directors, each underwriter and each person who
controls any such underwriter within the meaning of Section 15 of the Securities
Act, against certain liabilities, including liabilities under the Securities
Act. The Three Party Agreement also provides that the Company shall not, for the
period ending seven years following the consummation of the Hillhaven
Acquisition, (i) acquire additional shares of Vencor Common Stock, (ii)
participate in any solicitation of proxies with respect to Vencor Common Stock,
(iii) participate in a group with respect to Vencor Common Stock, (iv) deposit
its shares of Vencor Common Stock into a voting trust or (v) otherwise act to
seek to control or influence Vencor.
On January 31, 1990, the Company and Hillhaven entered into a Guarantee
Reimbursement Agreement (the "Guarantee Reimbursement Agreement") which provided
that the Company guarantee certain liabilities of Hillhaven in consideration for
a fee. Upon Vencor's acquisition of Hillhaven, the rights and duties of
Hillhaven under the agreement were assumed by Vencor. At May 31, 1995 and 1994,
an aggregate total of approximately $182.0 million and $279.0 million,
respectively, of long-term debt, leases and contingent liabilities were
guaranteed by the Company and the Company received fees of approximately $4.6
million, $6.7 million and $9.6 million during fiscal years 1995, 1994 and 1993,
respectively.
Pursuant to the Management Agreement, dated January 31, 1990, between the
Company and Hillhaven (the "Management Agreement"), which Management Agreement
was assumed by Vencor, Vencor provides management, consulting and advisory
services in connection with the operation of seven nursing centers owned or
leased by the Company or its subsidiaries. Under the Management Agreement, the
Company must pay management fees and reimburse certain costs and expenses. Such
amounts totalled approximately $3.1 million, $3.2 million and $2.4 million in
fiscal years 1995, 1994 and 1993, respectively.
Vencor is currently leasing certain nursing centers from Health Care
Property Partners, a joint venture in which the Company has a minority interest.
Lease payments by Vencor to this joint venture amounted to approximately $9.6
million, $9.9 million and $9.7 million for the years ended May 31, 1995, 1994
and 1993, respectively.
Vencor is operated and managed by Vencor's management completely independent
from the Company. The Company does not consider that its ownership of Vencor
Common Stock, or any other aspect of its relationship with Vencor, affords it
the power to control the management or policies of Vencor, nor that the Company
and Vencor are under common control. Accordingly, the Company believes that it
is not an affiliate of Vencor.
27
<PAGE>
PRICE RANGE OF VENCOR COMMON STOCK AND DIVIDENDS
Vencor Common Stock has been listed and traded on the NYSE under the symbol
"VC" since February 4, 1992. Prior to such time, Vencor Common Stock was listed
and traded on NASDAQ under the symbol "VCOR". On November 30, 1995, there were
approximately 7,800 holders of record of Vencor Common Stock.
The following table sets forth, for the calendar quarters indicated (ended
March 31, June 30, September 30 and December 31), the range of high and low
sales prices of Vencor Common Stock as reported on the NYSE Composite Tape. The
prices in the table for Vencor Common Stock are adjusted to reflect a three-for-
two stock split effected on October 25, 1994.
<TABLE>
<CAPTION>
VENCOR COMMON STOCK
-----------------
HIGH LOW
----------- -----------
<S> <C> <C>
1993:
First quarter.............................................................. $ 24 1/8 $ 14
Second quarter............................................................. 19 1/2 13 7/8
Third quarter.............................................................. 20 7/8 13
Fourth quarter............................................................. 19 7/8 14 3/8
1994:
First quarter.............................................................. 24 7/8 19 1/8
Second quarter............................................................. 24 20
Third quarter.............................................................. 30 3/8 22 3/8
Fourth quarter............................................................. 30 5/8 25 3/4
1995:
First quarter.............................................................. 37 27 1/8
Second quarter............................................................. 38 28 1/2
Third quarter.............................................................. 36 1/4 28 1/4
Fourth quarter (through December 8)........................................ 33 3/8 26 1/4
</TABLE>
On December 8, 1995, the last reported sales price of Vencor Common Stock on
the NYSE Composite Tape was $33.375 per share.
Vencor has not paid a dividend on outstanding shares of Vencor Common Stock.
28
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to an Indenture (the "Indenture") between
the Company and The Bank of New York as Trustee (the "Trustee") and will be
entitled to the benefits of an escrow agreement (the "Escrow Agreement") between
the Company and The Bank of New York, as escrow agent (the "Escrow Agent"). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of the proposed form of Indenture and Escrow Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
definitions of certain terms used in the following summary are set forth below
under "-- Certain Definitions." As used in this Description of Notes, the term
"Company" refers to Tenet Healthcare Corporation and not to any of its
Subsidiaries.
The Notes will be general unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior and Senior Subordinated
Debt of the Company. As of August 31, 1995, on a pro forma basis as described
above, the aggregate outstanding principal amount of Senior and Senior
Subordinated Debt of the Company would have been approximately $3.1 billion. In
addition, the Notes will be effectively subordinated to all indebtedness and
other obligations of the Company's subsidiaries, which, at August 31, 1995 on a
pro forma basis, would have been approximately $1.4 billion (excluding trade
payables of $257.6 million at August 31, 1995). See "Historical and Pro Forma
Capitalization."
The operations of the Company are conducted through its subsidiaries and,
therefore, the Company is dependent upon the cash flow of its subsidiaries to
meet its obligations, including its obligations under the Notes. The Notes
effectively will be subordinated to all outstanding Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's subsidiaries. Any right of the Company to receive assets of any of
its subsidiaries upon the latter's liquidation or reorganization (and the
consequent right of the Holders of Notes to participate in those assets)
effectively will be subordinated to the claims of that subsidiary's creditors,
except to the extent that the Company itself is recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interest in the assets of such subsidiary and any Indebtedness
of such subsidiary senior to that held by the Company. At August 31, 1995, the
outstanding Indebtedness and other obligations of the Company's subsidiaries
were approximately $1.4 billion, excluding trade payables of $257.6 million at
August 31, 1995, and intercompany Indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be general unsecured obligations of the Company limited in
aggregate principal amount to $ million and will mature on , 2005.
Interest on the Notes will accrue at the rate per annum set forth on the cover
page of this Prospectus and will be payable semiannually in arrears on
and of each year, commencing on , 1996, to Holders of record on
the immediately preceding and , respectively. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of original issuance.
Interest on the Notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to the Holders of the
Notes at their respective addresses set forth in the register of holders of
Notes; provided that all payments with respect to Notes, the Holders of which
have given wire transfer instructions, on or prior to the relevant record date,
to the paying agent, will be required to be made by wire transfer of immediately
available funds to the accounts specified
29
<PAGE>
by such Holders. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
EXCHANGE RIGHTS
The Notes are exchangeable for shares of Vencor Common Stock at any time or
from time to time on or after November 6, 1997 and prior to maturity of the
Notes, unless previously redeemed, at the Exchange Rate, subject to adjustment
under the circumstances described below and subject to the Company's right to
pay cash equal to the Market Price of the shares of Vencor Common Stock for
which such Notes are exchangeable in lieu of delivery of such shares as
described below. The Notes will be exchangeable prior to November 6, 1997 only
in the event of a merger, consolidation or liquidation of Vencor pursuant to
which all shares of Vencor Common Stock held by the Exchange Agent are converted
into or exchanged for cash or other securities registered under the Securities
Act. No payment or adjustment will be made on exchange of any Note for interest
accrued thereon or dividends on any shares of Vencor Common Stock; provided that
if a Note is surrendered for exchange after the record date for an interest
payment and on or before the date for payment of interest, then notwithstanding
such exchange, the interest falling due on such interest payment date will be
paid to the person in whose name the Note is registered at the close of business
on such record date. In the event the Notes are called for redemption, the
exchange rights will terminate at the close of business on the business day
preceding the redemption date (or, in the case of a call for redemption within
ten days following a tender or exchange offer for shares of Vencor Common Stock
(or any other securities deliverable upon exchange) on the last business day
preceding the fifteenth day after the mailing of the notice of redemption).
In order to exercise the right of exchange, the Holder of any Note must
surrender his or her Note at the office or agency of the Company maintained for
such purpose in New York, New York, which initially will be the corporate trust
office of the Escrow Agent. Each Note to be surrendered must be accompanied by
written notice to the Company and the Escrow Agent that the Holder elects to
exchange such Note. The Indenture provides that delivery of certificates for
shares of Vencor Common Stock (and any securities, property or cash apportioned
thereto as described below) may be delayed at the request of the Company in
order to effectuate the calculations of any adjustment to the number of shares
of Vencor Common Stock and securities, property and cash apportioned thereto
deliverable upon exchange, to obtain any certificate representing securities to
be delivered or to complete any reapportionment of the Vencor Common Stock (and
any securities, property or cash apportioned thereto) which is required by the
Indenture. No fractional shares of Vencor Common Stock will be delivered on any
exchange of Notes and in lieu thereof a cash adjustment based on the Market
Price of Vencor Common Stock will be paid. Any shares of Vencor Common Stock, or
any other securities or property held in escrow for the benefit of Holders of
Notes, remaining in escrow after the expiration of the right to surrender Notes
for exchange and when all other obligations of the Company under the Escrow
Agreement shall have been satisfied, will be returned to and become the property
of the Company and/or its Permitted Transferees, if any (as defined below under
"-- Sale or Transfer of Vencor Common Stock") as their interests may appear.
In lieu of delivering certificates representing shares of Vencor Common
Stock in exchange for any Notes, the Escrow Agent shall, if so directed by the
Company, pay to the Holder surrendering such Notes an amount in cash equal to
the Market Price of the shares of Vencor Common Stock for which such Notes are
exchangeable, determined as of the date of receipt by the Escrow Agent of the
notice of exchange relating to such Notes, plus any cash or other property
theretofore apportioned to such shares of Vencor Common Stock. Prior to so
directing the Escrow Agent to make any such cash payment, the Company shall
deposit with the Escrow Agent the cash so payable.
The Company or its Permitted Transferee will be entitled to all cash
dividends paid on the shares of Vencor Common Stock held for exchange by the
Escrow Agent, other than dividends paid pursuant to a plan of liquidation,
partial liquidation, recapitalization or restructuring or other extraordinary
cash dividends. The Company or its Permitted Transferee also will be entitled to
all interest payments on any debt securities
30
<PAGE>
held for exchange by the Escrow Agent which are issued in exchange for or with
respect to Vencor Common Stock held by the Escrow Agent, including pursuant to
any merger or consolidation of Vencor or in connection with any sale of all or
substantially all of the assets of Vencor.
If the number of shares of Vencor Common Stock shall be increased by a stock
split or reclassification or by way of a stock dividend or decreased by a
reverse stock split, the Exchange Rate will be proportionately adjusted.
If any distribution of cash, securities or other property is made with
respect to the shares of Vencor Common Stock or other property held for exchange
by the Escrow Agent (other than cash dividends payable on the shares of Vencor
Common Stock and interest paid on debt securities to which the Company or its
Permitted Transferee is entitled as described above, the distributions described
in the preceding paragraph or any securities or other property received in a
merger or consolidation of Vencor or in connection with any sale of all or
substantially all of the assets of Vencor as described in the next paragraph) or
if transferable subscription rights, options, warrants or other similar rights
are granted to the Escrow Agent or the Company or its Permitted Transferee in
respect of the shares of Vencor Common Stock or other property held for exchange
by the Escrow Agent, the Company will cause any such securities, other property,
cash, and rights that it or any Permitted Transferee receives to be deposited
with the Escrow Agent and the Escrow Agent will notify the Company of any such
securities, other property, cash and rights that it receives. The Company will
direct the Escrow Agent, to the extent such securities, other property and
rights are transferable, to sell all such securities, other property and rights
for cash. The Escrow Agent will hold the cash proceeds for distribution pro rata
with the Vencor Common Stock or other securities to be delivered upon exchange.
To the extent such securities, other property or rights are nontransferable, the
Company, at its option, will either (a) cause such securities, other property or
rights to be distributed to the Holders of the Notes, (b) provide the Escrow
Agent with funds for the exercise of any such rights, or (c) direct the Escrow
Agent to retain such securities, other property or rights for the benefit of the
Holders of the Notes.
In the case of any merger or consolidation of Vencor or any sale of all or
substantially all of the assets of Vencor, the Holder of any Note surrendered
for exchange thereafter will be entitled to receive the kind and amount of
shares of stock and other securities and property receivable upon or in
connection with such transaction by a Holder of the number of shares of Vencor
Common Stock for which such Note might have been exchanged immediately prior to
such transaction, as well as a pro rata share of any cash or property held for
exchange by the Escrow Agent in accordance with the preceding paragraph.
The Company is required to give to Holders of Notes prior notice, as
promptly as practicable after notice is received by the Company, of certain
dividends on the shares of Vencor Common Stock required to be held for the
benefit of the Holders, the granting by Vencor of certain rights, options or
warrants to Holders of shares of Vencor Common Stock, reclassification of the
shares of Vencor Common Stock, certain mergers involving Vencor or the sale of
all or substantially all of the assets of Vencor and the dissolution,
liquidation or winding up of Vencor.
Any cash held by the Escrow Agent that is deliverable upon exchange of the
Notes will be invested in securities issued or guaranteed by the United States
of America or any agency or instrumentality thereof, provided that such
obligations shall mature by their terms within 12 months following their
purchase. Any interest or gain on such investments will be for the benefit of
the Company, and the Company will be responsible for any losses on such
investments.
To the extent that Notes are redeemed prior to exchange, the Company and,
upon demand of the Company, any applicable Permitted Transferee, will be
entitled to receive from the Escrow Agent such number of shares of Vencor Common
Stock and such amount of cash or the property, if any, held by the Escrow Agent
for exchange which exceed the number of shares of Vencor Common Stock and amount
of cash or other property required to be held by the Escrow Agent for the
exchange of all Notes remaining outstanding after such redemption.
If the Company calls the Notes in whole or in part for redemption with a
notice given within ten days after the commencement of a tender offer or
exchange offer for shares of Vencor Common Stock (or any
31
<PAGE>
other securities deliverable upon exchange), the Company will have the right
(but not the obligation) to cause the Escrow Agent to tender for its own account
or for the account of a Permitted Transferee shares of Vencor Common Stock (or
any other securities deliverable upon exchange) into the offer. The number of
shares of Vencor Common Stock tendered may not include the number of shares of
Vencor Common Stock deliverable upon exchange of the aggregate principal amount
of outstanding Notes after giving effect to such redemption. The Company must,
to the extent Notes so called for redemption are surrendered for exchange on or
before the last business day preceding the fifteenth day after the mailing of
the notice of redemption, cause to be withdrawn from the offer, or otherwise
cause to be delivered to the Escrow Agent, a number of shares of Vencor Common
Stock sufficient to permit their delivery in exchange for such Notes. The
proceeds of the sale of shares of Vencor Common Stock pursuant to any such
tender or exchange offer and any shares of Vencor Common Stock returned
following the expiration or termination of such offer, which are no longer
deliverable in exchange for Notes so called for redemption, will be for the
Company's benefit and will not be subject to the Escrow Agreement.
The Company will not be obligated, however, and the Escrow Agent shall not
have the authority, except as described below, to exchange on a voluntary basis
(for example, in the context of a cash tender offer) any of the Vencor Common
Stock for cash, securities or other property. In certain situations, this could
be detrimental to the interests of the Holders of the Notes and might require
such Holders to exchange their Notes for shares of Vencor Common Stock in order
to participate in any such voluntary exchange. Except in the event of a merger,
consolidation or liquidation of Vencor pursuant to which all shares of Vencor
Common Stock held by the Exchange Agent are converted into or exchanged for cash
or other securities registered under the Securities Act, Holders will not have
the right to exchange their Notes prior to November 6, 1997. In certain
circumstances including, without limitation, a cash merger of Vencor, it is
possible that the shares of Vencor Common Stock which theretofore might have
been received in exchange for the Notes will no longer be available for
exchange. In such event, only the cash, securities or other property received
upon the exchange of the shares of Vencor Common Stock (exclusive of any
interest or dividends payable with respect thereto) will be available upon
exchange of the Notes to the Holders thereof.
The right of a Holder to exchange his or her Note for shares of Vencor
Common Stock (or other securities, property or cash) held by the Escrow Agent
could be adversely affected in the event of the bankruptcy, insolvency or
liquidation of the Company. The shares of Vencor Common Stock (or other
securities, property or cash) held by the Escrow Agent will be deemed to be an
asset of the Company subject to the claims of its general creditors. The right
of a Holder to exchange his or her Note for shares of Vencor Common Stock (or
other securities, property or cash) held by the Escrow Agent could be adversely
affected in the event of bankruptcy, insolvency or liquidation of a Permitted
Transferee if such shares, securities or cash were determined to be an asset of
the Permitted Transferee; however, the Company shall remain liable in the event
of the bankruptcy, insolvency or liquidation of the Permitted Transferee to
perform all of the Company's duties and obligations under the Indenture and the
Escrow Agreement.
ESCROW OF EXCHANGE PROPERTY
Prior to the issuance of the Notes, the Company will deposit the shares of
Vencor Common Stock with the Escrow Agent to provide for the exchange of all
Notes offered hereby. The Escrow Agent will act as agent for the exchange of
Notes. A breach of the Escrow Agreement will not constitute grounds for
accelerating the indebtedness evidenced by the Notes, but the Holders and the
Trustee will have the remedies provided by the Indenture, including
acceleration, for failure by the Company to cause exchange in accordance with
the Indenture. The Company and its Permitted Transferee will be entitled to vote
their respective shares of the escrowed shares of Vencor Common Stock.
With certain limited exceptions, amendments and modifications of the Escrow
Agreement may be made by the Company and the Escrow Agent with the consent of
the Holders of a majority in principal amount of the outstanding Notes, provided
that without the consent of each Holder affected thereby no such amendment or
modification may affect adversely the right to exchange any Notes for shares of
Vencor Common Stock at the rate and upon the terms set forth in the Indenture or
reduce the percentage of Notes necessary to amend or modify the Escrow
Agreement.
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SALE OR TRANSFER OF VENCOR COMMON STOCK
The Company may, at any time and from time to time in its sole discretion,
sell or transfer all or any part of its right, title and interest in the shares
of Vencor Common Stock to any wholly owned subsidiary of the Company or any
partnership all of the general partners and limited partners of which are the
Company and/ or wholly owned subsidiaries of the Company (any of the foregoing
are hereinafter referred to as a "Permitted Transferee"); PROVIDED THAT (1) such
shares of Vencor Common Stock sold or transferred shall remain subject to the
terms and conditions of the Escrow Agreement and the Indenture; (2) any such
Permitted Transferee must expressly agree in writing to become bound by the
terms and conditions of the Escrow Agreement, as such Escrow Agreement may be
amended from time to time, as though such Permitted Transferee were a party
thereto; (3) the Company shall notify the Escrow Agent in writing at the time of
any such sale or transfer as to the number of shares of Vencor Common Stock so
sold or transferred to such Permitted Transferee; and (4) such sale or transfer
shall be in compliance with federal and all applicable state and foreign
securities laws. Notwithstanding any such sale or transfer, except as otherwise
provided by the Escrow Agreement, the Company shall remain liable to perform all
of its duties and obligations under the Indenture and the Escrow Agreement.
REGISTRATION OF VENCOR COMMON STOCK UNDER THE SECURITIES ACT
The Company has agreed that at any time that a Holder of Notes exchanges
such Notes for certificates representing shares of Vencor Common Stock and an
effective registration statement of Vencor filed with the Commission (or related
qualification under state blue sky or securities laws) would be required in
order for the Escrow Agent to deliver such shares of Vencor Common Stock in the
United States or to a United States Person, the Company will use its reasonable
best efforts to ensure that an effective registration statement of Vencor is on
file with the Commission covering the delivery of such shares of Vencor Common
Stock and any qualification under state blue sky or securities laws required for
such delivery is maintained and, in the event such registration statement is not
effective or such qualification is not maintained, will direct the Escrow Agent
to pay such Holder cash, in lieu of delivering such shares of Vencor Common
Stock, in accordance with the provisions of the Indenture.
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 of all Senior and Senior Subordinated Debt, whether outstanding
on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the Holders of Senior and Senior Subordinated Debt will
be entitled to receive payment in full of all Obligations due in respect to such
Senior and Senior Subordinated Debt (including interest accruing after the
commencement of any such proceeding at the rate specified in the applicable
Senior and Senior Subordinated Debt, whether or not allowed or allowable as a
claim in such proceeding) before the Holders of Notes will be entitled to
receive any payment with respect to the Notes, and until all Obligations with
respect to Senior and Senior Subordinated Debt are paid in full, any
distribution to which the Holders of Notes would be entitled shall be made to
the Holders of Senior and Senior Subordinated Debt (except that Holders of Notes
may receive securities that (i) are subordinated at least to the same extent as
the Notes to Senior and Senior Subordinated Debt and any securities issued in
exchange for Senior and Senior Subordinated Debt, (ii) are unsecured (except to
the extent the Notes are secured), (iii) are not Guaranteed by any Subsidiary of
the Company (except to the extent the Notes are so Guaranteed), and (iv) have a
Weighted Average Life to Maturity and final maturity that are not shorter than
the Weighted Average Life to Maturity of the Notes or any securities issued to
Holders of Senior and Senior Subordinated Debt under the Credit Facility
pursuant to a plan of reorganization or readjustment).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior and Senior
Subordinated Debt occurs and is continuing beyond any applicable period of
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grace or (ii) any other default occurs and is continuing with respect to
Designated Senior and Senior Subordinated Debt that permits holders of the
Designated Senior and Senior Subordinated Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice"), for so long as any Obligations are outstanding under
the Credit Facility, from the Representative thereunder and, thereafter, from
the holders or Representative of any Designated Senior and Senior Subordinated
Debt. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in the case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior and Senior Subordinated Debt has been accelerated. No new
period of payment blockage may be commenced within 360 days after the receipt by
the Trustee of any prior Payment Blockage Notice. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Indenture will further require that the Company promptly notify holders
of Senior and Senior Subordinated Debt if payment of the Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are Holders of Senior and Senior Subordinated Debt.
OPTIONAL REDEMPTION
The Notes will not be subject to redemption prior to , 1998 and will
be redeemable on such date and thereafter at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice to each Holder,
at the redemption prices (expressed as percentages of the principal amount) set
forth below plus accrued and unpaid interest, if any, thereon to the applicable
redemption date (subject to the right of Holders of record on a Record Date to
receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date), if redeemed during the 12-month period beginning on of
the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- -----------
<S> <C>
1998.......................................................... %
1999.......................................................... %
2000.......................................................... %
2001.......................................................... %
2002 and thereafter........................................... 100.000%
</TABLE>
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are then listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that Notes with a principal amount of $1,000 shall not be redeemed in
part. Notice of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions of them called for
redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company will not be required to make any mandatory redemption or sinking
fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Upon the occurrence of a Change of Control Triggering Event, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such
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Holder's Notes pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 100% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of purchase
(the "Change of Control Payment") on a date that is not more than 90 days after
the occurrence of such Change of Control Triggering Event (the "Change of
Control Payment Date"). Within 30 days following any Change of Control
Triggering Event, the Company will mail, or at the Company's request the Trustee
will mail, a notice to each Holder offering to repurchase the Notes held by such
Holder pursuant to the procedures specified in such notice. The Company will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent that such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control Triggering Event.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
and not withdrawn pursuant to the Change of Control Offer, (2) deposit with the
paying agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The paying agent will promptly mail to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control Triggering
Event, the Indenture will not contain provisions that permit the Holders of the
Notes to require that the Company repurchase or redeem the Notes in the event of
a takeover, recapitalization or similar transaction.
The Credit Agreement prohibits the Company from purchasing any Notes more
than twelve months prior to the final maturity thereof, and also provides that
certain change of control events with respect to the Company will constitute a
default thereunder. See "Description of the Credit Agreement." Any future credit
agreements or other agreements relating to Senior and Senior Subordinated Debt
to which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control Triggering Event occurs at a time
when the Company is prohibited from purchasing Notes, the Company could seek the
consent of its lenders to the purchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company does not obtain
such a consent or refinance such borrowings, the Company will remain prohibited
from purchasing Notes. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture which would, in
turn, constitute a default under the Credit Agreement.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental Indenture
in form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
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<PAGE>
conveyance or other disposition shall have been made will have a Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes at maturity or otherwise; (iii) failure by the Company to comply
with the provisions described under the caption "-- Repurchase at the Option of
Holders"; (iv) failure by the Company for 60 days after notice to comply with
any of its other agreements in the Indenture or the Notes; (v) any default
occurs under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Significant Subsidiaries (or the payment
of which is Guaranteed by the Company or any of its Significant Subsidiaries),
whether such Indebtedness or Guarantee exists on the date of the Indenture or is
thereafter created, which default (a) constitutes a Payment Default or (b)
results in the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or that has been so accelerated, aggregates $25.0 million or
more; (vi) failure by the Company or any of its Significant Subsidiaries to pay
final judgments aggregating in excess of $25.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries and (viii) failure by the Company to comply with the provisions
described under the caption "-- Exchange Rights."
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee on behalf of the Holders of all of the
Notes, may waive any existing Default or Event of Default and its consequence
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
A "Default" is defined to mean any event that is or with the passage of time
or the giving of notice or both would be an Event of Default and a "Payment
Default" is defined to mean any failure to pay any scheduled installment of
interest or principal on any Indebtedness within the grace period provided for
such payment in the documentation governing such Indebtedness.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the Federal securities laws and it is the view of the
Commission that such a waiver is against public policy and is therefore
unenforceable.
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<PAGE>
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for such
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for such Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any
Note, (iii) reduce the rate of or change the time for payment of interest on any
Note, (iv) make any change in the Indenture regarding the exchange rights other
than to increase the Exchange Rate, (v) waive a Default or Event of Default in
the payment of principal of or premium, if any, or interest on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount thereof and a waiver of the payment default that
resulted from such acceleration), (vi) make any Note payable in money other than
that stated in the Notes, (vii) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or premium, if any, or interest on the
Notes, (viii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
REPORTS
The Indenture will provide that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereof by the Company's independent certified public accountants and
(ii) all current reports that would be required to be filed with the Commission
on Form 8-K if the Company were required to file such reports. In addition,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability and make such information available to securities
analysts and prospective investors upon request.
CONCERNING THE TRUSTEE
The Indenture will contain certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property
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<PAGE>
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if the Trustee acquires
any conflicting interest it must eliminate such conflict within 90 days, apply
to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will not be under
any obligation to exercise any of its rights or powers under the Indenture at
the request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
CERTAIN DEFINITIONS
Set forth are certain defined terms used in the Indenture. Reference is made
to the Indenture for a full disclosure of all such terms, as well as any other
capitalized terms used herein for which no definition is provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control. The Company believes that it is not an affiliate of
Vencor.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole to any Person or group (as such term is
used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than to a
Person or group who, prior to such transaction, held a majority of the voting
power of the voting stock of the Company, (ii) the acquisition by any Person or
group (as defined above) of a direct or indirect interest in more than 50% of
the voting power of the voting stock of the Company, by way of merger or
consolidation or otherwise, or (iii) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
The phrase "all or substantially all" of the assets of the Company will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred, in which case a holder's ability
to obtain the benefit of a Change of Control Offer may be impaired. In addition,
no assurances can be given that the Company will be able to acquire Notes
tendered upon the occurrence of a Change of Control Triggering Event.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a Change
of Control and a Rating Decline.
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<PAGE>
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock), less all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made in accordance with
GAAP as a result of the acquisition of such business) subsequent to the date of
the Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, and excluding the cumulative effect of a
change in accounting principles, all as determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT FACILITY" means that certain Credit Agreement by and among the
Company and Morgan Guaranty Trust Company of New York and the other banks that
are party thereto, providing for $1.8 billion in aggregate principal amount of
senior term debt and up to $500.0 million in aggregate principal amount of
senior revolving debt, including any related notes, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, extended, renewed, refunded, replaced or refinanced, in whole
or in part, from time to time.
"DESIGNATED SENIOR AND SENIOR SUBORDINATED DEBT" means (i) so long as any
Obligations are outstanding under the Credit Facility, such Obligations and (ii)
thereafter, any other Senior and Senior Subordinated Debt the principal amount
of which is $100.0 million or more and that has been designated by the Company
as "Designated Senior and Senior Subordinated Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, as in effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange contracts
or currency swap agreements and (iii) other agreements or arrangements designed
to protect such Person against fluctuations in interest rates or currency
values.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such person of any indebtedness of any other Person.
39
<PAGE>
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset given to
secure Indebtedness, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction with respect to any such lien, pledge, charge or security
interest).
"MARKET PRICE" means as of any time of determination the average of the
Sales Prices of the Vencor Common Stock (or other securities held by the Escrow
Agent) for the five Business Day period (appropriately adjusted to take into
account the occurrence during such period of certain events that would result in
an adjustment of the Exchange Rate with respect to the Vencor Common Stock)
commencing on the first Business Day after delivery by the Company or the Escrow
Agent of notice to the Holders that the Company has elected to pay cash in lieu
of delivering shares of Vencor Common Stock (or other property deliverable upon
such exchange) in exchange for any Notes. Because the Market Price is determined
after delivery of the exchange notice, Holders of Notes bear the market risk
with respect to the value of Vencor Common Stock (or other property deliverable
upon such exchange) from the date of delivery of such notice until the date of
determination of such Market Price. The period between the date of delivery by a
holder of a notice of exchange and the date of determination of the Market Price
may not exceed seven Business Days.
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"RATING AGENCIES" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's
or both shall not make a rating of the Notes publicly available, a nationally
recognized securities rating agency or agencies, as the case may be, selected by
the Company, which shall be substituted for S&P or Moody's or both, as the case
may be.
"RATING CATEGORY" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories); and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining whether
the rating of the Notes has decreased by one or more gradations, gradations
within Rating Categories (+ and - for S&P, 1, 2 and 3 for Moody's; or the
equivalent gradations for another Rating Agency) shall be taken into account
(e.g., with respect to S&P, a decline in rating from BB+ to BB, as well as from
BB- to B+, will constitute a decrease of one gradation).
"RATING DATE" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) the first public notice of the occurrence of a Change
of Control or of the intention by the Company to effect a Change of Control.
"RATING DECLINE" means the occurrence on or within 90 days after the date of
the first public notice of the occurrence of a Change of Control or of the
intention by the Company to effect a Change of Control (which period shall be
extended so long as the rating of the Notes is under publicly announced
consideration for possible downgrade by any of the Rating Agencies) of: (a) in
the event the Notes are rated by either Moody's or S&P on the Rating Date as
Investment Grade, a decrease in the rating of the Notes by both Rating Agencies
to a rating that is below Investment Grade, or (b) in the event the Notes are
rated below Investment Grade by both Rating Agencies on the Rating Date, a
decrease in the rating of the Notes by either Rating Agency by one or more
gradations (including gradations within Rating Categories as well as between
Rating Categories).
"SENIOR AND SENIOR SUBORDINATED DEBT" means any Indebtedness of the Company,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Notes and all Obligations with respect to any such Indebtedness. Notwithstanding
anything to the contrary in the foregoing, Senior and Senior Subordinated Debt
will not include (w) any liability for Federal, state, local or other taxes owed
or owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates or (y) any trade payables.
40
<PAGE>
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"S&P" means Standard & Poor's Corporation and its successors.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person (or any
combination thereof).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
41
<PAGE>
DESCRIPTION OF THE CREDIT AGREEMENT
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), Bank of
America N.T.&S.A., The Bank of New York and Bankers Trust Company (collectively,
the "Arranging Agents") and a syndicate of other lenders (the "Lenders") provide
the Company with the $2.3 billion credit agreement (the "Credit Agreement")
expiring in 2001 consisting of (i) the six-and-a-half year amortizing senior
term debt (the "Senior Term Debt") originally in the aggregate principal amount
of $1.8 billion, and (ii) the six-and-a-half year $500.0 million senior
revolving debt (the "Senior Revolving Debt"), with a letter of credit option not
to exceed $100.0 million. The Arranging Agents also provide a separate letter of
credit facility to the Company in an aggregate principal amount of approximately
$91.0 million, upon terms substantially similar to the Credit Agreement (the
"Metrocrest Letter of Credit Facility"). The Metrocrest Letter of Credit
Facility replaced a previous letter of credit facility established in connection
with certain bonds issued by Metrocrest Hospital Authority as part of the
financing of two hospitals operated by subsidiaries of the Company. The Notes
will be subordinated to the Company's obligations under the Credit Agreement and
the Metrocrest Letter of Credit Facility.
INTEREST RATE. Loans under the Credit Agreement bear interest, at the
option of the Company, at either (i) a base rate equal to the higher of the rate
announced from time to time by Morgan Guaranty as its prime rate or the daily
federal funds rate plus 50 basis points plus, in each case, an interest margin
ranging from zero to 50 basis points based on the ratios of the Company's
consolidated net earnings before interest, taxes, depreciation and amortization
and other noncash charges to interest expense and the ratio of the Company's
consolidated total debt to the Company's consolidated net earnings before
interest, taxes, depreciation and amortization and other noncash charges or (ii)
the London interbank offered rate (as adjusted for certain reserve requirements)
for 1-, 2-, 3- or 6-month periods plus an interest margin ranging from 50 to 150
basis points based on the respective levels of the same ratios. Commitment fees
also will be payable to each Lender based on the unused amount of such Lender's
commitment to make loans at rates ranging from 18.75 basis points to 50 basis
points as determined by reference to the same ratios.
SECURITY. The Company's obligations under the Credit Agreement are secured
by a first priority lien on (i) the capital stock of the Company's present and
future direct subsidiaries, (ii) all indebtedness owed to the Company by its
subsidiaries and (iii) one of the Company's subsidiary's equity investment in
Westminster Health Care Holdings PLC ("Westminster").
MANDATORY PAYMENTS. The Company must make quarterly mandatory payments on
the Senior Term Debt in each fiscal year in the annual amounts set forth below:
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1995
------------------------------
YEAR ENDED MAY 31, HISTORICAL AS ADJUSTED (1)
- ----------------------------------- ----------- -----------------
<S> <C> <C>
1996............................... $ 133.1 $ 133.1
1997............................... 177.5 177.5
1998............................... 222.5 222.5
1999............................... 312.5 312.5
2000............................... 357.5 357.5
2001............................... 402.5 62.5
<FN>
- ------------------------
(1) Adjusted to reflect repayment of the Senior Term Debt from the net proceeds
of this Offering.
</TABLE>
Additional prepayments will be required from the proceeds of certain events,
including the sale of certain assets and offerings of equity securities. The
Credit Agreement also requires the repayment of Senior Revolving Debt (without a
corresponding reduction in revolving loan commitments) with a portion of
proceeds of a sale or other disposition of the equity investments in Vencor or
Westminster or of the Company's international subsidiaries, up to an aggregate
of $200.0 million; thereafter, all of the remaining proceeds of such sales must
be applied to prepay the installments of the Senior Term Debt. All mandatory
prepayments of the Senior Term Debt shall be applied in inverse order of
maturity until the installments due on August 31, 2001 and in fiscal year 2001
are paid in full and then to the remaining installments on a pro rata basis.
42
<PAGE>
COVENANTS. The Credit Agreement includes various affirmative, negative and
financial covenants, including, without limitation, (i) restrictions on
disposition of assets and the making of acquisitions and other investments, (ii)
prohibitions on the prepayment, redemption or defeasance of the Notes,
subordinated indebtedness and certain other indebtedness, (iii) limitations on
debt incurrence, lien incurrence, dividends and stock repurchases, (iv)
limitations on mergers and changes of business and (v) a minimum consolidated
net worth requirement, a minimum fixed charge coverage ratio and a maximum
leverage ratio.
EVENTS OF DEFAULT. Events of default under the Credit Agreement include
various events of default customary for such type of agreement including,
without limitation, events of default for failure to pay principal or interest
when due (subject, in the case of interest, to specified grace periods), breach
of a representation or warranty, failure to comply with a covenant, the
continuance of a default under any other indebtedness exceeding $25.0 million,
including the Notes, a change in control of the Company and the cessation of any
lien on any of the collateral under the Credit Agreement as a perfected first
priority lien.
43
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the material Federal income tax
consequences of investing in the Notes. This discussion is for original
purchasers of the Notes and is based on the Federal income tax law now in
effect, which is subject to change, possibly retroactively. This summary does
not discuss all aspects of Federal income taxation that may be relevant to
particular noteholders in light of their individual investment circumstances,
such as persons holding Notes as a hedge or as part of a straddle, or to certain
types of noteholders subject to special tax rules (E.G., financial institutions,
insurance companies, tax-exempt organizations, and foreign persons), nor does it
discuss any aspects of state, local or foreign tax law consequences. This
summary assumes that investors will hold their Notes as "capital assets"
(generally, property held for investment) under the Internal Revenue Code of
1986, as amended. Each prospective investor is urged to consult his tax advisor
regarding the specific Federal, state, local, and foreign income and other tax
consequences of the acquisition, holding, exchanging, or otherwise disposing of
Notes.
GENERAL. There is no precise legal authority that addresses the Federal
income tax treatment of exchangeable debt instruments with characteristics
similar to the Notes. The Internal Revenue Service, however, is currently
reviewing the proposed original issue discount regulations applicable to
"contingent payment" debt instruments, which, when issued in final form, may
address the tax treatment of exchangeable debt instruments with characteristics
similar to the Notes. The Company believes that the following discussion
describes the most appropriate tax treatment of the Notes based on the legal
authorities that are presently available. Prospective investors should note that
there are possible alternative treatments that may have different results for
investors, including some that may be less favorable. In addition, final
original issue discount regulations may require different treatment and results.
Accordingly, each prospective investor should consult his tax advisor regarding
the potential alternative tax treatments of the Notes.
The Notes should be treated, for Federal income tax purposes, as a unit
composed of a debt component (I.E., the stated interest payments and the
principal amount due at maturity) (the "Debt Component") and an option component
(I.E., the exchange feature) (the "Option Component"). The issue price of the
Notes will be apportioned to each of these components in accordance with their
relative fair market value on the date of issuance. For this purpose, the
Company has determined that for each $1,000.00 principal amount of Notes,
$ will be apportioned to the Debt Component and $ will be apportioned
to the Option Component. This issue price allocation will likely be binding upon
a holder of a Note, for Federal income tax purposes, unless such holder adopts a
different allocation that is explicitly disclosed on his Federal income tax
return timely filed for the year in which the Note is acquired.
ORIGINAL ISSUE DISCOUNT. The Debt Component will be treated as issued with
original issue discount, for Federal income tax purposes, in an amount equal to
the excess of the principal amount due at maturity over the issue price of the
Debt Component. Holders will be required to include original issue discount in
ordinary income over the period that they hold the Notes in advance of the
receipt of the cash attributable thereto. The amount of original issue discount
to be included in income will be determined using a constant yield method, which
will result in a greater portion of such discount being included in income in
the later part of the term of the Notes. Any amount included in income as
original issue discount will increase both the adjusted issue price of, and a
holder's tax basis in, the Debt Component.
SALE. A holder will recognize a gain or loss upon a sale or other taxable
disposition of a Note (other than pursuant to the holder's exercise of the right
to exchange the Note for Vencor Common Stock (the "Exchange Right") as discussed
below) in an amount equal to the difference between the amount realized from the
disposition and the holder's aggregate adjusted tax basis in the Note (I.E., the
holder's aggregate adjusted tax basis in the Debt Component and the Option
Component). Such gain or loss should be a capital gain or loss, and will be
long-term if the Note has been held for more than one year. It is possible,
however, that the contingent payment original issue discount regulations, when
finalized, may require that all or a portion of such gain be treated as
additional interest income that would be subject to tax as ordinary income.
EXCHANGE OF NOTES FOR STOCK. The exchange of a Note for Vencor Common Stock
pursuant to the Exchange Right should be treated, for Federal income tax
purposes, as a taxable disposition of the Note and, accordingly, a holder should
recognize a gain or loss on the consummation of the exchange in an amount
44
<PAGE>
equal to the difference between the fair market value of the Vencor Common Stock
received and the holder's aggregate adjusted tax basis in the Note (as described
above). Such gain or loss should be a capital gain or loss, which will be
long-term if the Note has been held for more than one year. The adjusted tax
basis in the Vencor Stock received pursuant to the exchange will be equal to the
fair market value of the Vencor Stock at the time of the exchange and the
holding period for such stock will commence the day following the date of
exchange.
EXCHANGE OF NOTES FOR CASH. If the holder tenders a Note to the Company
pursuant to the Exchange Right and the Company elects to settle the exchange
with cash rather than with the Vencor Stock, a holder will recognize gain or
loss in an amount equal to the difference between the amount of cash received in
the exchange and the holder's aggregate adjusted tax basis in the Note (as
described above). Although not free from doubt, (i) a portion of the gain equal
to the difference between the aggregate adjusted issue price of the Debt
Component and the face amount of the Note should be treated as additional
interest income and (ii) any gain in excess thereof should be treated as capital
gain, which will be long-term if the Note has been held for more than one year.
It is possible, however, that the contingent payment original issue discount
regulations, when finalized, may require that all or a portion of such gain be
treated as additional interest income subject to tax as ordinary income.
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") between the Company and Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch" and, together with DLJ, the "Underwriters"),
each of the Underwriters has severally agreed to purchase from the Company, and
the Company has agreed to sell to each of the Underwriters, $ aggregate
principal amount of Notes set forth opposite its name below, at the public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
- ------------------------------------------------------------------------------ --------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........................... $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................
--------------
$
--------------
--------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to certain conditions precedent, including the approval
of certain legal matters by counsel. The Company has agreed to indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or to contribute to payments that the Underwriters may
be required to make in respect thereof. The nature of the Underwriters'
obligations is such that the Underwriters are committed to purchase all of the
Notes if any of the Notes are purchased by them.
The Underwriters have advised the Company that they propose to offer the
Notes directly to the public initially at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such offering price
less a concession not to exceed % of the principal amount of the Notes. The
Underwriters may reallow discounts not in excess of % of the principal amount
of the Notes to certain other dealers. After the initial public offering of the
Notes, the offering price and other selling terms may be changed by the
Underwriters.
The Underwriters may not make any sales or series of sales of Notes with an
aggregate principal amount exceeding $ (convertible into Vencor Common Stock
representing more than 2.5% of the voting power of the outstanding Vencor Common
Stock) to any person or related groups of persons who would immediately
thereafter own or have the right to acquire more than 5% of the voting power of
the outstanding Vencor Common Stock.
The Notes have been approved for listing, subject to official notice of
issuance, on the NYSE under the symbol "THC D 05." Nevertheless, the Notes are
new issues of securities, have no established trading market and may not be
widely distributed. The Company has been advised by the Underwriters that,
following the completion of this Offering, the Underwriters presently intend to
make a market in the Notes as permitted by applicable laws and regulations. The
Underwriters, however, are under no obligation to do so and may discontinue any
market-making activities at any time at the sole discretion of the Underwriters.
No assurance can be given as to the liquidity of any trading market for the
Notes.
DLJ has provided and is currently retained to provide certain investment
banking services to the Company for which it has received and is entitled to
receive usual and customary fees. DLJ acted as financial advisor to the Company
in connection with the Merger and the related transactions and with respect to
the Company's investment in Hillhaven, for which it received usual and customary
fees. In addition, DLJ was the lead manager of the Senior Notes Offering.
46
<PAGE>
LEGAL MATTERS
Certain legal matters as to the validity of the Notes offered hereby will be
passed upon for the Company by Scott M. Brown, Senior Vice President and General
Counsel of the Company and Skadden, Arps, Slate, Meagher & Flom, Los Angeles,
California. Certain legal matters in connection with this Offering will be
passed upon for the Underwriters by Davis Polk & Wardwell. With respect to
certain matters governed by Nevada law, Scott M. Brown, Skadden, Arps, Slate,
Meagher & Flom and Davis Polk & Wardwell will rely on the opinion of Woodburn
and Wedge, Reno, Nevada.
EXPERTS
The consolidated financial statements and schedule of Tenet Healthcare
Corporation as of May 31, 1995 and 1994, and for each of the years in the
three-year period ended May 31, 1995, have been incorporated by reference herein
and in the Registration Statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the consolidated
financial statements refers to a change in the method of accounting for income
taxes in 1994.
The consolidated financial statements of American Medical Holdings, Inc. and
American Medical International, Inc. incorporated in this Prospectus by
reference to the Annual Report on Form 10-K, as amended, for the year ended
August 31, 1994, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
NOTES OFFERED HEREBY OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
THE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 10
Use of Proceeds................................ 17
Historical and Pro Forma Capitalization........ 17
Ratio of Earnings to Fixed Charges............. 17
Pro Forma Financial Information................ 18
Vencor......................................... 26
Relationship Between the Company and Vencor.... 26
Price Range of Vencor Common Stock and
Dividends..................................... 28
Description of Notes........................... 29
Description of the Credit Agreement............ 42
Certain Federal Income Tax Consequences........ 44
Underwriting................................... 46
Legal Matters.................................. 47
Experts........................................ 47
</TABLE>
[LOGO]
TENET HEALTHCARE CORPORATION
$350,000,000
% EXCHANGEABLE SUBORDINATED NOTES DUE 2005
-----------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the SEC registration fee and the NASD filing fee. The Company will bear
all of such expenses.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 120,690
NASD filing fee................................................... 30,500
Rating Agency Fee................................................. 100,000
Blue sky fees and expenses........................................ 30,000
Printing and engraving expenses................................... 200,000
Legal fees and expenses........................................... 250,000
Accounting fees and expenses...................................... 50,000
Trustee fees...................................................... 15,000
Miscellaneous..................................................... 3,810
---------
Total......................................................... $ 800,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law ("Nevada Law") provides
generally and in pertinent part that a Nevada corporation may indemnify its
directors and officers against expenses, judgments, fines, and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 78.751 further provides that, in connection with the defense or
settlement of any action by or in the right of the corporation, a Nevada
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them if, in connection with the matters in issue,
they acted in good faith, in a manner they reasonably believed to be in, or not
opposed to, the best interest of the corporation. Section 78.751 further permits
a Nevada corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
Article X of the Restated Articles of Incorporation, as amended, of the
Registrant and Article IX of the Restated By-Laws, as amended, of the Registrant
provide that the Registrant shall indemnify its directors and officers to the
fullest extent permitted by Nevada Law. The Registrant has entered into
indemnification agreements with each of its directors and executive officers.
Such indemnification agreements are intended to provide a contractual right to
indemnification, to the maximum extent permitted by law, for expenses (including
attorneys' fees), judgments, penalties, fines, and amounts paid in settlement
actually and reasonably incurred by the person to be indemnified in connection
with any proceeding (including, to the extent permitted by applicable law, any
derivative action) to which they are, or are threatened to be made, a party by
reason of their status in such positions. Such indemnification agreements do not
change the basic legal standards for indemnification set forth under Nevada Law
or the Restated Articles of Incorporation, as amended, of the Registrant. Such
agreements are intended to be in furtherance, and not in limitation of, the
general right to indemnification provided in the Registrant's Restated Articles
of Incorporation, as amended.
Section 78.037 of the Nevada Law provides that the articles of incorporation
may contain a provision eliminating or limiting the personal liability of a
director or officer to the corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director provided that such provision shall
not eliminate
II-1
<PAGE>
or limit the liability of a director or officer (i) for acts or omissions which
involve intentional misconduct or a knowing violation of law, or (ii) under
Section 78.300 of the Nevada Law (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock).
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement between the Company and the Underwriters
4.1 Form of Indenture between the Company and Bank of New York, as Trustee, relating
to the Notes (including the form of certificate representing the Notes)
4.2 Form of Escrow Agreement between the Company and Bank of New York, as Escrow
Agent, relating to the Vencor Common Stock
5.1* Opinion of Scott M. Brown, Esq.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom re: tax matters
10.1* $2,300,000,000 Credit Agreement, dated as of February 28, 1995, among the
Company, the Lenders party thereto, Morgan Guaranty Trust Company of New York,
Bank of America National Trust and Savings Association, The Bank of New York
and Bankers Trust Company, as Arranging Agents, and Morgan Guaranty Trust
Company of New York, as Administration Agent (Incorporated by reference to
Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q dated April 14,
1995)
10.2* Form of Amendment No. 1 to the Credit Agreement, dated as of August 31, 1995,
among the Company, Morgan Guaranty Trust Company of New York, Bank of America
N.T.&S.A., The Bank of New York, Bankers Trust Company and the other lenders
parties thereto (Incorporated by reference to Exhibit 10.1 to the Registrant's
Amendment No. 1 to the Registration Statement on Form S-3, Registration No.
33-62591, dated September 26, 1995)
11.1* Statement of Computation of Per Share Earnings for the three fiscal years ended
May 31, 1995 (incorporated by reference to Exhibit 11 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1995)
11.2* Statement of Computation of Per Share Earnings for the quarters ended August 31,
1994 and 1995 (incorporated by reference to Exhibit 11 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1995)
11.3* Statement of Computation of Pro Forma Per Share Earnings for the fiscal year
ended May 31, 1995 and the quarters ended August 31, 1994 and 1995
12.1* Statement of Computation of Ratios of Earnings to Fixed Charges
12.2* Statement of Computation of Pro Forma Ratios of Earnings to Fixed Charges
23.1* Consent of Scott M. Brown, Esq. (to be included in the opinion filed as Exhibit
5.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3* Consent of Price Waterhouse LLP
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom (to be included in the opinion
filed as Exhibit 8.1)
24.1* Power of Attorney (included on page II-4)
25.1* Statement of Eligibility of Bank of New York, as Trustee with respect to the
Notes
</TABLE>
- ------------------------
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus to provide such interim financial information.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, the Nevada Law, the
Restated Articles of Incorporation, and the Restated Bylaws, as amended, or
otherwise, the Registrant has been advised 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. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Monica, State of California on December 12,
1995.
TENET HEALTHCARE CORPORATION
By: /s/ JEFFREY C. BARBAKOW*
--------------------------------------
Jeffrey C. Barbakow
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------- -------------------------------- ----------------------
<C> <S> <C>
/s/ JEFFREY C. BARBAKOW* Chairman of the Board of December 12, 1995
---------------------------------------- Directors and Chief Executive
Jeffrey C. Barbakow Officer (Principal Executive
ATTORNEY-IN-FACT Officer)
/s/ MICHAEL H. FOCHT, SR.* President, Chief Operating December 12, 1995
---------------------------------------- Officer and Director
Michael H. Focht, Sr.
/s/ RAYMOND L. MATHIASEN* Senior Vice President and Chief December 12, 1995
---------------------------------------- Financial Officer (Principal
Raymond L. Mathiasen Financial and Accounting
ATTORNEY-IN-FACT Officer)
/s/ BERNICE B. BRATTER* Director December 12, 1995
----------------------------------------
Bernice B. Bratter
/s/ JOHN T. CASEY* Director December 12, 1995
----------------------------------------
John T. Casey
/s/ MAURICE J. DEWALD* Director December 12, 1995
----------------------------------------
Maurice J. DeWald
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------- -------------------------------- ----------------------
<C> <S> <C>
/s/ PETER DE WETTER* Director December 12, 1995
----------------------------------------
Peter de Wetter
/s/ EDWARD EGBERT, M.D.* Director December 12, 1995
----------------------------------------
Edward Egbert, M.D.
/s/ RAYMOND A. HAY* Director December 12, 1995
----------------------------------------
Raymond A. Hay
/s/ LESTER B. KORN* Director December 12, 1995
----------------------------------------
Lester B. Korn
/s/ JAMES P. LIVINGSTON* Director December 12, 1995
----------------------------------------
James P. Livingston
/s/ ROBERT W. O'LEARY* Director December 12, 1995
----------------------------------------
Robert W. O'Leary
/s/ THOMAS J. PRITZKER* Director December 12, 1995
----------------------------------------
Thomas J. Pritzker
/s/ RICHARD S. SCHWEIKER* Director December 12, 1995
----------------------------------------
Richard S. Schweiker
*By:
-----------------------------------
Scott M. Brown
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement between the Company and the Underwriters........................
4.1 Form of Indenture between the Company and Bank of New York, as Trustee, relating to the Notes
(including the form of certificate representing the Notes)....................................
4.2 Form of Escrow Agreement between the Company and Bank of New York, as Escrow Agent, relating to
the Vencor Common Stock.......................................................................
5.1* Opinion of Scott M. Brown, Esq.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom re: tax matters................................
10.1* $2,300,000,000 Credit Agreement, dated as of February 28, 1995, among the Company, the Lenders
party thereto, Morgan Guaranty Trust Company of New York, Bank of America National Trust and
Savings Association, The Bank of New York and Bankers Trust Company, as Arranging Agents, and
Morgan Guaranty Trust Company of New York, as Administration Agent (Incorporated by reference
to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q dated April 14, 1995)
10.2* Form of Amendment No. 1 to the Credit Agreement, dated as of August 31, 1995, among the
Company, Morgan Guaranty Trust Company of New York, Bank of America N.T.&S.A., The Bank of New
York, Bankers Trust Company and the other lenders parties thereto (Incorporated by reference
to Exhibit 10.1 to the Registrant's Amendment No. 1 to the Registration Statement on Form S-3,
Registration No. 33-62591, dated September 26, 1995)
11.1* Statement of Computation of Per Share Earnings for the three fiscal years ended May 31, 1995
(incorporated by reference to Exhibit 11 to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1995)
11.2* Statement of Computation of Per Share Earnings for the quarters ended August 31, 1994 and 1995
(incorporated by reference to Exhibit 11 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1995)
11.3* Statement of Computation of Pro Forma Per Share Earnings for the fiscal year ended May 31, 1995
and the quarters ended August 31, 1994 and 1995
12.1* Statement of Computation of Ratios of Earnings to Fixed Charges
12.2* Statement of Computation of Pro Forma Ratios of Earnings to Fixed Charges
23.1* Consent of Scott M. Brown, Esq. (to be included in the opinion filed as Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP...............................................................
23.3* Consent of Price Waterhouse LLP
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom (to be included in the opinion filed as Exhibit
8.1)..........................................................................................
24.1* Power of Attorney (included on page II-4)
25.1* Statement of Eligibility of Bank of New York, as Trustee with respect to the Notes
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
[DRAFT]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TENET HEALTHCARE CORPORATION
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
------------------------------
UNDERWRITING AGREEMENT
------------------------------
Dated as of __________, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TENET HEALTHCARE CORPORATION
% EXCHANGEABLE SUBORDINATED NOTES DUE 2007
EXCHANGEABLE FOR SHARES OF COMMON STOCK
OF VENCOR, INC.
UNDERWRITING AGREEMENT
----------------------
__________, 1995
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
Subject to the terms and conditions herein contained, Tenet
Healthcare Corporation, a Nevada corporation (the "Company"), proposes to issue
and sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with DLJ, the
"Underwriters") an aggregate of $_____ million principal amount of its %
Exchangeable Subordinated Notes due 2007 (the "Securities"). The Securities are
to be issued pursuant to the provisions of an Indenture (the "Indenture") to be
dated as of __________, 1995, by and between the Company and The Bank of New
York, as Trustee (the "Trustee") and will also be subject to the provisions of
an escrow agreement to be dated as of __________, 1995 (the "Escrow Agreement")
between the Company and The Bank of New York, as Escrow Agent (the "Escrow
Agent"). The Securities will be exchangeable for shares ("Vencor Common
Shares") of common stock of Vencor, Inc., a Delaware corporation ("Vencor"), on
the terms set forth in the Securities, the Indenture and the Escrow Agreement.
This Agreement, the Securities, the Indenture and the Escrow Agreement are
collectively referred to herein as the "Transaction Documents."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in
<PAGE>
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated pursuant thereto
(collectively, the "Act"), a registration statement on Form S-3 (No. 33- ),
with respect to the Securities, including a preliminary prospectus, subject to
completion, relating to the Securities. The registration statement, as amended
at the time it becomes effective or, if a post-effective amendment is filed with
respect thereto, as amended by such post-effective amendment at the time of its
effectiveness (including in each case all documents incorporated or deemed to be
incorporated by reference therein, if any, all financial statements and
exhibits, and the information, if any, contained in a prospectus subsequently
filed with the Commission pursuant to Rule 424(b) under the Act and deemed to be
a part of the registration statement at the time of its effectiveness pursuant
to Rule 430A of the Act) is hereinafter referred to as the "Registration
Statement;" and the prospectus constituting a part of the Registration Statement
at the time it became effective, or such revised prospectus as shall be provided
to the Underwriters for use in connection with the offering of the Securities
that differs from the prospectus on file with the Commission at the time the
Registration Statement became effective (including, in each case, all documents
incorporated or deemed to be incorporated by reference therein, if any), whether
or not filed with the Commission pursuant to Rule 424(b) under the Act, is
hereinafter referred to as the "Prospectus." Any reference herein to the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any preliminary prospectus shall be deemed to refer to and include the documents
incorporated by reference therein, and any reference herein to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell to the Underwriters,
and the Underwriters agree, severally and not jointly, to purchase from the
Company, the Securities in the respective principal amounts set forth opposite
their names on Schedule I hereto, plus such amount as they may individually
become obligated to purchase pursuant to Section 8 hereof, at a purchase price
equal to % of the principal amount of the Securities together with accrued
interest, if any, to the Closing Date (the "Purchase Price").
3. DELIVERY AND PAYMENT. Delivery to you of and payment for
the Securities shall be made at 10:00 A.M., New York City time, on __________,
1995 (such time and date being referred to as the "Closing Date"), at the
offices of DLJ at 140 Broadway, New York, New York 10005 (Cashier's Window, Main
Level), or such other place as you shall reasonably designate.
The Securities in definitive form shall be registered in such
names and issued in such denominations as you shall request in writing not later
than two full business days prior to the Closing Date, and shall be made
available to you at the offices
- 2 -
<PAGE>
of DLJ (or at such other place as shall be acceptable to you) for inspection not
later than 10:00 A.M., New York City time, on the business day next preceding
the Closing Date. The Securities shall be delivered to you on the Closing Date
with any transfer taxes payable upon initial issuance thereof duly paid by the
Company, for your respective accounts against payment of the Purchase Price by
certified or official bank checks payable in New York Clearing House funds to
the order of the Company. The Closing Date and the location of delivery of, and
the form of payment for, the Securities may be varied by agreement between DLJ
and the Company.
4. AGREEMENTS OF THE COMPANY. The Company agrees with each of
you that:
(a) It will, if the Registration Statement has not
heretofore become effective under the Act, and if otherwise necessary or
required by law, file an amendment to the Registration Statement or, if
necessary pursuant to Rule 430A of the Act, a post-effective amendment to the
Registration Statement, in each case as soon as practicable after the execution
and delivery of this Agreement, and it will use its best efforts to cause the
Registration Statement or such post-effective amendment to become effective at
the earliest possible time. If the Registration Statement has become effective
and the Company, omitting from the Prospectus certain information in reliance
upon Rule 430A of the Act, elects not to file a post-effective amendment
pursuant to Rule 430A of the Act, it will file the form of Prospectus required
by Rule 424(b) of the Act within the time period specified by Rule 430A and Rule
424(b) of the Act. The Company will otherwise comply in a timely manner with
all applicable provisions of Rule 424 and Rule 430A of the Act.
(b) It will advise DLJ promptly and, if requested by DLJ,
confirm such advice in writing, (i) when the Registration Statement has become
effective, if and when the Prospectus is sent for filing pursuant to Rule 424 of
the Act and when any post-effective amendment to the Registration Statement
becomes effective, (ii) of the receipt of any comments from the Commission or
any state securities commission or any other regulatory authority that relate to
the Registration Statement or requests by the Commission or any state securities
commission or any other regulatory authority for any amendment or supplement to
the Registration Statement or any amendment or supplements to the Prospectus or
for additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, or of the
suspension of qualification of the Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by the
Commission or any state securities commission or any other regulatory authority
and (iv) of the happening of any event during the period referred to in
paragraph (d), below, which makes any statement of a material fact made in the
Registration Statement untrue or which requires the making of any additions to
or changes in the Registration Statement in order to make the statements therein
not misleading or that makes any statement of a material fact made in the
Prospectus untrue or which requires the making of any addition to or change in
the Prospectus in order to make the statements therein, in light of the
- 3 -
<PAGE>
circumstances under which they were made, not misleading. The Company shall use
its best efforts to prevent the issuance of any stop order or order suspending
the qualification or exemption of the Securities under any Federal or state
securities or Blue Sky laws, and, if at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or any
state securities commission or any other regulatory authority shall issue an
order suspending the qualification or exemption of the Securities under any
state securities or Blue Sky laws, the Company shall use every reasonable effort
to obtain the withdrawal or lifting of such order at the earliest possible time.
(c) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as in your
reasonable judgment a prospectus is required to be delivered in connection with
sales of the Securities by an Underwriter or a dealer, it will furnish to each
Underwriter and each dealer, without charge, as many copies of the Prospectus,
including all documents incorporated by reference therein, (and of any amendment
or supplement to the Prospectus) as you may reasonably request.
(d) If during the period specified in paragraph (c) of this
Section 4 any event shall occur as a result of which it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein, in
the light of the circumstances existing as of the date the Prospectus is
delivered to an offeree or a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with any law, it will promptly
prepare and file with the Commission an appropriate amendment or supplement to
the Prospectus so that the statements in the Prospectus, as so amended or
supplemented, will not, in the light of the circumstances existing as of the
date the Prospectus is so delivered, be misleading, and will comply with
applicable law, and will promptly notify you of such event and amendment or
supplement and furnish to you without charge such number of copies thereof as
you may reasonably request.
(e) It will make generally available to its security
holders, as soon as practicable and for the time period specified by Rule 158
under the Act, a consolidated earnings statement which shall satisfy the
provision of Section 11(a) and Rule 158 of the Act.
(f) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, it will pay and be responsible for
all costs, charges, expenses, fees and taxes incurred in connection with or
incident to (i) the preparation, printing, filing, distribution and delivery
under the Act of the Registration Statement (including financial statements and
exhibits), each preliminary prospectus, the Prospectus and all amendments and
supplements thereto, (ii) the registration with the Commission and the issuance
and delivery of the Securities, (iii) the printing and delivery of this
Agreement, the Indenture, the Escrow Agreement and all other agreements,
memoranda, reports, correspondence and other documents printed, distributed and
delivered in connection with the offering of the Securities, (iv) the
registration or
- 4 -
<PAGE>
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the jurisdictions referred to in paragraph (i) below (including, in
each case, the reasonable fees and disbursements of counsel relating to such
registration or qualification and memoranda relating thereto and any filing fees
in connection therewith), (v) furnishing such copies of the Registration
Statement (including exhibits), Prospectus and preliminary prospectuses, and all
amendments and supplements to any of them, including any document incorporated
by reference therein, as may be reasonably requested by the Underwriters or by
dealers to whom Securities may be sold, (vi) any filing with the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
offering of the Securities (including, without limitation, any filing fees in
connection therewith but excluding the fees of Davis Polk & Wardwell, legal
counsel to the Underwriters ("Underwriters' Counsel")), (vii) the listing of the
Securities on the New York Stock Exchange (the "NYSE"), (viii) the rating of the
Securities by investment rating agencies, (ix) any "qualified independent
underwriter" as required by Schedule E of the Bylaws of the NASD (including fees
and disbursements of counsel for such qualified independent underwriter) and (x)
the performance by the Company of its other obligations under this Agreement,
including (without limitation) the fees of the Trustee and Escrow Agent, the
cost of their respective personnel and other internal costs, the cost of
printing and engraving the certificates representing the Securities, and all
expenses incident to the sale and delivery of the Securities to the
Underwriters.
(g) It will furnish to DLJ, without charge, one signed copy
(plus one additional signed copy to Underwriters' Counsel) of the Registration
Statement as first filed with the Commission and of each amendment or supplement
to it, including each post-effective amendment, all exhibits filed therewith and
all documents incorporated by reference therein, and such number of conformed
copies of the Registration Statement as so filed and of each amendment to it,
including each post-effective amendment, but without exhibits, as you may
reasonably request.
(h) It will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus (other than any
document required to be filed under the Securities Exchange Act of 1934, as
amended, including the rules and regulations thereunder (collectively, the
"Exchange Act") that upon filing is deemed to be incorporated by reference
therein) of which you shall not previously have been advised and provided a copy
prior to the filing thereof or to which you shall reasonably object unless in
the opinion of legal counsel to the Company such amendment or supplement is
required by law to be filed; it will furnish to you at or prior to the filing
thereof a copy of any document that upon filing is deemed to be incorporated by
reference in the Registration Statement or Prospectus; and it will prepare and
file with the Commission, promptly upon your reasonable request, any amendment
or supplement to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities by you, and will use its best efforts to cause
the same to become effective as promptly as possible.
- 5 -
<PAGE>
(i) Prior to any public offering of the Securities, it will
cooperate with you and Underwriters' Counsel in connection with the registration
or qualification of the Securities for offer and sale by the Underwriters under
the state securities or Blue Sky laws of such United States jurisdictions as you
may request. The Company will continue such qualification in effect so long as
required by law for distribution of the Securities and will file such consents
to service of process or other documents as may be necessary in order to effect
such registration or qualification (PROVIDED, that the Company shall not be
obligated to qualify as a foreign corporation in any jurisdiction in which it is
not so qualified nor to take any action that would subject it to general consent
to service of process in any jurisdiction in which it is not now so subject).
(j) It timely will complete all required filings and
otherwise comply fully in a timely manner with all provisions of the Exchange
Act to effect the registration of the securities pursuant thereto, and, during
the period specified in paragraph (c) of this Section 4, will file timely all
reports required to be filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and it will use its best
efforts to cause the Securities to be listed on the NYSE.
(k) So long as any of the Securities are outstanding, it
will mail to each of the Underwriters, without charge, a copy of each report or
other publicly available information furnished to holders of the Securities, or
filed with the Commission, whether or not required by law or pursuant to the
Indenture, and such other publicly available information concerning the Company
and its subsidiaries as you may reasonably request, at the same time as such
reports or other information are furnished to such holders.
(l) To the extent permitted by law, it will not voluntarily
claim, and will actively resist any attempts to claim, the benefit of any usury
laws against the holders of the Securities.
(m) It will use the proceeds from the sale of the Securities
in the manner described in the Prospectus under the caption "Use of Proceeds."
(n) During the period beginning on the date of this
Agreement and continuing to and including the Closing Date, it will not offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company or warrants, rights, or options to purchase debt securities of the
Company (other than (i) the Securities and (ii) commercial paper issued in the
ordinary course of business), without your prior written consent.
(o) It will use its best efforts to do and perform all
things required to be done and performed under this Agreement by it prior to or
after the
- 6 -
<PAGE>
Closing Date and will use its reasonable best efforts to satisfy all conditions
precedent on its part to be satisfied prior to the delivery of the Securities.
5. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to each Underwriter that:
(a) When the Registration Statement becomes effective,
including on the date of effectiveness of any post-effective amendment, at the
date of the Prospectus (if different) and at the Closing Date, the Registration
Statement will comply in all material respects with the provisions of the Act,
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; at the date of the Prospectus, at the date of
any supplement or amendment to the Prospectus and at the Closing Date, the
Prospectus and each supplement or amendment thereto will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to statements in or
omissions from the Registration Statement or the Prospectus (or any supplement
or amendment to them) made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by or on behalf
of any Underwriter through DLJ expressly for use therein. The Company
acknowledges for all purposes under this Agreement (including this paragraph and
Section 6 hereof) that the statements set forth in the last paragraph on the
cover page and the third paragraph under the caption "Underwriting" in the
Prospectus constitute the only written information furnished to the Company by
or on behalf of any Underwriter through DLJ expressly for use in the
Registration Statement, the preliminary prospectus, or the Prospectus (or any
amendment or supplement to any of them) and that the Underwriters shall not be
deemed to have provided any information (and therefore are not responsible for
any statements or omissions) pertaining to any arrangement or agreement with
respect to any party other than the Underwriters. When the Registration
Statement becomes effective, the Indenture will be deemed to have been qualified
under and will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended, and the rules and regulations promulgated
pursuant thereto (collectively, the "TIA"). At the date of any post-effective
amendment to the Registration Statement, at the date of the Prospectus and any
amendment or supplement thereto (if different) and at the Closing Date, the
qualification of the Indenture under the TIA will not have been suspended and
the Indenture will conform in all material respects to the requirements of the
TIA. No contract or document of a character required to be described in the
Registration Statement, the Prospectus or any of the documents incorporated by
reference therein or to be filed as an exhibit to the Registration Statement or
to any of the documents incorporated by reference therein has not been described
and filed as required.
(b) Each preliminary prospectus and the Prospectus, filed as
part of the Registration Statement as originally filed or as part of any
amendment or
- 7 -
<PAGE>
supplement thereto, or filed pursuant to Rule 424 or 430A under the Act,
complied when so filed in all material respects with the Act.
(c) The documents incorporated by reference in the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any preliminary prospectus, when they became or become effective under the Act
or were or are filed with the Commission under the Exchange Act, as the case may
be, conformed or will conform in all material respects with the requirements of
the Act or the Exchange Act, as applicable.
(d) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any United States
Federal or state governmental body, agency or official which prevents the
issuance of the Securities, suspends the effectiveness of the Registration
Statement, prevents or suspends the use of any preliminary prospectus or
suspends the sale of the Securities in any jurisdiction referred to in Section
4(i) hereof; no injunction, restraining order, or order of any nature by any
Federal or state court has been issued with respect to the Company or any of its
subsidiaries which would prevent the issuance or sale of the Securities, suspend
the effectiveness of the Registration Statement, or prevent or suspend the use
of any preliminary prospectus or Prospectus in any jurisdiction referred to in
Section 4(i) hereof.
(e) The capitalization table set forth in the Prospectus
under the caption "Historical and Pro Forma Capitalization" identifies in
reasonable detail all outstanding short-term and long-term indebtedness and
shareholders' equity of the Company and its subsidiaries, prior to and after
giving PRO FORMA effect to the consummation of the offering of the Securities,
the application of the net proceeds therefrom as described in the Prospectus and
certain other transactions described in the Prospectus.
(f) The Indenture has been duly authorized by the Company
and, when duly executed and delivered in accordance with its terms, will be a
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity) and except to the extent that a waiver of rights under any usury laws
may be unenforceable.
(g) The Escrow Agreement has been duly authorized, by the
Company and, when duly executed and delivered in accordance with its terms, will
be a valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
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<PAGE>
(h) The Securities have been duly authorized by the Company
and, when executed and delivered by the Company and authenticated by the Trustee
in accordance with the Indenture and paid for in accordance with the terms of
this Agreement, will constitute legal, valid and binding obligations of the
Company, enforceable against the Company according to their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity) and except to the extent that a waiver of
rights under any usury laws may be unenforceable, will be entitled to the
benefits of the Indenture and will conform in all material respects to the
description thereof in the Prospectus.
(i) This Agreement has been duly authorized and validly
executed and delivered by the Company and constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except to the
extent that rights to indemnification and contribution with respect to liability
in connection with Federal or state securities laws may be unenforceable under
such laws or the policies underlying such laws and except to the extent that a
waiver of rights under any usury laws may be unenforceable.
(j) The execution and delivery of this Agreement by the
Company, the execution and delivery of the Indenture, the Escrow Agreement and
the Securities by the Company, the issuance and sale of the Securities, the
performance of the Company's obligations under this Agreement, the Securities,
the Indenture and the Escrow Agreement and the consummation of the transactions
contemplated by this Agreement, the Indenture and the Escrow Agreement
including, without limitation, the delivery of Vencor Common Shares pursuant to
the Securities will not conflict with or result in a breach or violation of any
of the respective charters or bylaws of the Company or any of its subsidiaries
(each, a "Subsidiary" and collectively, the "Subsidiaries") or any of the terms
or provisions of, or constitute a default or cause an acceleration of any
obligation under or result in the imposition or creation of (or the obligation
to create or impose) any security interest, mortgage, pledge, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien") with respect to,
any of the Transaction Documents or any other obligation, bond, agreement, note,
debenture, or other evidence of indebtedness, or any indenture, mortgage, deed
of trust or other agreement, lease or instrument (collectively, "Agreement") to
which the Company or any of the Subsidiaries is a party or by which it or any of
them is bound, or to which any properties of the Company or any of the
Subsidiaries is or may be subject, or any order of any court or governmental
agency, body or official having jurisdiction over the Company or any of the
Subsidiaries or any of their properties, or violate or conflict with any
statute, rule or regulation or administrative regulation or decree or court
decree applicable to the Company or any of the Subsidiaries, or any of their
respective assets or properties,
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<PAGE>
where, in any such instance, such conflict, breach, violation, default,
acceleration of indebtedness or Lien would have, singly or in the aggregate, a
material adverse effect on the assets, liabilities, results of operations,
financial condition or prospects of the Company and the Subsidiaries, taken as a
whole (a "Material Adverse Effect").
(k) No authorization, approval or consent or order of, or
filing with, any court or governmental body, agency or official is necessary in
connection with the transactions contemplated by this Agreement, except such as
may be required by the NASD or have been obtained and made under the Act, the
Exchange Act, the TIA or state securities or Blue Sky laws or regulations.
Neither the Company nor, to the best of the Company's knowledge, any of its
affiliates is presently doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(l) The Securities have been approved for listing on the
NYSE, subject to official notice of issuance.
(m) The Company has been duly organized, is validly existing
as a corporation in good standing under the laws of the State of Nevada and has
the requisite power and authority to carry on its business as it is currently
being conducted, to own, lease and operate its properties and to authorize the
offering of the Securities, to execute, deliver and perform this Agreement and
to issue, sell and deliver the Securities, and is duly qualified and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
where the operation, ownership or leasing of property or the conduct of its
business requires such qualification and where failure to be so qualified or in
good standing would have a Material Adverse Effect. Each of the Subsidiaries of
the Company that (i) directly or indirectly own or lease any interest in any
hospitals, healthcare facilities or medical office buildings, (ii) directly or
indirectly conduct any insurance activities or (iii) are otherwise material to
the Company and the Subsidiaries, taken as a whole (collectively, the
"Significant Subsidiaries"), has been duly organized, is validly existing as a
corporation in good standing under the laws of its jurisdiction of incorporation
and has the requisite power and authority to carry on its business as it is
currently being conducted and to own, lease and operate its properties and each
is duly qualified and is in good standing as a foreign corporation authorized to
do business in each jurisdiction where the operation, ownership or leasing of
property or the conduct of its business requires such qualifications and where
failure to be so qualified or in good standing would have a Material Adverse
Effect.
(n) All of the issued and outstanding shares of capital
stock of, or other ownership interests in, each of the Significant Subsidiaries
have been duly authorized and validly issued, and all of the shares of capital
stock of, or other ownership interests in, each of the Significant Subsidiaries
other than Australian Medical Enterprises Limited ("AME") are owned, directly or
through subsidiaries, by the Company. All such shares of capital stock are fully
paid and nonassessable, and are owned free and clear of any Lien, except Liens
securing indebtedness under the Credit Agreement (as defined in the Prospectus),
and there are no outstanding subscriptions, rights, warrants, options,
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calls, convertible or exchangeable securities, commitments of sale, or Liens
related to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock of, or other ownership interest in, any of the
Subsidiaries, except that shareholders of AME have certain preemptive rights
with respect to rights offerings by AME.
(o) Neither the Company nor the Significant Subsidiaries is
in violation of its respective charter or bylaws and neither the Company nor the
Subsidiaries is in default in the performance of any obligation, bond,
agreement, debenture, note or any other evidence of indebtedness, or any
indenture, mortgage, deed of trust or other contract, lease or other instrument
to which the Company or any of the Subsidiaries is a party or by which any of
them is bound, or to which any of the property or assets of the Company or any
of the Subsidiaries is subject, except as would not have, singly or in the
aggregate, a Material Adverse Effect.
(p) Except as disclosed in the Registration Statement or the
Prospectus, there is no action, suit, proceeding or investigation before or by
any court, governmental agency or body, arbitration board or tribunal, or
governmental or private accrediting body, domestic or foreign, pending against
or affecting the Company or any of the Subsidiaries, or any of their respective
assets or properties, which is required to be disclosed in the Registration
Statement or the Prospectus, or in which there is a reasonable possibility of
adverse decisions which in the aggregate could reasonably be expected to have a
Material Adverse Effect, or which might materially and adversely affect the
Company's performance of its obligations, as applicable, pursuant to this
Agreement (including, without limitation, the issuance of the Securities), the
Indenture, the Escrow Agreement or the transactions contemplated hereby and
thereby, and to the best of the Company's knowledge, after due inquiry, no such
action, suit, or proceeding is contemplated or threatened.
(q) Except as disclosed in the Registration Statement or the
Prospectus, neither the Company nor the Subsidiaries is subject to any judgment,
order or decree of any court, governmental authority or arbitration board or
tribunal which has had or which can reasonably be expected to have, a Material
Adverse Effect.
(r) The firms of accountants that have certified or shall
certify the applicable consolidated financial statements and supporting
schedules and the notes thereto of the Company and American Medical Holdings,
Inc., a Delaware corporation ("AMH"), filed or to be filed with the Commission
as part of the Registration Statement and the Prospectus or incorporated therein
by reference are, to the best of the Company's knowledge, independent public
accountants with respect to the Company and its Subsidiaries and AMH and its
Subsidiaries, as the case may be, as required by the Act. The consolidated
financial statements, together with related schedules and notes, set forth or
incorporated by reference in the Prospectus and the Registration Statement,
comply as to form in all material respects with the requirements of the Act and
fairly present the consolidated financial position of the Company and its
Subsidiaries and AMH and its Subsidiaries, as the case may be, at the respective
dates indicated and the results of their
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<PAGE>
operations and their cash flows for the respective periods indicated, in
accordance with generally accepted accounting principles in the United States of
America ("GAAP") consistently applied throughout such periods and in accordance
with Regulation S-X. The PRO FORMA financial statements contained in the
Registration Statement have been prepared in conformity with the standards set
forth in Rule 11-02 of Regulation S-X and on a basis consistent with such
historical statements and give effect to assumptions made on a reasonable basis
and present fairly the historical and proposed transactions contemplated by the
Prospectus and this Agreement. The Company's ratio of earnings to fixed charges
(actual and PRO FORMA) included in the Prospectus under the captions
"Prospectus Summary--Summary Pro Forma Financial Information," "Pro Forma
Financial Information" and in Exhibits 12.1 and 12.2 to the Registration
Statement have been calculated in compliance with Item 503(d) of the
Commission's Regulation S-K. The other financial and statistical information
and data of the Company included or incorporated by reference in the Prospectus
and in the Registration Statement, historical and PRO FORMA, are in all
material respects accurately presented and prepared on a basis consistent with
the books and records of the Company.
(s) The projected amount of operating synergies and other
cost reductions resulting from the Merger (as defined in the Prospectus)
included in the Registration Statement was determined by the Company with a
reasonable basis and in good faith and the assumptions used in the determination
of the amount of such projected operating synergies and other cost reductions
are all those the Company believes are significant in projecting the amount of
such synergies and other cost reductions. Notwithstanding the foregoing, no
assurance can be made as to the amount of cost savings, if any, that actually
will be realized.
(t) Except as contemplated by the Registration Statement and
the Prospectus, subsequent to the respective dates as of which information is
presented in the Registration Statement and the Prospectus and up to the Closing
Date (i) neither the Company nor the Subsidiaries has incurred any liabilities
or obligations, direct or contingent, which are material to the Company and the
Subsidiaries, taken as a whole, or entered into any transaction not in the
ordinary course of business, (ii) there has been no decision or judgment in the
nature of litigation or arbitration that could reasonably be expected to have a
Material Adverse Effect, (iii) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital stock and
(iv) there has not been any material adverse change, or any development which
could involve a material adverse change, in the results of operations, assets,
liabilities, financial condition or prospects of the Company or its
Subsidiaries, taken as a whole (any of the items set forth in clauses (i), (ii),
(iii) or (iv) above, a "Material Adverse Change").
(u) (i) Except as described in the Registration Statement or
Prospectus or as could not reasonably be expected to have a Material Adverse
Effect, each of the Company and the Subsidiaries has all certificates, consents,
exemptions, orders, permits, licenses, authorizations, accreditations or other
approvals or rights (each,
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<PAGE>
an "Authorization") of and from, and has made all declarations and filings with,
all Federal, state, local and other governmental authorities, all
self-regulatory organizations, all governmental and private accrediting bodies
and all courts and other tribunals, necessary or required to own, lease, license
and use its properties and assets and to conduct its business in the manner
described in the Prospectus, (ii) all such Authorizations are valid and in full
force and effect, except as could not reasonably be expected to have, singly or
in the aggregate, a Material Adverse Effect, (iii) the Company and the
Subsidiaries are in compliance with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory authorities
and governing bodies having jurisdiction with respect thereto except as could
not reasonably be expected to have a Material Adverse Effect and (iv) neither
the Company nor the Subsidiaries has received any notice of proceedings relating
to the revocation or modification of any such Authorization.
(v) The Company is not an "affiliate" of Vencor within the
meaning of Rule 144 promulgated by the Commission under the Act.
(w) The [8,301,067] Vencor Common Shares to be delivered to
the Escrow Agent pursuant to the Exchange Agreement (the "Deposited of Shares")
have been duly authorized and validly issued and are fully paid and
non-assessable.
(x) The Company will have at the time of delivery thereof to
the Escrow Agent valid and legal title to the Deposited Shares free and clear of
any Lien and if any Deposited Shares are delivered to a holder of Securities
pursuant to the terms of the Securities such holder will acquire valid and legal
title to such Deposited Shares free and clear of any Lien.
(y) The Deposited Shares are listed on the New York Stock
Exchange.
(z) It is not necessary to register the Deposited Shares
under the Act in connection with the offering and sale of the Securities in the
manner contemplated by this Agreement and the Prospectus.
(aa) The factual statements set forth in the opinion of
Skadden, Arps, Slate, Meagher & Flom attached as Exhibit A hereto (the
"Non-affiliate Opinion") are true and correct.
(bb) Neither the Company nor any agent acting on its behalf
has taken or will take any action that is reasonably likely to cause the
issuance or sale of the Securities to violate Regulation G, T, U, or X of the
Board of Governors of the Federal Reserve System, in each case as in effect, on
the date hereof.
(cc) Neither the Company nor any of the Significant
Subsidiaries is (i) an "investment company" or a company "controlled" by an
investment company
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<PAGE>
within the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or a "subsidiary company" of a holding company, or an
"affiliate" thereof within the meaning of the Public Utility Holding Company Act
of 1934, as amended.
(dd) Each certificate signed by any officer of the Company
and delivered to the Underwriters or the Underwriters' Counsel shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(ee) There exists as of the date hereof (after giving effect
to the transactions contemplated by the Transaction Documents) no event or
condition which would constitute a default or an event of default (in each case
as defined in the Credit Agreement) under the Credit Agreement and no event or
condition which would constitute a default or an event of default (in each case
as defined in each of the Transaction Documents) under any of the Transaction
Documents which would reasonably be expected to result in a Material Adverse
Effect.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless (i)
each of the Underwriters and their respective affiliates, (ii) each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) any of the Underwriters or any of their respective affiliates
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "Controlling Person"), and (iii) each of the respective officers,
directors, partners, employees, representatives and agents of any of the
Underwriters or any Controlling Person, and each of their respective officers,
directors, partners, employees, representatives and agents (any person referred
to in clause (i), (ii) or (iii) of this Section 6(a) may hereinafter be referred
to as an "Indemnified Person") to the fullest extent lawful, from and against
any and all losses, claims, damages, judgments, actions, costs, assessments,
expenses and other liabilities (collectively, "Liabilities"), including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any foreign, Federal, state or local authority,
regulatory body, administrative agency, court or other governmental or
quasi-governmental body, commenced or threatened, including the reasonable fees
and expenses of counsel to any Indemnified Person, to the extent such
Liabilities are directly or indirectly caused by, related to, based upon or
arising out of, or in connection with, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
supplement or amendment thereto), or the Prospectus (including any amendment or
supplement thereto) or any preliminary prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, except
insofar as such Liabilities are caused by any such untrue statement or omission
or alleged untrue
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<PAGE>
statement or omission that is (x) made in reliance upon and in conformity with
information relating to any of the Underwriters furnished in writing to the
Company by or on behalf of the Underwriter through DLJ expressly for use in the
Registration Statement (or any amendment or supplement thereto) or the
Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus or (y) with respect to the Underwriter from whom the person asserting
the Liabilities purchased Securities, made in any preliminary prospectus if a
copy of the Prospectus (as amended or supplemented, if the Company shall have
furnished the Underwriters with such amendments or supplements thereto on a
timely basis) was not delivered by or on behalf of such Underwriter to the
person asserting the Liabilities, if required by law to have been so delivered
by the Underwriter seeking indemnification, at or prior to the written
confirmation of the sale of the Securities, and it shall be finally determined
by a court of competent jurisdiction, in a judgment not subject to appeal or
review, that the Prospectus (as so amended or supplemented) would have
completely corrected such untrue statement or omission. The foregoing indemnity
shall be in addition to any liability that the Company might otherwise have to
any of the Underwriters and such other Indemnified Persons. The Company shall
notify you promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement which involves the
Company or an Indemnified Person.
(b) In case any action or proceeding (for all purposes of
this Section 6, including any governmental or quasi-governmental investigation)
shall be brought or asserted against any of the Indemnified Persons with respect
to which indemnity under this Section 6 may be sought against the Company, such
Underwriter (or the Underwriter controlled by such Controlling Person) promptly
shall notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Underwriter and payment of all fees and expenses; PROVIDED, that the delay or
failure to give such notice shall not relieve the Company from any liability
that it may have on account of the indemnity under this Section 6, unless and
only to the extent that such delay or omission materially adversely affects the
ability of the Company to defend or assume the defense of such action or
proceeding. Upon receiving such notice, the Company shall be entitled to
participate in any such action or proceeding and to assume, at its sole expense,
the defense thereof, with counsel reasonably satisfactory to such Indemnified
Person (who shall not, except with the consent of the Indemnified Person to be
represented, be counsel to the Company or any of the Subsidiaries) and, after
written notice from the Company to such Indemnified Person of its election so to
assume the defense thereof within five business days after receipt of the notice
from the Indemnified Person of such action or proceeding, the Company shall not
be liable to such Indemnified Person hereunder for legal expenses of other
counsel subsequently incurred by such Indemnified Person in connection with the
defense thereof, other than reasonable costs of investigation, unless (i) the
Company agrees in writing to pay such fees and expenses, or (ii) the Company
fails promptly to assume such defense or fails to employ counsel reasonably
satisfactory to such Indemnified Person, or (iii) the named parties to any such
action or proceeding (including
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<PAGE>
any impleaded parties) include both such Indemnified Person and the Company or
an affiliate of the Company, and that Indemnified Person shall have been advised
in writing by counsel, with a copy of such writing to the Company, that either
(x) there may be one or more legal defenses available to such Indemnified Person
that are different from or additional to those available to the Company or such
affiliate or (y) a conflict may exist between such Indemnified Person and the
Company or such affiliate. In the event of any of clause (i), (ii) and (iii) of
the immediately preceding sentence, the Company shall not have the right to
assume the defense thereof on behalf of the Indemnified Person and such
Indemnified Person shall have the right to employ its own counsel in any such
action and the fees and expenses of such counsel shall be paid, as incurred, by
the Company, subject to repayment to the Company if it is ultimately determined
that an Indemnified Person is not entitled to indemnification hereunder, it
being understood, however, that the Company shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all of the Indemnified
Persons which firm shall be designated in writing by DLJ. The Company shall not
be liable for any settlement of any such action or proceeding effected without
the Company's written consent, which consent may not be unreasonably withheld,
but if settled with the written consent of the Company, the Company agrees to
indemnify and hold harmless any Indemnified Person from and against any loss or
liability by reason of such settlement. The Company shall not, without the
prior written consent of each Indemnified Person, settle, compromise or consent
to the entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit, investigation or other proceeding in respect of
which any Indemnified Person is or could have been a party and indemnification
or contribution could have been sought hereunder by such Indemnified Person,
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
(c) Each of the Underwriters agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement, and any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company,
to the same extent as the foregoing indemnity from the Company to each of the
Indemnified Persons, but only with respect to claims and actions based on
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through DLJ expressly for use in the Registration Statement,
Prospectus or preliminary prospectus, as applicable. In case any action shall
be brought against the Company, any of its directors, any such officer, or any
such controlling person based on the Registration Statement, the Prospectus or
any preliminary prospectus in respect of which indemnity is sought against any
Underwriter pursuant to the foregoing sentence, the Underwriter shall have the
rights and duties given to the Company (except that if the Company shall have
assumed the defense thereof, such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof,
but the fees and expenses of such counsel shall be at
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<PAGE>
the expense of such Underwriter), and the Company, its directors, any such
officers, and each such controlling person shall have the rights and duties
given to the Indemnified Person by Section 6(b) above.
(d) If the indemnification provided for in this Section 6 is
finally determined by a court of competent jurisdiction to be unavailable to an
Indemnified Person in respect of any Liabilities referred to herein, then the
Company, in lieu of indemnifying such Indemnified Person, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such
Liabilities: (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Indemnified Person on
the other hand from the offering of the Securities,or (ii) if the allocation
provided by clause (i), above, is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i), above, but also the relative fault of the Company and the
Indemnified Person in connection with the actions, statements or omissions that
resulted in such Liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and any of the Underwriters (and its related Indemnified Persons), on the other
hand, shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by such Underwriter, in each case as set forth in the
Prospectus. The relative fault of the Company and the Underwriter shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact related to information supplied by the Company or the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The indemnity
and contribution obligations of the Company set forth herein shall be in
addition to any liability or obligation the Company may otherwise have to any
Indemnified Person.
The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 6(d) were
determined by PRO RATA allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the Liabilities referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6, none of the Underwriters (and
its related Indemnified Persons referred to in Section 6 above) shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total underwriting discount applicable to the Securities purchased by
such underwriter exceeds the amount of any damages or liabilities which such
Underwriter (and its related Indemnified Persons referred to in Section 6 above)
has otherwise been required to pay
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<PAGE>
or incur by reason of such untrue or alleged untrue statement or omission or
alleged omission or other indemnified action or proceeding. Notwithstanding
anything to the contrary contained herein, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 6(d) are several in proportion to the respective aggregate principal
amount of Securities purchased by each of the Underwriters hereunder and not
joint.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
respective obligations of the several Underwriters to purchase any Securities
under this Agreement are subject to the satisfaction or waiver by the several
underwriters of each of the following conditions on the Closing Date:
(a) All the representations and warranties of the
Company contained or incorporated by reference in this Agreement shall be true
and correct on the Closing Date after giving effect to the transactions
contemplated by the Transaction Documents, with the same force and effect as if
made on and as of the Closing Date. The Company and its Subsidiaries shall have
performed or complied with all of their obligations and agreements herein
contained and required to be performed or complied with by it at or prior to the
Closing Date.
(b) (i) The Registration Statement shall have become
effective (or, if a post-effective amendment is required to be filed pursuant to
Rule 430A of the Act, such post-effective amendment shall have become effective
(or, if any Securities are sold in reliance upon Rule 430A of the Act and no
post-effective amendment is so required to be filed, the Prospectus shall have
been timely filed with the Commission in accordance with Section 4(a) hereof))
on the date of this Agreement or at such later date and time as you may approve
in writing, (ii) at the Closing Date, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission and every request for additional information on the part of the
Commission shall have been complied with in all respects, (iii) no stop order
suspending the sale of the Securities in any jurisdiction referred to in Section
4(i) shall have been issued and no proceeding for that purpose shall have been
commenced or shall be pending or threatened, and (iv) since the effective date
of the Registration Statement, there shall not have occurred any event required
to be set forth in an amendment or supplement to the Registration Statement or
Prospectus that has not been set forth, and there shall not have been any
document required to be filed under the Exchange Act that upon such filing would
be deemed to be incorporated by reference in the Prospectus that has not been so
filed.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency, body or official which would, as of the Closing Date,
prevent the issuance of
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the Securities; and no injunction, restraining order or order of any nature by
any Federal or state court shall have been issued as of the Closing Date which
would prevent the issuance of the Securities. Subsequent to the execution and
delivery of this Agreement and prior to the Closing Date, there shall not have
been any downgrading, nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) of the
Act.
(d) (i) Since the earlier of the date hereof or the dates as
of which information is given in the Registration Statement and the Prospectus,
there shall not have been any Material Adverse Change or any material adverse
change, or any development which could involve a material adverse change, in the
results of operations, assets, liabilities, financial condition or prospects of
Vencor and its subsidiaries, taken as a whole (a "Material Adverse Vencor
Change"), (ii) since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or development involving a prospective material adverse
change, in the capital stock or debt, of the Company and the Subsidiaries, taken
as a whole, and (iii) neither the Company nor any of its Subsidiaries shall have
any liability or obligation, direct or contingent, that is material to the
Company and the Subsidiaries, taken as a whole, and which is not disclosed in
the Registration Statement and the Prospectus.
(e) You shall have received a certificate of the Company,
dated the Closing Date, executed on behalf of the Company, by an executive
officer and a financial officer of the Company satisfactory to you confirming,
as of the Closing Date, the matters set forth in paragraphs (a), (b), (c), (d)
and (k) of this Section 7.
(f) On the Closing Date, you shall have received:
(1) an opinion (satisfactory to you and your counsel),
dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom, counsel
for the Company ("Skadden, Arps"), to the effect that:
(i) the Company has the corporate power and
corporate authority to enter into and perform its obligations under
this Agreement; and this Agreement has been duly authorized,
executed and delivered by the Company;
(ii) the Registration Statement (other than the
documents incorporated by reference therein described in clause
(iii) below), at the time it became effective and on the Closing
Date, complied as to form in all material respects with the
applicable requirements of the Act and the TIA (except for
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financial statements, schedules and other financial data included
therein and the Statement of Eligibility and Qualification of the
Trustee on Form T-1 (the "Form T-1"), as to which no opinion need be
expressed);
(iii) each document filed pursuant to the Exchange
Act and incorporated by reference in the Prospectus, at the time it
was filed or last amended, complied as to form in all material
respects to the applicable requirements of the Exchange Act (except
for financial statements, schedules and other financial data
included or incorporated by reference therein or omitted therefrom,
as to which no opinion need be expressed);
(iv) the Securities have been duly authorized and
executed by the Company and, when authenticated in accordance with
the terms of the Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be
valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the
benefits of the Indenture under which they are being issued, except
to the extent that the enforceability thereof may be limited by (a)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws in effect as of the date of the
opinion or thereafter relating to or affecting creditors' rights
generally and (b) general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity)
and except that such counsel need express no opinion as to the
enforceability or effect of the waiver of rights under any usury
laws pursuant to the Indenture;
(v) the Indenture has been duly authorized,
executed and delivered by the Company and, assuming due
authorization, execution and delivery thereof by the Trustee, is a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that the
enforceability thereof may be limited by (a) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws in effect as of the date of the opinion or thereafter relating
to or affecting creditors' rights generally and (b) general
principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity) and except that such counsel need
express no opinion as to the enforceability or effect of the waiver
of rights under any usuary laws pursuant to the Indenture;
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(vi) the Escrow Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery thereof by the Escrow Agent,
is a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that
the enforceability thereof may be limited by (a) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws in effect as of the date of the opinion or
thereafter relating to or affecting creditors' rights generally and
(b) general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity);
(vii) the Securities, the Indenture and the Escrow
Agreement conform in all material respects to the descriptions
thereof contained in the Prospectus;
(viii) the Company and each of its Significant
Subsidiaries (as identified by the Company on a schedule to such
opinion) is a corporation existing and in good standing under the
laws of its jurisdiction or organization;
(ix) neither the Company nor any of its
Significant Subsidiaries is (a) an "investment company" or a company
"controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended, or (b) a "holding
company" or a "subsidiary company" of a holding company, or an
"affiliate" therefor within the meaning of the Public Utility
Holding Company Act of 1935, as amended;
(x) no consent, approval, authorization or other
order of, or filing with, any Federal or New York executive,
legislative, judicial, administrative or regulatory body, including,
without limitation, the Commission (each, a "Governmental
Authority"), is legally required under any laws, rules and
regulations of the State of New York and the United States of
America that, in the experience of such counsel, are normally
applicable to transactions of the type contemplated by this
Agreement, the Indenture and the Escrow Agreement (provided that no
opinion need be expressed as to the "blue sky" or state securities
laws of any jurisdiction) (collectively, the "Applicable Laws") for
the issuance or sale to the Underwriters of the Securities as
contemplated by this Agreement except such as may be required under
the Act, the Exchange Act and the TIA;
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<PAGE>
(xi) the execution and delivery by the Company of
this Agreement, the Indenture, the Escrow Agreement, the issuance
and sale of the Securities to you as contemplated thereby and the
performance of the Company's obligations pursuant to this Agreement,
the Indenture and the Escrow Agreement including, without
limitation, the delivery of Vencor Common Shares pursuant to the
Securities (a) will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under the charter or bylaws of the Company; (b) will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default (with the passage of time
or otherwise) under, or result in the imposition of a Lien on any
properties of the Company or any of its Subsidiaries or an
acceleration of indebtedness pursuant to any of the agreements
listed on a schedule attached to such counsel's opinion, where, in
any such instance, such breach, default, Lien, acceleration of
indebtedness or conflict could have, singly or in the aggregate, a
material adverse effect or a prospective material adverse effect on
the assets, liabilities, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole;
PROVIDED that, with respect to the Credit Agreement dated February
28, 1995, among the Company and the lenders party thereto, as
amended by Amendment No. 1 to the Credit Agreement dated as of
August 31, 1995 among the Company and the lenders party thereto, no
opinion need be expressed with respect to the performance of any of
the obligations contained in the Indenture (i) to the extent that
they require the Company to repay or repurchase (or to offer to
repay or repurchase) any of the Securities upon a Change of Control
Triggering Event (as defined in the Indenture) or in the event of
certain Asset Sales (as defined in the Indenture) or (ii) to the
extent they would require the Company to grant any lien; and (c)
will not conflict with or violate any Applicable Law or any order or
decree of New York or Federal Governmental Authorities by which the
Company or any of its Subsidiaries is bound, the existence of which
is actually known to such counsel or has been specifically disclosed
to such counsel in writing by the Company;
(xii) the Credit Agreement conforms in all
material respects to the descriptions thereof contained in the
Prospectus;
(xiii) All of the Deposited Shares have been duly
authorized and validly issued and are fully paid and non-assessable.
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<PAGE>
(xiv) The Company had, at the time of delivery
thereof to the Escrow Agent, valid and legal title to the Deposited
Shares free and clear of any Lien and if any Deposited Shares are
delivered to a holder of Securities pursuant to the terms of the
Securities, such holder will acquire valid and legal title to such
Deposited Shares free and clear of any Lien.
(xv) It is not necessary to register the
Deposited Shares under the Act in connection with the offering and
sale of the Securities in the manner contemplated by this Agreement
and the Prospectus.
(xvi) the Staff of the Commission has orally
advised such counsel that the Registration Statement was declared
effective under the Act and the Indenture was qualified under the
TIA, in each case, at 4:15 p.m., Washington, D.C. time, on October
10, 1995, and, to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement or
the qualification of Indenture has been issued and no proceedings
for that purpose are pending; and the Prospectus has been sent for
filing with the Commission pursuant to Rule 424(b) within the time
period required by such Rule.
(2) In giving their opinion required by subsection
(f)(1) of this Section 7, such counsel may state that such opinions are
limited to matters governed by the Federal laws of the United States of
America and the laws of the State of New York.
In addition, such counsel shall state that such counsel
has participated in conferences with officers and other representatives of
the Company, representatives of the independent public accountants for the
Company, your representatives and your counsel at which the contents of
the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the Prospectus,
on the basis of the foregoing, no fact has come to the attention of such
counsel that leads it to believe that the Registration Statement, at the
time it became effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus, as of its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, except
that such counsel need not express any opinion or belief with respect to
the financial statements, schedules and other
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<PAGE>
financial data included or incorporated by reference in or excluded from
the Registration Statement or the Prospectus, the exhibits to the
Registration Statement or the Form T-1.
In rendering the foregoing opinions, Skadden, Arps may
rely as to matters of Nevada law on the opinion of Woodburn & Wedge,
Nevada counsel to the Company, or such other counsel as is reasonably
satisfactory to the Underwriters' Counsel.
(3) a reliance letter (satisfactory to you and your
counsel), dated the Closing Date, of Skadden, Arps permitting you to rely
upon the Non-affiliate Opinion as if it were addressed to you.
(4) an opinion (satisfactory to you and Underwriters'
Counsel), dated the Closing Date, of Scott M. Brown, Esq., Senior Vice
President and General Counsel of the Company, to the effect that:
(i) the descriptions in the Registration
Statement and the Prospectus of statutes, legal and governmental
proceedings, contracts and other documents and regulatory matters,
including, without limitation, those described in the Prospectus
under the captions "Risk Factors--Limits on Reimbursement,"
"--Extensive Regulation," "--Healthcare Reform Legislation" and in
the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1995 under the captions "Medicare, Medicaid and
Other Revenues" and "Health Care Reform, Regulation and
Licensing" and in the Company's Quarterly Report on Form 10-Q
for the quarter ended August 31, 1995 under the caption "Legal
Proceedings" insofar as such statements constitute summaries of
legal matters, documents or proceedings referred to therein are
accurate in all material respects and such counsel does not know
of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus (or
required to be filed under the Exchange Act if upon such filing
they would be incorporated by reference therein) or to be filed
as exhibits to the Registration Statement which are not
described and filed as required; it being understood that such
counsel need express no opinion as to the financial statements,
notes or schedules or other financial data included or
incorporated by reference therein or those parts of the
Registration Statement that constitute the Form T-1);
(ii) each of the Company and its Significant
Subsidiaries has such Authorizations from all regulatory or
governmental officials, bodies and tribunals as are necessary to
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<PAGE>
own, lease and operate its respective properties and to conduct its
business in the manner described in the Prospectus;
(iii) to the best of such counsel's knowledge,
there is no current, pending or threatened action, suit or
proceeding before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of its
Subsidiaries or to which any of their respective property is subject
of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Prospectus;
(iv) all of the issued and outstanding shares of
capital stock of, or other ownership interests in, each Significant
Subsidiary of the Company have been duly and validly authorized and
issued, and the shares of capital stock of, or other ownership
interests in, each such subsidiary, other than AME, are owned of
record, directly or through subsidiaries, by the Company, are fully
paid and nonassessable, and to the best knowledge of such counsel
are owned free and clear of any material, consensual Lien, other
than Liens arising under the Credit Agreement, except that
shareholders of AME have certain preemptive rights with respect to
rights offerings by AME; and
(v) the Company and each of its significant
subsidiaries (as defined under the Commission's Regulation S-X and
identified on a schedule to such opinion) is a duly organized
corporation, has the requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus, and, to
the extent each is a party thereto, to execute, deliver and perform
its obligations pursuant to the Indenture, the Escrow Agreement and
this Agreement, and is duly qualified as a foreign corporation and
in good standing in each jurisdiction where the ownership, leasing
or operation of property or the conduct of its business requires
such qualification, except where the failure so to be qualified
could not have, singly or in the aggregate, a Material Adverse
Effect.
(5) In giving their opinion required by subsection
f(4) of this Section 7, such counsel shall state that no fact has come to
the attention of such counsel that leads it to believe that the
descriptions of statutes, legal and governmental proceedings, contracts
and other documents and regulatory matters described in the Registration
Statement and the Prospectus under the captions set forth in subsection
(f)(4)(i) of this Section 7 contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
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<PAGE>
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(6) an opinion (satisfactory to you and Underwriters'
Counsel), dated the Closing Date, of Woodburn & Wedge, special Nevada
counsel to the Company, to the effect that:
(i) the Company has the corporate power and
authority to execute, deliver and perform this Agreement and the
Company has the corporate power and authority to authorize,
issue and sell the Securities as contemplated by this Agreement;
(ii) this Agreement has been duly authorized,
executed and delivered by the Company, and the Securities, the
Indenture and the Escrow Agreement have been duly authorized,
executed and delivered by the Company;
(iii) the Company is a duly organized and validly
existing corporation in good standing under the laws of the
State of Nevada and has the requisite corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement
and the Prospectus, and to execute and deliver, and perform its
obligations pursuant to, the Indenture, the Escrow Agreement,
the Securities and this Agreement;
(iv) no consent, approval, authorization, or order
of any Nevada governmental agency or body is required, for the
consummation by the Company of the transactions contemplated by
this Agreement in connection with the issuance and sale of the
Securities;
(v) the execution and delivery by the Company of
this Agreement, the Indenture, the Escrow Agreement and the
issuance and sale of the Securities to you as contemplated by
this Agreement and the performance of its obligations pursuant
to this Agreement, the Securities, the Indenture and the Escrow
Agreement including, without limitation, the delivery of Vencor
Common Shares pursuant to the Securities will not conflict with
or result in a breach or violation of any of the terms or
provision of, or constitute a default under, (a) any of the
charter or bylaws of the Company, or (b) any existing applicable
statute, rule or regulation or any order of any Nevada court or
governmental agency or body having jurisdiction over the Company
or any of its properties; provided that the opinion expressed in
clause (b) is limited to those statutes, rules or regulations
which, in the experience of such counsel, are normally
applicable to transactions of the type contemplated
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<PAGE>
by this Agreement in connection with the issuance and sale of
the Securities; and
(vi) in any action or proceeding arising out of
or relating to this Agreement, the Indenture or the Escrow
Agreement in any court of the State of Nevada or in any federal
court sitting in the State of Nevada, such court would recognize
and give effect to the provisions of Section 10 of this
Agreement, Section [9.10] of the Indenture and Section __ of the
Escrow Agreement wherein the parties thereto agreed, to the
extent therein stated, that each such document shall be governed
by and construed in accordance with the internal laws of the
State of New York.
(g) You shall have received an opinion, dated the Closing
Date, of Davis Polk & Wardwell counsel for the Underwriters, in form and
substance reasonably satisfactory to you.
(h) You shall have received complete sets of all closing
documents, including without limitation all opinions, required to be delivered
under any of the other Transaction Documents.
(i) You shall have received letters on and as of the date
hereof as well as on and as of the Closing Date, in the latter case constituting
an affirmation of the statements set forth in the earlier letters, in form and
substance satisfactory to you, from KPMG Peat Marwick LLP and Price Waterhouse
LLP, independent public accountants to the Company and AMH, respectively, with
respect to the financial statements and certain financial information contained
or incorporated by reference in the Registration Statement and the Prospectus as
you shall reasonably require.
(j) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the
Securities, the Registration Statement and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory to Davis Polk & Wardwell and such counsel shall
have been furnished with such documents and opinions, in addition to those set
forth above, as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 7, in order to
evidence the accuracy, completeness and satisfaction in all material respects of
any of the representations, warranties or conditions herein contained and to
render the opinion referred to in Section 7(g) hereof.
(k) There shall have been no amendments, alterations,
modifications, or waivers of any provisions of the Transaction Documents since
the date of the execution and delivery thereof by the parties thereto other than
those which are disclosed in the Registration Statement or the Prospectus or any
supplement thereto or which under the Act are not required to be disclosed in
the Prospectus or any supplement thereto and which have been disclosed to the
Underwriters prior to the date hereof.
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<PAGE>
8. EFFECTIVE DATE OF AGREEMENT, DEFAULT AND TERMINATION. This
Agreement shall become effective upon the later of (i) the execution and
delivery of this Agreement by the parties hereto, (ii) the effectiveness of the
Registration Statement, and (iii) if a post-effective amendment is required to
be filed pursuant to Rule 430A under the Act, the effectiveness of such
post-effective amendment.
This Agreement may be terminated at any time on or prior to
the Closing Date by you by notice to the Company if any of the following has
occurred: (i) subsequent to the date the Registration Statement is declared
effective or the date of this Agreement, any Material Adverse Change, or any
Material Adverse Vencor Change which, in your judgment, impairs the investment
quality of the Securities, (ii) any outbreak or escalation of hostilities or
other national or international calamity or crisis or material adverse change in
the financial markets of the United States or elsewhere, or any other
substantial national or international calamity or emergency if the effect of
such outbreak, escalation, calamity, crisis or emergency would, in your judgment
make it impracticable or inadvisable to market the Securities or to enforce
contracts for the sale of the Securities, (iii) any suspension or limitation of
trading generally in securities, or in any securities of the Company or Vencor,
on the New York, American or Pacific Stock Exchanges, the National Association
of Securities Dealers Automated Quotation National Market, or the
over-the-counter markets or any setting of minimum prices for trading on such
exchanges or markets, (iv) any declaration of a general banking moratorium by
either Federal or New York authorities, (v) the taking of any action by any
Federal, state or local government or agency in respect of its monetary or
fiscal affairs that in your judgment has a material adverse effect on the
financial markets in the United States, and would, in your judgment, make it
impracticable or inadvisable to market the Securities or to enforce contracts
for the sale of the Securities, (vi) any securities of the Company or any of its
Subsidiaries shall have been downgraded or placed on any "watch list" for
possible downgrading or reviewed for a possible change that does not indicate
the direction of the possible change by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule 436(g)(2) of
the Act, or (vii) the enactment, publication, decree or other promulgation of
any Federal or state statute, regulation, or rule or order of any court or other
governmental authority which in your judgment could have a Material Adverse
Effect.
If this Agreement shall be terminated by you pursuant to
clause (i), (vi) or, in the case of a statute, regulation, rule or order
specifically addressing the Company, and not affecting its industry generally,
(vii) of the second paragraph of this Section 8 or because of the failure or
refusal on the part of the Company to comply with the terms or to fulfill any of
the conditions of this Agreement, the Company agrees to reimburse you for all
reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) incurred by you. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 4(f) hereof. If this Agreement is terminated
pursuant to this Section
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<PAGE>
8, such termination shall be without liability of any Underwriter to the Company
or any of its Subsidiaries.
If on the Closing Date either Underwriter shall fail or refuse
to purchase the Securities which it has agreed to purchase hereunder on such
date and arrangements satisfactory to the non-defaulting Underwriter and the
Company for the purchase of such Securities are not made within 48 hours after
such default, this Agreement shall terminate without liability on the part of
the non-defaulting Underwriter and the Company, except as otherwise provided in
this Section 8. In any such case that does not result in termination of this
Agreement, either the non-defaulting Underwriter or the Company may postpone the
Closing Date for not longer than seven (7) days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve a defaulting Underwriter from liability in respect
of any default of any such Underwriter under this Agreement.
9. NOTICES. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a) if to the Company, to it at
2700 Colorado Avenue, Santa Monica, California 90404, Attention: Treasurer, with
copies to Attention: General Counsel and to Skadden, Arps, Slate, Meagher &
Flom, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Attention: Brian J. McCarthy and (b) if to any Underwriter, to Donaldson, Lufkin
& Jenrette Securities Corporation, 140 Broadway, New York, New York 10005,
Attention: Syndicate Department, and, in each case, with a copy to Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York 10017, Attention : Richard D.
Truesdell, Jr., or in any case to such other address as the person to be
notified may have requested in writing.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPALS OF CONFLICTS OF LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK
STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION
OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED
HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY
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<PAGE>
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
11. SEVERABILITY. Any determination that any provision of
this Agreement may be, or is, unenforceable shall not affect the enforceability
of the remainder of this Agreement.
12. SUCCESSORS. Except as otherwise provided, this
Agreement has been and is made solely for the benefit of and shall be binding
upon the Company, the Underwriters, any Indemnified Person referred to herein
and their respective successors and assigns, all as and to the extent provided
in this Agreement, and no other person shall acquire or have any right under or
by virtue of this Agreement. The terms "successors and assigns" shall not
include a purchaser of any of the Securities from any of the Underwriters merely
because of such purchase.
13. CERTAIN DEFINITIONS. For purposes of this Agreement,
(a) "business day", means any day on which the NYSE is open for trading and (b)
"subsidiary" has the meaning set forth in Rule 405 of the Act.
14. COUNTERPARTS. This Agreement may be executed in one
or more counterparts and, if executed in one or more counterparts, the executed
counterparts shall each be deemed to be an original, not all such counterparts
shall together constitute one and the same instrument.
15. HEADINGS. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
16. SURVIVAL. The indemnities and contribution provisions
and the other agreements, representations and warranties of the Company, its
officers and directors and of the Underwriters set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Securities, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any of the Underwriters or by or on behalf of the Company, the officers or
directors of the Company or any controlling person of the Company, (ii)
acceptance of the Securities and payment for them hereunder and (iii)
termination of this Agreement.
- 30 -
<PAGE>
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement among the Company and you.
Very truly yours,
TENET HEALTHCARE CORPORATION
By:
------------------------------
Name: Terence P. McMullen
Title: Senior Vice President
- 31 -
<PAGE>
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
Acting on behalf of themselves
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
------------------------------
Name: David L. Dennis
Title: Managing Director
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:
----------------------------------
Name: Mathew M. Pendo
Title: Director
- 32 -
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL PERCENTAGE
UNDERWRITER AMOUNT OF TOTAL
<S> <C> <C>
Donaldson, Lufkin & Jenrette Securities Corporation $ %
Merrill Lynch, Pierce, Fenner & Smith Incorporated %
Total .............. $ 100%
</TABLE>
I-1
<PAGE>
DRAFT
______________________________________________________________________________
______________________________________________________________________________
TENET HEALTHCARE CORPORATION
________________________
$_________
____% EXCHANGEABLE SUBORDINATED NOTES due 2007
_______________________________
______________________
INDENTURE
Dated as of __________, 1995
______________________
____________________________
THE BANK OF NEW YORK
____________________________
as Trustee
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................ 1
Section 1.02. Other Definitions...................................... 7
Section 1.03. Incorporation by Reference of TIA...................... 8
Section 1.04. Rules of Construction.................................. 8
ARTICLE 2
THE SECURITIES; OFFER TO PURCHASE PROCEDURES
Section 2.01. Form and Dating........................................ 9
Section 2.02. Execution and Authentication........................... 9
Section 2.03. Registrar and Paying Agent............................. 10
Section 2.04. Paying Agent to Hold Money in Trust.................... 10
Section 2.05. Holder Lists........................................... 11
Section 2.06. Transfer and Exchange.................................. 11
Section 2.07. Replacement Securities................................. 12
Section 2.08. Outstanding Securities................................. 12
Section 2.09. Treasury Securities.................................... 13
Section 2.10. Temporary Securities................................... 13
Section 2.11. Cancellation........................................... 13
Section 2.12. Defaulted Interest..................................... 13
Section 2.13. Record Date............................................ 14
Section 2.14. CUSIP Number........................................... 14
ARTICLE 3
COVENANTS
Section 3.01. Payment of Securities.................................. 14
Section 3.02. Maintenance of Office or Agency........................ 15
Section 3.03. Commission Reports..................................... 16
Section 3.04. Compliance Certificate................................. 17
Section 3.05. Taxes.................................................. 18
Section 3.06. Stay, Extension and Usury Laws......................... 18
Section 3.07. Change of Control...................................... 18
Section 3.08. Corporate Existence.................................... 21
ARTICLE 4
SUCCESSORS
Section 4.01. Limitations On Mergers, Consolidations or
Sales of Assets........................................ 21
<PAGE>
Page
Section 4.02. Successor Corporation Substituted...................... 22
ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.01. Events of Default...................................... 23
Section 5.02. Acceleration........................................... 25
Section 5.03. Other Remedies......................................... 26
Section 5.04. Waiver of Past Defaults................................ 27
Section 5.05. Control by Majority.................................... 27
Section 5.06. Limitation on Suits.................................... 27
Section 5.07. Rights of Holders to Receive Payment................... 28
Section 5.08. Collection Suit by Trustee............................. 28
Section 5.09. Trustee May File Proofs of Claim....................... 28
Section 5.10. Priorities............................................. 29
Section 5.11. Undertaking for Costs.................................. 29
ARTICLE 6
TRUSTEE
Section 6.01. Duties of Trustee...................................... 30
Section 6.02. Rights of Trustee...................................... 31
Section 6.03. Individual Rights of Trustee........................... 32
Section 6.04. Trustee's Disclaimer................................... 32
Section 6.05. Notice of Defaults..................................... 33
Section 6.06. Reports by Trustee to Holders.......................... 33
Section 6.07. Compensation and Indemnity............................. 33
Section 6.08. Replacement of Trustee................................. 34
Section 6.09. Successor Trustee or Agent by Merger, etc.............. 35
Section 6.10. Eligibility; Disqualification.......................... 35
Section 6.11. Preferential Collection of Claims Against Company...... 36
ARTICLE 7
DISCHARGE OF INDENTURE
Section 7.01. Defeasance and Discharge of this Indenture and the
Securities............................................. 36
Section 7.02. Legal Defeasance and Discharge......................... 36
Section 7.03. Covenant Defeasance.................................... 37
Section 7.04. Conditions to Legal or Covenant Defeasance............. 37
Section 7.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.................. 39
Section 7.06. Repayment to Company................................... 40
Section 7.07. Reinstatement.......................................... 41
ARTICLE 8
AMENDMENT, SUPPLEMENT AND WAIVER
ii
<PAGE>
Page
Section 8.01. Without Consent of Holders............................. 41
Section 8.02. With Consent of Holders................................ 42
Section 8.03. Compliance with TIA.................................... 43
Section 8.04. Revocation and Effect of Consents...................... 43
Section 8.05. Notation on or Exchange of Securities.................. 44
Section 8.06. Trustee to Sign Amendments, etc........................ 44
ARTICLE 9
MISCELLANEOUS
Section 9.01. TIA Controls........................................... 45
Section 9.02. Notices................................................ 45
Section 9.03. Communication by Holders with Other Holders............ 46
Section 9.04. Certificate and Opinion as to Conditions Precedent..... 46
Section 9.05. Statements Required in Certificate or Opinion.......... 47
Section 9.06. Rules by Trustee and Agents............................ 47
Section 9.07. Legal Holidays......................................... 47
Section 9.08. No Personal Liability of Directors, Officers,
Employees and Shareholders............................. 48
Section 9.09. Duplicate Originals.................................... 48
Section 9.10. Governing Law.......................................... 48
Section 9.11. No Adverse Interpretation of Other Agreements.......... 48
Section 9.12. Successors............................................. 48
Section 9.13. Severability........................................... 48
Section 9.14. Counterpart Originals.................................. 49
Section 9.15. Table of Contents, Headings, etc....................... 49
ARTICLE 10
REDEMPTION OF SECURITIES
Section 10.01. Notices to Trustee..................................... 49
Section 10.02. Selection of Securities to Be Redeemed................. 49
Section 10.03. Notice of Redemption................................... 50
Section 10.04. Effect of Notice of Redemption......................... 51
Section 10.05. Deposit of Redemption Price............................ 51
Section 10.06. Securities Redeemed in Part............................ 52
Section 10.07. Optional Redemption................................... 52
Section 10.08. Mandatory Redemption................................... 52
ARTICLE 11
EXCHANGE OF SECURITIES
Section 11.01. Right of Exchange...................................... 53
Section 11.02. Method of Exchange..................................... 53
Section 11.03. Fractional Interests................................... 55
iii
<PAGE>
Section 11.04. Adjustment of Exchange Rate............................ 56
Section 11.05. Escrow Agreement....................................... 57
Section 11.06. Notice of Certain Events............................... 62
Section 11.07. Transfer Taxes......................................... 63
Section 11.08. Shares Free and Clear.................................. 64
Section 11.09. Cancellation of Securities............................. 64
Section 11.10. Consolidation, etc., of Vencor......................... 64
Section 11.11. Certain Tender or Exchange Offers for Vencor
Common Stock........................................... 65
Section 11.12. Obligations of Trustee and Escrow Agent................ 66
Section 11.13. Tax Adjustments........................................ 66
Section 11.14. Cash Equivalent........................................ 69
Section 11.15. Computation of Taxes Payable........................... 69
Section 11.16. Tax Assumptions for Permitted Transferees.............. 70
Section 11.17. Registration of Vencor Common Shares................... 70
ARTICLE 12
SUBORDINATION
Section 12.01. Agreement to Subordinate............................... 70
Section 12.02. Certain Definitions.................................... 71
Section 12.03. Liquidation; Dissolution; Bankruptcy................... 71
Section 12.04. Default on Designated Senior and Senior
Subordinated Debt...................................... 72
Section 12.05. Acceleration of Securities............................. 73
Section 12.06. When Distribution Must Be Paid Over.................... 73
Section 12.07. Notice by Company...................................... 73
Section 12.08. Subrogation............................................ 74
Section 12.09. Relative Rights........................................ 74
Section 12.10. Subordination May Not Be Impaired by Company........... 74
Section 12.11. Distribution or Notice to Representative............... 75
Section 12.12. Rights of Trustee and Paying Agent..................... 75
Section 12.13. Authorization to Effect Subordination.................. 75
Section 12.14. Amendments............................................. 76
EXHIBITS
Exhibit A FORM OF SECURITY
iv
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- --------------- -----------------
310 (a)(1)............................................ 6.10
(a)(2)............................................. 6.10
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(a)(5)............................................. 6.10
(b) ............................................... 6.08; 6.10
(c) ............................................... N.A.
311 (a) .............................................. 6.11
(b) ............................................... 6.11
(c) ............................................... N.A.
312 (a)............................................... 2.05
(b)................................................ 9.03
(c) ............................................... 9.03
313 (a) .............................................. 6.06
(b)(1) ............................................ N.A.
(b)(2) ............................................ 6.06
(c) ............................................... 6.06; 9.02
(d)................................................ 6.06
314 (a) .............................................. 3.03; 9.02
(b) ............................................... N.A.
(c)(1)............................................. 9.04
(c)(2)............................................. 9.04
(c)(3)............................................. N.A.
(d)................................................ N.A.
(e) .............................................. 9.05
(f)................................................ N.A.
315 (a)...............................................6.01(iii)(b)
(b)................................................ 6.05; 9.02
(c) .............................................. 6.01(i)
(d)................................................ 6.01(iii)
(e)................................................ 5.11
316 (a)(last sentence) ............................... 2.09
(a)(1)(a).......................................... 5.05
(a)(1)(b) ......................................... 5.04
(a)(2)............................................. N.A.
(b) ............................................... 5.07
(c) ............................................... 2.13; 8.04
317 (a)(1) ........................................... 5.08
(a)(2)............................................. 5.09
(b) ............................................... 2.04
318 (a)............................................... 9.01
(b)................................................ N.A.
(c)................................................ 9.01
N.A. means not applicable.
____________________________
*THIS CROSS-REFERENCE TABLE IS NOT PART OF THE INDENTURE.
<PAGE>
INDENTURE dated as of __________, 1995 between Tenet Healthcare Corporation, a
Nevada corporation (the "COMPANY"), and The Bank of New York, as trustee
(the "TRUSTEE").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the ____%
Exchangeable Subordinated Notes due 2007 (the "SECURITIES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"AFFILIATE" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any authorized committee thereof.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE" means, at the time any determination thereof is to be
made, any lease of property, real or personal, in respect of which the present
value of the minimum rental commitment would be capitalized on a balance sheet
of the lessee in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a Capital Lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
1
<PAGE>
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole to any Person or group (as such
term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than
to a Person or group who, prior to such transaction, held a majority of the
voting power of the voting stock of the Company, (ii) the acquisition by any
Person or group, as defined above, of a direct or indirect interest in more than
50% of the voting power of the voting stock of the Company, by way of merger,
consolidation or otherwise, or (iii) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a
Change of Control and a Rating Decline.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means Tenet Healthcare Corporation, as obligor under the
Securities, unless and until a successor replaces Tenet Healthcare Corporation,
in accordance with Article 4 hereof and thereafter includes such successor.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date PLUS (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock), LESS
all write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made in accordance
with GAAP as a result of the acquisition of such business) subsequent to the
date hereof in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, and excluding the cumulative effect of a
change in accounting principles, all as determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing
2
<PAGE>
Directors who were members of such Board at the time of such nomination or
election.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 9.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"CREDIT FACILITY" means that certain Credit Agreement, dated as of
February 28, 1995, by and among the Company and Morgan Guaranty Trust Company of
New York and the other banks that are party thereto, providing for $1.8 billion
in aggregate principal amount of senior term debt and up to $500.0 million in
aggregate principal amount of senior revolving debt, including any related
notes, collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended as of August 31, 1995, and as amended,
modified, extended, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect from time to time.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts or currency swap agreements and (iii) other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency values.
3
<PAGE>
"HOLDER" means a Person in whose name a Security is registered.
"INDEBTEDNESS" means with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
given to secure Indebtedness, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction with respect to any such lien, pledge, charge or
security interest).
"MARKET PRICE" means as of any time of determination the average of
the sale prices of the Vencor Common Stock (or other securities held by the
Escrow Agent) for the five Business Day period (appropriately adjusted to take
into account the occurrence during such period of certain events that would
result in an adjustment of the Exchange Rate with respect to the Vencor Common
Shares) commencing on the first Business Day after delivery by the Company or
the Escrow Agent of notice to the Holders that the Company has elected to pay
cash in lieu of delivering Vencor Common Shares (or other property deliverable
upon such exchange) in exchange for any Securities.
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
4
<PAGE>
"OFFICERS" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary
and any Vice President of the Company or any Subsidiary, as the case may be.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers,
one of whom must be the principal executive officer, principal financial officer
or principal accounting officer of the Company.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, any Subsidiary or the Trustee.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust or unincorporated organization
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"RATING AGENCIES" means (i) S&P and (ii) Moody's or (iii) if S&P or
Moody's or both shall not make a rating of the Securities publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, shall be substituted for S&P or Moody's or both, as the
case may be.
"RATING CATEGORY" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories); and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining
whether the rating of the Securities has decreased by one or more gradations,
gradations within Rating Categories (+ and - for S&P, 1, 2 and 3 for Moody's; or
the equivalent gradations for another Rating Agency) shall be taken into account
(E.G., with respect to S&P, a decline in a rating from BB+ to BB, as well as
from BB- to B+, shall constitute a decrease of one gradation).
"RATING DATE" means the date which is 90 days prior to the earlier of
(i) a Change of Control and (ii) the first public notice of the occurrence of a
Change of Control or of the intention by the Company to effect a Change of
Control.
"RATING DECLINE" means the occurrence on or within 90 days after the
date of the first public notice of the occurrence of a Change of Control or of
the intention by the Company to effect a Change of Control (which period shall
be extended so long as the rating of the Securities is under publicly announced
consideration for possible downgrade by any of the Rating Agencies) of: (a) in
5
<PAGE>
the event the Securities are rated by either Moody's or S&P on the Rating Date
as Investment Grade, a decrease in the rating of the Securities by both Rating
Agencies to a rating that is below Investment Grade, or (b) in the event the
Securities are rated below Investment Grade by both Rating Agencies on the
Rating Date, a decrease in the rating of the Securities by either Rating Agency
by one or more gradations (including gradations within Rating Categories as well
as between Rating Categories).
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"SECURITIES" means the securities described above, issued under this
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"S&P" means Standard & Poor's Corporation and its successors.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA, except as provided in Section 8.03 hereof.
6
<PAGE>
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"VENCOR" means Vencor, Inc., a Delaware corporation.
"VENCOR COMMON SHARES" means the 8,301,067 shares of Vencor Common
Stock to be deposited pursuant to the Escrow Agreement.
"VENCOR COMMON STOCK" means Shares of common stock, $.25 par value,
of Vencor, Inc.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
"Bankruptcy Law"...................... 5.01
"Change of Control Offer"............. 3.07
"Change of Control Payment"........... 3.07
"Change of Control Payment Date"...... 3.07
"Commencement Date"................... 2.15
"Covenant Defeasance"................. 7.03
"Custodian"........................... 5.01
"Event of Default".................... 5.01
"Legal Defeasance".................... 7.02
"Legal Holiday"....................... 9.07
"Notice of Default"................... 5.01
"Offer Amount"........................ 2.15
"Offer Period"........................ 2.15
"Paying Agent"........................ 2.03
"Registrar"........................... 2.03
7
<PAGE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Securities;
"INDENTURE SECURITY HOLDER" means a Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee;
"OBLIGOR" on the Securities means the Company and any successor
obligor upon the Securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by the Commission rule
under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
8
<PAGE>
ARTICLE 2
THE SECURITIES; OFFER TO PURCHASE PROCEDURES
SECTION 2.01. FORM AND DATING.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements approved as to form by the Company and
required by law, stock exchange rule, agreements to which the Company is subject
or usage. Each Security shall be dated the date of its authentication. The
Securities shall be issuable only in registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Securities for the Company
by manual or facsimile signature. The Company's seal shall be reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture. The
form of Trustee's certificate of authentication to be borne by the Securities
shall be substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Securities for original issue up to the
aggregate principal amount stated in paragraph 4 of the Securities. The
aggregate principal amount of Securities outstanding at any time shall not
exceed the amount set forth herein except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
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SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Securities
may be presented for registration of transfer or for exchange and where
Securities may be surrendered for exchange in accordance with the provisions of
Article 11 for Vencor Common Shares (and cash, other securities and other
property under certain circumstances) (including any co-registrar, the
"REGISTRAR") and (ii) an office or agency where Securities may be presented
for payment (the "PAYING AGENT"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent, Registrar or co-registrar without prior notice to any Holder. The
Company shall notify the Trustee and the Trustee shall notify the Holders of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent, Registrar or co-registrar. The Company shall enter into an
appropriate agency agreement with any Agent not a party to this Indenture, which
shall incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails to maintain a Registrar or Paying Agent, or fails to give the foregoing
notice, the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 6.07 hereof.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the
Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
On or prior to the due date of principal of, premium, if any, and
interest on any Securities, the Company shall deposit with the Trustee or the
Paying Agent money sufficient to pay such principal, premium, if any, and
interest becoming due. The Company shall require each Paying Agent other than
the Trustee to agree in writing that the Paying Agent shall hold in trust for
the benefit of the Holders or the Trustee all money held by the Paying Agent for
the payment of principal of, premium, if any, and interest on the Securities,
and shall notify the Trustee of any Default by the Company in making any such
payment. While any such Default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company) shall have no
further liability for the money delivered to
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the Trustee. If the Company acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, including
the aggregate principal amount of the Securities held by each thereof, and the
Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
When Securities are presented to the Registrar with a request to
register the transfer or to exchange them for an equal principal amount of
Securities of other denominations, the Registrar shall register the transfer or
make the exchange if its requirements for such transactions are met; PROVIDED,
HOWEVER, that any Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Holder thereof or by his attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Securities at the Registrar's request,
subject to such rules as the Trustee may reasonably require.
Neither the Company nor the Registrar shall be required to register
the transfer or exchange of a Security between the record date and the next
succeeding interest payment date.
No service charge shall be made to any Holder for any registration
of transfer or exchange (except as otherwise expressly permitted herein), but
the Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10 or 8.05 hereof, which shall be paid by the Company).
Prior to due presentment for registration of transfer of any
Security, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Security is registered as the absolute owner of such
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Security for the purpose of receiving payment of principal of, premium, if any,
and interest on such Security and for all other purposes whatsoever, whether or
not such Security is overdue, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
SECTION 2.07. REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee or the
Company, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss which any of them may
suffer if a Security is replaced. Each of the Company and the Trustee may
charge for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 3.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
Subject to Section 2.09 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount
of Securities then outstanding have concurred in any demand, direction, waiver
or consent, Securities owned by the Company or any
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Affiliate of the Company shall be considered as though not outstanding, except
that for purposes of determining whether the Trustee shall be protected in
relying on any such demand, direction, waiver or consent, only Securities that a
Responsible Officer actually knows to be so owned shall be so considered.
Notwithstanding the foregoing, Securities that are to be acquired by the Company
or an Affiliate of the Company pursuant to an exchange offer, tender offer or
other agreement shall not be deemed to be owned by the Company or an Affiliate
of the Company until legal title to such Securities passes to the Company or
such Affiliate, as the case may be.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee, upon receipt of the written order of the Company signed
by two Officers of the Company, shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company and the Trustee consider appropriate
for temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee, upon receipt of the written order of the Company signed by two
Officers of the Company, shall authenticate definitive Securities in exchange
for temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges as definitive Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall return
such cancelled Securities to the Company. The Company may not issue new
Securities to replace Securities that it has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five Business Days prior to the
related payment date, in each case at the rate provided in the Securities and in
Section 3.01 hereof. The Company shall, with the consent of the Trustee, fix or
cause to be fixed each such special record date and payment date. At least
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15 days before the special record date, the Company (or the Trustee, in the name
of and at the expense of the Company) shall mail to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
Trustee is not the permitted under this Indenture shall be determined as
316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Securities may use a "CUSIP" number, and
if it does so, the Trustee shall use the CUSIP number in notices to Holders;
PROVIDED that any such notice may state that no representation is made as to
the correctness or accuracy of the CUSIP number printed in the notice or on the
Securities and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the
Trustee of any change in the CUSIP number.
ARTICLE 3
COVENANTS
SECTION 3.01. PAYMENT OF SECURITIES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Securities on the dates and in the manner provided
in this Indenture and the Securities. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary of the Company, holds as of 10:00 a.m. Eastern Time on
the due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. Such Paying Agent shall return to the Company, no later than
five days following the date of payment, any money (including accrued interest)
that exceeds such amount of principal, premium, if any, and interest to be paid
on the Securities.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the interest rate then applicable to the Securities
to the extent lawful. In addition, it shall pay interest (including
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post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Securities may be
surrendered for registration of transfer or exchange and where Securities may be
surrendered for exchange in accordance with the provisions of Article 11 for
Vencor Common Shares (and cash, other securities and other property under
certain circumstances) and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an office or agency in
the Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates The Bank of New York, 101 Barclay
Street, 21 West, New York, New York 10286 as one such office or agency of the
Company in accordance with Section 2.03 hereof.
SECTION 3.03. COMMISSION REPORTS.
(i) So long as any of the Securities remain outstanding, the
Company shall provide to the Trustee within 15 days after the filing thereof
with the Commission copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) that the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. All obligors on the Securities shall comply with the provisions
of TIA Section 314(a). Notwithstanding that the Company may not
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be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act or otherwise report on an annual and quarterly basis on forms provided for
such annual and quarterly reporting pursuant to rules and regulations
promulgated by the Commission, the Company shall file with the Commission and
provide to the Trustee (a) within 90 days after the end of each fiscal year,
annual reports on Form 10-K (or any successor or comparable form) containing the
information required to be contained therein (or required in such successor or
comparable form), including a "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and a report thereon by the
Company's certified public accountants; (b) within 45 days after the end of each
of the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or
any successor or comparable form) containing the information required to be
contained therein (or required in any successor or comparable form), including a
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS"; and (c) promptly from time to time after the occurrence of an
event required to be therein reported, such other reports on Form 8-K (or any
successor or comparable form) containing the information required to be
contained therein (or required in any successor or comparable form); PROVIDED,
HOWEVER, that the Company shall not be in default of the provisions of this
Section 3.03(i) for any failure to file reports with the Commission solely by
the refusal of the Commission to accept the same for filing. Each of the
financial statements contained in such reports shall be prepared in accordance
with GAAP.
(ii) The Trustee, at the Company's expense, shall promptly mail
copies of all such annual reports, information, documents and other reports
provided to the Trustee pursuant to Section 3.03(i) hereof to the Holders at
their addresses appearing in the register of Securities maintained by the
Registrar.
(iii) Whether or not required by the rules and regulations of the
Commission, the Company shall file a copy of all such information and reports
with the Commission for public availability and make such information available
to securities analysts and prospective investors upon request.
(iv) The Company shall provide the Trustee with a sufficient number
of copies of all reports and other documents and information that the Trustee
may be required to deliver to the Holders under this Section 3.03.
(v) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 3.04. COMPLIANCE CERTIFICATE.
(i) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether each has kept, observed, performed
and fulfilled its obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge each entity has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture (or,
if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action each is taking or proposes to take with respect thereto), all without
regard to periods of grace or notice requirements, and that to the best of his
or her knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal of or interest, if any, on the
Securities is prohibited or if such event has occurred, a description of the
event and what action each is taking or proposes to take with respect thereto.
(ii) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 3.03 above shall be accompanied by a
written statement of the Company's certified independent public accountants (who
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements nothing has
come to their attention which would lead them to believe that the Company or any
Subsidiary of the Company has violated any provisions of Article 3 or of Article
4 of this Indenture or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(iii) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of (a) any Default or Event of Default or (b) any event of default under any
other mortgage, indenture or instrument referred to in Section 5.01(v) hereof,
an Officers' Certificate specifying such Default, Event of Default or event of
default and what action the Company is taking or proposes to take with respect
thereto.
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SECTION 3.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except (i) as contested in good faith by appropriate proceedings and with
respect to which appropriate reserves have been taken in accordance with GAAP or
(ii) where the failure to effect such payment is not adverse in any material
respect to the Holders.
SECTION 3.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 3.07. CHANGE OF CONTROL.
Upon the occurrence of a Change of Control Triggering Event, each
Holder of Securities shall have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Securities pursuant to the offer described below (the "CHANGE OF
CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the date of purchase (the "CHANGE OF CONTROL PAYMENT") on a date that is not
more than 90 days after the occurrence of such Change of Control Triggering
Event (the "CHANGE OF CONTROL PAYMENT DATE").
Within 30 days following any Change of Control Triggering Event, the
Company shall mail, or at the Company's request the Trustee shall mail, a notice
of a Change of Control to each Holder (at its last registered address with a
copy to the Trustee and the Paying Agent) offering to repurchase the Securities
held by such Holder pursuant to the procedure specified in such notice. The
Change of Control Offer shall remain open from the time of mailing until the
close of business on the Business Day next preceding the Change of Control
Payment Date. The notice, which shall govern the terms of the Change of Control
Offer, shall contain all instructions and materials necessary to enable the
Holders to tender Securities pursuant to the Change of Control Offer and shall
state:
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(1) that the Change of Control Offer is being made pursuant to
this Section 3.07 and that all Securities tendered will be
accepted for payment;
(2) the Change of Control Payment and the Change of Control
Payment Date, which date shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed;
(3) that any Security not tendered will continue to accrue
interest in accordance with the terms of this Indenture;
(4) that, unless the Company defaults in the payment of the Change
of Control Payment, all Securities accepted for payment
pursuant to the Change of Control Offer will cease to accrue
interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to
any Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the
Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice prior to
the close of business on the Business Day next preceding the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be,
receives, not later than the close of business on the Business
Day next preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security the Holder
delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered, which
unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof; and
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(8) the circumstances and relevant facts regarding such Change of
Control (including, but not limited to, information with
respect to PRO FORMA historical financial information after
giving effect to such Change of Control, information regarding
the Person or Persons acquiring control and such Person's or
Persons' business plans going forward) and any other
information that would be material to a decision as to whether
to tender a Security pursuant to the Change of Control Offer.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered and not withdrawn pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Securities or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Securities so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Securities or portions thereof being purchased by the Company. The Paying Agent
shall promptly mail to each Holder of Securities so tendered the Change of
Control Payment for such Securities, and the Trustee shall promptly authenticate
and mail (or cause to be transferred by book entry) to each Holder a new
Security equal in principal amount to any unpurchased portion of the Securities
surrendered, if any; PROVIDED that each such new Security shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities as a result of a Change of Control.
SECTION 3.08. CORPORATE EXISTENCE.
Subject to Section 3.07 and Article 4 hereof, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of each
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
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taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
ARTICLE 4
SUCCESSORS
SECTION 4.01. LIMITATIONS ON MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
The Company may not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless:
(i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have
been made is a corporation organized or existing under the
laws of the United States, any state thereof or the District
of Columbia;
(ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the
entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made
assumes all the Obligations of the Company under this
Indenture and the Securities pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists; and
(iv) the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made shall have Consolidated
Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company
immediately preceding the transaction.
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The Company shall deliver to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel, covering clauses (i) through (iv) above, stating that the
proposed transaction and such supplemental indenture comply with this Indenture.
The Trustee shall be entitled to conclusively rely upon such Officers'
Certificate and Opinion of Counsel.
SECTION 4.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 4.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition, the provisions of this Indenture referring to the "Company"
shall refer instead to the successor corporation), and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person has been named as the Company, herein.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
Each of the following constitutes an "EVENT OF DEFAULT":
(i) default for 30 days in the payment when due of interest
on the Securities;
(ii) default in payment when due of the principal of or
premium, if any, on the Securities at maturity or
otherwise;
(iii) failure by the Company to comply with the provisions of
Section 3.07;
(iv) failure by the Company to comply with any other covenant
or agreement in the Indenture or the Securities for the
period and after the notice specified below;
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(v) any default that occurs under any mortgage, indenture or
instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is Guaranteed by
the Company or any of its Significant Subsidiaries),
whether such Indebtedness or Guarantee exists on the
date hereof or is created after the date hereof, which
default (a) constitutes a Payment Default or (b) results
in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount
of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there
has been a Payment Default or that has been so
accelerated, aggregates $25.0 million or more;
(vi) failure by the Company or any of its Significant
Subsidiaries to pay a final judgment or final judgments
aggregating in excess of $25.0 million entered by a
court or courts of competent jurisdiction against the
Company or any of its Significant Subsidiaries if such
final judgment or judgments remain unpaid or
undischarged for a period (during which execution shall
not be effectively stayed) of 60 days after their entry;
(vii) the Company or any Significant Subsidiary thereof
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case in which it is
the debtor,
(c) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
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(e) admits in writing its inability generally to pay
its debts as the same become due;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any
Significant Subsidiary thereof in an involuntary
case in which it is the debtor,
(b) appoints a Custodian of the Company or any
Significant Subsidiary thereof or for all or
substantially all of the property of the Company
or any Significant Subsidiary thereof, or
(c) orders the liquidation of the Company or any
Significant Subsidiary thereof,
and the order or decree remains unstayed and in effect
for 60 days; and
(ix) failure by the Company to make any exchange of Vencor
Common Shares (or such other securities or property or
cash as shall be added to such Vencor Common Shares or
as such Vencor Common Shares shall have been changed
into as provided in Article 11 hereof) for any Security
at the Exchange Rate and upon the terms set forth in
Article 11 hereof.
The term "BANKRUPTCY LAW" means title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "CUSTODIAN" means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under clause (iv) is not an Event of Default until the
Trustee notifies the Company in writing, or the Holders of at least 25% in
principal amount of the then outstanding Securities notify the Company and the
Trustee in writing, of the Default and the Company does not cure the Default
within 60 days after receipt of such notice. The written notice must specify
the Default, demand that it be remedied and state that the notice is a "NOTICE
of Default."
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SECTION 5.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (vii) or (viii) of Section 5.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities by written notice to the
Company and the Trustee, may declare the unpaid principal of, premium, if any,
and any accrued and unpaid interest on all the Securities to be due and payable
immediately. Upon such declaration the principal, premium, if any, and interest
shall be due and payable immediately. If an Event of Default specified in
clause (vii) or (viii) of Section 5.01 hereof occurs with respect to the Company
or any Significant Subsidiary thereof such an amount shall IPSO FACTO become
and be immediately due and payable without further action or notice on the part
of the Trustee or any Holder.
If an Event of Default occurs under this Indenture prior to the
maturity of the Securities by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of such Securities prior to the date of maturity, then
a premium with respect thereto (expressed as a percentage of the amount that
would otherwise be due but for the provisions of this sentence) shall become and
be immediately due and payable to the extent permitted by law upon the
acceleration of such Securities if such Event of Default occurs during the
twelve-month period beginning on __________ of the years set forth below:
YEAR PERCENTAGE
1995.............................. _______ %
1996.............................. _______ %
1997.............................. _______ %
1998.............................. _______ %
1999.............................. _______ %
2000.............................. _______ %
2001.............................. _______ %
2002.............................. _______ %
2003.............................. _______ %
2004.............................. _______ %
2005.............................. _______ %
2006.............................. _______ %
Any determination regarding the primary purpose of any such
action or inaction, as the case may be, shall be made by and set forth in a
resolution of the Board of Directors (including the concurrence of a majority
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of the independent directors of the Company then serving) delivered to the
Trustee after consideration of the business reasons for such action or inaction,
other than the avoidance of payment of such premium or prohibition on
redemption. In the absence of fraud, each such determination shall be final and
binding upon the Holders of Securities. Subject to Section 6.01 hereof, the
Trustee shall be entitled to rely on the determination set forth in any such
resolutions delivered to the Trustee.
SECTION 5.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Securities or to enforce the performance of any provision of the Securities
or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 5.04. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal
amount of the Securities then outstanding by written notice to the Trustee may
on behalf of the Holders of all of the Securities waive any existing Default or
Event of Default and its consequences under this Indenture except a continuing
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on any Security or in respect of the exchange of Securities pursuant
to Article 11 hereof. Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 5.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Securities 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 on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders or that may involve
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the Trustee in personal liability. The Trustee may take any other action which
it deems proper which is not inconsistent with any such direction.
SECTION 5.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Securities only if:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee
to pursue the remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(v) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Securities do not
give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal, premium, if any, and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 5.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 5.01(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company or any other
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obligor for the whole amount of principal, premium, if any, and interest
remaining unpaid on the Securities and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
amounts due the Trustee under Section 6.07 hereof, including the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 6.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 5.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 6.07, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
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Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Securities
for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 5.10 upon five Business Days prior notice to
the Company.
SECTION 5.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 5.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(i) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(ii) Except during the continuance of an Event of Default known to
the Trustee:
(a) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture or the TIA and the
Trustee need perform only those duties that are specifically
set forth in this Indenture or the TIA and no
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others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee, and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, in
the case of any such certificates or opinions which by any
provisions hereof are required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(iii) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) this paragraph does not limit the effect of paragraph
(ii) of this Section;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 5.05 hereof.
(iv) Whether or not therein expressly so provided every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (i), (ii), and (iii) of this Section.
(v) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives security and
indemnity satisfactory to it against any loss, liability or expense.
(vi) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Absent written instruction from the Company, the Trustee shall not be required
to invest any such money. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
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(vii) The Trustee shall not be deemed to have knowledge of any
matter unless such matter is actually known to a Responsible Officer.
SECTION 6.02. RIGHTS OF TRUSTEE.
(i) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(ii) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(iii) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(iv) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture. A permissive right
granted to the Trustee hereunder shall not be deemed an obligation to act.
(v) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 6.10 and 6.11 hereof.
SECTION 6.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, nor shall it
be accountable for the Company's use of the proceeds from the
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Securities or any money paid to the Company or upon the Company's direction
under any provision of this Indenture, nor shall it be responsible for the use
or application of any money received by any Paying Agent other than the Trustee,
nor shall it be responsible for any statement or recital herein or any statement
in the Securities or any other document in connection with the sale of the
Securities or pursuant to this Indenture other than its certificate of
authentication.
SECTION 6.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment on any Security, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders.
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each December 31 beginning with the December 31
following the date hereof, the Trustee shall mail to the Holders a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders
shall be mailed to the Company and filed with the Commission and each stock
exchange on which the Securities are listed. The Company shall promptly notify
the Trustee when the Securities are listed on any stock exchange.
SECTION 6.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
Company and Trustee shall agree in writing. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
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The Company shall indemnify the Trustee against any and all losses,
liabilities, damages, claims or expenses incurred by it arising out of or in
connection with the acceptance of its duties and the administration of the
trusts under this Indenture, except as set forth below. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 6.07 shall survive
the satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.01(vii) or (viii) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
SECTION 6.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Securities may remove the Trustee by
so notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 6.10 hereof;
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(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a Custodian or public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Securities may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee after written request by any Holder who has been a
Holder for at least six months fails to comply with Section 6.10 hereof, such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 6.07 hereof. Notwithstanding replacement of the Trustee pursuant to
this Section 6.08, the Company's obligations under Section 6.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 6.09. SUCCESSOR TRUSTEE OR AGENT BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee or Agent.
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SECTION 6.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by federal or
state authority and shall have a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
within the twelve months preceding the requirements of TIA Section 310(a)(1),
310(b).
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
(2) and (5). The Trustee is subject to TIA Section relationship listed in TIA
shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.01. DEFEASANCE AND DISCHARGE OF THIS INDENTURE AND THE
SECURITIES.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, with respect
to the Securities, elect to have either Section 7.02 or 7.03 hereof be applied
to all outstanding Securities upon compliance with the conditions set forth
below in this Article 7.
SECTION 7.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 7.01 hereof of the option
applicable to this Section 7.02, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Securities, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 7.05 hereof and the other
Sections of this Indenture referred to in clauses (i) and (ii) of this Section
7.02, and to have satisfied all its other obligations under such Securities and
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this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Securities to
receive solely from the trust fund described in Section 7.04 hereof, and as more
fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due,
(ii) the Company's obligations with respect to such Securities under Sections
2.04, 2.06, 2.07, 2.10 and 3.02 hereof, (iii) the rights, powers, trusts, duties
and immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 6.07 hereof, and the Company's obligations in
connection therewith and (iv) this Article 7. Subject to compliance with this
Article 7, the Company may exercise its option under this Section 7.02
notwithstanding the prior exercise of its option under Section 7.03 hereof with
respect to the Securities.
SECTION 7.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 7.01 hereof of the option
applicable to this Section 7.03, the Company shall be released from its
obligations under the covenants contained in Section 3.07 and Article 4 hereof
with respect to the outstanding Securities on and after the date the conditions
set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the
Securities shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Securities shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 5.01(iii) hereof, but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby. In addition, upon
the Company's exercise under Section 7.01 hereof of the option applicable to
this Section 7.03, Sections 5.01(iv) through 5.01(vi) hereof shall not
constitute Events of Default.
SECTION 7.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either
Section 7.02 or Section 7.03 hereof to the outstanding Securities:
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(i) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.10 who shall agree to comply with the provisions of this
Article 7 applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (a)
cash in U.S. Dollars in an amount, or (b) non-callable Government
Securities that through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, cash in U.S. Dollars in
an amount, or (c) a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on such outstanding Securities on the
stated maturity date of such principal or installment of principal,
premium, if any, or interest.
(ii) In the case of an election under Section 7.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since
the date hereof, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Securities
will not recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred.
(iii) In the case of an election under Section 7.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States confirming that the Holders of the outstanding Securities
will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred.
(iv) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or, insofar as
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Section 5.01(vii) or 5.01(viii) hereof is concerned, at any time in the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(v) Such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound (other than a breach, violation or default
resulting from the borrowing of funds to be applied to such deposit).
(vi) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(vii) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by the Company pursuant to its
election under Section 7.02 or 7.03 hereof was not made by the Company
with the intent of preferring the Holders of the Securities over the other
creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others.
(viii) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the Legal
Defeasance under Section 7.02 hereof or the Covenant Defeasance under
Section 7.03 hereof (as the case may be) have been complied with as
contemplated by this Section 7.04.
SECTION 7.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 7.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
7.05, the "Trustee") pursuant to Section 7.04 hereof in respect of the
outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
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Securities of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 7.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Article 7 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any money or non-callable Government Securities held by it as provided
in Section 7.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
7.04(i) hereof), are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 7.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its written request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the NEW YORK TIMES and
THE WALL STREET JOURNAL (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
SECTION 7.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Dollars
or non-callable Government Securities in accordance with Section 7.02
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or 7.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 7.02 or 7.03 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 7.02 or
7.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes
any payment of principal of, premium, if any, or interest on any Security
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Security to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 8
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 8.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture
or the Securities without the consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(iii) to provide for the assumption of the Company's
obligations to the Holders of the Securities in the case
of a merger, consolidation or sale of assets pursuant to
Article 4 hereof;
(iv) to make any change that would provide any additional
rights or benefits to the Holders of the Securities or
that does not adversely affect the legal rights
hereunder of any such Holder; or
(v) to comply with requirements of the Commission in order
to effect or maintain the qualification of this
Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental indenture,
and upon receipt by the Trustee of the documents described in Section 8.06
hereof, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this
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Indenture and to make any further appropriate agreements and stipulations which
may be therein contained, but the Trustee shall not be obligated to enter into
such supplemental indenture which affects its own rights, duties or immunities
under this Indenture or otherwise.
SECTION 8.02. WITH CONSENT OF HOLDERS.
Except as provided in the next succeeding paragraphs, this Indenture
or the Securities may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for such Securities), and any existing default or compliance with any provision
of this Indenture or the Securities may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Securities
(including consents obtained in connection with a tender offer or exchange offer
for such Securities).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence satisfactory to the Trustee of
the consent of the Holders as aforesaid, and upon receipt by the Trustee of the
documents described in Section 8.06 hereof, the Trustee shall join with the
Company in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 8.02 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
Subject to Sections 5.04 and 5.07 hereof, the Holders of a majority in aggregate
principal amount of the Securities then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities. Without the consent of each Holder affected, however, an amendment
or waiver may not (with respect to any Security held by a non-consenting
Holder):
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(i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Security;
(iii) reduce the rate of or change the time for payment of interest
on any Security;
(iv) make any change regarding the exchange rights set forth in
Article 11 other than to increase the Exchange Rate;
(v) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Securities
(except a rescission of acceleration of the Securities by the
Holders of at least a majority in aggregate principal amount
thereof and a waiver of the payment default that resulted from
such acceleration);
(vi) make any Security payable in money other than that stated in
the Securities;
(vii) make any change in Section 5.04 or 5.07 hereof; or
(viii) make any change in this sentence of this Section 8.02.
SECTION 8.03. COMPLIANCE WITH TIA.
Every amendment to this Indenture or the Securities shall be set
forth in a supplemental indenture that complies with the TIA as then in effect.
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security if the Trustee receives written notice of revocation before the date
the waiver or amendment becomes effective. An amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date
for determining which Holders must consent to such amendment or
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waiver. If the Company fixes a record date, the record date shall be fixed at
(i) the later of 30 days prior to the first solicitation of such consent or the
date of the most recent list of Holders furnished to the Trustee prior to such
solicitation pursuant to Section 2.05 hereof or (ii) such other date as the
Company shall designate.
SECTION 8.05. NOTATION ON OR EXCHANGE OF SECURITIES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Security
shall not affect the validity and effect of such amendment or waiver.
SECTION 8.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 8 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive
and, subject to Section 6.01, shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or Supplemental Indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it shall be valid and
binding upon the Company in accordance with its terms. The Company may not sign
an amendment or supplemental indenture until the Board of Directors approves it.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 9.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in person or mailed by first
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class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company:
Tenet Healthcare Corporation
2700 Colorado Avenue
Santa Monica, California 90404
Telecopier No.: (310) 998-6700
Attention: Treasurer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Telecopier No.: (213) 687-5600
Attention: Brian J. McCarthy
If to the Trustee:
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Unless otherwise set forth above, any notice or communication to a
Holder shall be mailed by first class mail, certified or registered, return
receipt requested, or by overnight air courier guaranteeing next day delivery to
its address shown on the register kept by the Registrar. Any notice or
Section 311(b). A Trustee who has resigned or been removed communication shall
to the extent required by the TIA. Failure to mail a notice or
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communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 9.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 9.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements
set forth in Section 9.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 9.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been satisfied.
SECTION 9.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been satisfied; PROVIDED,
HOWEVER, that with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 9.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 9.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized or obligated by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
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SECTION 9.08. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS.
No director, officer, employee, incorporator or shareholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Securities, the Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of the Securities
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
SECTION 9.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 9.10. GOVERNING LAW.
The internal law of the State of New York, shall govern and be used
to construe this Indenture and the Securities, without regard to the conflict of
laws provisions thereof.
SECTION 9.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or its Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 9.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 9.13. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
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SECTION 9.14. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 9.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
ARTICLE 10
REDEMPTION OF SECURITIES
SECTION 10.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 10.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Securities to be redeemed and (iv) the redemption price.
SECTION 10.02. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed at any time,
the Trustee shall select the Securities to be redeemed among the Holders in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are then listed, or, if the Securities are not
so listed, on a pro rata basis, by lot or by such method the Trustee shall deem
fair and appropriate; provided, that Securities with a principal amount of
$1,000 shall not be redeemed in part.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. Securities and
portions of them selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Securities of a Holder are to be redeemed, the
entire outstanding amount of Securities held by such Holder, even if not a
multiple of $1,000 shall be redeemed.
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SECTION 10.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed by first class mail a notice of
redemption to each Holder of Securities to be redeemed at its registered
address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) if any Security is being redeemed in part, the porion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date;
(7) the paragraph of the Securities and/or Section of this
Indenture pursuant to which the Securities called for redemption are being
redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on
the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Security shall not affect the validity
of the proceeding for the redemption of any other Security.
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SECTION 10.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 10.03
hereof, Securities called for redemption become due and payable on the
redemption date at the redemption price plus accrued and unpaid interest, if
any, to such date.
SECTION 10.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of, and accrued interest on, all Securities to be redeemed on
that date. The Trustee or the Paying Agent shall promptly return to the Company
any money deposited with the Trustee or the Paying Agent of the Company in
excess of the amounts necessary to pay the redemption price of (including any
applicable premium), and accrued interest on, all Securities to be redeemed.
On and after the redemption date, interest ceases to accrue on the
Securities or the portions of Securities called for redemption. If a Security
is redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Security was registered at the close of business on
such record date. If any Security called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal is paid, and to the extent lawful
on any interest not paid on such unpaid principal, in each case at the rate
provided in the Securities and in Section 3.01 hereof.
SECTION 10.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense of
the Company a new Security equal in principal amount to the unredeemed portion
of the Security surrendered.
SECTION 10.07. OPTIONAL REDEMPTION.
On or after _________________, 1997, the Company may redeem all or
any portion of the Securities at a redemption price (expressed as a percentage
of the principal amount thereof), as set forth in the immediately succeeding
paragraph, plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on a Record Date to receive interest
due on an interest payment date that is on or prior to such
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Redemption Date); provided, however that the Securities are redeemable prior to
________________, 1998 only if, for a period of twenty consecutive trading days,
the last reported sale price for Vencor Common Shares shall have exceeded 150%
of the Exchange Price then in effect.
The redemption price as a percentage of the principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
beginning __________________ of the following years:
YEAR PERCENTAGE
---- ----------
1997....................... _____%
1998....................... _____%
1999....................... _____%
2000....................... _____%
2001....................... _____%
2002 and thereafter........ _____%
SECTION 10.08. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to repurchase
Securities under certain circumstance pursuant to Section 3.07 hereof, the
Company shall have no mandatory redemption or sinking fund obligations with
respect to the Securities.
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ARTICLE 11
EXCHANGE OF SECURITIES
SECTION 11.01. RIGHT OF EXCHANGE.
Subject to and upon compliance with the provisions of this Article
11, at the option of the Holder thereof, any Security or any portion of the
principal amount thereof which is $1,000 or an integral multiple of $1,000 may,
at any time or from time on or after September 28, 1997 and before the close of
business on _______, 2007 (or if not a Business Day the next preceding Business
Day), or, in case such Security or portion thereof shall have been called for
redemption prior to such date, then in respect of such Security or portion
thereof until and including, but (unless the Company shall default in payment
due upon the redemption thereof) not after, the close of business on the
Business Day next preceding the Redemption Date or, in case such Security or
portion thereof shall have been called for redemption in accordance with Section
11.11, then in respect of such Security or portion thereof until and including,
but (unless the Company shall default in payment due upon the redemption
thereof) not after, the close of business on the Business Day next preceding the
fifteenth day after the date the notice of redemption is mailed, be exchanged
for fully paid and non-assessable Vencor Common Shares (or such other securities
or property or cash as shall be added to such Vencor Common Shares or as such
Vencor Common Shares shall have been changed into as provided in this Article
11) at the Exchange Rate hereinafter provided.
The rate at which Vencor Common Shares shall be delivered upon
exchange (herein called the "Exchange Rate") shall be initially _______ Vencor
Common Shares for each $1,000 principal amount of Securities exchanged. The
Exchange Rate shall be subject to adjustment as provided in Sections 11.04,
11.05 and 11.10.
SECTION 11.02. METHOD OF EXCHANGE.
In order to exercise the right of exchange, the Holder of any
Security to be exchanged shall surrender such Security to the Escrow Agent at
the office or agency maintained for that purpose pursuant to Section 2.03,
accompanied by written notice to the Company and the Escrow Agent that the
Holder elects to exchange such Security or, if less than the entire principal
amount of a Security is to be exchanged, the portion thereof to be exchanged.
Such notice shall also state the name or names (with address) in which the
certificate or certificates for Vencor Common Shares (or such other securities,
property or cash as shall be added to such Vencor Common Shares or as such
Vencor Common Shares shall have been changed into as provided in this Article
11) which shall be issuable on such exchange shall be issued.
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Securities surrendered for exchange shall be accompanied (if so required by the
Company or Escrow Agent) by proper assignments thereof to the Company or in
blank for transfer.
If the Company does not elect to deliver cash in lieu of Vencor
Common Shares pursuant to Section 11.13 hereof, as promptly as practicable after
the receipt of such notice and the proper surrender of such Security as
aforesaid (subject, however, to the following paragraph of this Section 11.02
and to Section 11.13), the Company shall deliver or cause the Escrow Agent to
deliver at said office or agency to such Holder, or on his written order, a
certificate or certificates for the number of full Vencor Common Shares (or such
other securities or property as such Vencor Common Shares shall have been
changed into as provided in this Article 11) deliverable upon the exchange of
any such Security (or specified portion thereof), the property and securities
(other than cash), if any, apportioned thereto, a check for any cash apportioned
thereto and provision shall be made for any fractional interests in Vencor
Common Shares or other securities or property as provided in Section 11.03.
Such exchange shall be deemed to have been effected immediately prior to the
close of business on the date on which such notice shall have been received by
the Company and the Escrow Agent and such Security shall have been properly
surrendered as aforesaid, and at such time the rights of the Holder of such
Security as a Holder shall cease and the person or persons in whose name or
names any certificate or certificates for Vencor Common Shares (or such other
securities or property as shall be added to such Vencor Common Shares or as such
Vencor Common Shares shall have been changed into as provided in this Article
11) shall be deliverable upon such exchange shall, as between such person or
persons and the Company and any Permitted Transferee (as defined below), be
deemed to have become the holder or holders of record of the shares or
securities represented thereby.
Delivery of such certificate or certificates, of property and
securities, if any, apportioned thereto and of any check for any cash
apportioned thereto and for cash in lieu of fractional interests as aforesaid
may be delayed for a reasonable period of time at the request of the Company
(which shall be made by an Officer's Certificate) in order to effectuate the
calculation of the adjustments of the Vencor Common Shares (or such other
securities or property as shall be added to such Vencor Common Shares or as such
Vencor Common Shares shall have been changed into as provided in this Article
11) and cash apportioned thereto pursuant to this Article 11, to obtain any
certificate representing securities to be delivered or to complete any
reapportionment of the Vencor Common Shares, cash and other property apportioned
thereto which is required by this Article 11. If, between any date an exchange
under this Section is deemed effected and delivery of the applicable security or
securities, such security or securities shall cease to have any or certain
rights, or a record date or effective date of a transaction to which Section
11.04, 11.05, or 11.10 applies shall occur, the person entitled to receive such
security or securities shall be entitled only to receive such
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security or securities as so modified and any proceeds received thereon on or
after the date and time on which such an exchange is deemed effected, and the
Company, any Permitted Transferee (as defined below), the Trustee and the Escrow
Agent shall not otherwise be liable with respect to the modification, from the
date such an exchange is deemed effected to the date of such delivery, of such
security or securities.
Except as otherwise expressly provided in this Indenture, no payment
or adjustment shall be made upon any exchange on account of any interest accrued
on the Securities surrendered for exchange or on account of any dividends on the
Vencor Common Shares delivered upon such exchange; provided that interest
accrued on any Securities surrendered for exchange on or after any record date
and before the interest payment date relating thereto shall be paid to the
holder of record as of such record date.
In the case of any Security which is exchanged in part only, upon
such exchange the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company except for transfer
taxes in the case that the new Security is to be registered in a name different
than that in which the old Security was issued, a new Security or Securities of
authorized denominations in principal amount equal to the unexchanged portion of
such Security.
SECTION 11.03. FRACTIONAL INTERESTS.
No fractional Vencor Common Shares or fractional interest in other
securities or property shall be delivered upon exchange of Securities. If more
than one Security shall be surrendered for exchange at one time by the same
Holder, the number of full shares or whole interests in other securities or
property which shall be delivered upon exchange shall be computed on the basis
of the aggregate principal amount of the Securities (or specified portions
thereof to the extent permitted hereby) so surrendered. Instead of any
fractional Vencor Common Share (or other fractional interest) which would
otherwise be deliverable upon exchange of any Security or Securities (or
specified portions thereof), the Escrow Agent on behalf of the Company shall pay
a cash adjustment in respect of such fractional interest in an amount equal to
the same fraction of the Market Price per share of the Vencor Common Stock (or
the same fraction of the Market Price of a whole interest in the other
securities or property) on the Business Day next preceding the date of exchange.
The Escrow Agent shall obtain the funds for payment of such fractional interests
by, at the direction of the Company, (i) the sale of Vencor Common Shares held
by it, to the extent that after such sale the number of Vencor Common Shares
remaining on deposit with the Escrow Agent shall be sufficient to allow the
exchange of all outstanding Securities for Vencor Common Shares on the basis of
the then applicable Exchange Rate, (ii) the sale of whole interests in the other
securities or property held by it, to the extent that after such sale the number
of whole interests in the other securities
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or property remaining on deposit with the Escrow Agent shall be sufficient to
allow the exchange of all outstanding Securities on the basis of the then
applicable Exchange Rate or (iii) sufficient cash contributions from the
Company. The Company agrees to furnish any additional moneys required to permit
such payment.
SECTION 11.04. ADJUSTMENT OF EXCHANGE RATE.
The Exchange Rate shall be subject to adjustment as follows:
(a) In the event Vencor shall, (i) pay a dividend on the Vencor
Common Stock in Vencor Common Stock, (ii) subdivide outstanding shares of
Vencor Common Stock into a greater number of shares of Vencor Common
Stock, (iii) combine outstanding shares of Vencor Common Stock into a
smaller number of shares of Vencor Common Stock, or (iv) issue, by
reclassification of Vencor Common Stock, any shares of its common stock
(which in any such case shall apply to the Vencor Common Shares held by
the Escrow Agent under the Escrow Agreement), the Exchange Rate in effect
immediately prior thereto shall be proportionately adjusted so that the
Holder of any Securities thereafter surrendered for exchange shall be
entitled (subject to Section 11.13 hereof) to receive the number and kind
of shares of Vencor Common Stock (in addition to any cash or other
property apportioned thereto) which he would have owned or have been
entitled to receive after the happening of any of the events described
above had such Securities been exchanged immediately prior to the record
date (or if there is no record date, the effective date) of such event.
Such adjustments shall be made whenever any of the events listed above
shall occur and shall become effective as of immediately after the close
of business on the record date in the case of a stock dividend and shall
become effective as of immediately after the close of business on the
effective date in the case of a subdivision or combination or
reclassification. Any Holder surrendering any Securities after such
record date or such effective date, as the case may be, shall be entitled
to receive Vencor Common Shares at the Exchange Rate as so adjusted
pursuant to this Section 11.04(a), in addition to any cash or other
property apportioned thereto.
(b) Notwithstanding the foregoing provisions, no adjustment in the
Exchange Rate shall be required unless such adjustment would require an
increase or decrease in such Exchange Rate of more than 1%; provided that
any adjustments which by reason of this paragraph (b) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment.
(c) All calculations under this Section 11.04 shall be made to the
nearest one-ten-thousandth (.0001) of a share.
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(d) Whenever the Exchange Rate is adjusted as herein provided, the
Company shall determine the adjusted Exchange Rate in accordance with this
Section 11.04 and shall prepare a certificate setting forth such adjusted
Exchange Rate and any cash and other property apportioned to the Vencor
Common Shares and showing in detail the facts upon which such adjustments
are based, and such certificate shall forthwith be filed with the Trustee
and the Escrow Agent and a notice stating the Exchange Rate has been
adjusted and setting forth the adjusted Exchange Rate and any cash and
other property apportioned to the Vencor Common Shares shall as soon as
practicable be mailed by or on behalf of the Company to the Holders at
their last addresses as they shall appear upon the Security register
maintained pursuant to Section 2.05.
SECTION 11.05. ESCROW AGREEMENT.
(a) Simultaneously with the execution and delivery of this
Indenture the Company is entering into the Escrow Agreement with The Bank
of New York, as Escrow Agent, pursuant to which it is depositing with the
Escrow Agent 8,301,067 Vencor Common Shares. The Escrow Agent shall be
the exchange agent for the exchange of Securities for the Vencor Common
Shares (or such other securities or property or cash as shall be added to
such Vencor Common Shares or as such Vencor Common Shares shall have been
changed into as provided in this Article 11) as the Holders of all
outstanding Securities shall from time to time be entitled to receive
pursuant to this Article 11 upon exchange thereof. The Company may, at
any time and from time to time in its sole discretion, sell or transfer
all or any part of its right, title and interest in the Vencor Common
Shares to any wholly-owned subsidiary of the Company or any partnership
all of the general partners and limited partners of which are wholly-owned
subsidiaries of the Company (any of the foregoing are hereinafter referred
to as a "Permitted Transferee"); provided that: (1) such Vencor Common
Shares sold or transferred shall remain subject to the terms and
conditions of the Escrow Agreement and the Indenture; (2) any such
Permitted Transferee must expressly agree in writing to become bound by
the terms and conditions of the Escrow Agreement, as such Escrow
Agreement, may be amended from time to time, as though such Permitted
Transferee were a party thereto; (3) the Company shall notify the Escrow
Agent in writing at the time of any such sale or transfer as to the number
of Vencor Common Shares so sold or transferred to such Permitted
Transferee; and (4) such sale or transfer shall be in compliance with
federal and all applicable state and foreign securities laws.
Notwithstanding any such sale or transfer, except as otherwise provided in
the Escrow Agreement, the Company shall remain liable to perform all of
its duties and obligations hereunder and under the Escrow Agreement.
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(b) The Company and any Permitted Transferee, shall each be
entitled (based upon their respective ownership of Vencor Common Shares)
to all (i) cash dividends paid on the Vencor Common Shares held by the
Escrow Agent other than dividends paid pursuant to a plan of liquidation,
partial liquidation, recapitalization, restructuring or other
extraordinary cash dividends and (ii) interest payments on any debt
securities held for exchange by the Escrow Agent which are issued in
exchange for or with respect to Vencor Common Shares held by the Escrow
Agent, including pursuant to any merger or consolidation of Vencor or in
connection with the sale of all or substantially all of the assets of
Vencor. The Escrow Agent shall retain and apply as hereinafter provided
all other dividends paid on the securities held by the Escrow Agent under
the Escrow Agreement.
(c) If any distribution of cash, securities, or other property is
made on Vencor Common Shares held by the Escrow Agent under the Escrow
Agreement (other than (i) cash dividends payable on the Vencor Common
Shares to which the Company or any Permitted Transferee is entitled and
interest paid on debt securities, as specified in paragraph (b) above,
(ii) dividends, subdivisions, combinations and reclassifications for which
an adjustment in the Exchange Rate is made pursuant to Section 11.04 and
(iii) securities or other property received in a transaction to which
Section 11.10 applies) or if transferable subscription rights, options,
warrants or other similar rights are granted to the Company, any Permitted
Transferee (with respect to any securities or property held by the Escrow
Agent) or the Escrow Agent, as the holder thereof, in respect of the
Vencor Common Shares or other property held for exchange by the Escrow
Agent, the Company will cause to be deposited with the Escrow Agent any
such securities, other property, cash and rights that it or any Permitted
Transferee receives and the Escrow Agent shall, as soon as reasonably
practicable after its receipt of any such securities, other property, cash
or rights, notify the Company and any affected Permitted Transferee of
such receipt. The Company shall cause the Escrow Agent, to the extent
such rights, options, warrants, securities or other property are
transferable, to sell all such options, warrants, securities or other
property and rights for cash. Any net cash proceeds therefrom shall be
apportioned equally among the Vencor Common Shares for which outstanding
Securities are exchangeable as of immediately after the close of business
on the record date for the distribution or grant to which this paragraph
(c) applies, or if there is no such record date, the effective date of
such distribution or grant. Any Holder surrendering any Securities after
such record date, or such effective date, as the case may be, and prior to
the distribution date shall be entitled to receive, in addition to the
Vencor Common Shares for which such Securities are exchangeable (and any
cash or property theretofore apportioned to such shares hereunder), the
amount of cash so apportioned to such Vencor Common
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Shares. Whenever a transaction occurs to which this paragraph (c)
applies, the Company shall determine the Exchange Rate (calculated to the
nearest .0001 of a share) and the cash and other property apportioned to
the Vencor Common Shares as adjusted in accordance with this paragraph (c)
and shall prepare an Officer's Certificate setting forth the Exchange Rate
and the cash and other property apportioned to the Vencor Common Shares
held by the Escrow Agent under the Escrow Agreement as so adjusted and
showing in detail the facts upon which such calculation is based, and such
certificate shall forthwith be filed with the Trustee and Escrow Agent and
a notice stating that a transaction to which this paragraph (c) applies
has occurred and setting forth the Exchange Rate and the cash and other
property apportioned to the Vencor Common Shares, in accordance with this
Section 11.5, shall as soon as practicable be mailed by or on behalf of
the Company to the Holders at their last addresses as they shall appear
upon the Security register maintained pursuant to Section 2.05.
(d) If, at any time any Securities are outstanding, any
distribution or grant is made to holders of any Vencor Common Shares held
or required to be held by the Escrow Agent under the Escrow Agreement, of
any nontransferable subscription rights, options, warrants or other
similar nontransferable rights, securities or property, the Company shall
elect to do any of the following: (i) to the extent permissible by the
terms of said subscription rights, options, warrants or other similar
nontransferable rights, securities or property, cause such rights,
securities or property to be distributed pro rata by the Escrow Agent to
the Holders pro rata based on the principal amount of the Securities held
by such Holders of record of Securities shown on the Security register as
of immediately after the close of business on the record date (or if there
is no record date, the close of business on the effective date), for such
distribution or grant, but subject to the provisions of Section 11.7
hereof, (ii) provide to the Escrow Agent the necessary funds and direct
the Escrow Agent to exercise such options, warrants, or rights and to hold
the securities or other property received upon such exercise for the
benefit of Holders of Securities or (iii) direct the Escrow Agent to
retain such options, warrants, or rights and to hold the securities or
property for delivery to the Holders of Securities upon the exchange of
such Securities. Any options, warrants, rights, securities or property
retained pursuant to clause (iii) above and any securities or other
property received by the Escrow Agent pursuant to clause (ii) above less
any cash, property or securities as determined pursuant to the last three
sentences of this paragraph (d) delivered to or sold or segregated for the
benefit of the Company or any Permitted Transferee, shall be apportioned
equally among the Vencor Common Shares for which outstanding Securities
are exchangeable as of immediately after the close of business on the
record date for the distribution or grant to which this paragraph (d)
applies or, if there is
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no such record date, the effective date of such distribution or grant.
Any Holder exchanging any Securities after such record date, or such
effective date, as the case may be, shall be entitled to receive the
Vencor Common Shares for which such Securities are exchangeable and the
amount of cash, or any such options, warrants, rights, securities or
property, so apportioned to such Vencor Common Shares, but subject to the
provisions of the last three sentences of this paragraph and Section 11.7
hereof. Notwithstanding the foregoing, any such options, warrants or
rights which may expire prior to the final maturity date of the
Securities, may not be retained pursuant to clause (iii) of this paragraph
(d) beyond the expiration date thereof, but must be distributed or
exercised pursuant to clause (i) or (ii) of this paragraph (d). The
Company shall be promptly repaid any amounts supplied by it pursuant to
the foregoing clause (ii) of this paragraph (d). If the Company is
entitled to any amount because it provided funds to pay for an exercise
pursuant to clause (ii) of this paragraph (d), it shall receive such
amount in cash held by the Escrow Agent, but if the amount of such cash
held by the Escrow Agent shall be less than the amount due the Company,
the Escrow Agent shall (i) as soon as reasonably practicable and to the
extent legally permissible, sell in accordance with written instructions
received from the Company such number of Vencor Common Shares or other
property or securities held or required to be held by the Escrow Agent, as
may be necessary to realize an amount of proceeds which, after payment of
any taxes by the Company and the Escrow Agent on such sale (which shall be
evidenced by an Opinion of Counsel and Officer's Certificate in the manner
specified in Section 11.7 hereof), shall equal the amount of any such
insufficiency, or (ii) if in the opinion of the Company such sale is not
advisable or legally permissible, segregate for the benefit of the Company
or deliver to the Company an amount of property or securities, held or
required to be held by the Escrow Agent, having a Market Price, as
determined by an Officer's Certificate, equal to the amount of such
insufficiency. Following such sale, segregation or delivery, the Vencor
Common Shares, cash and other property or securities, held by the Escrow
Agent shall be proportionately adjusted as of immediately after the close
of business on the record date for the distribution or grant to which this
paragraph (d) applies or, if there is no record date, the effective date
of such distribution or grant.
(e) The Company shall be entitled to any net income or gain
resulting from investments of cash made by the Escrow Agent pursuant to
Section 6 of the Escrow Agreement, in accordance with the provisions
thereof, and the Company shall reimburse or cause the reimbursement of the
Escrow Agent for any losses realized in respect of such investments.
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(f) The Company and any Permitted Transferee shall each have the
full and unqualified right and power to exercise any rights to vote, or to
give consents to take any other action in respect of, its respective share
of the Vencor Common Shares or any other security held in escrow under the
Escrow Agreement at any time, and the Escrow Agent shall have no duty to
exercise any such rights.
(g) The Company (or any applicable Permitted Transferee) shall be
entitled, out of the property held by the Escrow Agent, to such number of
Vencor Common Shares and such amount of any cash (investments contemplated
by this Section 11.05 being deemed for these purposes to be cash and to be
valued at their outstanding principal balance) and other property as shall
be in excess of the number of Vencor Common Shares and the amount of cash
and other property apportioned thereto, all held by the Escrow Agent,
which would be deliverable upon the exchange of all Securities then
outstanding, and such excess shall be held by the Escrow Agent for the
account of the Company and, subject to the limitations contained in the
Escrow Agreement, released to the Company (or to any applicable Permitted
Transferee) upon demand of the Company. With respect to releases of cash,
the Escrow Agent shall release cash or such of the investment securities
so held as the Company may designate.
(h) Upon expiration of the right to surrender Securities for
exchange and when all other obligations of the Company and any Permitted
Transferee shall have been satisfied under the Escrow Agreement, all cash
and investments and other property held by the Escrow Agent under the
Escrow Agreement which are not required with respect to Securities
previously surrendered for exchange will, subject to the limitations
contained in the Escrow Agreement, be delivered by the Escrow Agent to the
Company and any Permitted Transferee based upon their respective shares of
the Vencor Common Shares.
SECTION 11.06. NOTICE OF CERTAIN EVENTS.
In case at any time:
(a) Vencor shall declare a dividend (or any other distribution) on
Vencor Common Stock; or
(b) Vencor shall authorize the granting of subscription rights,
options, warrants or other similar rights to holders of Vencor Common
Stock; or
(c) there shall occur any reclassification of Vencor Common Stock
(other than a subdivision or combination of outstanding shares of
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Vencor Common Stock) or any consolidation or merger to which Vencor is a
party and for which approval of any stockholders of Vencor is required, or
the sale or transfer of all or substantially all of the assets of Vencor;
or
(d) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of Vencor; then the Company shall cause to be
filed at the office or agency maintained for the purpose of exchange of
Securities pursuant to Section 2.03, and shall cause to be mailed to the
Holders of Securities at their last addresses as they shall appear upon
the Security register, as promptly as practicable after receipt of notice
by the Company of any record date or other applicable date hereinafter
specified a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, or grant of rights, or, if
a record is not to be taken, the date as of which the holders of Vencor
Common Stock of record to be entitled to such dividend, distribution or
grant of rights is to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as
of which it is expected that holders of Vencor Common Stock shall be
entitled to exchange their Vencor Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up.
SECTION 11.07. TRANSFER TAXES.
The Company will pay any and all documentary, stamp, transfer or
similar taxes that may be payable in respect of the transfer and delivery of
Vencor Common Shares (or such other securities or property as shall be added to
such Vencor Common Shares or as such Vencor Common Shares shall have been
changed into as provided in this Article 11) pursuant hereto; provided that the
Company shall not be required to pay any such tax which may be payable in
respect of any transfer involved in the delivery of Vencor Common Shares (or
such other securities or property as shall be added to such Vencor Common Shares
or as such Vencor Common Shares shall have been changed into as provided in this
Article 11) in a name other than that in which the Securities so exchanged were
registered and no such transfer or delivery shall be made unless and until the
person requesting such transfer has paid to the Company the amount of any such
tax, or has established, to the satisfaction of the Company, that such tax has
been paid; and, provided further, that the Company shall not be obligated to pay
any withholding taxes payable by Securityholders due to the exchange of any
Securities.
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SECTION 11.08. SHARES FREE AND CLEAR.
The Company hereby warrants that, upon exchange of a Security
pursuant to this Indenture, the Holder thereof shall receive legal and valid
title to the Vencor Common Shares and any cash and other property apportioned
thereto for which such Security is at such time exchangeable pursuant to this
Indenture free and clear of any and all Liens. Except as provided in Section
11.07, the Company will discharge all Liens and pay all charges with respect to
the delivery of Vencor Common Shares (or such other securities or property as
shall be added to such Vencor Common Shares or as such Vencor Common Shares
shall have changed into as provided in this Article 11).
SECTION 11.09. CANCELLATION OF SECURITIES.
All Securities delivered for exchange shall be delivered by the
Escrow Agent to the Trustee for cancellation and the Trustee shall dispose of
the same as provided in Section 2.11.
SECTION 11.10. CONSOLIDATION, ETC., OF VENCOR.
(a) In the case of any consolidation or merger of Vencor with or
into any other corporation or of any sale or transfer of all or
substantially all of the assets of Vencor or of any voluntary or
involuntary dissolution, liquidation or winding up of Vencor, the Company
shall execute and deliver to the Trustee a supplemental indenture
satisfactory in form to the Trustee, and to the Escrow Agent a
supplemental escrow agreement satisfactory in form to the Escrow Agent,
providing that the holder of each Security then outstanding shall have the
right thereafter to exchange such Security for (i) the kind and amount of
securities and other property receivable upon such consolidation, merger,
sale, transfer, dissolution, liquidation or winding up by a holder of the
number of Vencor Common Shares for which such Security was exchangeable
immediately prior to such consolidation, merger, sale, transfer,
dissolution, liquidation or winding up had such holder of Vencor Common
Shares failed to exercise any rights of election as to the kind or amount
of securities or other property receivable upon such consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, and (ii)
the kind and amount of securities (other than Vencor Common Shares) and
other property or cash apportioned to the Vencor Common Shares for which
such Security was exchangeable immediately prior to such consolidation,
merger, sale, transfer, dissolution, liquidation or winding up. Such
supplemental indenture shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Article 11.
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(b) The provisions of this Section 11.10 shall similarly apply to
any successive consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
SECTION 11.11. CERTAIN TENDER OR EXCHANGE OFFERS FOR VENCOR COMMON STOCK.
In the event that a tender offer or exchange offer for the Vencor
Common Stock (or such other securities as shall be added to such Vencor Common
Shares or as such Vencor Common Shares shall have been changed into as provided
in this Article 11) is commenced by any person (including the issuer of such
security) after the date on which the Securities may be redeemed at the option
of the Company pursuant to Section 10.07, the Company has the right to redeem,
in each case, in accordance with this Section 11.11 at the optional redemption
prices set forth in the form of Security hereinabove recited, together with
accrued interest to the date fixed for redemption, all or any part of the
Securities so long as (i) the Trustee shall have received notice of such
redemption from the Company not later than two days after the date of
commencement of such tender or exchange offer; provided that if the second such
day is not a Business Day, the Trustee shall have received such notice not later
than the next succeeding Business Day, (ii) any notice of redemption
(substantially in the form of Exhibit A attached hereto) shall be mailed to the
Holders of Securities called for redemption not later than ten days after the
date of commencement of such tender or exchange offer as determined by Company
and (iii) such tender or exchange offer shall not have been terminated by the
date that such notice is mailed. If notice of redemption is given in accordance
with the preceding sentence, the Company shall thereafter have the right to
instruct the Escrow Agent to tender, for its own account or for the account of a
Permitted Transferee, Vencor Common Shares (or such other securities, as
aforesaid) pursuant to such tender or exchange offer, provided the number of
Vencor Common Shares (or such other securities, as aforesaid) so tendered does
not include the number of such Vencor Common Shares (or such other securities,
as aforesaid) which would be deliverable upon exchange of the aggregate
principal amount of the outstanding Securities after giving effect to such
redemption in accordance with this Section 11.11. In addition to the
information called for by Section 10.03, any notice of redemption given pursuant
to this Section 11.11 shall state whether or not the Company by the date of such
notice has decided to cause Vencor Common Shares (or such other securities, as
aforesaid) held in escrow to be tendered pursuant to such tender or exchange
offer and, if tendered, that such Vencor Common Shares (or such other
securities, as aforesaid) may be sold, to the extent purchased, to the offeror
in accordance with such tender or exchange offer except to the extent that the
Holders of Securities called for redemption duly surrender their Securities to
the Escrow Agent in exchange for Vencor Common Shares (or such other securities,
as aforesaid) by not later than the close of business on the last Business Day
preceding the fifteenth day (which date shall be specified) after the date such
notice is mailed or to the extent that
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the Company otherwise determines to withdraw the shares so tendered. The
Company shall cause to be withdrawn from the tender or exchange offer, or
otherwise to be delivered to the Escrow Agent, a number of Vencor Common Shares
(or such other securities, as aforesaid) at least equal to the number of Vencor
Common Shares (or such other securities, as aforesaid) deliverable in exchange
for Securities which are called for redemption pursuant to this Section 11.11
and are duly surrendered for exchange for Vencor Common Shares (or such other
securities, as aforesaid) by not later than the close of business on such last
Business Day preceding the fifteenth day in order to permit such Securities so
to be exchanged. The proceeds of the sale of Vencor Common Shares (or such
other securities, as aforesaid) sold pursuant to the tender or exchange offer
and any shares tendered which are returned to the Company or the Escrow Agent
following the expiration or termination of such tender or exchange offer, or
which are withdrawn, which are no longer deliverable in exchange for Securities
called for redemption pursuant to this Section 11.11, shall be the property of
the Company and not subject to the Escrow Agreement.
SECTION 11.12. OBLIGATIONS OF TRUSTEE AND ESCROW AGENT.
Subject to the provisions of Section 6.01, neither the Trustee nor
the Escrow Agent shall at any time be under any duty or responsibility to any
Holder of Securities to determine whether any facts exist which may require any
adjustment of the Exchange Rate, or with respect to the nature or extent of any
such adjustment when made, or with respect to the method employed herein, or in
any supplemental indenture, in making the same. Neither the Trustee nor the
Escrow Agent shall be accountable with respect to the validity or value (or the
kind or amount) of any Vencor Common Stock, or of any securities or property,
which may at any time be issued or delivered upon the exchange of any Security;
and neither the Trustee nor the Escrow Agent makes any representation with
respect thereto. Neither the Trustee nor the Escrow Agent shall be responsible
for any failure of the Company to transfer or deliver any Vencor Common Shares
or stock certificates or other securities or property to the Escrow Agent as
provided herein or, subject to the provisions of Section 6.01 and the express
obligations assumed under the Escrow Agreement, to comply with any of the
covenants of the Company contained in this Article 11.
SECTION 11.13. CASH EQUIVALENT.
Notwithstanding any other provisions in this Article 11, in lieu of
delivering certificates representing Vencor Common Shares in exchange for
Securities surrendered in accordance with Section 11.02, the Escrow Agent shall,
if so directed by the Company, pay to the Holder surrendering such Securities an
amount in cash equal to the value of Vencor Common Shares for which such
Securities are exchangeable (based on the Market Price on the date of receipt by
the Escrow Agent of the notice of exchange delivered by such
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Holder pursuant to Section 11.02), plus any cash and other property theretofore
apportioned to such Vencor Common Shares in accordance with Section 11.05. Prior
to so directing the Escrow Agent to make any such cash payment, the Company
shall deposit with the Escrow Agent the cash so payable.
SECTION 11.14. REGISTRATION OF VENCOR COMMON SHARES.
The Company hereby covenants that at any time that a Holder of
Securities exchanges such Securities for certificates representing Vencor Common
Shares and an effective registration statement of Vencor filed with the
Commission (or related qualification under state blue sky or securities law)
would be required in order for the Escrow Agent to deliver such Vencor Common
Shares in the United States or to a United States Person, the Company will use
its reasonable best efforts to ensure that an effective registration statement
of Vencor is on file with the Commission covering the delivery of such Vencor
Common Shares and any qualification under state blue sky or securities laws
required for such delivery is maintained. If such registration statement is not
effective or such qualification is not maintained, the Company shall direct the
Escrow Agent to pay such Holder cash, in lieu of delivering such Vencor Common
Shares in accordance with the provisions of Section 11.13.
ARTICLE 12
SUBORDINATION
SECTION 12.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Security agrees,
that the Indebtedness evidenced by the Security is subordinated in right of
payment, to the extent and in the manner provided in this Article, to the prior
payment in full of all Senior and Senior Subordinated Debt (whether outstanding
on the date hereof or hereafter created, incurred, assumed or Guaranteed), and
that the subordination is for the benefit of the holders of Senior and Senior
Subordinated Debt.
SECTION 12.02. CERTAIN DEFINITIONS.
"Designated Senior and Senior Subordinated Debt" means (i) so long
as any Obligations are outstanding under the Credit Facility, such Obligations
and (ii) thereafter, any other Senior and Senior Subordinated Debt permitted
hereunder the principal amount of which is $100.0 million or more and that has
been designated by the Company as "Designated Senior and Senior Subordinated
Debt".
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"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior and Senior Subordinated Debt.
"Senior and Senior Subordinated Debt" means any Indebtedness of the
Company unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Securities and all Obligations with respect to any of the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
and Senior Subordinated Debt will not include (w) any liability for federal,
state, local or other taxes owed or owing by the Company, (x) any Indebtedness
of the Company to any of its Subsidiaries or other Affiliates or (y) any trade
payables .
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
SECTION 12.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, holders of Senior and Senior Subordinated Debt will be
entitled to receive payment in full of all Obligations due in respect of such
Senior and Senior Subordinated Debt (including interest accruing after the
commencement of any such proceeding at the rate specified in the applicable
Senior and Senior Subordinated Debt, whether or not allowed or allowable as a
claim in such proceeding) before the Holders will be entitled to receive any
payment with respect to the Securities and until all Obligations with respect to
Senior and Senior Subordinated Debt are paid in full, any distribution to which
the Holders would be entitled shall be made to the holders of Senior and Senior
Subordinated Debt (except that Holders may receive securities that (i) are
subordinated to at least the same extent as the Securities to Senior and Senior
Subordinated Debt and any securities issued in exchange for Senior and Senior
Subordinated Debt, (ii) are unsecured (except to the extent the Securities are
secured), (iii) are not Guaranteed by any Subsidiary of the Company (except to
the extent the Securities are so Guaranteed), and (iv) have a Weighted Average
Life to Maturity and final maturity that are not shorter than the Weighted
Average Life to Maturity of the Securities or any securities issued to Holders
of Senior and Senior Subordinated Debt under the Credit Facility pursuant to a
plan of reorganization or readjustment.
SECTION 12.04. DEFAULT ON DESIGNATED SENIOR AND SENIOR SUBORDINATED DEBT.
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The Company may not make any payment upon or in respect of the
Securities (except in securities that are subordinated to at least the same
extent as the Securities to Senior and Senior Subordinated Debt and any
securities issued in exchange for Senior and Senior Subordinated Debt if:
(i) a default in the payment of the principal of, premium, if any
or interest on Designated Senior and Senior Subordinated Debt occurs and
is continuing beyond any applicable period of grace in the agreement,
indenture or other document governing such Designated Senior and Senior
Subordinated Debt; or
(ii) any other default occurs and is continuing with respect to
Designated Senior and Senior Subordinated Debt that permits holders of the
Designated Senior and Senior Subordinated Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice"), for so long as any Obligations
are outstanding under the Credit Facility, from the Representative
thereunder and, thereafter, from the holders or Representative of any
Designated Senior and Senior Subordinated Debt. If the Trustee receives
any such notice, a subsequent notice received within 360 days thereafter
shall not be effective for purposes of this Section 12.04. No nonpayment
default that existed or was continuing on the date of delivery of any such
notice to the Trustee shall be, or be made, the basis for a subsequent
notice.
The Company may and shall resume payments on the Securities:
(1) in the case of a payment default, upon the date which the
default is cured or waived, and
(2) in the case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received, unless
the maturity of any Designated Senior and Senior Subordinated Debt has
been accelerated.
SECTION 12.05. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior and Senior
Subordinated Debt of the acceleration.
SECTION 12.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Securities at a time when the Trustee or
such Holder, as applicable, has actual knowledge that such payment
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is prohibited by Section 12.04 hereof, such payment shall be held by the Trustee
or such Securityholder, in trust for the benefit of, and shall be paid forthwith
over and delivered, upon written request, to, the holders of Senior and Senior
Subordinated Debt as their interests may appear or their Representative under
the indenture or other agreement (if any) pursuant to which such Senior and
Senior Subordinated Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
and Senior Subordinated Debt remaining unpaid to the extent necessary to pay
such Obligations in full in accordance with their terms, after giving effect to
any concurrent payment or distribution to or for the holders of Senior and
Senior Subordinated Debt.
With respect to the holders of Senior and Senior Subordinated Debt,
the Trustee undertakes to perform only such obligations on the part of the
Trustee as are specifically set forth in this Article 12, and no implied
covenants or obligations with respect to the holders of Senior and Senior
Subordinated Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
and Senior Subordinated Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior and Senior
Subordinated Debt shall be entitled by virtue of this Article 12, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee.
SECTION 12.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any Obligations
with respect to the Securities to violate this Article, but failure to give such
notice shall not affect the subordination of the Securities to the Senior and
Senior Subordinated Debt as provided in this Article.
SECTION 12.08. SUBROGATION.
After all Senior and Senior Subordinated Debt is paid in full and
until the Securities are paid in full, Holders shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Securities) to the
rights of holders of Senior and Senior Subordinated Debt to receive
distributions applicable to Senior and Senior Subordinated Debt to the extent
that distributions otherwise payable to the holders have been applied to the
payment of Senior and Senior Subordinated Debt. A distribution made under this
Article to holders of Senior and Senior Subordinated Debt that otherwise would
have been made to Holders is not, as between the Company and Holders, a payment
by the Company on the Securities.
SECTION 12.09. RELATIVE RIGHTS.
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This Article defines the relative rights of Holders and holders of
Senior and Senior Subordinated Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation of
the Company, which is absolute and unconditional, to pay principal of and
interest on the Securities in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior and
Senior Subordinated Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior and Senior Subordinated Debt to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still a Default or Event
of Default.
SECTION 12.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior and Senior Subordinated Debt to
enforce the subordination of the Indebtedness evidenced by the Securities shall
be impaired by any act or failure to act by the Company or any Holder or by the
failure of the Company or any Holder to comply with this Indenture.
SECTION 12.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders
of Senior and Senior Subordinated Debt, the distribution may be made and the
notice given to their Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article 12, the Trustee and the Holders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior and Senior Subordinated Debt and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 12.
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SECTION 12.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 12 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Securities, unless the Trustee shall have received at
its Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Securities to violate this Article 12. Only the Company or
a Representative may give the notice. Nothing in this Article 12 shall impair
the claims of, or payments to, the Trustee under or pursuant to Section 6.07
hereof.
The Trustee in its individual or any other capacity may hold Senior
and Senior Subordinated Debt with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights.
SECTION 12.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Security by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 12, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes.
SECTION 12.14. AMENDMENTS.
The provisions of this Article 12 shall not be amended or modified
without the written consent of the holders of all Senior and Senior Subordinated
Debt.
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SIGNATURES
Dated as of _______________ TENET HEALTHCARE CORPORATION
By:
----------------------------------
Name:
Title:
Attest:
___________________________ (SEAL)
Dated as of _______________ THE BANK OF NEW YORK, as
Trustee
By:
----------------------------------
Name:
Title:
Attest:
___________________________ (SEAL)
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EXHIBIT A
(Face of Security)
___% Exchangeable Subordinated Note
due __________, 2007
CUSIP:
No. $____________
TENET HEALTHCARE CORPORATION
promises to pay to
_________________________________________________________________________
or its registered assigns, the principal sum of ________________________________
Dollars on __________, 2007.
Interest Payment Dates: _______ and __________, commencing __________, 1996
Record Dates: ______ and __________ (whether or not a Business Day).
TENET HEALTHCARE CORPORATION
By: _________________________
Dated: __________, 1995
(SEAL)
Trustee's Certificate of Authentication:
This is one of the Securities referred
to in the within-mentioned Indenture:
The Bank of New York, as Trustee
By: ___________________________
Authorized Signatory
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(Back of Security)
____% EXCHANGEABLE SUBORDINATED NOTE
due __________, 2007
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. INTEREST. Tenet Healthcare Corporation, a Nevada corporation
(the "COMPANY"), promises to pay interest on the principal amount of this
Security at the rate and in the manner specified below.
The Company shall pay interest in cash on the principal amount of
this Security at the rate per annum of ____%. The Company shall pay interest
semiannually in arrears on _______ and __________ of each year, commencing
__________, 1996 to Holders of record on the immediately preceding _______ and
__________, respectively, or if any such date of payment is not a Business Day
on the next succeeding Business Day (each an "INTEREST PAYMENT DATE").
Interest shall be computed on the basis of a 360-day year comprised
of twelve 30-day months. Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
the original issuance of the Securities. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of 1% per annum in excess of
the interest rate then applicable to the Securities; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are cancelled after such record
date and on or before such Interest Payment Date. The Holder hereof must
surrender this Security to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
Principal, premium, if any, and interest shall be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest may be made by
check mailed to the Holder's registered address. Notwithstanding the foregoing,
all payments with respect to Securities the Holders of which have given wire
transfer instructions, on or before the relevant record date, to the Paying
Agent shall be made by wire transfer of immediately available funds to the
accounts specified by such Holders.
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3. PAYING AGENT AND REGISTRAR. Initially, the Trustee shall act
as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company and
any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an
Indenture, dated as of __________, 1995 (the "INDENTURE"), between the Company
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA") as in effect on the date of the Indenture. The Securities are subject
to all such terms, and Holders are referred to the Indenture and such act for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Securities. The Securities are
unsecured general obligations of the Company. The Securities are limited to
$___________ in aggregate principal amount.
5. OPTIONAL REDEMPTION. On or after ___________, 1997, the
Company may redeem all or any portion of the Securities at a redemption price
(expressed as a percentage of the principal amount thereof), as set forth in the
immediately succeeding paragraph, plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of the Holders of record on a Record
Date to receive interest due on an Interest Payment Date that is on or prior to
such Redemption Date); provided, however, that the Securities are redeemable
prior to _______________, 1998 only if, for a period of twenty consecutive
trading days, the last reported sale price for Vencor Common Shares shall have
exceed 150% of the Market Price then in effect.
The redemption price as a percentage of the principal amount shall
be as follows, if the Securities are redeemed during the 12-month period
beginning ______________ of the following years:
YEAR PERCENTAGE
---- ----------
1997....................... _____%
1998....................... _____%
1999....................... _____%
2000....................... _____%
2001....................... _____%
2002 and thereafter........ _____%
6. MANDATORY REDEMPTION. Subject to the Company's obligation to
make an offer to repurchase Securities under certain circumstances pursuant to
Section 3.07 of the Indenture (as described in paragraph 6 below), the Company
shall have no mandatory redemption or sinking fund obligations with respect to
the Securities.
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7. REPURCHASE AT OPTION OF HOLDER. If there is a Change of
Control Triggering Event, the Company shall offer to repurchase on the Change of
Control Payment Date all outstanding Securities at 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon to the Change
of Control Payment Date. Holders that are subject to an offer to purchase shall
receive a Change of Control Offer from the Company prior to any related Change
of Control Payment Date and may elect to have such Securities purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
8. SUBORDINATION. The Securities are subordinated to Senior and
Subordinated Debt (as defined in the Indenture), which includes any Indebtedness
of the Company that is not expressly pari passu with or subordinated to the
Securities and all Obligations (as defined in the Indenture) of the Company with
respect thereto. To the extent provided in the Indenture, Senior and
Subordinated Debt must be paid, in cash, cash equivalents or otherwise in a
manner satisfactory to the holders of Senior and Subordinated Debt, before the
Securities may be paid. The Company agrees, and each Holder by accepting a
Security consents and agrees, to the subordination provided in the Indenture and
authorizes the Trustee to give it effect.
9. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at its registered address. Securities may
be redeemed in pat but only in whole multiples of $1,000, unless all of the
Securities held by a Holder are to be redeemed. On and after the redemption
date, interest ceases to accrue on Securities or portions of them called for
redemption.
10. EXCHANGE RIGHTS. Subject to the provisions of the Indenture,
the holder of this Security has the right, at his option, at any time or from
time to time on or after September 28, 1997 until and including, but not after
the close of business on, the date of final maturity of this Security (except
that, in case this Security or a portion hereof shall be called for redemption
and the Company shall not thereafter default in making due provision for the
payment of the redemption price, such right shall terminate with respect to this
Security or such portion hereof at the close of business on the last business
day preceding the date fixed for redemption or, in case this Security or a
portion hereof shall be called for redemption in accordance with Section 11.11
of the Indenture and the Company shall not thereafter default in making due
provision for the payment of the redemption price, such right shall terminate
with respect to this Security or such portion hereof at the close of business on
the last business day preceding the fifteenth day after the mailing of the
notice of redemption), to exchange the principal of this Security, or any
portion thereof which is $1,000 or a multiple of $1,000, into fully paid and
non-assessable Vencor Common Shares, as said shares shall be constituted at the
date of exchange (or such other securities or property or cash as shall be
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added to such Vencor Common Shares or as such Vencor Common Shares shall have
been changed into as provided in the Indenture), at the Exchange Rate of
____________ Vencor Common Shares (or such other securities, property or cash)
for each $1,000 principal amount of the Securities (the "Exchange Rate") or at
the adjusted Exchange Rate in effect at the date of exchange if an adjustment
has been made, determined as provided in the Indenture, upon surrender of this
Security to the Company at the office or agency of the Company maintained for
the purpose in the Borough of Manhattan, The City of New York, together with a
fully executed notice substantially in the form entitled "Exchange Notice"
appearing below that the holder elects so to exchange this Security (or any
portion hereof which is an integral multiple of $1,000); provided that the
Company may, in lieu of delivering Vencor Common Shares in exchange for this
Security, elect to pay the holder hereof an amount in cash equal to the Market
Price (as of the date of receipt at such office or agency of such notice of
exchange) as defined in the Indenture of such Vencor Common Shares into which
this Security (or any portion hereof which is an integral multiple of $1,000
which the holder elects to exchange) is exchangeable, plus any securities,
property or cash theretofore apportioned to such Vencor Common Shares, subject
to certain conditions as more fully described in the Indenture. Except as
expressly provided in the Indenture, no payment or adjustment shall be made on
account of interest accrued on this Security (or portion thereof) so exchanged
or on account of any dividend or distribution on any such shares of common stock
of Vencor Power Company issued upon exchange. If so required by the Company or
the Trustee, this Security, upon surrender for exchange as aforesaid, shall be
duly endorsed by, or be accompanied by instruments of transfer, in form
satisfactory to the Company, duly executed by, the holder or by his duly
authorized attorney. The Exchange Rate from time to time in effect is subject
to adjustment as provided in the Indenture. No fractional interest in Vencor
Common Shares (or other securities) will be issued on exchange, but an
adjustment in cash will be made for any fractional interest as provided in the
Indenture.
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons, and in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Securities between a record date and the corresponding
Interest Payment Date.
12. PERSONS DEEMED OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this Security
is registered as its absolute owner for the purpose of receiving payment of
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<PAGE>
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
The registered Holder of a Security shall be treated as its owner for all
purposes.
13. AMENDMENT, SUPPLEMENT AND WAIVERS. Except as provided in the
next succeeding paragraphs, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a tender offer or exchange offer for Securities) and any
existing default or compliance with any provision of the Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents obtained
in connection with a tender offer or exchange offer for Securities).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Security held by a non-consenting Holder of
Securities): (i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver, (ii) reduce the principal of or
change the fixed maturity of any Security, (iii) reduce the rate of or change
the time for payment of interest on any Security, (iv) make any change regarding
the exchange rights set forth in Article 11 of the Indenture other than to
increase the Exchange Rate, (v) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Securities,
(except a rescission of acceleration of the Securities by the Holders of at
least a majority in aggregate principal amount thereof and a waiver of the
payment default that resulted from such acceleration), (vi) make any Security
payable in money other than that stated in the Securities, (vii) make any change
in the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Securities to receive payments of principal of or premium,
if any, or interest on the Securities or (viii) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Securities, the Company and the Trustee may amend or supplement the Indenture or
the Securities to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Securities in addition to or in place of certificated Securities,
to provide for the assumption of the Company's obligations to Holders of the
Securities in the case of a merger, consolidation or sale of assets, to make any
change that would provide any additional rights or benefits to the Holders of
the Securities or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with requirements of the Securities
and Exchange Commission (the "COMMISSION") in order to effect or maintain the
qualification of the Indenture under the TIA.
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14. DEFAULTS AND REMEDIES. Events of Default under the Indenture
include: (i) a default for 30 days in the payment when due of interest on the
Securities; (ii) a default in payment when due of the principal of or premium,
if any, on the Securities, at maturity or otherwise; (iii) a failure by the
Company to comply with the provisions described under the covenant "Change of
Control;" (iv) a failure by the Company for 60 days after notice to comply with
any of its other agreements in the Indenture or the Securities; (v) any default
that occurs under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Significant Subsidiaries (or the payment
of which is Guaranteed by the Company or any of its Significant Subsidiaries)
whether such Indebtedness or Guarantee exists on the date of the Indenture, or
is created after the date of the Indenture, which default (a) constitutes a
Payment Default or (b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or that has been so accelerated,
aggregates $25.0 million or more; (vi) failure by the Company or any of its
Significant Subsidiaries to pay a final judgment or final judgments aggregating
in excess of $25.0 million entered by a court or courts or competent
jurisdiction against the Company or any of its Significant Subsidiaries if such
final judgment or judgments remain unpaid or undischarged for a period (during
which execution shall not be effectively stayed) of 60 days after their entry;
(vii) certain events of bankruptcy or insolvency with respect to the Company or
any of its Significant Subsidiaries; and (viii) a failure by the Company to make
any exchange of Vencor Common Shares for any Security in accordance with the
terms of the Indenture. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities by written notice to the Company and the Trustee, may
declare all the Securities to be due and payable immediately (plus, in the case
of an Event of Default that is the result of willful actions (or inactions) by
or on behalf of the Company intended to avoid prohibitions on redemptions of the
Securities contained in the Indenture or the Securities, an amount of premium
applicable pursuant to the Indenture). Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries,
all outstanding Securities shall become due and payable without further action
or notice. Holders of the Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Securities may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Securities notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in such
Holders' interest.
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<PAGE>
The Holders of not less than a majority in aggregate principal
amount of the Securities then outstanding by written notice to the Trustee may
on behalf of the Holders of all of the Securities waive any existing Default or
Event of Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest or premium on, or the
principal of, the Securities.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
The above description of Events of Default and remedies is qualified
by reference, and subject in its entirety, to the more complete description
thereof contained in the Indenture.
15. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to enter into
certain mergers and consolidations.
16. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if it were not Trustee.
17. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS. No director, officer, employee, incorporator or shareholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Securities, the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
18. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
19. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
A-8
<PAGE>
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers as a convenience to Holders. No representation is
made as to the accuracy of such numbers either as printed on the Securities and
reliance may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Tenet Healthcare Corporation
2700 Colorado Avenue
Santa Monica, California 90404
Attention: Treasurer
A-9
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: For value received (i)
or (we) hereby sell, assign and transfer this Security to
______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and do hereby irrevocably constitute and appoint _____________________________
Attorney to transfer this Security on the books of the Company with full power
of substitution in the premises.
______________________________________________________________________________
Date: ______________
Your Signature:___________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee.*
__________
*Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 3.07 of the Indenture, check the following box:
/ / Section 3.07
(Change of Control)
If you want to have only part of the Security purchased by the Company
pursuant to Section 3.07 of the Indenture, state the amount you elect to have
purchased:
$ _______________
Date:____________
Your Signature:___________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee.*
__________
*Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-11
<PAGE>
[FORM OF EXCHANGE NOTICE]
To: TENET HEALTHCARE CORPORATION
The undersigned registered owner of this Security hereby: (i)
irrevocably exercises the option to exchange this Security, or the portion
hereof below designated, for shares of common stock ($.25 par value per share)
of Vencor, Inc. or other securities, other property or cash in accordance with
the terms of the Indenture referred to in this Security and (ii) directs that
such shares, other securities, other property or cash deliverable upon the
exchange, together with any check in payment for fractional shares, and any
Security representing any unexchanged principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or other securities are to be delivered registered
in the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Principal Amount to be
Exchanged: (if less than all)
$_______________________________
Dated __________ ________________________________
Signature
Notice: The signature to this Exchange Notice must correspond with the name as
it appears upon the face of the written Security in every particular, without
alteration, or enlargement or any change whatsoever.
Fill in for registration of shares if to be delivered, and of Securities if to
be issued, otherwise than to and in the name of the registered holder.
___________________________
Social Security or Other
Taxpayer Identifying Number
______________________________
(Name)
______________________________
(Street Address)
______________________________
(City, State and Zip Code)
(Please print name and
address)
A-12
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of ___________, 1995 between Tenet
Healthcare Corporation, a Nevada corporation (the "Company"), and The Bank of
New York, as Escrow Agent (the "Escrow Agent").
WHEREAS the Company has executed and delivered an Indenture (the
"Indenture") dated as of ___________, 1995, to The Bank of New York, trustee
(such trustee or such trustee's successor as such, the "Trustee");
WHEREAS under and pursuant to the Indenture the Company may issue up
to _______________ principal amount of its ____% Exchangeable Subordinated Notes
Due 2007 (the "Notes");
WHEREAS, pursuant and subject to the terms of the Notes and the
Indenture, the Notes are exchangeable at the option of the holder thereof for
shares of common stock, $.25 par value, of Vencor, Inc. ("Vencor Common Stock")
(or such other securities, property or cash as may be deliverable upon exchange
pursuant to the Indenture) at any time or from time to time on or after
September 28, 1997, and prior to maturity of the Notes, unless previously
redeemed, at the exchange rate (the "Exchange Rate") of ______ shares of Vencor
Common Stock per $1,000 principal amount of Notes, subject to adjustment as
provided in the Indenture and subject to the Company's right to pay cash equal
to the Market Price of the shares of Vencor Common Stock for which such Notes
are exchangeable in lieu of delivery of such shares. The Notes will be
exchangeable prior to September 28, 1997 only in the event of a merger,
consolidation or liquidation of Vencor, Inc. pursuant to which all shares of
Vencor Common Stock held by the Escrow Agent are converted into or exchanged for
cash or other securities registered under the Securities Act; and
WHEREAS, pursuant to the Indenture the Company is obligated to
deposit with the Escrow Agent certificates representing up to 8,301,067 shares
of Vencor Common Stock (the "Vencor Common Shares");
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and in order to set forth the terms upon which the Vencor Common
Shares deposited with the Escrow Agent by the Company for delivery upon exchange
of the Notes and all other property held by the Escrow Agent hereunder shall be
held and dealt with by the Escrow Agent and its successors as such, the Company
and the Escrow Agent hereby agree as follows:
<PAGE>
SECTION 1(a). Deposit
The Company, simultaneously with the execution and delivery of this
Agreement, is delivering to the Escrow Agent, irrevocably except as provided in
Section 7 hereof, to be held by the Escrow Agent hereunder a certificate or
certificates, registered in the name of the Escrow Agent or its agent or
nominee, representing 8,301,067 shares of Vencor Common Stock. The Company
represents and warrants that it has good and lawful title to such shares, that
such shares are fully paid and non-assessable, and that such shares are
delivered free and clear of any liens, claims, charges and encumbrances. The
Escrow Agent hereby acknowledges receipt of such certificate or certificates for
8,301,067 shares of Vencor Common Stock.
The Company and any Permitted Transferee (as defined in Section
1(b)) and the Escrow Agent recognize that the holders of the Notes have an
interest in the powers conferred on the Escrow Agent under this Agreement, and,
except as provided in Section 8 hereof, such powers may not be revoked or
modified without the consent of the holders of at least two-thirds in principal
amount of the Notes at the time outstanding; PROVIDED that no revocation or
modification shall change the right to exchange any Notes for Vencor Common
Shares and other Escrowed Property (as defined below) at the Exchange Rate and
upon the terms set forth in Article 11 of the Indenture or reduce the aforesaid
percentage of Notes the holders of which are required to consent to any
revocation or modification, without the consent of all the holders of all Notes
then outstanding.
The Vencor Common Shares received by the Escrow Agent and retained
for the benefit of the holders from time to time of the Notes, together with
such additional shares of Vencor Common Stock and such other securities, cash
and other property as may be received and retained by the Escrow Agent in
accordance with this Agreement, are herein sometimes referred to as the
"Escrowed Property". Subject to the provisions of Section 9(c) hereof, the
Escrow Agent shall cause any cash dividends on Escrowed Property and any
payments with respect to United States federal, state and local income tax which
the Company or any Permitted Transferee, is entitled to receive under Sections
11.05 or 11.13, respectively, of the Indenture to be paid to the Company or such
Permitted Transferee, as the case may be.
SECTION 1(b). Sale and Transfer
The Company may at any time and from time to time in its sole
discretion, sell or transfer all or any part of its right, title and interest in
the Vencor Common Shares to any
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<PAGE>
wholly-owned subsidiary of the Company or any partnership all of the general
partners and limited partners of which are wholly-owned subsidiaries of the
Company (any of the foregoing are hereinafter referred to as a "Permitted
Transferee"); PROVIDED that (i) such Vencor Common Shares so sold or
transferred shall remain subject to the terms and conditions of this Agreement
and the Indenture; (2) any such Permitted Transferee must expressly agree in
writing to become bound by the terms and conditions of this Agreement as such
Agreement may be amended from time to time as though such Permitted Transferee
were a party hereto; (3) the Company shall notify the Escrow Agent in writing at
the time of any such sale or transfer as to the number of Vencor Common Shares
so transferred to such Permitted Transferee; and (4) such sale or transfer shall
be in compliance with federal and all applicable state and foreign securities
laws. Notwithstanding any such sale or transfer, except as otherwise provided
herein, the Company shall remain liable to perform all of its duties and
obligations hereunder.
SECTION 2. Covenant by Escrow Agent
The Escrow Agent shall hold the Vencor Common Shares and all other
Escrowed Property received by it pursuant to this Agreement for the purposes and
upon the terms and conditions set forth in the Indenture and this Agreement.
SECTION 3. Notification of Adjustment of Exchange Rate; Exchange of Notes
The Company will notify the Escrow Agent in writing forthwith upon
any adjustment of the Exchange Rate, and will, upon request, notify the Escrow
Agent in writing of the Market Price of the Vencor Common Shares (or per unit of
any other property which is part of the Escrowed Property) as of any relevant
date for the purpose of computing cash adjustments in respect of fractional
interests. The Escrow Agent shall be under no duty or responsibility with
respect to any such notice except to exhibit such notice from time to time to
any holder of Notes requesting inspection thereof.
Upon surrender to the Escrow Agent of any Note (or a principal
portion thereof which is an integral multiple of $1,000) for exchange in
accordance with the terms thereof and of the Indenture, the Escrow Agent shall
promptly (i) cause to be delivered, to or on the order of the person for whose
account such Note (or portion) was so surrendered for exchange, a certificate or
certificates representing the number of full shares of Vencor Common Shares or
other securities, together with
3
<PAGE>
payment of any cash adjustment in respect of any fractional interest in shares
or other securities, and such additional cash or other property, which the
holder or holders of such Note (or portion thereof) shall be entitled to receive
in accordance with the terms hereof and thereof, (ii) deliver to the Trustee the
Note so exchanged, and (iii) if only a portion of said Note is exchanged, obtain
from the Trustee and deliver to or on the order of the person for whose account
the Note was surrendered for exchange a new Note or Notes for the principal
amount thereof not exchanged; PROVIDED that if the Company elects to make a
cash payment in lieu of exchange of Vencor Common Shares pursuant to Section
11.14 of the Indenture and if sufficient funds are first deposited with the
Escrow Agent by the Company, the Escrow Agent shall pay to the holder of the
Notes so surrendered an amount in cash equal to the value of Vencor Common
Shares for which such Notes are exchangeable (based on the Market Price on the
date of receipt by the Escrow Agent of the notice of exchange delivered by the
holder of Notes pursuant to Section 11.02 of the Indenture).
In any case in which Section 11.04 of the Indenture shall require
that an adjustment of the Exchange Rate be made immediately following a record
date, the Escrow Agent may defer delivering to the holder of any Note
surrendered for exchange after such record date the additional securities and
other property deliverable upon such exchange as a result of such adjustment
until such additional securities and other property have been delivered to the
Escrow Agent; and, in lieu of the additional securities and other property the
delivery of which is so deferred, the Escrow Agent shall deliver to such holder
appropriate evidence (determined in the sole discretion of the Escrow Agent) of
the right to receive such additional securities and other property.
SECTION 4. Division of Certificates; Payment of Taxes, Fees and Charges, and
Cash Adjustments; Payment of Fractional Interest
The Company and any Permitted Transferee shall make, execute and
deliver or cause to be made, executed and delivered any and all such instruments
and assurances, and take all such further action, as may be reasonably necessary
or proper to carry out the intention of or to facilitate the performance of the
terms of this Agreement or to secure the rights and remedies hereunder of the
holders of the Notes. The Company shall pay (i) any and all documentary, stamp,
transfer or similar taxes that may be payable in respect of the deposit of the
Vencor Common Shares, and the transfer or delivery of the Escrowed Property to
holders of Notes upon exchange thereof, PROVIDED that the Company
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<PAGE>
shall not be obligated to pay any withholding taxes payable by holders of such
Notes due to the exchange thereof; (ii) any income or other taxes incurred by
the Escrow Agent in its capacity as such for any reason (except for payment or
accrual of its own fees); (iii) all reasonable, out-of-pocket fees or charges of
the Escrow Agent in connection with or arising out of this Agreement, the
Indenture or any exchange of Notes in accordance with the terms hereof and
thereof; (iv) all cash adjustments in respect of fractions of shares of Vencor
Common Stock or other fractional units of property which the holders of Notes
may be entitled to receive upon exchange thereof (after giving effect to moneys
received by the Escrow Agent from the sale of Escrowed Property for the purpose
of paying for such fractional interests); and (v) cash in an amount equal to any
losses on investments made pursuant to Section 6 of this Agreement to the extent
necessary to maintain on deposit with the Escrow Agent funds (investment
securities held pursuant to Section 6 being valued as funds at the outstanding
principal balance thereof) equal from time to time to the aggregate amount of
cash apportioned to all Vencor Common Shares at each such time deliverable upon
exchange of all Notes then outstanding. Notwithstanding the foregoing, the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery, upon an exchange of Notes, of Escrowed
Property in a name other than that in which the Notes so exchanged were
registered, and no such transfer or delivery shall be made unless and until the
person requesting such transfer has paid to the Company or the Escrow Agent the
amount of any such tax or has established, to the satisfaction of the Company
and the Escrow Agent, that such tax has been paid.
The Escrow Agent shall be authorized to, and, at the Company's
direction, shall, sell any Vencor Common Shares or other securities which are
part of the Escrowed Property held by it in order to obtain the funds necessary,
or anticipated by it to be necessary, for payment of fractional interests with
respect to Notes delivered to it for exchange; PROVIDED that after any such
sale, the number of shares of Vencor Common Shares and any such other securities
remaining on deposit with the Escrow Agent shall be sufficient to allow the
exchange of all the then outstanding Notes for shares of Vencor Common Stock and
other Escrowed Property on the basis of the then applicable Exchange Rate. If a
sale of Vencor Common Shares to make cash payments for fractional shares is not
permitted, then the Company shall furnish additional moneys to permit such
payment in accordance with Section 11.03 of the Indenture.
5
<PAGE>
SECTION 5. Voting of Escrowed Property
The Company and any Permitted Transferee shall each have the full
and unqualified right and power to exercise any right to vote, or give consents
or take other action in respect of, its respective share of the Vencor Common
Shares or other securities which are part of the Escrowed Property, and the
Escrow Agent shall have no such rights.
The Escrow Agent or its nominee shall from time to time deliver, or
cause to be delivered, to the Company or any Permitted Transferee, as the case
may be, such proxies, duly executed and in the form required by applicable law,
as may be necessary or appropriate to permit the Company or such Permitted
Transferee, as the case may be, to vote on each matter submitted to the holders
of shares of Vencor Common Stock or other securities which are part of the
Escrowed Property.
SECTION 6. Investment of Cash
All cash received and retained by the Escrow Agent under Section
11.05 of the Indenture shall, at the direction of the Company, be invested in
securities issued or guaranteed by the United States of America or any agency or
instrumentality thereof, PROVIDED that such obligations shall mature by their
terms within 12 months following their purchase.
SECTION 7. Distribution of Escrowed Property to Company or Permitted
Transferee
Subject to the provisions of Section 9(c) hereof, the Escrow Agent
shall cause any Escrowed Property which the Company or any Permitted Transferee
is entitled to receive under Section 11.05 of the Indenture to be delivered to
the Company or such Permitted Transferee.
SECTION 8. Amendment or Modification of Agreement
The Company and the Escrow Agent may by mutual accord cure any
ambiguity or correct or supplement any provision contained herein which may be
inconsistent with any other provision contained herein or with any provision of
the Indenture. Otherwise, except with respect to an amendment which is for one
or more of the following purposes:
6
<PAGE>
(1) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the covenants of the Company
herein contained;
(2) to add to the covenants of the Company, for the benefit of the
holders of the Notes, or to surrender any right or power herein conferred upon
the Company;
(3) to comply with the requirements of Section 11.10 of the
Indenture;
(4) to make any other provisions with respect to matters or
questions arising under this Agreement or the Indenture which shall not be
inconsistent with the provisions of this Agreement or the Indenture, provided
such action shall not materially adversely affect the interest of the holders of
the Notes; or
(5) to evidence the acceptance by a Permitted Transferee of its
obligations hereunder;
this Agreement may not be amended or modified at any time without the written
consent of the Escrow Agent, the written consent of the Company and the consent
of the holders of not less than two-thirds of the outstanding aggregate
principal amount of the Notes. No amendment or modification shall change the
right to exchange any Notes for Vencor Common Shares and other Escrowed Property
at the Exchange Rate and upon the terms set forth in Article 11 of the Indenture
or reduce the aforesaid percentage of Notes the holders of which are required to
consent to any amendment or modification, without the consent of all the holders
of all Notes then outstanding.
SECTION 9. Duties and Obligations of Escrow Agent
(a) The Escrow Agent shall not at any time be under any duty or
responsibility to any holder of Notes to determine whether any facts exist which
may require any adjustments of the Exchange Rate, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment; and the Escrow Agent may conclusively rely
as to all such matters upon the notice furnished by the Company pursuant to
Section 3 hereof. The Escrow Agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any Vencor Common Shares, or of any
other securities or other property, which may at any time be delivered upon the
exchange of any Note; and the Escrow Agent makes no representation with respect
thereto. The Escrow Agent shall not be responsible for any failure of the
Company or any Permitted
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<PAGE>
Transferee to comply with any of its covenants contained in this Agreement or in
the Indenture.
(b) The Escrow Agent, either directly or through its nominee, shall
be under no duty or obligation to enforce, through the institution of legal
proceedings or otherwise, any of its rights as the record owner (either directly
or through its nominee) of the Vencor Common Shares or any other Escrowed
Property either to secure possession of any cash or other securities or other
property or otherwise to assert any rights or claims in the interest of any
holder of Notes, nor shall it be required to make independent inquiry as to any
matter but may rely upon such written notice pertaining to the Vencor Common
Shares or other securities or other property as it shall receive from the
Company, the Trustee or from the issuer of any of the securities held by it
hereunder; PROVIDED that if the Escrow Agent shall be furnished with
indemnity, in manner and form satisfactory to it, against losses or expenses
which may be sustained or incurred by it in taking such action, the Escrow Agent
shall take such action as may be specifically directed in writing by the
Company, but the Escrow Agent shall have the right to decline to follow any such
direction if it shall be advised by counsel that the actions so directed may not
be lawfully taken or if the Escrow Agent shall in good faith determine that such
action so directed would be unjustly prejudicial to the holders of Notes.
(c) The Escrow Agent shall be obligated to perform only such duties
as are herein specifically set forth. The Escrow Agent shall not be liable for
any action taken, omitted or suffered by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred upon it by
this Agreement, and may conclusively rely and shall be protected in acting or
refraining from acting in reliance upon advice of counsel (which need not
constitute an Opinion of Counsel) or upon any certificate, request or other
document believed by it to be genuine and to have been signed or presented by
the proper party or parties; PROVIDED that the Escrow Agent shall not make any
payment or deliver any Escrowed Property to the Company or any Permitted
Transferee until delivery to the Escrow Agent of an Officer's Certificate as to
compliance with the conditions precedent provided for in Section 11.05(h) of the
Indenture. The Escrow Agent shall not be required to take any action hereunder
which, in the opinion of its counsel, will be contrary to law.
In the event the Escrow Agent is instructed by the Company to sell
any securities (including the Vencor Common Shares) that constitute Escrowed
Property, the Escrow Agent shall be entitled to an opinion of counsel (which
counsel is satisfactory to the Escrow Agent), to the effect that the
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<PAGE>
proposed sale of securities will not violate any applicable United States
federal or state securities laws.
SECTION 10. Sales and Tenders of Escrowed Property
In the event that Article 11 of the Indenture requires or permits
the Company to direct the Escrow Agent to sell or tender its respective share of
Escrowed Property, the Escrow Agent shall sell or tender such Escrowed Property
in such manner as shall be set forth in written instructions concerning any such
sale or tender which are given by the Company by means of an Officer's
Certificate and shall remit the proceeds thereof as provided in such Officer's
Certificate. Such Officer's Certificate shall demonstrate to the reasonable
satisfaction of the Escrow Agent that such sale or tender and such disposition
of proceeds is permitted under the Indenture.
SECTION 11. Release or Sale of Excess Escrowed Property
The Company and any applicable Permitted Transferee, upon demand by
the Company, shall be entitled at any time and from time to time, out of the
Escrowed Property held by the Escrow Agent, to such kind and amount of Escrowed
Property as shall be in excess of the kind and amount of Escrowed Property which
would be required for the exchange of all Notes then outstanding for the
Escrowed Property on the basis of the then applicable Exchange Rate and other
terms and provisions of the Indenture and this Agreement, and such excess shall,
upon delivery of the certificate provided for in the next following sentence, be
released to the Company or such Permitted Transferee or sold for the account of
the Company or such Permitted Transferee upon demand by the Company. Upon
demanding any release or sale of Escrowed Property, the Company shall deliver to
the Escrow Agent an Officer's Certificate that shall (i) state the principal
amount of Notes then outstanding and the kind and amount of Escrowed Property
required for delivery to the Holders thereof upon exchange; (ii) state that the
release or sale of such kind and amount of Escrowed Property as so requested is
permitted by the provisions of this Section and the Indenture, (iii) demonstrate
to the reasonable satisfaction of the Escrow Agent that the Escrowed Property to
be released or sold would not be deliverable upon exchange of all Notes then
outstanding, and (iv) if the Company shall have directed the Escrow Agent to
sell any of such excess Escrowed Property, state that such sale is a bona fide
sale to a Person (as hereinafter defined) who is not an affiliate of the
Company. Upon receipt of such Certificate from the Company, the Escrow Agent
shall, as promptly as possible, release to the Company or such Permitted
Transferee or sell, as
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<PAGE>
the case may be, the kind and amount of Escrowed Property requested to be
released or sold as specified in such Certificate.
The term "Person" as used herein means any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
SECTION 12. Cash Dividends
Promptly upon its receipt thereof, the Escrow Agent shall deliver to
the Company or any Permitted Transferee all cash dividends received with respect
to any Vencor Common Shares, to the extent that the Company or such Permitted
Transferee is entitled to receive such dividends pursuant to the terms of the
Indenture, in accordance with the terms of such Notes and of the Indenture.
SECTION 13. Merger, etc., of the Company
(a) The Company hereby covenants and agrees that, upon any
consolidation or merger, or any transfer or lease of all or substantially all of
its assets other than a consolidation or merger in which the Company is the
continuing corporation, the rights and obligations of the Company under this
Agreement shall be expressly assumed, by a supplemental agreement satisfactory
in form to the Escrow Agent, executed and delivered to the Escrow Agent by the
Person formed by such consolidation, or with or into which the Company shall
have merged or to which the assets of the Company shall have been transferred or
leased.
(b) In the case of any consolidation or merger, or any transfer or
lease of all or substantially all of the Company's assets referred to in
subsection (a) hereof, and upon the execution and delivery to the Escrow Agent
of the supplemental agreement referred to therein by the successor or acquiring
Person, such successor or acquiring Person shall succeed to the rights and
obligations of and be substituted for the Company under this Agreement, with the
same effect as if such Person had been named herein as the Company, and in the
event of any such sale or conveyance, the Company (which term shall for this
purpose mean the Person named as the "Company" in the first paragraph of this
Agreement or any successor Person which shall theretofore have become such in
the manner described in this Section) shall be discharged from all obligations
and covenants under this Agreement and may (but need not) be dissolved and
liquidated.
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SECTION 14. Reliance on Information Supplied
The Escrow Agent may rely on the contents of any Officer's
Certificate furnished hereunder and, in delivering any such certificate, the
Company may rely on information furnished to the Company by the Escrow Agent as
to the quantity and identity of Vencor Common Shares and other Escrowed Property
delivered to holders of Notes upon exchange thereof and on published information
as of the end of the preceding year (or such more recent date as of which such
information has been publicly announced by Vencor) as to matters concerning
Vencor Common Shares and Vencor. The Escrow Agent will furnish on request to
the Company such information as to the Escrow Agent's holdings and as to
Escrowed Property delivered to Holders of Notes upon exchange thereof.
SECTION 15. Expenses and Indemnification of the Escrow Agent
The Company covenants and agrees to pay to the Escrow Agent from
time to time, and the Escrow Agent shall be entitled to, reasonable
compensation, and the Company will pay or reimburse the Escrow Agent upon its
request for all reasonable, out-of-pocket expenses, disbursements and advances
incurred or made by the Escrow Agent in accordance with any of the provisions of
this Agreement (including the reasonable, out-of-pocket compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its gross negligence or bad faith. The Company also covenants to indemnify the
Escrow Agent for, and to hold it harmless against, any loss, liability, claim,
cause of action or expense incurred without gross negligence or bad faith on the
part of the Escrow Agent and arising out of or in connection with its duties
under this Agreement. The Trustee and the Holders of the Notes shall not be
liable for any expenses or compensation of the Escrow Agent and no charge shall
be made for such expenses or compensation against the Escrowed Property.
SECTION 16. Resignation or Removal of the Escrow Agent
(a) The Escrow Agent may at any time resign by giving 60 days'
written notice of resignation to the Company and the Trustee. The Company may
at any time remove the Escrow Agent by giving like written notice of removal to
the Escrow Agent and the Trustee. The Holders of a majority in principal amount
of the Notes at the time outstanding may at any time remove the Escrow Agent.
If the Escrow Agent shall resign or be removed, a
11
<PAGE>
successor Escrow Agent, which in each case shall be a bank or trust company
having surplus and capital of at least $100,000,000 shall be appointed by the
Company by written instrument executed and delivered to the Escrow Agent and to
such successor Escrow Agent, a copy of which shall be delivered by the Company
to the Trustee.
(b) Any resignation or removal of the Escrow Agent and any
appointment of a successor Escrow Agent pursuant to any of the provisions of
this Agreement shall become effective upon acceptance of appointment by the
successor as provided in Section 17 hereof.
SECTION 17. Acceptance by Successor Escrow Agent
Any successor Escrow Agent appointed as provided in Section 16 of
this Agreement shall execute, acknowledge and offer to the Company and to its
predecessor Escrow Agent an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Escrow Agent shall
become effective and such successor Escrow Agent, without any further act, deed
or conveyance shall become vested with all the right, title and interest to all
property held hereunder, and all other rights, powers, duties and obligations
hereunder, of such predecessor Escrow Agent; but nevertheless such predecessor
Escrow Agent shall forthwith deliver to such successor Escrow Agent physical
possession of the certificates evidencing the Vencor Common Shares and of all
other Escrowed Property, and such predecessor Escrow Agent shall, on the written
request of the Company or such successor Escrow Agent and upon payment of any
amounts then due it pursuant to the provisions of Section 15 hereof, execute and
deliver to such successor Escrow Agent an instrument transferring to such
successor Escrow Agent all right, title and interest hereunder in and to the
Vencor Common Shares and the other Escrowed Property, and all other rights and
powers hereunder, of such predecessor Escrow Agent.
SECTION 18. Succession by Merger, etc.
Any Person into which the Escrow Agent may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Escrow Agent shall be a party, or any
Person succeeding to the business of the Escrow Agent, shall be the successor of
the Escrow Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation shall be eligible under Section 16 hereof.
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SECTION 19. Termination of Agreement
This Agreement shall terminate when the rights of all holders of
Notes under the Indenture to surrender Notes for exchange pursuant to Article 11
of the Indenture shall have expired or been terminated and when all other
obligations of the Company shall have been satisfied under this Agreement, which
termination or expiration and satisfaction shall be evidenced by an Officer's
Certificate of the Company to that effect. Upon termination of this Agreement
pursuant to this Section 19, any Vencor Common Shares and any other Escrowed
Property remaining in the hands of the Escrow Agent hereunder which are not
required for the exchange of Notes previously duly surrendered and duly accepted
for the exchange shall be delivered first to the Permitted Transferee to the
extent of its interest therein, and second to the Company.
SECTION 20. Notices
Any notice or communication shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid,
addressed as follows:
If to the Company:
Scott M. Brown, Esq.
Senior Vice President,
Secretary and General Counsel
Tenet Healthcare Corporation
2700 Colorado Avenue
Santa Monica, California 90404
Telephone: (310) 998-8000
If to the Escrow Agent:
The Bank of New York
101 Barclay Street
New York, New York 10286
The Company or the Escrow Agent by notice to the other may designate
additional or different addresses for subsequent notices of communications.
Any notice or communication mailed to a holder of Notes shall be
mailed by first-class mail, postage prepaid, to such holder at such holder's
address as it appears on the registration books of the Registrar for the Notes
and shall be sufficiently given to such holder if so mailed within the time
prescribed.
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<PAGE>
Failure to mail notice or communication to a holder of Notes or any
defect in it shall not affect its sufficiency with respect to other holders of
Notes. If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it.
SECTION 21. Benefits of Agreement
Nothing in this Agreement or the Notes, expressed or implied, shall
give or be construed to give any person, firm or corporation, other than the
parties hereto, the holders of Notes as such and the Trustee as such holders'
representative, any legal or equitable right, remedy or claim under any
covenant, condition or provision herein contained, all the covenants, conditions
and provisions contained in this Agreement being for the sole benefit of the
parties hereto, the holders of the Notes as such and the Trustee as such
holders' representative.
SECTION 22. Headings
The headings contained in this Agreement are for convenience of
reference only and shall have no effect on the interpretation or operation of
this Agreement.
SECTION 23. Definitions
Terms defined in the Indenture and not otherwise defined herein
have, as used herein, the respective meanings provided for therein.
SECTION 24. Choice of Laws
This Agreement shall be construed in accordance with the law of the
State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and their respective corporate seals to be affixed hereto by duly
authorized officers as of the day and year first above written.
TENET HEALTHCARE CORPORATION
By_______________________________
Title:
THE BANK OF NEW YORK, as Escrow
Agent
By_______________________________
Title:
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<PAGE>
EXHIBIT 8.1
[Skadden Letterhead]
Tenet Healthcare Corporation
2700 Colorado Avenue
Santa Monica, CA 90404
Re: Tenet Healthcare Corporation
Registration Statement on Form S-3
File No. 33-63451
------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Tenet Healthcare Corporation, a Nevada
corporation (the "Company"), in connection with the contemplated offering (the
"Offering") of $350 million aggregate principal amount of Exchangeable
Subordinated Notes due 2005 exchangeable for shares of common stock of Vencor,
Inc. (the "Exchangeable Subordinated Notes"). This opinion is being furnished in
accordance with the requirements of Item 601(b)(8) of Regulation S-K under the
Securities Act of 1933, as amended (the "Act"). Capitalized terms used herein
and not otherwise defined have the respective meanings set forth in the
Registration Statement on Form S-3 relating to the Exchangeable Subordinated
Notes initially filed with the Securities and Exchange Commission (the
"Commission") on October 17, 1995 (as thereafter amended from time to time and
together with all exhibits thereto, the "Registration Statement").
Our opinion is based upon an examination of the Registration Statement, the
form of the Exchangeable Subordinated Notes, the Indenture, and such other
documents as we have deemed necessary or appropriate as a basis for the opinion
set forth below. In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed, or photostatic copies,
and the authenticity of the originals of such copies. As to any facts material
to this opinion that we did not independently establish or verify, we have
relied upon statements and representations of officers and other representatives
of the Company and our opinion is premised, in part, on the veracity of such
statements and representations. We have also assumed that the Offering will be
consummated in accordance with the description set forth in the Registration
Statement.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended, Treasury regulations, judicial
decisions, administrative rulings, and other applicable authorities, in each
case as in effect on the date hereof. The statutory provisions, regulations, and
interpretations on which this opinion is based are subject to change, and such
changes could apply retroactively. In addition, because there is no precise
legal authority that addresses the Federal income tax treatment of exchangeable
debt instruments with characteristics similar to the Exchangeable Subordinated
Notes, there can be no assurances that the Internal Revenue Service would not
take a position contrary to the Federal income tax treatment of the Exchangeable
Subordinated Notes described in the Registration Statement.
<PAGE>
Based on the foregoing, we are of the opinion that, although the discussion
set forth in the section of the Registration Statement entitled "Certain Federal
Income Tax Consequences" does not purport to discuss all possible Federal income
tax considerations of the acquisition, holding, exchanging or otherwise
disposing of the Exchangeable Subordinated Notes, such discussion constitutes,
in all material respects, a fair and accurate summary of the Federal income tax
consequences that the likely to be material to a purchaser of the Exchangeable
Subordinated Notes.
Other than as expressly stated above, we express no opinion on any issue
relating to the Company or to any investment therein or under any other law. We
are furnishing this opinion to you solely for the Company's benefit in
connection with the Offering and this opinion is not to be used, circulated,
quoted, or otherwise referred to for any other purpose without our written
permission.
We consent to the filing of this opinion as Exhibit 8.1 to the Registration
Statement and to the reference to Skadden, Arps, Slate, Meagher & Flom therein
under the caption "Legal Matters." In giving this consent, we do not hereby
admit that we are within the category of persons whose consent is required under
Section 7 of the Act or the rules or regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
<PAGE>
EXHIBIT 23.2
AUDITORS' CONSENT
The Board of Directors
Tenet Healthcare Corporation
We consent to the use of our reports dated July 25, 1995 incorporated by
reference in the Registration Statement on Form S-3 of Tenet Healthcare
Corporation, relating to the consolidated balance sheets of Tenet Healthcare
Corporation and subsidiaries as of May 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended May 31, 1995, and the related
schedule, and to the reference to our firm under the heading "Experts" in the
prospectus. Our report on the 1994 consolidated financial statements refers to a
change in the method of accounting for income taxes.
KPMG PEAT MARWICK LLP
Los Angeles, California
December 11, 1995
