<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1997.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: I-7293
------------------------
TENET HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 95-2557091
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or No.)
organization)
3820 STATE STREET
SANTA BARBARA, CALIFORNIA 93105
(Address of principal (Zip Code)
executive offices)
</TABLE>
AREA CODE (805) 563-7000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------- ------------------------
<S> <C>
Common Stock New York Stock Exchange
Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
7 3/8% Medium Term Notes due 1997 New York Stock Exchange
9 5/8% Senior Notes due 2002 New York Stock Exchange
8 5/8% Senior Notes due 2003 New York Stock Exchange
7 7/8% Senior Notes due 2003 New York Stock Exchange
8% Senior Notes due 2005 New York Stock Exchange
6% Exchangeable Subordinated Notes due 2005 New York Stock Exchange
10 1/8% Senior Subordinated Notes due 2005 New York Stock Exchange
8 5/8% Senior Subordinated Notes due 2007 New York Stock Exchange
</TABLE>
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendments to this Form 10-K. / /
As of July 31, 1997, there were 304,733,190 shares of Common Stock
outstanding. The aggregate market value of the shares of Common Stock held by
non-affiliates of the Registrant, based on the closing price of these shares on
the New York Stock Exchange, was $9,116,106,163. For the purposes of the
foregoing calculation only, all directors and executive officers of the
Registrant have been deemed affiliates.
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended May 31, 1997, have been incorporated by reference into Parts I, II
and IV of this Report. Portions of the definitive Proxy Statement for the
Registrant's 1997 Annual Meeting of Shareholders have been incorporated by
reference into Part III of this Report.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT--1997
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I
Item 1. Business................................................................................... 1
Item 2. Properties................................................................................. 19
Item 3. Legal Proceedings.......................................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders........................................ 20
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...................... 20
Item 6. Selected Financial Data.................................................................... 20
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 20
Item 8. Financial Statements and Supplementary Data................................................ 20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 20
PART III
Item 10. Directors and Executive Officers of the Registrant......................................... 21
Item 11. Executive Compensation..................................................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 21
Item 13. Certain Relationships and Related Transactions............................................. 21
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.......................... 21
</TABLE>
- ------------------------
Note: The responses to Items 5 through 8, Item 12 and portions of Items 1, 3,
10, 11 and 14 are included in the Registrant's Annual Report to
Shareholders for the year ended May 31, 1997, or the definitive Proxy
Statement for the Registrant's 1997 Annual Meeting of Shareholders. The
required information is incorporated into this Report by reference to
those documents and is not repeated herein.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Tenet Healthcare Corporation (together with its subsidiaries, "Tenet", the
"Registrant" or the "Company") is the second largest investor-owned healthcare
services company in the United States. At May 31, 1997, Tenet's subsidiaries
owned or operated 128 general hospitals with 27,959 licensed beds and related
healthcare facilities serving urban and rural communities in 22 states and held
investments in other healthcare companies. Tenet's subsidiaries also owned or
operated a small number of rehabilitation hospitals, specialty hospitals,
long-term care facilities, psychiatric facilities and medical office buildings
located on the same campus as, or nearby, its general hospitals, as well as
various ancillary healthcare businesses, including outpatient surgery centers,
home healthcare programs, ambulatory, occupational and rural healthcare clinics,
health maintenance organizations, a preferred provider organization and a
managed care insurance company. Tenet intends to continue its strategic
acquisitions of and partnerships with additional general hospitals and related
healthcare businesses in order to expand and enhance its integrated healthcare
delivery systems.
On January 30, 1997, the Company acquired OrNda HealthCorp ("OrNda"). The
acquisition was accomplished when a subsidiary of Tenet was merged with and into
OrNda (the "Merger"), leaving OrNda and all of its subsidiaries as wholly-owned
subsidiaries of Tenet. OrNda now is known as Tenet HealthSystem HealthCorp. The
Merger was accounted for as a pooling-of-interests and, accordingly, the
consolidated financial statements incorporated herein by reference and all
statistical data shown herein prior to the Merger have been restated to include
the accounts and results of operations of OrNda for all periods presented. Prior
to the Merger, OrNda was the third largest investor-owned provider of healthcare
services in the United States. The Merger joined Tenet's then-existing 77
hospitals and related healthcare operations with OrNda's then-existing 50
general hospitals and related healthcare operations.
As discussed in more detail under Domestic General Hospitals on page 2
below, Tenet's subsidiaries, including OrNda, acquired 11 general hospitals
during fiscal 1997 and four general hospitals during the first quarter of fiscal
1998. In addition, Tenet sold one general hospital and closed one general
hospital during fiscal 1997. Tenet also sold one general hospital and closed one
general hospital during the first quarter of fiscal 1998.
At May 31, 1997, Tenet's subsidiaries also owned or operated various
ancillary healthcare operations, discussed in more detail under Other Domestic
Operations on page 7 below, and held as investments interests in Vencor, Inc.
("Vencor"), Total Renal Care Holdings, Inc. ("TRC") and Health Care Property
Partners ("HCPP"). These investments are discussed in more detail under
Investments on page 8 below.
In connection with the Merger, Tenet issued $400 million of 7 7/8% Senior
Notes due 2003, $900 million of 8% Senior Notes due 2005 and $700 million of
8 5/8% Senior Subordinated Notes due 2007, and entered into a new revolving
credit agreement that allows Tenet to borrow, repay and reborrow up to $2.8
billion prior to its January 31, 2002, maturity date. The Company had
approximately $2.0 billion available under its new revolving credit agreement at
May 31, 1997.
Under segment reporting criteria, Tenet believes that "healthcare" is its
only material business segment. See the discussion of Tenet's revenues and
operations in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in Tenet's 1997 Annual Report to Shareholders.
1
<PAGE>
OPERATIONS
DOMESTIC GENERAL HOSPITALS
All of Tenet's operations are conducted through its subsidiaries and
affiliates. Tenet's general hospital and other healthcare operations are
conducted primarily through the following three subsidiaries and their
subsidiaries and affiliates: (i) Tenet HealthSystem Hospitals, Inc., (ii) Tenet
HealthSystem Medical, Inc. and (iii) Tenet HealthSystem HealthCorp. At May 31,
1997, Tenet's subsidiaries and affiliates operated 128 general hospitals (27,959
licensed beds) serving urban and rural communities in 22 states. Of those
general hospitals, 100 are owned by Tenet's subsidiaries and affiliates and 28
are owned by and leased from third parties (including two leased from HCPP, as
discussed on page 8 below, and two owned facilities that are on leased land).
During fiscal 1997, Tenet's subsidiaries, including OrNda, acquired the
ownership of (or interests in) the following 11 general hospitals: (i) the
378-bed Hialeah Hospital in Hialeah, Florida, (ii) the 136-bed Cypress Fairbanks
Medical Center in Houston, Texas, (iii) the 68-bed Westside Medical Center in
Los Angeles, California, (iv) the 400-bed Centinela Hospital Medical Center in
Inglewood, California, (v) the 329-bed St. Vincent Hospital in Worcester,
Massachusetts, (vi) the 319-bed Lloyd Noland Hospital in Birmingham, Alabama,
(vii) the 296-bed Western Medical Center in Santa Ana, California, (viii) the
193-bed Western Medical Center - Anaheim in Anaheim, California, (ix) the
357-bed North Shore Medical Center in Miami, Florida, (x) the 312-bed Brookside
Hospital in San Pablo, California, and (xi) the 398-bed Desert Hospital in Palm
Springs, California. In addition, Tenet sold one general hospital and closed one
general hospital during fiscal 1997.
In the first quarter of fiscal 1998, Tenet acquired the three-hospital
1,030-bed Deaconess Incarnate Word Health System in St. Louis, Missouri, and the
28-bed Sylvan Grove Hospital in Jackson, Georgia, and announced that the
construction of a new hospital in Weston, Florida, under a joint venture with
the Cleveland Clinic has been approved by the State of Florida. During the first
quarter of fiscal 1998, the Company also entered a definitive agreement with
Eastern Health System, Inc. ("Eastern") to form a joint venture, which will be
managed by Tenet, to operate four general hospitals and substantially all of
their related operations in the greater Birmingham, Alabama area. In addition,
Tenet sold one facility and closed one facility during the first quarter of
fiscal 1998. Tenet also entered into a definitive agreement to sell the 90-bed
Plateau Medical Center in Oak Hill, West Virginia.
Each of Tenet's general hospitals offers acute care services and most offer
operating and recovery rooms, radiology services, intensive care and coronary
care nursing units, pharmacies, clinical laboratories, respiratory therapy
services, physical therapy services and outpatient facilities. A number of the
hospitals also offer tertiary care services such as open heart surgery, neonatal
intensive care, neuroscience, orthopedic services and oncology services. Three
of the Company's hospitals, Memorial Medical Center, USC University Hospital and
Sierra Medical Center, offer quaternary care in such areas as heart, lung, liver
and kidney transplants and USC University Hospital and Sierra Medical Center
also offer gamma knife brain surgery. With the exception of one general hospital
that was acquired in fiscal 1996 and one general hospital acquired in the first
quarter of fiscal 1998, each of the Company's facilities that is eligible for
accreditation is fully accredited by the Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO"), the Commission on Accreditation of
Rehabilitation Facilities (in the case of rehabilitation hospitals) or another
appropriate accreditation agency. Both of the unaccredited general hospitals
referred to above are in the process of becoming accredited for the first time.
With such accreditation, the Company's hospitals are eligible to participate in
the Medicare and Medicaid programs.
Various factors, such as technological developments permitting more
procedures to be performed on an outpatient basis, pharmaceutical advances and
pressures to contain healthcare costs, have led to a shift from inpatient care
to ambulatory or outpatient care. Tenet has responded to this trend by enhancing
its hospitals' outpatient service capabilities, including (i) establishing
freestanding outpatient surgery centers
2
<PAGE>
at or near certain of its hospital facilities, (ii) reconfiguring certain
hospitals to more effectively accommodate outpatient treatment, by, among other
things, providing more convenient, dedicated outpatient facilities and (iii)
restructuring existing surgical capacity to allow a greater number and range of
procedures to be performed on an outpatient basis. Tenet's facilities will
continue to emphasize those outpatient services that can be provided on a
quality, cost-effective basis and that the Company believes will experience
increased demand. The patient volumes and net operating revenues at both the
Company's general hospitals and its outpatient surgery centers are subject to
seasonal variations caused by a number of factors, including but not necessarily
limited to, seasonal cycles of illness, climate and weather conditions, vacation
patterns of both patients and physicians and other factors relating to the
timing of elective procedures.
In addition, inpatient care is continuing to move from acute care to
sub-acute care, where a less-intensive level of care is provided. Tenet has been
proactive in the development of a variety of sub-acute inpatient services to
utilize a portion of its unused capacity. By offering cost-effective ancillary
services in appropriate circumstances, Tenet is able to provide a continuum of
care where the demand for such services exists. For example, in certain
hospitals the Company has developed transitional care, rehabilitation and
long-term care sub-acute units. Such units utilize less intensive staffing
levels to provide the range of services sought by payors with a lower cost
structure.
The Merger allowed Tenet to acquire a substantial portfolio of hospitals
providing quality care responsive to the current managed care environment. Many
of the general hospitals acquired in the Merger are located in geographic areas
where Tenet already operated hospitals, including southern California and south
Florida. The Merger has allowed Tenet to coordinate the services provided by all
of its subsidiaries, including OrNda, in these geographic areas, which Tenet
believes has accelerated its development of integrated healthcare delivery
systems in these areas. The Merger also expanded Tenet's operations into several
new geographic areas, including Arizona, Iowa, Massachusetts, Mississippi,
Nevada, Oregon, Washington, West Virginia and Wyoming.
The largest concentrations of the Company's hospitals now are in California
(35.2%), Texas (15.6%) and Florida (13.3%). The concentrations of hospitals in
these three states increases the risk that any adverse economic, regulatory or
other developments that may occur in such states may adversely affect the
Company's operations or financial condition.
Tenet believes that its general hospitals are well-positioned to compete
effectively in the rapidly evolving healthcare environment. Tenet continually
analyzes whether each of its hospitals fits within its strategic plans and has
and will continue to analyze ways in which such assets may best be used to
maximize shareholder value. To that end, the Company plans to close, sell or
convert to alternate uses certain of the Company's facilities and services in
order to eliminate duplicate services and excess capacity resulting from the
Merger.
3
<PAGE>
The following table lists, by state, the general hospitals owned or (if
indicated below) leased by Tenet's subsidiaries and operated domestically as of
May 31, 1997:
<TABLE>
<CAPTION>
GEOGRAPHIC LICENSED
AREA/STATE FACILITY LOCATION BEDS STATUS
- -------------------- --------------------------------------------------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
Alabama Brookwood Medical Center Birmingham 586 Owned
Lloyd Noland Hospital Birmingham 319 Owned
Arizona Community Hospital Medical Center Phoenix 53 Owned
Mesa General Hospital Medical Center (1) Mesa 138 Leased
St. Luke's Medical Center (1) Phoenix 280 Leased
Tempe St. Luke's Hospital (1) Tempe 106 Leased
Tucson General Hospital Tucson 129 Owned
Arkansas Central Arkansas Hospital Searcy 193 Owned
Methodist Hospital of Jonesboro (2) Jonesboro 104 Owned
National Park Medical Center Hot Springs 166 Owned
St. Mary's Regional Medical Center Russellville 170 Owned
California Alvarado Hospital Medical Center San Diego 231 Owned
(Southern) Brotman Medical Center Culver City 438 Owned
Centinela Hospital Medical Center Inglewood 400 Owned
Century City Hospital (1) Los Angeles 190 Leased
Chapman Medical Center (1) Orange 135 Leased
Coastal Communities Hospital (3) Santa Ana 177 Owned
Community Hospital of Huntington Park (1) Huntington Park 81 Leased
Desert Hospital (1) Palm Springs 388 Leased
Encino Hospital (1)(4) Encino 151 Leased
Fountain Valley Regional Hospital and Medical Fountain Valley 395 Owned
Center
Garden Grove Hospital and Medical Center Garden Grove 167 Owned
Garfield Medical Center Monterey Park 211 Owned
Greater El Monte Community Hospital South El Monte 113 Owned
Harbor View Medical Center (5) San Diego 156 Owned
Irvine Medical Center (1) Irvine 176 Leased
John F. Kennedy Memorial Hospital Indio 130 Owned
Lakewood Regional Medical Center Lakewood 161 Owned
Los Alamitos Medical Center Los Alamitos 173 Owned
Medical Center of North Hollywood North Hollywood 160 Owned
Midway Hospital Medical Center Los Angeles 225 Owned
Mission Hospital of Huntington Park Huntington Park 109 Owned
Monterey Park Hospital Monterey Park 102 Owned
Placentia Linda Hospital Placentia 114 Owned
San Dimas Community Hospital San Dimas 93 Owned
Santa Ana Hospital Medical Center (1) Santa Ana 90 Leased
South Bay Medical Center (1) Redondo Beach 201 Leased
Saint Luke Medical Center Pasadena 165 Owned
Suburban Medical Center (1) Paramount 182 Leased
Tarzana Regional Medical Center (1)(4) Tarzana 233 Leased
USC University Hospital (6) Los Angeles 285 Leased
Western Medical Center--Anaheim Anaheim 193 Owned
Western Medical Center Santa Ana 296 Owned
Whittier Hospital Medical Center Whittier 159 Owned
Woodruff Community Hospital Long Beach 96 Owned
California Brookside Hospital (1) San Pablo 233 Leased
(Northern) Community Hospital of Los Gatos (1) Los Gatos 153 Leased
Doctors Hospital of Manteca Manteca 73 Owned
Doctors Medical Center of Modesto Modesto 397 Owned
Doctors Hospital of Pinole (1) Pinole 137 Leased
French Hospital Medical Center (7) San Luis Obispo 147 Owned
Redding Medical Center Redding 185 Owned
San Ramon Regional Medical Center San Ramon 123 Owned
Sierra Vista Regional Medical Center San Luis Obispo 199 Owned
Twin Cities Community Hospital Templeton 84 Owned
Valley Community Hospital (1) Santa Maria 70 Leased
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC LICENSED
AREA/STATE FACILITY LOCATION BEDS STATUS
- -------------------- --------------------------------------------------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
Florida Coral Gables Hospital Coral Gables 273 Owned
(Southern) Delray Medical Center Delray Beach 211 Owned
Florida Medical Center (8) Ft. Lauderdale 459 Owned
Florida Medical Center, South (8) Plantation 202 Owned
Hialeah Hospital Hialeah 378 Owned
Hollywood Medical Center Hollywood 324 Owned
North Ridge Medical Center Ft. Lauderdale 391 Owned
North Shore Medical Center Miami 357 Owned
Palm Beach Gardens Medical Center (1) Palm Beach Gardens 204 Leased
Palmetto General Hospital Hialeah 360 Owned
Parkway Regional Medical Center North Miami 689 Owned
West Boca Medical Center Boca Raton 185 Owned
Florida Memorial Hospital of Tampa Tampa 174 Owned
(Tampa/St. North Bay Medical Center New Port Richey 122 Owned
Petersburg) Palms of Pasadena Hospital St. Petersburg 310 Owned
Seven Rivers Community Hospital Crystal River 128 Owned
Town & Country Hospital Tampa 201 Owned
Georgia North Fulton Regional Hospital (1) Roswell 167 Leased
Spalding Regional Hospital Griffin 160 Owned
Indiana Culver Union Hospital Crawfordsville 120 Owned
Winona Memorial Hospital Indianapolis 317 Owned
Iowa Davenport Medical Center Davenport 150 Owned
Louisiana Doctors Hospital of Jefferson (1) Metairie 138 Leased
Kenner Regional Medical Center Kenner 300 Owned
Meadowcrest Hospital Gretna 200 Owned
Memorial Medical Center, Mid-City New Orleans 272 Owned
Memorial Medical Center, Uptown New Orleans 526 Owned
Minden Medical Center Minden 121 Owned
Northshore Regional Medical Center (1) Slidell 174 Leased
St. Charles General Hospital New Orleans 173 Owned
Massachusetts Saint Vincent Hospital Worcester 398 Owned
Mississippi Gulf Coast Medical Center Biloxi 189 Owned
Missouri Columbia Regional Hospital Columbia 265 Owned
Lucy Lee Hospital (1) Poplar Bluff 201 Leased
Lutheran Medical Center St. Louis 408 Owned
Twin Rivers Regional Medical Center Kennett 118 Owned
Nebraska Saint Joseph Hospital (9) Omaha 404 Owned
Nevada Lake Mead Hospital Medical Center North Las Vegas 198 Owned
North Carolina Central Carolina Hospital Sanford 137 Owned
Frye Regional Medical Center (1) Hickory 355 Leased
Oregon Eastmoreland Hospital Portland 100 Owned
Woodland Park Hospital (6) Portland 209 Leased
South Carolina East Cooper Regional Medical Center Mount Pleasant 100 Owned
Hilton Head Hospital (10) Hilton Head 64 Owned
Piedmont Medical Center Rock Hill 268 Owned
Tennessee John W. Harton Regional Medical Center Tullahoma 137 Owned
Medical Center of Manchester (1) Manchester 49 Leased
Saint Francis Hospital Memphis 693 Owned
University Medical Center Lebanon 261 Owned
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC LICENSED
AREA/STATE FACILITY LOCATION BEDS STATUS
- -------------------- --------------------------------------------------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
Texas Doctors Hospital Dallas 268 Owned
(Dallas) Garland Community Hospital Garland 113 Owned
Lake Pointe Medical Center (11) Rowlett 92 Owned
RHD Memorial Medical Center (1) Dallas 190 Leased
Trinity Medical Center (1) Carrollton 149 Leased
Texas Cypress Fairbanks Medical Center Houston 136 Owned
(Houston) Houston Northwest Medical Center (12) Houston 498 Owned
Park Plaza Hospital Houston 468 Owned
Sharpstown General Hospital Houston 190 Owned
Twelve Oaks Hospital Houston 336 Owned
Texas Brownsville Medical Center Brownsville 177 Owned
(Other) Mid-Jefferson Hospital Nederland 138 Owned
Nacogdoches Medical Center Nacogdoches 150 Owned
Odessa Regional Hospital (13) Odessa 100 Owned
Park Place Medical Center Port Arthur 236 Owned
Providence Memorial Hospital El Paso 501 Owned
Sierra Medical Center El Paso 365 Owned
South Park Hospital and Medical Center Lubbock 101 Owned
Southwest General Hospital San Antonio 286 Owned
Trinity Valley Medical Center Palestine 150 Owned
Washington Puget Sound Hospital Tacoma 160 Owned
West Virginia Plateau Medical Center Oak Hill 90 Owned
Wyoming Lander Valley Medical Center Lander 102 Owned
</TABLE>
- ------------------------------
(1) Leased from a third party.
(2) Owned by a limited liability company of which a Tenet subsidiary owns 95%
and is the managing member.
(3) Owned by a partnership in which a Tenet subsidiary owns 50% and is the
managing general partner.
(4) Leased by a partnership in which Tenet's subsidiaries own a 75% interest.
(5) This hospital was closed during the first quarter of fiscal year 1998.
(6) On leased land.
(7) Independently managed and being held for sale as of May 31, 1997. This
hospital was sold during the first quarter of fiscal year 1998.
(8) Owned by a partnership in which Tenet's subsidiaries own an 85% interest.
Tenet is in the process of repurchasing the minority interest in the
partnership.
(9) Owned by a limited liability company in which a Tenet subsidiary owns a 74%
interest and is the managing member.
(10) Owned by a partnership in which Tenet's subsidiaries own a 90% interest.
(11) This hospital is owned by a partnership in which Tenet's subsidiaries own
an 80% interest. The partnership leases the land on which the facility is
located from a wholly owned Tenet subsidiary.
(12) This hospital is owned by a partnership in which Tenet's subsidiaries own a
70% interest. The partnership leases the land on which the facility is
located from a wholly owned Tenet subsidiary.
(13) Owned by a partnership in which Tenet's subsidiaries own a 78% interest.
6
<PAGE>
The following table shows certain information about the general hospitals
owned or leased domestically by Tenet's subsidiaries, including OrNda, for the
fiscal years ended May 31:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Total number of facilities....................................... 116 123 128
Total number of licensed beds.................................... 23,691 26,265 27,959
Average occupancy during the period.............................. 41.6% 42.7% 42.6%
</TABLE>
The above tables do not include rehabilitation hospitals, long-term care
facilities, psychiatric facilities, outpatient surgery centers or other
ancillary facilities.
BUSINESS STRATEGY
The Company's strategic objective is to provide quality healthcare services
responsive to the current managed care environment. Tenet believes that
competition among healthcare providers occurs primarily at the local level.
Accordingly, the Company tailors its local strategies to address the specific
competitive characteristics of the geographic areas in which it operates,
including the number of facilities operated by Tenet, the nature and structure
of physician practices and physician groups, the extent of managed care
penetration, the number and size of competitors and the demographic
characteristics of the area. Key elements of the Company's strategy are:
- to develop integrated healthcare delivery systems by coordinating the
operations and services of the Company's facilities with other hospitals
and ancillary care providers and through alliances with physicians and
physician groups;
- to reduce costs through enhanced operating efficiencies while improving
the quality of care provided;
- to develop or maintain its strong relationships with physicians and
generally to foster a physician-friendly culture;
- to enter into discounted fee for service arrangements, capitated contracts
and other managed care contracts with third party payors; and
- to acquire or enter into strategic partnerships with hospitals, groups of
hospitals, other healthcare businesses, ancillary healthcare providers,
physician practices and physician practice assets where appropriate to
expand and enhance quality integrated healthcare delivery systems
responsive to the current managed care environment.
INTERNATIONAL HOSPITALS
At May 31, 1997, a subsidiary of the Company continued to operate a 184-bed
tertiary-care hospital in Barcelona, Spain. A subsidiary of the Company also is
developing a 56-bed hospital in Cham, Canton Zug, Switzerland. The opening of
that hospital, which had been scheduled for the second quarter of fiscal 1997,
has been postponed indefinitely due to a decision by the Cantonal Health
Authority. Although an appeal of that decision has been denied, the Company is
exploring alternatives to open the facility.
OTHER DOMESTIC OPERATIONS
At May 31, 1997, Tenet's subsidiaries owned or operated a small number of
rehabilitation hospitals, specialty hospitals, long-term care facilities,
psychiatric facilities and medical office buildings located on the same campus
as, or nearby, its general hospitals, as well as various ancillary healthcare
businesses, including outpatient surgery centers, home healthcare programs,
ambulatory, occupational and rural healthcare clinics, health maintenance
organizations, a preferred provider organization and a managed care insurance
company.
7
<PAGE>
INVESTMENTS
At May 31, 1997, Tenet held as investments (i) 8,301,067 shares, an
approximately 12.0% interest, in Vencor, a healthcare services provider
primarily focusing on the needs of the elderly, (ii) 3,000,000 shares, an
approximately 11.3% interest, in TRC, which operates kidney dialysis units and
certain related healthcare businesses and (iii) an approximately 23.0% interest
in HCPP, a partnership originally formed by the Company and Health Care Property
Investors, Inc. for the purpose of acquiring from and leasing back to the
Company 21 long-term care facilities, two general hospitals and one psychiatric
facility. Since that time, the Company has assigned to Vencor (as successor to
The Hillhaven Corporation) and other third parties its leasehold interests in
the 21 long-term care facilities and the psychiatric hospital, but remains
contingently liable for the lease payments on those facilities. The Company
continues to lease the two general hospitals from HCPP. HCPP does not own any
properties other than those originally purchased from the Company. In January
1996, Tenet sold $320 million principal amount of its 6% Exchangeable
Subordinated Notes due 2005, which Notes are exchangeable into Tenet's 8,301,067
shares of Vencor common stock at any time on or after November 6, 1997, at an
exchange rate of 25.9403 shares per $1,000 principal amount of the notes,
subject to the Company's right to pay an amount in cash equal to the market
price of the shares of Vencor common stock in lieu of delivery of such shares.
The exchange price equivalent to the exchange rate is $38.55 per share.
PROPERTIES
Tenet's principal executive offices are located at 3820 State Street, Santa
Barbara, CA 93105. That building is leased by a Tenet subsidiary under a
five-year lease with one five-year renewal option. The telephone number of
Tenet's Santa Barbara headquarters is (805) 563-7000. Hospital support services
for Tenet's subsidiaries are located in space leased by a subsidiary in its
operations center in Dallas, Texas. At May 31, 1997, Tenet and its subsidiaries
also were leasing space for regional offices in Alabama, Arizona, Arkansas,
California, Florida, Georgia, Louisiana, Tennessee and Texas. In addition,
Tenet's subsidiaries operated domestically 147 medical office buildings, most of
which are adjacent to Tenet's general hospitals.
The number of licensed beds and locations of the Company's general hospitals
are described on pages 4 through 6 above. As of May 31, 1997, Tenet had
approximately $128 million of outstanding loans secured by real property and
approximately $60 million of capitalized lease obligations. The Company believes
that all of these properties, as well as the administrative and medical office
buildings described above, are suitable for their intended purposes.
MEDICAL STAFF AND EMPLOYEES
Tenet's hospitals are staffed by licensed physicians who have been admitted
to the medical staff of individual hospitals. Members of the medical staffs of
Tenet's hospitals often also serve on the medical staffs of hospitals not owned
by the Company and may terminate their affiliation with the Tenet hospital or
shift some or all of their admissions to competing hospitals at any time.
Although the Company purchases physician practices and, where permitted by law,
employs physicians, most of the physicians who practice at the Company's
hospitals are not employees of the Company. The Company also manages physician
practices in states where corporations are not permitted to purchase physician
practices or employ physicians. Nurses, therapists, lab technicians, facility
maintenance staff and the administrative staff of hospitals, however, normally
are employees of the Company.
Tenet's operations are dependent on the efforts, ability and experience of
its officers, employees and physicians. Tenet's continued growth depends on its
ability to attract and retain skilled employees, on the ability of its officers
to manage growth successfully and on Tenet's ability to attract and retain
physicians and other healthcare professionals at its hospitals. In addition, the
success of Tenet is, in part, dependent upon the quality, number and
specialities 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. Although Tenet currently
believes it will continue to be able to successfully attract and retain
8
<PAGE>
key officers, qualified physicians and other healthcare professionals, the loss
of some or all of its key officers or an inability to attract or retain
sufficient numbers of qualified physicians and other healthcare professionals
could have a material adverse impact on future results of operations.
The number of Tenet's employees (of which approximately 32% were part-time
employees) at May 31, 1997, was approximately as follows:
<TABLE>
<S> <C>
General Hospitals and Other Businesses(1).......................... 104,200
Dallas Operations Center and Regional and Support Offices.......... 698
Corporate Headquarters............................................. 102
---------
Total.............................................................. 105,000
---------
---------
</TABLE>
- ------------------------
(1) Includes employees whose employment relates to the operations of the
Company's general hospitals, rehabilitation hospitals, psychiatric
facilities, specialty hospitals, outpatient surgery centers, managed
services organizations (including physicians whose practices have been
acquired by the Company), print center, debt collection subsidiaries, other
domestic healthcare operations, and the international hospitals.
Tenet is subject to the Federal minimum wage and hour laws and maintains
various employee benefit plans. Labor relations at Tenet's facilities have been
satisfactory. A small percentage of Tenet's employees are represented by labor
unions. Although the Company currently is not experiencing a shortage of nursing
personnel, the availability of nursing personnel fluctuates from year to year,
and the Company cannot predict the degree to which it will be affected by the
future availability and cost of nursing personnel.
COMPETITION
Tenet's general hospitals and other healthcare businesses operate in
competitive environments. A facility's competitive position within the
geographic area in which it operates is affected by such competitive factors as
the quality of care provided, including the number, quality and specialties of
the physicians, nurses and other healthcare professionals on its staff, the
quality of services provided by such facility to patients and their physicians,
its reputation, its managed care contracting relationships, the extent to which
it is part of an integrated network, the number of competitive facilities, the
state of its buildings and improvements, the quality and the state of the art of
its medical equipment, its location and its charges for services. Tax-exempt
competitors may have certain financial advantages, such as endowments,
charitable contributions, tax-exempt financing and exemption from sales,
property and income taxes, not available to Tenet facilities. The length of time
a facility has been a part of the community and the availability of other
healthcare alternatives also are competitive factors.
One factor of ever-increasing importance in the competitive position of
Tenet's facilities is the ability of those facilities to obtain managed care
contracts. The importance of obtaining managed care contracts has increased over
the years and is expected to continue to increase as employers, private and
government payors and others turn to the use of managed care in an attempt to
control rising healthcare costs. The revenues and operating results of most of
the Company's hospitals' are significantly affected by the hospitals' ability to
negotiate favorable contracts with managed care payors. Under such contracts,
healthcare providers agree to provide services on a discounted-fee or capitated
basis in exchange for the payors agreeing to send some or all of their
members/employees to those providers. With capitated contracts, a healthcare
provider such as Tenet receives specific fixed periodic payments from a health
maintenance organization, preferred provider organization or employer based on
the number of members of such organization being serviced by the provider. In
return, the provider agrees to provide healthcare services to such members
regardless of the actual costs incurred and services provided. The profitability
of such contracts depends upon the provider's ability to negotiate payments per
patient that, in the aggregate,
9
<PAGE>
are adequate to cover the cost of meeting the healthcare needs of the covered
persons. In some cases, a provider may contract with an insurance carrier to
cover some or all of the costs of providing the necessary healthcare.
A healthcare provider's ability to compete for such contracts is affected by
many factors, such as the competitive factors referred to above, the scope,
breadth and quality of services a hospital offers in a given geographic area,
its ability to form its own, or to join with other healthcare providers to form,
integrated healthcare delivery systems and the scope, breadth and quality of
services offered by competing healthcare providers and/or systems. Tenet
evaluates changing circumstances in each geographic area on an ongoing basis and
positions itself to compete in the managed care market by forming its own, or
joining with others to form integrated healthcare delivery systems, such as
Tenet South Florida HealthSystem in south Florida, Sierra Providence Health
Network in El Paso, Texas, Tenet Louisiana HealthSystem in the greater New
Orleans area, Tenet California HealthSystem in California and Tenet Houston
HealthSystem in Houston, Texas, that actively pursue and enter into managed care
contracts. Tenet's integrated healthcare delivery systems also compete for
traditional fee-for-service patients and contracts with traditional healthcare
insurers and employers.
As discussed more fully on page 14, recent changes in the Federal Medicare
laws permit providers to create Provider Service Organizations to contract
directly with the Federal government for the provision of medical care to
Medicare beneficiaries on a fully capitated basis. As part of the Health Care
Financing Administration's demonstration project in this area, Tenet and its
physician partners launched Tenet Choices 65 in July 1997. Tenet Choices 65 is a
Medicare managed care plan for Medicare patients in the greater New Orleans
area. If it proves successful, Tenet Choices 65 could serve as a model for
similar plans for seniors throughout the country.
The healthcare industry, including Tenet, has been characterized in recent
years by increased competition for patients and staff physicians, significant
excess capacity at general hospitals, a shift from inpatient to outpatient
treatment settings and increased consolidation. New competitive strategies of
hospitals and other healthcare providers place increasing emphasis on the use of
alternative healthcare delivery systems (such as home healthcare services,
outpatient surgery and emergency and diagnostic centers) that eliminate or
reduce lengths of hospital stays. The principal factors contributing to these
trends are advances in medical technology and pharmaceuticals, cost-containment
efforts by managed care payors, employers and traditional healthcare 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 its
hospitals to continue to attract and retain staff physicians, enter into managed
care contracts and organize and structure integrated healthcare delivery
systems, including those with other healthcare providers and physician practice
groups, while continuing to provide quality, cost-effective care.
The Company's hospitals, and the healthcare industry as a whole, also face
the challenge of continuing to provide quality patient care while dealing with
strong competition for patients and with pressure on reimbursement rates not
only by private payors, but also by government payors. National and state
efforts to reform the healthcare system in the United States may further impact
reimbursement rates. Changes in medical technology, existing and future
legislation, regulations and interpretations and competitive contracting for
provider services by payors may require changes in the Company's facilities,
equipment, personnel, procedures, rates and/or services in the future.
Inpatient admissions, average lengths of stay and average occupancy at
general hospitals throughout the industry, including the Company's general
hospitals, continue to be adversely affected by payor-required pre-admission
authorization and utilization review and payor pressure to maximize outpatient
and alternative healthcare delivery services for less acutely ill patients.
Increased competition, admissions constraints and payor pressures are expected
to continue. Inpatient acuity and intensity of services continue to increase as
less intensive services shift from an inpatient to an outpatient basis or to
alternative
10
<PAGE>
healthcare delivery services because of various factors such as technological
improvements, pharmaceutical advances and payor pressures to limit or reduce
payments. Those pressures imposed by government and private payors and the
increasing percentage of business negotiated with purchasers of group healthcare
services are expected to continue to adversely affect the per-patient revenues
received by the Company.
To meet these challenges, the Company (i) has expanded or converted many of
its general hospitals' facilities to include distinct outpatient centers, (ii)
offers discounts to private payor groups, (iii) enters into capitation contracts
in some service areas, (iv) upgrades facilities and equipment, and (v) offers
new programs and services. The Company has been reducing its costs, for example,
through the implementation of a case management system designed to maximize
efficiency by identifying cost-per-procedure variables among physicians
performing the same procedures, standardizing supplies used and negotiating
volume discounts for purchases. In addition, the Company has developed a
computerized outcomes management system that contains clinical and demographic
information from the Company's hospitals and physicians and allows users to
identify "best practices" for treating specific diagnostic related groups.
Nevertheless, there can be no assurance that these measures will be successful
or, if successful, will serve to compensate for the reduction in inpatient
admissions, average lengths of stay and average occupancy, and the consequent
reductions in per-patient revenue, resulting from the payor pressures referred
to above.
As noted above, the Company also is responding to these changes by forming
integrated healthcare delivery systems. Components of these systems include: (i)
encouraging physicians practicing at its hospitals to form independent physician
associations ("IPAs"), (ii) having the Company join with those IPAs, physicians
and physician group practices to form physician hospital organizations ("PHOs")
to contract with managed care and other payors as well as directly with
employers and (iii) forming management services organizations ("MSOs") to (A)
purchase physician practices or their assets, as appropriate, (B) provide
management and administrative services to physicians, physician group practices
and IPAs and (C) enter into managed care contracts both on behalf of those
groups and, in certain circumstances, on behalf of PHOs.
In large part, a hospital's revenues, whether from managed care payors,
traditional health insurance payors or directly from patients, depends on the
quality and scope of practices of physicians on staff. Physicians refer patients
to hospitals on the basis of the quality of services provided by the hospital to
patients and their physicians, the hospital's location, the quality of the
medical staff affiliated with the hospital and the quality and state of the art
of the hospital's facilities, equipment and employees. The Company attracts
physicians to its hospitals by equipping its hospitals with technologically
advanced equipment, sponsoring training programs to educate physicians on
advanced medical procedures, using governing boards for each hospital, the
members of which primarily are physicians and community members, to develop
short and long-term plans for the hospital and review and approve, as
appropriate, actions of the medical staff, including staff appointments,
credentialing, peer review and quality assurance, and otherwise creating an
environment within which physicians prefer to practice. While physicians may
terminate their association with a hospital at any time, Tenet believes that by
striving to maintain and improve the level of care at its hospitals and by
maintaining ethical and professional standards, it will attract and retain
qualified physicians with a variety of specialties.
There has been significant consolidation in the hospital industry over the
past decade due, in large part, to continuing pressures on payments from
government and private payors and increasing shifts away from the provision of
traditional in-patient services. Those economic trends have caused many
hospitals to close and many to consolidate either through acquisitions or
affiliations. Tenet's management believes that these cost-containment pressures
will continue and will lead to further consolidation in the hospital industry.
Tenet and its hospitals strive, on terms favorable to the Company, to
attract and retain physicians to their staffs, enter into managed care
contracts, organize and structure integrated healthcare delivery systems,
acquire hospitals or other healthcare facilities and acquire or assume the
management of
11
<PAGE>
physician practices. Other healthcare companies with greater financial
resources, with more facilities in a given geographic area or offering a wider
range of services may be competing in each of these areas. These competitive
factors may result in Tenet and its hospitals being less successful than they
would hope to be in accomplishing one or more of these goals.
MEDICARE, MEDICAID AND OTHER REVENUES
Tenet receives payments for patient care from private insurance carriers,
Federal Medicare programs for elderly and disabled patients, health maintenance
organizations ("HMOs"), preferred provider organizations ("PPOs"), state
Medicaid programs for indigent and cash grant patients, the Civilian Health and
Medical Program of the Uniformed Services ("CHAMPUS"), employers and patients
directly. General hospital inpatient services are reimbursed under Medicare
based on a prospective payment system ("PPS"), as discussed below. Historically,
Medicare payments for outpatient services provided by general hospitals, all
services provided by rehabilitation hospitals and home healthcare services have
been based on the lower of charges or allowable costs, subject to certain
limits. The Balanced Budget Act of 1997 (the "1997 Act") mandates that the
historical method of reimbursement for those services be changed to a PPS, which
will be phased in over time as discussed below. Payments from state Medicaid
programs are based on reasonable costs with certain limits or are at fixed
rates. Substantially all Medicare and Medicaid payments are below retail rates
for Tenet facilities. Payments from other sources usually are based on the
hospital's established charges, a percentage discount or all-inclusive per diem
rates.
The approximate percentages of Tenet's net patient revenue by payment
sources for Tenet's domestic general hospitals owned or operated by its
subsidiaries, including OrNda, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
Medicare........................................... 36.2% 39.0% 38.7% 39.6% 42.2%
Medicaid........................................... 11.9 10.1 8.9 8.6 8.6
Private and Other.................................. 51.9 50.9 52.4 51.8 51.2
--------- --------- --------- --------- ---------
Totals............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Medicare payments for general hospital inpatient care are based on a PPS
(the "DRG-PPS"), which generally has been applicable to Tenet's facilities since
1984. Under the DRG-PPS, a general hospital receives as reimbursement for its
operating costs related to each Medicare patient discharged from the hospital a
fixed amount based on the Medicare patient's assigned diagnostic related group
("DRG"). DRG payments do not consider a specific hospital's operating costs, but
are adjusted for area wage differentials. As discussed below, DRG payments
exclude the reimbursement of (a) capital costs, including depreciation, interest
relating to capital expenditures, property tax and lease expenses and (b)
outpatient services. These reimbursements are made in advance based on estimates
and later are increased or decreased, as the case may be.
Historically, DRG rates were increased each year to take into account the
increased cost of goods and services purchased by hospitals and non-hospitals
(the "Market Basket"). With the exception of Federal fiscal year 1997, in which
the increase in DRG Rates was equal to the 2.5% Market Basket, the percentage
increases to the DRG rates for the past several years have been lower than the
Market Basket and, as a result, the amount of reimbursement received by general
hospitals under the DRG-PPS has not kept up with the cost of goods and services.
Moreover, the 1997 Act freezes DRG rates at their 1997 levels through Federal
fiscal year 1998, which ends September 30, 1998. The 1997 Act also limits the
rate of increase in DRG rates thereafter to the annual Market Basket for such
year minus (a) 1.9%from October 1, 1998 through September 30, 1999, (b) 1.8%
from October 1, 1999 through September 30, 2000, and (c) 1.1% from October 1,
2000 through September 30, 2003.
12
<PAGE>
Medicare reimburses general hospitals' capital costs separately from DRG
payments. Beginning in 1992, a PPS for Medicare reimbursement of general
hospitals' inpatient capital costs ("PPS-CC") generally became effective with
respect to the Company's general hospitals. During Tenet's fiscal year ended May
31, 1997, Tenet's general hospitals received, in the aggregate, reimbursement
for substantially all of their actual capital costs under the PPS-CC. The 1997
Act provides that the amount of reimbursement that Tenet's general hospitals
otherwise would have received for their capital costs under the PPS-CC will be
reduced by approximately 18% effective October 1, 1997.
Outpatient services provided at general hospitals, physical rehabilitation
hospitals and psychiatric facilities historically have been reimbursed by
Medicare at the lower of customary charges or 94.2% of actual cost. In addition,
Congress historically has established additional limits on the reimbursement of
operating costs for the following outpatient services: (a) clinical laboratory
services, which have been reimbursed based on a fee schedule, and (b) ambulatory
surgery procedures and certain imaging and other diagnostic procedures, which
have been reimbursed based on a blend of the hospital's specific cost and the
rate paid by Medicare to non-hospital providers for such services. Under the
1997 Act, reimbursement for outpatient services provided at general hospitals
will be converted from the cost-based system to a PPS, which will be phased in
over a three-year period beginning January 1, 1999. The 1997 Act also corrects a
flaw in the existing payment formula for ambulatory surgery services referred to
as the "formula driven overpayment." That flaw resulted in general hospitals
receiving payments that were higher than those anticipated by the Health Care
Financing Administration ("HCFA"), but were still below the actual cost of
providing the services. The correction of the formula-driven overpayment will
result in reimbursement to general hospitals for outpatient services performed
by them being reduced even further below the cost of providing those services.
Hospitals and hospital units currently exempt from the DRG-PPS, such as
qualified psychiatric facilities and physical rehabilitation hospitals ("Exempt
Hospitals/Units"), traditionally have been reimbursed by Medicare on a
cost-based system under which target rates for each facility were used in
applying various limitations and calculating incentive payments. Tenet's Exempt
Hospitals/Units received a Market Basket increase of 2.5% in target rates for
cost reporting periods commencing in Federal fiscal year 1997. Under the 1997
Act, however, Exempt Hospitals/Units will receive no increase to their target
rates for cost reporting periods from October 1, 1997 through September 30,
1998. Increases in target rates after that date will vary between a Market
Basket increase and no increase at all, depending upon the extent to which the
Exempt Hospitals/Units' actual costs are below their target rates. An additional
change under the 1997 Act is that the Company's Exempt Hospitals/Units will lose
certain incentive payments they have been receiving for keeping their costs
lower than their pre-established base rates. The 1997 Act also provides that
reimbursement for rehabilitation hospitals will change from the existing
cost-based system to a PPS, which change will be phased in over three years
beginning October 1, 1997.
Home health services historically have been exempt from the DRG-PPS and have
been reimbursed by Medicare at cost, subject to certain limits. The 1997 Act
requires that HCFA develop a PPS for home health services, which is to be phased
in over a four-year period beginning October 1, 2000. In the interim,
reimbursement rates in effect under the current system will be reduced. The 1997
Act provides that rates in effect on September 30, 1999 will be reduced by 15%
under the PPS. The 1997 Act further provides that rates in effect on September
30, 1999 will be reduced by 15% effective October 1, 1999, even if HCFA has not
yet begun to implement the PPS. As a result of these changes, the Company
expects that its hospitals will receive significantly lower reimbursement for
home health services.
Hospitals that treat a disproportionately large number of low-income
patients (Medicaid and Medicare patients eligible to receive supplemental social
security income) currently receive additional reimbursement from the Federal
government in the form of Disproportionate Share Payments. The 1997 Act provides
that such payments will be reduced by 1% for each Federal fiscal year from 1998
through 2002.
13
<PAGE>
A general hospital historically has been reimbursed its full DRG payment for
patients discharged from an acute-care setting regardless of whether the patient
received home health services or services in a rehabilitation hospital,
rehabilitation unit or skilled nursing facility (collectively, a "post-acute
setting") after being discharged from the general hospital. Under the 1997 Act,
if a patient is discharged from a general hospital to a post-acute setting prior
to being in the general hospital for the mean length of stay for the patient's
DRG, which mean length of stay varies for each DRG, the general hospital will
receive only a pro-rated payment for that DRG depending on the length of time
the patient was in the hospital. This new provision will become effective for
discharges after October 1, 1998, but will apply only with respect to the DRG's
that account for the top 10 discharges from general hospitals to a post acute
setting. HCFA is charged with the responsibility of identifying the 10 DRG's to
which the foregoing will apply.
Under current law, if a hospital is unable to collect a Medicare
beneficiary's deductible or co-payment (a "Bad Debt"), the hospital may be
reimbursed by the Federal government for the Bad Debt provided certain
conditions are met. The 1997 Act provides that the amount of a Bad Debt for
which the Company otherwise would be reimbursed will be reduced: 25% beginning
October 1, 1997, 40% beginning October 1, 1998, and 45% beginning October 1,
1999.
As discussed above, the 1997 Act dramatically changes the manner in which
the Company will be reimbursed for all services provided to Medicare
beneficiaries. While none of the changes individually is expected to have a
significant impact on the amount of reimbursement received by the Company, the
changes taken as a whole are expected to significantly reduce the amount of
reimbursement received by the Company from the Federal government. The aggregate
effect of those reduced payments, however, is not expected to have a material
adverse effect on the Company's overall results of operations.
The purpose of the 1997 Act is to balance the Federal budget by Federal
fiscal year 2002. The Company believes that while the 1997 Act is a good start
towards assuring the solvency of the Social Security system for the near term,
if the Federal budget is not balanced by Federal fiscal year 2002 and the
Federal deficit is not reduced thereafter, reimbursement rates are likely to be
further reduced to ensure the solvency of the Social Security system. The
Company is unable to predict at this time if there will be any further
reductions in reimbursement rates in future years and, if there are further
reductions, how significant those reductions will be.
The 1997 Act also contains various provisions that create new opportunities
for the Company. Certain of those provisions, such as those allowing for the
creation of Provider Service Organizations, allow providers such as Tenet to
contract directly with the Federal government for the provision of medical care
to Medicare beneficiaries on a fully capitated basis. Under capitation, the
Company receives a certain amount from the Federal government for each Medicare
beneficiary enrolled in its plans and assumes the risks and rewards of meeting
the healthcare needs of those enrolled in its plans. The Company may purchase
insurance to cover all or a portion of the cost of meeting the healthcare needs
of those covered.
The Medicare, Medicaid and CHAMPUS programs are subject to statutory and
regulatory changes, administrative rulings, interpretations and determinations,
requirements for utilization review and new governmental funding restrictions,
all of which may materially increase or decrease program payments as well as
affect the cost of providing services and the timing of payments to facilities.
The final determination of amounts earned under the programs often requires many
years, because of audits by the program representatives, providers' rights of
appeal and the application of numerous technical reimbursement provisions.
Management believes that adequate provision has been made for such adjustments.
Until final adjustment, however, significant issues remain unresolved and
previously determined allowances could be more or less than ultimately required.
14
<PAGE>
HEALTHCARE REFORM, REGULATION AND LICENSING
CERTAIN BACKGROUND INFORMATION. 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. In addition, the healthcare industry is
governed by a framework of Federal and state laws, rules and regulations that
are extremely complex and for which the industry has the benefit of little or no
regulatory or judicial interpretation. Although the Company believes it is in
compliance in all material respects with such laws, rules and regulations, if a
determination is made that the Company was in material violation of such laws,
rules or regulations, its operations and financial results could be materially
adversely affected.
As discussed under Medicare, Medicaid and Other Revenues on pages 12 through
14 above, the 1997 Act has the effect of reducing payments that will be made to
the Company under the Federal Medicare program. In addition, 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 government-program and
private patients. 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.
Many states have enacted or are considering enacting measures that are
designed to reduce their Medicaid expenditures and to make certain changes to
private healthcare insurance. Various states have applied, or are considering
applying, for a Federal waiver from current Medicaid regulations to allow them
to serve some of their Medicaid participants through managed care providers.
Tennessee has implemented such a program and Texas has passed a law mandating
the State to apply for such a waiver. Louisiana is considering wider use of
managed care for its Medicaid population. California has created a voluntary
health insurance purchasing cooperative that seeks to make healthcare coverage
more affordable for businesses with five to 50 employees and, effective January
1, 1995, began changing the payment system for participants in its Medicaid
program in certain counties from fee-for-service arrangements to managed care
plans. Florida limits the amount by which a hospital's net revenues per
admission may be increased each year, has enacted a program creating a system of
local purchasing cooperatives and has proposed other changes that have not yet
been enacted. Florida also has adopted, and other states are considering
adopting, legislation imposing a tax on revenues of hospitals to help finance or
expand those states' Medicaid systems. A number of other states are considering
the enactment of managed care initiatives designed to provide universal low-cost
coverage. These proposals also may attempt to include coverage for some people
who presently are uninsured.
CERTIFICATE OF NEED REQUIREMENTS. Some states require state approval for
construction and expansion of healthcare facilities, including findings of need
for additional or expanded healthcare facilities or services. 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 May 31, 1997, Tenet operated hospitals in 18 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.
15
<PAGE>
ANTIKICKBACK AND SELF-REFERRAL REGULATIONS. 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
antikickback and antifraud and abuse amendments codified under Section 1128B(b)
of the Social Security Act (the "Antikickback Amendments") prohibit certain
business practices and relationships that might affect the provision and cost of
healthcare services reimbursable under Medicare, Medicaid or other government
programs, including the payment or receipt of remuneration for the referral of
patients whose care will be paid for by such programs. Sanctions for violating
the Antikickback Amendments include criminal penalties and civil sanctions,
including fines and possible exclusion from government programs such as the
Medicare and Medicaid programs.
The "Health Insurance Portability and Accountability Act of 1996," which
became effective January 1, 1997, amends, among other things, Title XI (42
U.S.C. 1301 ET SEQ.) to broaden the scope of current fraud and abuse laws to
include all health plans, whether or not they are reimbursed as a Federal
program.
In addition, Section 1877 of the Social Security Act, which restricts
referrals by physicians of Medicare, Medicaid 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. 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.
The Federal government has issued regulations that describe some of the
conduct and business relationships permissible under the Antikickback Amendments
and the Physician Self-Referral Laws ("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. The Company systematically reviews all of its operations
to ensure that it complies with the Social Security Act and similar state
statutes.
Both Federal and state government agencies have announced heightened and
coordinated civil and criminal enforcement efforts. One project, Operation
Restore Trust, is focused on investigating healthcare providers in the home
health and nursing home industries as well as on medical suppliers to these
providers in California, Florida, Illinois, New York and Texas. Over the next
two years, the project will be expanded to Arizona, Colorado, Georgia,
Louisiana, Massachusetts, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee,
Virginia and Washington and may be expanded to include healthcare providers in
additional industries. Eventually, the project is intended to include all 50
states. The Company provides home health and/or nursing home care in each of the
states in which it operates general hospitals, including Arizona, California,
Florida, Georgia, Louisiana, Massachusetts, Missouri, Texas and Washington.
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 Tenet's business, financial condition and results of
operations.
16
<PAGE>
ENVIRONMENTAL REGULATIONS. The Company's healthcare operations generate
medical waste that must be disposed of in compliance with Federal, state and
local environmental laws, rules and regulations. The Company's operations, as
well as the Company's purchases and sales of facilities, also are subject to
compliance with various other environmental laws, rules and regulations. Such
compliance does not, and the Company anticipates that such compliance will not,
materially affect the Company's capital expenditures, earnings or competitive
position.
HEALTHCARE FACILITY LICENSING REQUIREMENTS. Tenet's healthcare facilities
are subject to extensive Federal, state and local legislation and regulation. In
order to maintain their operating licenses, healthcare facilities must comply
with strict standards concerning medical care, equipment and hygiene. Various
licenses and permits also are required in order to dispense narcotics, operate
pharmacies, handle radioactive materials and operate certain equipment. Tenet's
healthcare facilities hold all required governmental approvals, licenses and
permits. With the exception of one general hospital that was acquired in fiscal
1996 and one general hospital acquired in the first quarter of fiscal 1998, each
of Tenet's facilities that is eligible for accreditation is fully accredited by
the JCAHO, the Commission on Accreditation of Rehabilitation Facilities (in the
case of rehabilitation hospitals) or another appropriate accreditation agency.
Both of the unaccredited facilities referred to above are in the process of
becoming accredited for the first time. With such accreditation, the Company's
hospitals are eligible to participate in government-sponsored provider programs
such as the Medicare and Medicaid programs.
UTILIZATION REVIEW COMPLIANCE AND HOSPITAL GOVERNANCE. Tenet's healthcare
facilities are subject to and comply with various forms of utilization review.
In addition, under the Medicare PPS, each state must have a PRO to carry out a
Federally mandated system of review of Medicare patient admissions, treatments
and discharges in general hospitals. Medical and surgical services and practices
are extensively supervised by committees of staff doctors at each healthcare
facility, are overseen by each healthcare facility's local governing board, the
members of which primarily are physicians and community members, and are
reviewed by Tenet's quality assurance personnel. The local governing boards also
help maintain standards for quality care, develop long-range plans, establish,
review and enforce practices and procedures and approve the credentials and
disciplining of medical staff members.
COMPLIANCE PROGRAM
The Company maintains a multi-faceted corporate compliance and ethics
program. A portion of the program results from a 1994 settlement between the
Company and HHS. The mandated portion of the program, which is in effect until
June 1999, provides, in part, that the Company will not own or operate
psychiatric facilities (defined for the purposes of the agreement to include
residential treatment centers and substance abuse facilities) except as
specifically provided for under the terms of the agreement (which permits the
Company's subsidiaries to own and operate a small number of psychiatric
facilities on the same campus as or nearby certain of Tenet's general hospitals)
and requires self-reporting of credible evidence of violations of criminal law
or material violations of civil laws, rules or regulations governing Federally
funded programs. The Company now has in place a program designed to provide
annual ethics training to every employee and to encourage all employees to
report any ethical violations to a toll-free telephone hotline.
17
<PAGE>
MANAGEMENT
The executive officers of the Company who also are not Directors as of
August 22, 1997 are:
<TABLE>
<CAPTION>
NAME POSITION AGE
- -------------------------- -------------------------------------------------------------------------------- ---
<S> <C> <C>
Scott M. Brown Senior Vice President, General Counsel and Secretary 52
Trevor Fetter Executive Vice President and Chief Financial Officer 37
Raymond L. Mathiasen Senior Vice President and Chief Accounting Officer 54
</TABLE>
Scott M. Brown is Senior Vice President, General Counsel and Secretary of
the Company. He joined Tenet in 1981. Mr. Brown was elected Secretary in 1984
and Senior Vice President in 1990. He was appointed acting General Counsel in
July 1993 and General Counsel in February 1994.
Trevor Fetter is Executive Vice President and Chief Financial Officer of the
Company. Mr. Fetter joined Tenet as an Executive Vice President in October 1995.
In March 1996, he was appointed to the additional position of Chief Financial
Officer. Mr. Fetter served as Executive Vice President and Chief Financial
Officer of Metro-Goldwyn-Mayer, Inc. ("MGM") from September 1993 to October
1995, as Executive Vice President of MGM from October 1990 to September 1993,
and as Senior Vice President of MGM from 1988 to October 1990. From 1982 to
1988, Mr. Fetter worked in various corporate finance positions in the investment
banking division of Merrill Lynch Capital Markets.
Raymond L. Mathiasen is Senior Vice President and, since March 1996, Chief
Accounting Officer of the Company. From February 1994 to March 1996, Mr.
Mathiasen served as Senior Vice President and Chief Financial Officer of the
Company and from September 1993 to February 1994, Mr. Mathiasen served as Senior
Vice President and acting Chief Financial Officer. Mr. Mathiasen was elected to
the position of Senior Vice President in 1990 and Chief Operating Financial
Officer in 1991. Prior to joining Tenet as a Vice President in 1985, he was a
partner with Arthur Young & Company (now known as Ernst & Young).
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 and by policy period from $500,000 to $3.0 million per occurrence,
through a majority-owned insurance subsidiary. A significant portion of these
risks is, in turn, reinsured with major independent insurance companies. Prior
to fiscal 1995, the Company insured its professional and comprehensive general
liability risks related to its psychiatric and rehabilitation hospitals through
a wholly-owned insurance subsidiary, which 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 several coverage years. In addition, damages, if any, arising from
fraud and conspiracy claims in psychiatric malpractice cases (described under
Legal Proceedings below) may not be insured. If actual payments of claims
materially exceed projected payments of claims, Tenet's financial condition
could be materially adversely affected.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K, including, without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements of the
Company or industry results to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions, both national and in the regions in which the Company
operates; industry capacity; demographic changes; existing laws and government
regulations and changes in, or the failure to comply with laws and governmental
regulations; legislative proposals for healthcare reform; the ability to enter
into managed
18
<PAGE>
care provider arrangements on acceptable terms; a shift from fee-for-service
payment to capitated and other risk-based payment systems; changes in Medicare
and Medicaid reimbursement levels; liability and other claims asserted against
the Company; competition; the loss of any significant customers; technological
and pharmaceutical improvements that increase the cost of providing, or reduce
the demand for, healthcare; changes in business strategy or development plans;
the ability to attract and retain qualified personnel, including physicians; the
significant indebtedness of the Company; the lack of assurance that the
synergies expected from the OrNda Merger will be achieved; and the availability
and terms of capital to fund the expansion of the Company's business, including
the acquisition of additional facilities. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-looking
statements. Tenet disclaims any obligation to update any such factors or to
publicly announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
ITEM 2. PROPERTIES.
The response to this item is included in Item 1.
ITEM 3. LEGAL PROCEEDINGS.
The Company has been involved in significant legal proceedings of an unusual
nature related principally to its discontinued psychiatric business. During the
years ended May 31, 1995, 1996 and 1997, the Company recorded provisions to
estimate the cost of the ultimate disposition of all of these proceedings and to
estimate the legal fees that it expected to incur. The Company has settled the
most significant of these matters. The remaining reserves for unusual litigation
costs that relate to matters that had not been settled as of May 31, 1997, and
an estimate of the fees to be incurred subsequent to May 31, 1997, represent
management's estimate of the remaining net costs of the ultimate disposition of
these matters. There can be no assurance, however, that the ultimate liability
will not exceed such estimates. Although, based upon information currently
available to it, management believes that the amount of damages, if any, in
excess of its reserves for unusual litigation costs that may be awarded in any
of the following unresolved legal proceedings cannot reasonably be estimated,
management does not believe it is likely that any such damages will have a
material adverse effect on the Company's results of operations, liquidity or
capital resources.
Tenet continues to defend a greater-than-normal level of litigation relating
to certain of its subsidiaries' former psychiatric operations. The majority of
the lawsuits filed contain allegations of medical malpractice as well as
allegations of fraud and conspiracy against Tenet and certain of its
subsidiaries and former employees. Also named as defendants are numerous doctors
and other healthcare professionals. Tenet believes that the increase in
litigation arose primarily from advertisements by certain lawyers seeking former
psychiatric patients in order to file claims against Tenet and certain of its
subsidiaries. The advertisements focused, in many instances, on Tenet's
settlement of past disputes involving the operations of its discontinued
psychiatric business subsidiaries, including Tenet's 1994 resolution of the
Federal government's investigation and a corresponding criminal plea agreement
involving such discontinued psychiatric business of Tenet. From June 1, 1994 to
the present, approximately 1,000 cases alleging fraud and conspiracy have been
filed against the Company and certain of its subsidiaries. Most of the cases
have been filed in Texas and Washington, D.C. To date, the Company has resolved
approximately 700 of these cases.
19
<PAGE>
Tenet expects that additional lawsuits with similar allegations will be
filed. Tenet believes it has a number of defenses to each of these actions and
will defend these and any additional lawsuits vigorously. Until the lawsuits are
resolved, however, Tenet will continue to incur substantial legal expenses.
Two Federal class actions filed in August 1993 were consolidated into one
action pending in U.S. District Court in the Central District of California
captioned In re: National Medical Enterprises Securities Litigation II. This
consolidated action is on behalf of a purported class of shareholders who
purchased or sold stock of Tenet between January 14, 1993 and August 26, 1993,
and alleges violations of the securities laws by the Company and certain of its
executive officers. Based on these claims, plaintiffs seek compensatory damages,
injunctive relief, attorneys' fees, interest and costs. After unsuccessful
mediation, the parties agreed in May 1995 to proceed with the litigation. In
June 1995, the defendants filed a motion to dismiss and to strike plaintiffs'
complaint. Although in March 1997 the defendants' motion was denied, the Company
believes it has meritorious defenses to this action and will continue to defend
this litigation vigorously.
An agreement has been executed with the Department of Justice resolving the
investigation related to certain physician relationships at 12 of the hospitals
acquired by OrNda in its April 1994 acquisition of Summit Health Ltd. ("Summit")
and one OrNda hospital outside of the group acquired from Summit.
In its normal course of business the Company also is subject to claims and
lawsuits relating to injuries arising from patient treatment. The Company
believes that its liability for damages resulting from such claims and lawsuits
in its normal course of business is adequately covered by insurance or is
adequately provided for in its consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The response to this item is included on page 43 of the Registrant's Annual
Report to Shareholders for the year ended May 31, 1997. The required information
hereby is incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The response to this item is included on page 7 of the Registrant's Annual
Report to Shareholders for the year ended May 31, 1997. The required information
hereby is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The response to this item is included on pages 8 through 16 of the
Registrant's Annual Report to Shareholders for the year ended May 31, 1997. The
required information hereby is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this item is included on pages 17 through 40 and page 43 of
the Registrant's Annual Report to Shareholders for the year ended May 31, 1997.
The required information hereby is incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
20
<PAGE>
PART III
ITEMS 10 AND 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; EXECUTIVE
COMPENSATION.
Information concerning the Directors of the Registrant, including executive
officers of the Registrant who also are Directors, and other information
required by Items 10 and 11, is included on pages 2 through 5 of the definitive
Proxy Statement for Registrant's 1997 Annual Meeting of Shareholders and hereby
is incorporated by reference. Similar information regarding executive officers
of the Registrant who, except as noted therein, are not Directors is set forth
on page 18 above. Information regarding compensation of executive officers and
Directors of the Registrant is included on pages 7 through 16 and pages 22
through 27 of the definitive Proxy Statement for the Registrant's 1997 Annual
Meeting of Shareholders and hereby is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The response to this item is included on pages 6 and 27 of the definitive
Proxy Statement for the Registrant's 1997 Annual Meeting of Shareholders. The
required information hereby is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS.
The consolidated financial statements to be included in Part II, Item 8, are
incorporated by reference to the Registrant's 1997 Annual Report to
Shareholders. (See Exhibit (13)).
2. FINANCIAL STATEMENT SCHEDULES.
Schedule II--Valuation and Qualifying Accounts and Reserves (included on
page F-1)
All other schedules and Condensed Financial Statements of Registrant are
omitted because they are not applicable or not required or because the required
information is included in the financial statements or notes thereto.
3. EXHIBITS.
(3) Articles of Incorporation and Bylaws
(a) Restated Articles of Incorporation of Registrant, as amended October
13, 1987 and June 22, 1995 (Incorporated by reference to Exhibit 3(a)
to Registrant's Annual Report on Form 10-K, dated August 25, 1995,
for the fiscal year ended May 31, 1995)
(b) Restated Bylaws of Registrant, as amended October 16, 1996
(4) Instruments Defining the Rights of Security Holders, Including
Indentures
(a) Indenture, dated as of March 1, 1991, between the Registrant and The
Bank of New York, as Trustee, relating to Medium Term Notes
(Incorporated by reference to Exhibit 4(a) to Registrant's Annual
Report on Form 10-K, dated August 26, 1996, for the fiscal year ended
May 31, 1996)
21
<PAGE>
(b) Indenture, dated as of March 1, 1995, between Tenet and The Bank of
New York, as Trustee, relating to 9 5/8% Senior Notes due 2002
(Incorporated by reference to Exhibit 4(a) to Registrant's Quarterly
Report on Form 10-Q, dated April 14, 1995, for the fiscal quarter
ended February 28, 1995)
(c) First Supplemental Indenture, dated as of October 30, 1995, between
Tenet and The Bank of New York, as Trustee, relating to 9 5/8% Senior
Notes due 2002
(d) Second Supplemental Indenture, dated as of August 21, 1997, between
Tenet and The Bank of New York, as Trustee, relating to 9 5/8% Senior
Notes due 2002
(e) Indenture, dated as of March 1, 1995, between Tenet and The Bank of
New York, as Trustee, relating to 10 1/8% Senior Subordinated Notes
due 2005 (Incorporated by reference to Exhibit 4(b) to Registrant's
Quarterly Report on Form 10-Q, dated April 14, 1995, for the fiscal
quarter ended February 28, 1995)
(f) First Supplemental Indenture, dated as of October 27, 1995, between
Tenet and The Bank of New York, as Trustee, relating to 10 1/8%
Senior Subordinated Notes due 2005
(g) Second Supplemental Indenture, dated as of August 21, 1997, between
Tenet and The Bank of New York, as Trustee, relating to 10 1/8%
Senior Subordinated Notes due 2005
(h) Indenture, dated as of October 16, 1995, between Tenet and The Bank
of New York, as Trustee, relating to 8 5/8% Senior Notes due 2003
(Incorporated by reference to Exhibit 4(d) to Registrant's Annual
Report on Form 10-K, dated August 26, 1996, for the fiscal year ended
May 31, 1996)
(i) First Supplemental Indenture, dated as of October 30, 1995, between
Tenet and The Bank of New York, as Trustee, relating to 8 5/8% Senior
Notes due 2003
(j) Second Supplemental Indenture, dated as of August 21, 1997, between
Tenet and The Bank of New York, as Trustee, relating to 8 5/8% Senior
Notes due 2003
(k) Indenture, dated as of January 10, 1996, between Tenet and The Bank
of New York, as Trustee, relating to 6% Exchangeable Subordinated
Notes due 2005 (Incorporated by reference to Exhibit 4(a) to
Registrant's Quarterly Report on Form 10-Q, dated January 15, 1996,
for the fiscal quarter ended November 30, 1995)
(l) Escrow Agreement, dated as of January 10, 1996, among the Company,
NME Properties, Inc., NME Property Holding Co., Inc. and The Bank of
New York, as Escrow Agent (Incorporated by reference to Exhibit 4(b)
to Registrant's Quarterly Report on Form 10-Q, dated as of January
15, 1996, for the fiscal quarter ended November 30, 1995)
(m) Indenture, dated January 15, 1997, between Tenet and The Bank of New
York, as Trustee, relating to 7 7/8% Senior Notes due 2003
(n) Indenture, dated January 15, 1997, between Tenet and The Bank of New
York, as Trustee, relating to 8% Senior Notes due 2005
(o) Indenture, dated January 15, 1997, between Tenet and The Bank of New
York, as Trustee, relating to 8 5/8% Senior Subordinated Notes due
2007
(10) Material Contracts
(a) $91,350,000 Amended and Restated Letter of Credit and Reimbursement
Agreement, dated as of February 28, 1995, among the Company, as
Account Party, and Bank of America National Trust and Savings
Association, The Bank of New York, Bankers Trust Company and
22
<PAGE>
Morgan Guaranty Trust Company of New York, as Banks, and The Bank of
New York, as Issuing Bank (Incorporated by reference to Exhibit 10(b)
to Registrant's Quarterly Report on Form 10-Q, dated April 14, 1995,
for the fiscal quarter ended February 28, 1995)
(b) Amendment to Reimbursement Agreement, dated as of March 1, 1996,
among the Company, as Account Party, Bank of America National Trust
and Savings Association, The Bank of New York, Bankers Trust Company
and Morgan Guaranty Trust Company of New York, as Banks, and The Bank
of New York, as the Issuing Bank (Incorporated by reference to
Exhibit 10(b) to Registrant's Quarterly Report on Form 10-Q, dated as
of April 12, 1996, for the fiscal quarter ended February 29, 1996)
(c) Amendment No. 2 to Reimbursement Agreement, dated January 30, 1997,
among the Company, as Account Party, Bank of America National Trust
and Savings Corporation, The Bank of New York and Morgan Guaranty
Trust Company of New York, as Banks, and The Bank of New York, as
Issuing Bank
(d) Agreement, dated August 22, 1995, among the Registrant, The Hillhaven
Corporation and Vencor, Inc. (Incorporated by reference to Exhibit
10(n) to Registrant's Annual Report on Form 10-K, dated August 25,
1995, for the fiscal year ended May 31, 1995)
(e) $2,800,000,000 Credit Agreement, dated as of January 30, 1997, among
Tenet, as Borrower, the Lenders, Managing Agents and Co-Agents party
thereto, the Swingline Bank party thereto, The Bank of New York and
the Bank of Nova Scotia, as Documentation Agents, Bank of America
National Trust and Savings Association, as Syndication Agent, and
Morgan Guaranty Trust Company of New York, as Administrative Agent
(Incorporated by reference to Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q, dated as of April 14, 1997, for the fiscal
quarter ended February 28, 1997)
(f) Amendment, dated as of July 25, 1997, to the Credit Agreement, dated
as of January 30, 1997, among Tenet the Lenders, Managing Agents and
Co-Agents party thereto, the Swingline Bank party thereto, The Bank
of New York and The Bank of Nova Scotia, as Documentation Agents,
Bank of America National Trust and Savings Association, as
Syndication Agent, and Morgan Guaranty Trust Company of New York, as
Administrative Agent
(g) Letter from the Registrant to Jeffrey C. Barbakow, dated May 26, 1993
(Incorporated by reference to Exhibit 10(l) to Registrant's Annual
Report on Form 10-K, dated August 30, 1993, for the fiscal year ended
May 31, 1993)
(h) Letter from the Registrant to Jeffrey C. Barbakow, dated June 1, 1993
(Incorporated by reference to Exhibit 10(m) to Registrant's Annual
Report on Form 10-K, dated August 30, 1993, for the fiscal year ended
May 31, 1993)
(i) Memorandum from the Registrant to Jeffrey C. Barbakow, dated June 14,
1993 (Incorporated by reference to Exhibit 10(n) to Registrant's
Annual Report on Form 10-K, dated August 30, 1993, for the fiscal
year ended May 31, 1993)
(j) Memorandum of Understanding, dated May 21, 1996, from Jeffrey C.
Barbakow to the Company (Incorporated by reference to Exhibit 10(t)
to Registrant's Annual Report on Form 10-K, dated as of August 26,
1996, for the fiscal year ended May 31, 1996)
(k) Memorandum of Understanding, dated May 21, 1996, from Michael H.
Focht, Sr. to the Company (Incorporated by reference to Exhibit 10(u)
to Registrant's Annual Report on Form 10-K, dated as of August 26,
1996, for the fiscal year ended May 31, 1996)
(l) Executive Officers Relocation Protection Agreement (Incorporated by
reference to Exhibit 10(v) to Registrant's Annual Report on Form
10-K, dated as of August 26, 1996, for the fiscal year ended May 31,
1996)
23
<PAGE>
(m) Executive Officers Severance Protection Plan (Incorporated by
reference to Exhibit 10(w) to Registrant's Annual Report on Form
10-K, dated as of August 26, 1996, for the fiscal year ended May 31,
1996)
(n) Board of Directors Retirement Plan, effective January 1, 1985
(Incorporated by reference to Exhibit 10(x) to Registrant's Annual
Report on Form 10-K, dated as of August 26, 1996, for the fiscal year
ended May 31, 1996)
(o) First Amendment to Board of Directors Retirement Plan, effective as
of August 18, 1993 (Incorporated by reference to Exhibit 10(xx) to
Registrant's Annual Report on Form 10-K, dated August 30, 1993, for
the fiscal year ended May 31, 1993)
(p) Amendment to Directors Retirement Plan, dated as of April 25, 1994
(Incorporated by reference to Exhibit 10(oo) to Registrant's Annual
Report on Form 10-K, dated August 25, 1994, for the fiscal year ended
May 31, 1994)
(q) Third Amendment to the Board of Directors Retirement Plan, effective
as of July 30, 1997
(r) Supplemental Executive Retirement Plan, as amended May 21, 1986
(Incorporated by reference to Exhibit 10(o) to Registrant's Annual
Report on Form 10-K, dated August 21, 1992, for the fiscal year ended
May 31, 1992)
(s) Amendment to Supplemental Executive Retirement Plan, dated as of
April 25, 1994 (Incorporated by reference to Exhibit 10(ss) to
Registrant's Annual Report on Form 10-K, dated August 25, 1994, for
the fiscal year ended May 31, 1994)
(t) Amendment to Supplemental Executive Retirement Plan, dated as of July
25, 1994 (Incorporated by reference to Exhibit 10(tt) to Registrant's
Annual Report on Form 10-K, dated August 25, 1994, for the fiscal
year ended May 31, 1994)
(u) Third Amendment to Supplemental Executive Retirement Plan, dated as
of January 28, 1997
(v) 1994 NME Supplemental Executive Retirement Plan Trust Agreement,
dated as of May 25, 1994, as amended July 25, 1994, between the
Registrant, and United States Trust Company of New York (Incorporated
by reference to Exhibit 10(uu) to Registrant's Annual Report on Form
10-K, dated August 25, 1994, for the fiscal year ended May 31, 1994)
(w) Agreement, dated October 30, 1996, between Tenet and United States
Trust Company of New York, as Trustee, regarding the First Amendment
to the 1994 Tenet Supplemental Executive Retirement Plan Trust
(Incorporated by reference to Exhibit 10(b) to Registration Statement
on Form S-3 (Registration No. 333-26621) dated May 7, 1997, filed
with the Commission on May 7, 1997)
(x) 1994 Annual Incentive Plan (Incorporated by reference to Exhibit B to
the Definitive Proxy Statement, dated as of August 25, 1994, for the
Registrant's 1994 Annual Meeting of Shareholders)
(y) 1997 Annual Incentive Plan (Incorporated by reference to Exhibit B to
the Definitive Proxy Statement, dated as of August 26, 1997, for the
Registrant's 1997 Annual Meeting of Shareholders)
(z) Deferred Compensation Plan, effective March 23, 1983 (Incorporated by
reference to Exhibit 10(gg) to Registrant's Annual Report on Form
10-K, dated August 26, 1996, for the fiscal year ended May 31, 1996)
(aa) First Amendment to Deferred Compensation Plan, dated as of August
15, 1994 (Incorporated by reference to Exhibit 10(zz) to
Registrant's Annual Report on Form 10-K, dated August 25, 1994, for
the fiscal year ended May 31, 1994)
24
<PAGE>
(bb) 1994 NME Deferred Compensation Plan Trust Agreement, dated as of May
25, 1994, as amended July 25, 1994, between the Registrant and
United States Trust Company of New York (Incorporated by reference
to Exhibit 10(aaa) to Registrant's Annual Report on Form 10-K, dated
August 25, 1994, for the fiscal year ended May 31, 1994)
(cc) Agreement, dated October 30, 1996, between Tenet and United State
Trust Company of New York, as Trustee, Regarding the First Amendment
to the 1994 Tenet Deferred Compensation Plan Trust (Incorporated by
reference to Exhibit 10(d) to Registration Statement on Form S-3
(Registration No. 333-26621) dated May 7, 1997, filed with the
Commission on May 7, 1997)
(dd) First Amended and Restated 1994 Directors Stock Option Plan
(Incorporated by reference to Exhibit A to the Definitive Proxy
Statement, dated as of August 26, 1997, for the Registrant's 1997
Annual Meeting of Shareholders)
(ee) 1991 Stock Incentive Plan (Incorporated by reference to Exhibit
10(kk) to Registrant's Annual Report on Form 10-K, dated as of
August 26, 1996, for the fiscal year ended May 31, 1996)
(ff) Amended and Restated 1995 Stock Incentive Plan (Incorporated by
reference to Annex D to the Proxy Statement/Prospectus, dated as of
December 18, 1997, for the Registrant's Special Meeting of
Shareholders held on January 28, 1997)
(gg) First Amended and Restated 1995 Employee Stock Purchase Plan
(Incorporated by reference to Exhibit C to the definitive Proxy
Statement, dated as of August 26, 1997, for the Registrant's 1997
Annual Meeting of Shareholders)
(11) Statement Re: Computation of Per Share Earnings, page 26
(13) 1997 Annual Report to Shareholders of Registrant
(21) Subsidiaries of the Registrant
(23) Consent of Experts
(a) Accountants' Consent and Report on Consolidated Schedule (KPMG Peat
Marwick LLP)
(27.1) Financial Data Schedule for fiscal year 1997 (included only in the
EDGAR filing)
(27.2) Restated Financial Data Schedule for fiscal year 1996 (included only
in the EDGAR filing)
(B) REPORTS ON FORM 8-K
(1) On April 11, 1997, the Company filed with the Commission a Current
Report on Form 8-K, dated April 10, 1997, for Item 5, Other Events, and
Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits. The Form 8-K was filed to report the Company's earnings for the
fiscal quarter ended February 28, 1997.
(2) On April 17, 1997, the Company filed with the Commission a Current
Report on Form 8-K, dated April 16, 1997, for Item 5 Other Events, and
Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits. The Form 8-K included the following supplemental financial
information required as a result of the Merger: (i) Selected Supplemental
Financial Information, (ii) Management's Discussion and Analysis of
Supplemental Financial Condition and Results of Operations, (iii)
Supplemental Consolidated Balance Sheets of Tenet and Subsidiaries as of
May 31, 1995 and 1996, and the Related Supplemental Consolidated
Statements of Operations, Changes in Shareholders' Equity and Cash Flows
for Each of the Three Years in the Period Ended May 31, 1996, (iv) the
Notes to Supplemental Consolidated Financial Statements, and (v) the
Report of KPMG Peat Marwick LLP. The supplemental consolidated financial
statements give retroactive effect to the Merger.
25
<PAGE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(EXHIBIT 11)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average number of shares of common stock outstanding......... 213 213 234 282 304
Dilutive effect of common stock equivalents (stock options and
warrants)........................................................... 1 5 4 5 --
--------- --------- --------- --------- ---------
TOTAL................................................................. 214 218 238 287 304
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (loss) from continuing operations, adjusted for preferred stock
dividends........................................................... $ 276 $ 167 $ 264 $ 498 $ (73)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings (loss) per common and common equivalent share-- continuing
operations.......................................................... $ 1.29 $ 0.77 $ 1.10 $ 1.73 $ (0.24)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares used in primary calculation......... 214 218 238 287 304
Additional dilutive effect of common stock equivalents................ 1 1 1 1 --
Assumed conversion of dilutive convertible notes and debentures....... 14 14 13 7 --
Assumed conversion of redeemable preferred stock...................... -- -- 2 -- --
--------- --------- --------- --------- ---------
TOTAL................................................................. 229 233 254 295 304
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (loss) from continuing operations used in primary
calculation......................................................... $ 276 $ 167 $ 264 $ 498 $ (73)
Adjustments:
Interest expense on convertible debentures.......................... 9 11 14 9 --
Reduced reimbursement of above interest expense by Medicare......... (1) (1) (2) (2) --
Income tax on interest less Medicare reimbursement.................. (3) (4) (5) (3) --
Preferred stock dividends........................................... 1 2 2 -- --
--------- --------- --------- --------- ---------
Adjusted income (loss) from continuing operations..................... $ 282 $ 175 $ 273 $ 502 $ (73)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings (loss) per common and common equivalent share-- continuing
operations.......................................................... $ 1.24 $ 0.75 $ 1.08 $ 1.70 $ (0.24)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
26
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 26, 1997.
<TABLE>
<S> <C> <C> <C>
TENET HEALTHCARE CORPORATION
By: /s/ TREVOR FETTER By:
----------------------------------------
Trevor Fetter
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
By: /s/ RAYMOND L. MATHIASEN
----------------------------------------
Raymond L. Mathiasen
SENIOR VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
<CAPTION>
By: /s/ SCOTT M. BROWN
----------------------------------------
Scott M. Brown
SENIOR VICE PRESIDENT
By:
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on August 26, 1997, by the following persons on
behalf of the registrant and in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ JEFFREY C. BARBAKOW
------------------------------------------- Chairman, Chief Executive Officer and Director (Principal
Jeffrey C. Barbakow Executive Officer)
/s/ MICHAEL H. FOCHT, SR.
------------------------------------------- President, Chief Operating Officer and Director
Michael H. Focht, Sr.
/s/ BERNICE BRATTER
------------------------------------------- Director
Bernice Bratter
/s/ MAURICE J. DEWALD
------------------------------------------- Director
Maurice J. DeWald
/s/ PETER DE WETTER
------------------------------------------- Director
Peter de Wetter
/s/ EDWARD EGBERT, M.D.
------------------------------------------- Director
Edward Egbert, M.D.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ RAYMOND A. HAY
------------------------------------------- Director
Raymond A. Hay
/s/ LESTER B. KORN
------------------------------------------- Director
Lester B. Korn
/s/ RICHARD S. SCHWEIKER
------------------------------------------- Director
Richard S. Schweiker
</TABLE>
28
<PAGE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 1995, 1996 AND 1997
(IN MILLIONS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS CHARGED TO:
BALANCE AT --------------------------------
BEGINNING CONTINUING DISCONTINUED DEDUCTIONS OTHER BALANCE AT
OF PERIOD OPERATIONS (1) OPERATIONS (2) ITEMS (3) END OF PERIOD
----------- --------------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995.................... $ 122 $ 245 $ 25 $ (283) $ 103 $ 212
1996.................... 212 431 -- (471) 33 205
1997.................... 205 499 -- (474) (6) 224
</TABLE>
- ------------------------
(1) Before considering recoveries on accounts or notes previously written off.
(2) Accounts written off.
(3) Primarily beginning balances for purchased businesses, net of balances for
businesses sold, and, in 1997, also net of the elimination of the effects of
including OrNda's results of operations for the three months ended August
31, 1996 in both years ended May 31, 1996 and 1997.
F-1
<PAGE>
RESTATED BY-LAWS OF
TENET HEALTHCARE CORPORATION
A NEVADA CORPORATION
AS AMENDED OCTOBER 16, 1996
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1.1 PLACE OF MEETINGS.
All meetings of the shareholders shall be held at the principal office of
the Corporation in the State of California, or at any other place within or
without the State of Nevada as may be designated for that purpose from time to
time by the Board of Directors.
SECTION 1.2 ANNUAL MEETINGS.
The Annual meeting of the shareholders shall be held not later than 210
days after the close of the fiscal year, on the date and at the time set by the
Board of Directors, at which time the shareholders shall elect by plurality vote
an annual Class of the Board of Directors, consider reports of the affairs of
the Corporation, and transact such other business as may properly be brought
before the meeting.
SECTION 1.3 SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose or purposes
whatsoever, may be called at any time by the Chief Executive Officer or by the
Board of Directors.
SECTION 1.4 NOTICE OF MEETINGS.
1.4.1. Notice of each meeting of shareholders, whether annual or
special, shall be given at least 10 and not more than 60 days prior to the day
thereof by the Secretary or any Assistant Secretary causing to be delivered to
each shareholder of record entitled to vote at such meeting a written notice
stating the time and place of the meeting and the purpose or purposes for which
the meeting is called. Such notice shall be signed by the Chief Executive
Officer, the President, the Secretary or any Assistant Secretary and shall be
mailed postage prepaid to each shareholder at his address as it appears on the
stock books of the Corporation. If any shareholder has failed to supply an
address, notice shall be deemed to have been given if mailed to the address of
the principal office of the Corporation, or published at least once in a
newspaper having general circulation in the county in which the principal office
is located.
<PAGE>
-2-
1.4.2. It shall not be necessary to give any notice of the
adjournment of or the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken; provided
that when a meeting is adjourned for 30 days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting.
SECTION 1.5 CONSENT BY SHAREHOLDERS.
Any action which may be taken at a regular meeting of the shareholders,
except election of directors, may be taken without a meeting, if authorized by a
writing signed by holders of the number of shares required under the law to give
their approval for such purpose.
SECTION 1.6 QUORUM.
1.6.1. The presence in person or by proxy of the persons entitled
to vote a majority of the voting shares at any meeting constitutes a quorum for
the transaction of business. Shares shall not be counted in determining the
number of shares represented or required for a quorum or in any vote at a
meeting, if voting of them at the meeting has been enjoined or for any reason
they cannot be lawfully voted at the meeting.
1.6.2. The shareholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
1.6.3. In the absence of a quorum, a majority of the shares present
in person or by proxy and entitled to vote may adjourn any meeting from time to
time, but not for a period of more than 30 days at any one time, until a quorum
shall attend.
SECTION 1.7 VOTING RIGHTS.
1.7.1. Every shareholder of record of the Corporation shall be
entitled at each meeting of the shareholders to one vote for each share of stock
standing in his name on the books of the Corporation. Except as otherwise
provided by law, or by the Articles of Incorporation or any amendment thereto,
or by the By-Laws, if a quorum is present, the majority of votes cast in person
or by proxy shall be binding upon all shareholders of the Corporation.
1.7.2. The Board of Directors shall designate a day not more than
60 days prior to any meeting of the shareholders as the day as of which
shareholders entitled to notice of and to vote at such meetings shall be
determined.
<PAGE>
-3-
SECTION 1.8 PROXIES.
Every shareholder entitled to vote or to execute consents may do so either
in person or by written proxy executed in accordance with the provisions of
Section 78.355 of the Nevada Revised Statutes and filed with the Secretary of
the Corporation.
SECTION 1.9 MANNER OF CONDUCTING MEETINGS.
To the extent not in conflict with the provisions of the law relating
thereto, the Articles of Incorporation, or express provisions of these By-Laws,
meetings shall be conducted pursuant to such rules as may be adopted by the
chairman presiding at, or a majority of the shares represented at, the meeting.
ARTICLE II
DIRECTORS - MANAGEMENT
SECTION 2.1 POWERS.
Subject to the limitation of the Articles of Incorporation, of the By-Laws,
and of the laws of the State of Nevada as to action to be authorized or approved
by the shareholders, all corporate powers shall be exercised by or under
authority of, and the business and affairs of this Corporation shall be
controlled by, a Board of Directors.
SECTION 2.2 NUMBER AND QUALIFICATION.
The authorized number of directors of this Corporation shall be not less
than nine nor more than 15, with the exact number to be established from time to
time by resolution of the Board of Directors of this Corporation. All directors
of this Corporation shall be at least 21 years of age and at least a majority
shall be citizens of the United States.
SECTION 2.3 CLASSIFICATION AND ELECTION.
The Board of Directors shall be classified into three annual Classes, with
four directors in Class 1, four directors in Class 2, and five directors in
Class 3. Each Class of directors shall be elected for terms of three years.
Each term shall continue for the number of years stated and until their
successors are elected and have qualified. Their term of office shall begin
immediately after election. These By-Laws are being adopted subsequent to the
initial classification of directors in 1975. The directors in office as of the
date of adoption hereof shall continue to serve the terms for which they have
been previously elected.
SECTION 2.4 INCREASE IN THE NUMBER OF DIRECTORS.
<PAGE>
-4-
The Board of Directors may change the number of directors from time to
time; provided, however, neither the Board of Directors nor the shareholders may
ever increase the number of directorships by more than one during any
twelve-month period, except upon the affirmative vote of two-thirds of the
directors of each Class, or the affirmative vote of the holders of two-thirds of
all outstanding shares voting together and not by class. This provision may not
be amended except by a like vote.
SECTION 2.5 VACANCIES.
2.5.1. Any vacancies in the Board of Directors, except vacancies
first filled by the shareholders, may be filled by the affirmative vote of
two-thirds of the remaining directors of each Class, though less than a quorum,
or by a sole remaining director. Each director so elected shall hold office for
the balance of the term of the resigning director and until his successor is
elected. The power to fill vacancies shall in no event be delegated to any
committee appointed in accordance with these By-Laws.
2.5.2. The shareholders may at any time elect a director to fill
any vacancy not filled by the directors, and may elect the additional directors
at the meeting at which an amendment of the By-Laws is voted authorizing an
increase in the number of directors.
2.5.3. A vacancy or vacancies shall be deemed to exist in case of
the death, resignation, or removal of any director, or if the directors or
shareholders shall increase the authorized number of directors but shall fail at
a meeting at which such increase is authorized or at an adjournment thereof to
elect the additional director so provided for, or in case the shareholders fail
at any time to elect the full number of authorized directors.
2.5.4. If the Board of Directors accepts the resignation of a
director tendered to take effect at a future time, the Board or the shareholders
shall have power to immediately elect a successor who shall take office when the
resignation shall become effective.
2.5.5. No reduction of the number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
SECTION 2.6 REMOVAL OF DIRECTORS.
The entire Board of Directors or any individual director may be removed
from office, with or without cause, by the vote or written consent of
shareholders representing two-thirds of the issued and outstanding capital stock
entitled to vote.
<PAGE>
-5-
SECTION 2.7 RESIGNATIONS.
Any director of the Corporation may resign at any time either by oral
tender of resignation at any meeting of the Board or by giving written notice
thereof to the Secretary, the Chief Executive Officer or the President. Such
resignation shall take effect at the time it specifies, and the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 2.8 PLACE OF MEETINGS.
Meetings of the Board of Directors shall be held at the principal office of
the Corporation in the State of California, or at such other place within or
without the State of Nevada as may be designated for that purpose by the Board
of Directors. Any meeting shall be valid, wherever held, if held by the written
consent of all members of the Board of Directors, given before or after the
meeting and filed with the Secretary of the Corporation.
SECTION 2.9 MEETINGS AFTER ANNUAL SHAREHOLDERS' MEETING.
The first meeting of the Board of Directors held after the annual
shareholders' meeting shall be held at such time and place within or without the
State of Nevada as shall be fixed by announcement of the Chief Executive Officer
or the President given at the annual shareholders' meeting, and no other notice
of such meeting shall be necessary, provided a majority of the whole Board shall
be present. Alternatively, such meeting may be held at such time and place as
shall be fixed pursuant to notice given under other provisions of these By-Laws.
SECTION 2.10 OTHER REGULAR MEETINGS.
2.10.1. Regular meetings of the Board of Directors shall be held at
such time and place within or without the State of Nevada as may be agreed upon
from time to time by the Board.
2.10.2. No notice need be given of regular meetings, except that a
written notice shall be given to each director of the resolution establishing
specific meeting dates or a regular meeting date, which notice shall set forth
the date of the month, the time, and the place of the meetings.
SECTION 2.11 SPECIAL MEETINGS.
Special meetings of the Board of Directors shall be held whenever called by
the Chief Executive Officer or the President or by two-thirds of the directors
of each Class. Notice of any such meeting shall be mailed to each director not
later than three days before the day on which the meeting is to be held, or
shall be sent to him by telegraph, or delivered personally or by telephone, not
later than midnight of the day before the day of the meeting. Any meeting of
the Board of Directors shall be a legal meeting without any notice thereof
having been given, if each
<PAGE>
-6-
director consents to the holding thereof or waives notice by a writing filed
with the Secretary, or is present thereat and their oral consents are entered on
the minutes, or they take part in the deliberations thereat without objection.
Except as otherwise provided in the By-Laws or as may be indicated in the notice
thereof, any and all business may be transacted at any special meeting.
SECTION 2.12 WAIVER OF NOTICE.
Anything herein to the contrary notwithstanding, notice of any meeting of
directors shall not be required as to any director who shall waive notice in
writing (including telex, facsimile telephonic transmission, telegram, cablegram
or radiogram) before or after such meeting.
SECTION 2.13 NOTICE OF ADJOURNMENT.
Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place is fixed at the meeting
adjourned.
SECTION 2.14 QUORUM.
A majority of the number of directors as fixed by the Articles of
Incorporation or By-Laws shall be necessary to constitute a quorum for the
transaction of business, and the action of a majority of the directors present
at any meeting at which there is a quorum, when duly assembled, is valid as a
corporate act; provided, that a minority of the directors, in the absence of a
quorum, may adjourn from time to time or fill vacant directorships in accordance
with Section 2.5 but may not transact any business.
SECTION 2.15 ACTION BY UNANIMOUS WRITTEN CONSENT.
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting, if all members of the Board shall
individually or collectively consent in writing thereto. Such written consent
shall be filed with the minutes of the proceedings of the Board and shall have
the same force and effect as a unanimous vote of such directors.
SECTION 2.16 COMPENSATION.
The directors may be paid their expenses of attendance at each meeting of
the Board of Directors. Additionally, the Board of Directors may from time to
time, in its discretion, pay to directors either or both a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary for
services as a director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
<PAGE>
-7-
SECTION 2.17 TRANSACTIONS INVOLVING INTERESTS OF DIRECTORS.
In the absence of fraud, no contract or other transaction of the
Corporation shall be affected or invalidated by the fact that any of the
directors of the Corporation are in any way interested in, or connected with,
any other party to, such contract or transaction or are themselves parties to
such contract or transaction, provided that such transaction satisfies Section
78.140 of the Nevada Revised Statutes; and each and every person who may become
a director of the Corporation is hereby relieved, to the extent permitted by
law, from any liability that might otherwise exist from contracting in good
faith with the Corporation for the benefit of himself or any person in which he
may be in any way interested or with which he may be in any way connected. Any
director of the Corporation may vote and act upon any matter, contract or
transaction between the Corporation and any other person without regard to the
fact that he is also a stockholder, director or officer of, or has any interest
in, such other person.
SECTION 2.18 EMERITUS POSITIONS.
The Board of Directors may authorize parties to serve in an emeritus
position with respect to the Board of Directors, included by way of example but
not by way of limitation, as an Emeritus Director, as a Chairman Emeritus of the
Board of Directors or as a Vice-Chairman Emeritus of the Board of Directors.
These positions shall be honorary positions and parties elected to those
positions may be asked to attend meetings of the board of directors and meeting
of the shareholders from time to time. A party holding an emeritus position
shall not be an officer or director of the Company, shall have no vote at a
director's meeting, shall receive no fees for service in that position and shall
not be given access to material, non-published information pertaining, to the
Company. A party filling an emeritus position shall be requested to do so
because of his or her experience with and contributions to the Company.
ARTICLE III
OFFICERS
SECTION 3.1 EXECUTIVE OFFICERS.
The executive officers of the Corporation shall be a Chairman, a Vice
Chairman, a Chief Executive Officer, a President, one or more Senior Executive
Vice Presidents, one or more Executive Vice Presidents, one or more Group
Presidents and Chief Executive Officers, one or more Senior Vice Presidents, one
or more Vice Presidents, a Secretary, and a Treasurer. Any person may hold two
or more offices. The executive officers of the Corporation shall be elected
annually by the Board of Directors and shall hold office for one year or until
their respective successors shall be elected and shall qualify.
<PAGE>
-8-
SECTION 3.2 APPOINTED OFFICERS: TITLES.
3.2.1. The Chief Executive Officer or the Secretary in the case of
Assistant Secretaries or the Treasurer in the case of Assistant Treasurers may
appoint one or more Assistant Secretaries or one or more Assistant Treasurers,
each of whom shall hold such title at the pleasure of the appointing officer,
have such authority and perform such duties as are provided in the By-Laws, or
as the Chief Executive Officer or the appointing officer may determine from time
to time. Any person appointed under this Section 3.2.1 to serve in any of the
foregoing positions shall be deemed by reason of such appointment or service in
such capacity to be an "officer" of the corporation.
3.2.2. The Chief Executive Officer or a person designated by the
Chief Executive Officer may also appoint a president, one or more executive vice
presidents, one or more senior vice presidents, one or more vice presidents and
one or more assistant vice presidents for each operating group and division of
the Corporation and one or more senior vice presidents, one or more vice
presidents and one or more assistant vice presidents for each corporate staff
function and a corporate controller and one or more assistant controllers. Each
of such persons will hold such title at the pleasure of the Chief Executive
Officer and have authority to act for and shall perform duties with respect to
only the group, division or corporate staff function for which the person is
appointed. Any person appointed under this Section 3.2.2 to serve in any of the
foregoing positions shall not be deemed by reason of such appointment or service
in such capacity to be an "officer" of the Corporation.
SECTION 3.3 REMOVAL AND RESIGNATION.
3.3.1. Any officer may be removed, either with or without cause, by
a majority of the directors at the time in office, at any regular or special
meeting of the Board. Any appointed person may be removed from such position at
any time by the person making such appointment or his successor.
3.3.2. Any officer may resign at any time, by giving written notice
to the Board of Directors, the Chief Executive Officer, the President or the
Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice, or at any later time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3.4 VACANCIES.
<PAGE>
-9-
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the By-Laws for regular appointments to such office.
SECTION 3.5 CHAIRMAN AND VICE CHAIRMAN.
The Chairman shall preside at all meetings of the Board of Directors and
shall exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board of Directors. The Vice Chairman shall, in the
absence of the Chairman, preside at all meetings of the Board of Directors and
shall exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board of Directors.
SECTION 3.6 CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
affairs of the Corporation. He shall preside at all meetings of the
shareholders and, in the absence of the Chairman of the Board and the Vice
Chairman of the Board, at all meetings of the Board of Directors. He shall be
ex officio a member of the Executive Committee and shall have the general powers
and duties of management usually vested in the office of chief executive officer
of a corporation and such other powers and duties as may be prescribed by the
Board of Directors.
SECTION 3.7 PRESIDENT.
In the absence or disability of the Chief Executive Officer, the President
shall perform all of the duties of the Chief Executive Officer and when so
acting shall have all the powers and be subject to all the restrictions upon the
Chief Executive Officer, including the power to sign all instruments and to take
all actions which the Chief Executive Officer is authorized to perform by the
Board of Directors or the By-Laws. The President shall have the general powers
and duties usually vested in the office of president of a corporation and such
other powers and duties as may be prescribed by the Chief Executive Officer or
the Board of Directors.
SECTION 3.8 SENIOR EXECUTIVE VICE PRESIDENT, EXECUTIVE VICE PRESIDENT, SENIOR
VICE PRESIDENT AND VICE PRESIDENT.
In the absence or disability of the Chief Executive Officer and the
President, a Senior Executive Vice President, an Executive Vice President or a
Group President and Chief Executive Officer, in the order of his rank and
seniority shall perform all of the duties of the Chief Executive Officer, and
when so acting shall have all the powers of and be subject to all the
restrictions upon the Chief Executive Officer, including the power to sign all
instruments and to take all actions which the Chief Executive Officer is
authorized to perform by the Board of Directors or the By-Laws. The Senior
Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents and
Vice Presidents shall have the general powers and duties usually
<PAGE>
-10-
vested in the office of a vice president of a corporation; the Group Presidents
and Chief Executive Officers shall have the general powers and duties of a
principal executive officer of an operating group of a corporation; and each of
them shall have such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the Board of Directors, the
Executive Committee of the Board of Directors, the Chief Executive Officer or
the By-Laws.
SECTION 3.9 SECRETARY AND ASSISTANT SECRETARIES.
3.9.1. The Secretary shall (1) attend all sessions of the Board and
all meetings of the shareholders; and (2) record and keep, or cause to be kept,
all votes and the minutes of all proceedings in a book to be kept for that
purpose at the principal office of the Corporation, or at such other place as
the Board of Directors may from time to time determine, specifying therein (i)
the time and place of holding, (ii) whether regular or special, and if special,
how authorized, (iii) the notice thereof given, (iv) the names of those present
at directors' meetings, (v) the number of shares present or represented at
shareholders' meetings, and (vi) the proceedings thereof; and (3) perform like
duties for the Executive and other standing committees, when required. In
addition, he shall keep or cause to be kept, at the principal office of the
Corporation in the State of Nevada, those documents required to be kept thereat
by Section 5.2 of the By-Laws and Section 78.105 of the Nevada Revised Statutes.
3.9.2. The Secretary shall give, or cause to be given, notice of
meetings of the shareholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the Chief Executive Officer, under whose supervision he shall be. He shall
keep in safe custody the seal of the Corporation, and, when authorized by the
Board, affix the same to any instrument requiring it, and when so affixed, it
shall be attested by his signature or by the signature of the Treasurer or an
Assistant Secretary. The Secretary is hereby authorized to issue certificates,
to which the corporate seal may be affixed, attesting to the incumbency of
officers of this Corporation or to actions duly taken by the Board of Directors
or the shareholders.
3.9.3. The Assistant Secretaries, in the order of their seniority,
shall in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary, and shall perform such other duties as the
Chief Executive Officer or the Secretary shall prescribe.
SECTION 3.10 TREASURER AND ASSISTANT TREASURERS.
3.10.1. The Treasurer shall deposit all moneys and other valuables
in the name, and to the credit, of the Corporation, with such depositories as
may be ordered by the
<PAGE>
-11-
Board of Directors. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, shall render to the Chief Executive Officer
and directors, whenever they request it, an account of all his transactions as
Treasurer, and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
3.10.2. The Assistant Treasurers, in the order of their seniority,
shall in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer, and shall perform such other duties as the
Chief Executive Officer or the Treasurer shall prescribe.
SECTION 3.11 ADDITIONAL POWERS, SENIORITY AND SUBSTITUTION OF OFFICERS.
In addition to the foregoing powers and duties specifically prescribed for
the respective officers, the Board of Directors may from time to time by
resolution (i) impose or confer upon any of the officers such additional duties
and powers as the Board of Directors may see fit, (ii) determine the order of
seniority among the officers, and/or (iii) except as otherwise provided above,
provide that in the absence of any officer or officers, any other officer or
officers shall substitute for and assume the duties, powers and authority of the
absent officer or officers. Any such resolution may be final, subject only to
further action by the Board of Directors, or the resolution may grant such
discretion, as the Board of Directors deems appropriate, to the Chairman, the
Vice Chairman, the Chief Executive Officer, the President (or in his absence the
Senior Executive Vice President or the Executive Vice President serving in his
place) to impose or confer additional duties and powers, to determine the order
of seniority among officers, and/or to provide for substitution of officers as
above described.
SECTION 3.12 COMPENSATION.
The officers of the Corporation shall receive such compensation as shall be
fixed from time to time by the Board of Directors. No officer shall be
prohibited from receiving such salary by reason of the fact that he is also a
director of the Corporation.
SECTION 3.13 TRANSACTION INVOLVING INTEREST OF OFFICER.
In the absence of fraud, no contract or other transaction of the
Corporation shall be affected or invalidated by the fact that any of the
officers of the Corporation are in any way interested in, or connected with, any
other party to such contract or transaction, or are themselves parties to such
contract or transaction, provided that such transaction complies with
Section 78.140 of the Nevada Revised Statutes; and each and every person who is
or may become an officer of the Corporation is hereby relieved, to the extent
permitted by law, when acting in good faith, from any liability that might
otherwise exist from contracting with the Corporation for the benefit of himself
or any person in which he may be in any way interested or with which he may be
in any way connected.
<PAGE>
-12-
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
SECTION 4.1 STANDING COMMITTEES.
The Board of Directors shall appoint an Executive Committee, an Audit
Committee and a Compensation and Stock Option Committee, consisting of such
number of its members as it may designate, consistent with the Articles of
Incorporation, the By-Laws and the laws of the State of Nevada.
4.1.1. The Executive Committee shall have and may exercise, when
the Board is not in session, all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, but the Executive
Committee shall not have the power to fill vacancies on the Board, or to change
the membership of or to fill vacancies in the Executive Committee or any other
Committee of the Board, or to adopt, amend or repeal the By-Laws, or to declare
dividends.
4.1.2. The Audit Committee shall select and engage on behalf of the
Corporation, subject to the consent of the shareholders, and fix the
compensation of, a firm of certified public accountants whose duty it shall be
to audit the books and accounts of the Corporation and its subsidiaries for the
fiscal year in which they are appointed, and who shall report to such Committee.
The Audit Committee shall confer with the auditors and shall determine, and from
time to time shall report to the Board of Directors upon, the scope of the
auditing of the books and accounts of the Corporation and its subsidiaries. The
Audit Committee shall also be responsible for determining that the business
practices and conduct of employees and other representatives of the Corporation
and its subsidiaries comply with the policies and procedures of the Corporation.
None of the members of the Audit Committee shall be officers or employees of the
Corporation.
4.1.3. The Compensation and Stock Option Committee shall establish
a general compensation policy for the Corporation and shall have responsibility
for the approval of increases in directors' fees and in salaries paid to
officers and senior employees earning in excess of an annual salary to be
determined by the Committee. The Compensation and Stock Option Committee shall
have all of the powers of administration under all of the Corporation's employee
benefit plans, including any stock option plans, long-term incentive plans,
bonus plans, retirement plans, stock purchase plans and medical, dental and
insurance plans. In connection therewith, the Compensation and Stock Option
Committee shall determine, subject to the provisions of the Corporation's plans,
the directors, officers and employees of the Corporation eligible to participate
in any of the plans, the extent of such participation and the terms and
conditions under which benefits may be vested, received or exercised. None of
the members of
<PAGE>
-13-
the Compensation and Stock Option Committee shall be officers or employees of
the Corporation.
SECTION 4.2 OTHER COMMITTEES.
Subject to the limitations of the Articles of Incorporation, the By-Laws
and the laws of the State of Nevada as to action to be authorized or approved by
the shareholders, or duties not delegable by the Board of Directors, any or all
of the corporate powers may be exercised by or under authority of, and the
business and affairs of this Corporation may be controlled by, such other
committee or committees as may be appointed by the Board of Directors. The
powers to be exercised by any such committee shall be designated by the Board of
Directors.
SECTION 4.3 PROCEDURES.
Subject to the limitations of the Articles of Incorporation, the By-Laws
and the laws of the State of Nevada regarding the conduct of business by the
Board of Directors and its appointed committees, any committee created under
this Article may use any procedures for conducting its business and exercising
its powers, including but not limited to actions by the unanimous written
consent of its members in the manner set forth in Section 2.15. A majority (but
not less than two members) shall constitute a quorum. Notices of meetings may
be in any reasonable manner and may be waived as for meetings of directors.
ARTICLE V
CORPORATE RECORDS AND REPORTS - INSPECTION
SECTION 5.1 RECORDS.
The Corporation shall maintain adequate and correct accounts, books and
records of its business and properties. All of such books, records and accounts
shall be kept at its principal place of business in the State of California, as
fixed by the Board of Directors from time to time.
SECTION 5.2 ARTICLES, BY-LAWS AND STOCK LEDGER.
The Corporation shall maintain and keep the following documents at its
principal place of business in the State of Nevada: (i) a certified copy of the
Articles of Incorporation and all amendments thereto; (ii) a certified copy of
the By-Laws and all amendments thereto; and (iii) a statement setting forth the
following: "The Secretary of the Corporation, whose address is 2700
<PAGE>
-14-
Colorado Avenue, Santa Monica California 90404, is the custodian of the
duplicate stock ledger of the Corporation."
SECTION 5.3 INSPECTION.
Any person who has been a shareholder of record for at least six months
immediately preceding his demand, or any person holding, or thereunto authorized
in writing by the holders of, at least five percent of all of the Corporation's
outstanding shares, upon at least five days' written demand, or any judgment
creditor without prior demand, shall have the right to inspect in person or by
agent or attorney, during usual business hours, the duplicate stock ledger of
the Corporation and to make extracts therefrom; provided, however, that such
inspection may be denied to any shareholder or other person upon his refusal to
furnish to the Corporation an affidavit that such inspection is not desired for
a purpose which is in the interest of a business or object other than the
business of the Corporation and that he has not at any time sold or offered for
sale any list of shareholders of any corporation or aided or abetted any person
in procuring any such record of shareholders for any such purpose.
SECTION 5.4 CHECKS, DRAFTS, ETC.
All checks, drafts, or other orders for payment of money, notes, or other
evidences of indebtedness, issued in the name of, or payable to, the
Corporation, shall be signed or endorsed by such person or persons, and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
ARTICLE VI
OTHER AUTHORIZATIONS
SECTION 6.1 EXECUTION OF CONTRACTS.
The Board of Directors, except as the By-Laws otherwise provide, may
authorize any officer or officers or agent or agents to enter into any contract
or execute any instrument in the name of and on behalf of the Corporation. Such
authority may be general, or confined to specific instances. Unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority, except in the ordinary course of business, to bind the
Corporation by any contract or engagement or to pledge its credit, or to render
it liable for any purpose or in any amount.
SECTION 6.2 REPRESENTATION OF OTHER CORPORATIONS.
All shares of any other corporation, standing in the name of the
Corporation, shall be voted, represented, and all rights incidental thereto
exercised as directed by written consent or
<PAGE>
-15-
resolution of the Board of Directors expressly referring thereto. In general,
such rights shall be delegated by the Board of Directors under express
instructions from time to time as to each exercise thereof to the Chief
Executive Officer, the President, any Senior Executive Vice President, any
Executive Vice President, any Senior Vice President, any Vice President, the
Treasurer or the Secretary of this Corporation, or any other person expressly
appointed by the Board of Directors. Such authority may be exercised by the
designated officers in person, or by any other person authorized so to do by
proxy, or power of attorney, duly executed by such officers.
SECTION 6.3 DIVIDENDS.
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and on the terms and
conditions provided by the laws of the State of Nevada, and the Articles of
Incorporation, subject to any contractual restrictions to which the Corporation
is then subject.
ARTICLE VII
CERTIFICATES FOR AND TRANSFER OF SHARES
SECTION 7.1 CERTIFICATES FOR SHARES.
7.1.1. Certificates for shares shall be of such form and device as
the Board of Directors may designate and shall be numbered and registered as
they are issued. Each shall state the name of the record holder of the shares
represented thereby; its number and date of issuance; the number of shares for
which it is issued; the par value; a statement of the rights, privileges,
preferences and restrictions, if any; a statement as to rights of redemption or
conversion, if any; and a statement of liens or restrictions upon transfer or
voting, if any, or, alternatively, a statement that certificates specifying such
matters may be obtained from the Secretary of the Corporation.
7.1.2. Every certificate for shares must be signed by the Chief
Executive Officer or the President and the Secretary or an Assistant Secretary,
or must be authenticated by facsimiles of the signatures of the Chief Executive
Officer or the President and the Secretary or an Assistant Secretary. Before it
becomes effective, every certificate for shares authenticated by a facsimile or
a signature must be countersigned by a transfer agent or transfer clerk, and
must be registered by an incorporated bank or trust company, either domestic or
foreign, as registrar of transfers.
7.1.3. Even though an officer who signed, or whose facsimile
signature has been written, printed, or stamped on a certificate for shares
ceases, by death, resignation, or otherwise, to be an officer of the Corporation
before the certificate is delivered by the
<PAGE>
-16-
Corporation, the certificate shall be as valid as though signed by a duly
elected, qualified and authorized officer, if it is countersigned by the
signature or facsimile signature of a transfer clerk or transfer agent and
registered by an incorporated bank or trust company, as registrar of transfers.
7.1.4. Even though a person whose facsimile signature as, or on
behalf of, the transfer agent or transfer clerk has been written, printed or
stamped on a certificate for shares ceases, by death, resignation, or otherwise,
to be a person authorized to so sign such certificate before the certificate is
delivered by the Corporation, the certificate shall be deemed countersigned by
the facsimile signature of a transfer agent or transfer clerk for purposes of
meeting the requirements of this section.
SECTION 7.2 TRANSFER ON THE BOOKS.
Upon surrender to the Secretary or transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 7.3 LOST OR DESTROYED CERTIFICATES.
The Board of Directors may direct, or may authorize the Secretary to
direct, a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate for shares so lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors or Secretary may, in its or his discretion, and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost or
destroyed.
SECTION 7.4 TRANSFER AGENTS AND REGISTRARS.
The Board of Directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, who may be the same person, and may be the
Secretary of the Corporation, or an incorporated bank or trust company, either
domestic or foreign, who shall be appointed at such times and places as the
requirements of the Corporation may necessitate and the Board of Directors may
designate.
SECTION 7.5 FIXING RECORD DATE FOR DIVIDENDS, ETC.
<PAGE>
-17-
The Board of Directors may fix a time, not exceeding 50 days preceding the
date fixed for the payment of any dividend or distribution, or for the allotment
of rights, or when any change or conversion or exchange of shares shall go into
effect, as a record date for the determination of the shareholders entitled to
receive any such dividend or distribution, or any such allotment of rights, or
to exercise the rights in respect to any such change, conversion, or exchange of
shares, and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive such dividend, distribution, or allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after any record date
fixed as aforesaid.
SECTION 7.6 RECORD OWNERSHIP.
The Corporation shall be entitled to recognize the exclusive right of a
person registered as such on the books of the Corporation as the owner of shares
of the Corporation's stock to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VIII
AMENDMENTS TO BY-LAWS
SECTION 8.1 BY SHAREHOLDERS.
New or restated by-laws may be adopted, or these By-Laws may be repealed or
amended, at the annual shareholders' meeting or at any other meeting of the
shareholders called for that purpose, by a vote of shareholders entitled to
exercise a majority of the voting power of the Corporation.
SECTION 8.2 BY DIRECTORS.
Subject to the right of the shareholders to adopt, amend, or repeal
by-laws, as provided in Section 8.1, the Board of Directors may adopt, amend, or
repeal any of these By-Laws by the affirmative vote of two-thirds of the
directors of each Class except as otherwise provided in Section 2.4. This power
may not be delegated to any committee appointed in accordance with these
By-Laws.
SECTION 8.3 RECORD OF AMENDMENTS.
<PAGE>
-18-
Whenever an amendment or a new By-Law is adopted, it shall be copied in the
book of minutes with the original By-Laws, in the appropriate place. If any
By-Law is repealed, the fact of repeal, with the date of the meeting at which
the repeal was enacted, or written assent was filed, shall be stated in said
book.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 9.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION.
Subject to Section 9.3 of this Article IX, each person who was or is a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding") (other than an action by or in the right of the
Corporation), by reason of the fact that he, or a person of whom he is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action or inaction in an
official capacity or in any other capacity while serving as a director, officer,
employee, fiduciary or agent shall be indemnified and held harmless by the
Corporation to the fullest extent permitted by the laws of Nevada, as the same
exist or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgments, fines, employee
benefit plan exercise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection with
such proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 9.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION.
Subject to Section 9.3 of this Article IX, the Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he, or
a person of whom he is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer,
<PAGE>
-19-
employee, fiduciary or agent of enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee, fiduciary or agent, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
SECTION 9.3 AUTHORIZATION OF INDEMNIFICATION.
Any indemnification under this Article IX (unless ordered by a court or
advanced pursuant to Section 9.6 hereof) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 9.1 or Section 9.2 of this
Article IX, as the case may be. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if a majority vote
of a quorum consisting of directors who were not parties to the act, suit or
proceeding so orders, by independent legal counsel in a written opinion, or
(iii) if such a quorum is not obtainable, by independent legal counsel in a
written opinion, or (iv) by the shareholders. To the extent, however, that a
director or officer of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith, without the necessity of authorization in the
specific case.
SECTION 9.4 GOOD FAITH DEFINED.
For purposes of any determination under Section 9.3 of this Article IX, a
person shall be deemed to have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, or,
with respect to any criminal action or proceeding, to have had no reasonable
cause to believe his conduct was unlawful, if his action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used
<PAGE>
-20-
in this Section 9.4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 9.4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Sections 9.1
or 9.2 of this Article IX, as the case may be.
SECTION 9.5 INDEMNIFICATION BY A COURT.
If a claim under Sections 9.1 or 9.2 is not paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has failed to meet a
standard of conduct which makes it permissible under Nevada law for the
Corporation to indemnify the claimant for the amount claimed. Neither the
failure of the Corporation (including the Board, independent legal counsel, or
its shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he has met such standard of conduct, nor an actual determination by the
Corporation (including the Board, independent legal counsel, or its
shareholders) that the claimant has not met such standard of conduct, shall be a
defense to the action or create a presumption that the claimant has failed to
meet such standard of conduct.
SECTION 9.6 EXPENSES PAYABLE IN ADVANCE.
The right to indemnification conferred in this Article IX shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
Nevada General Corporation Law required, the payment of such expenses incurred
by a director or officer in his capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to any employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director of officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section 9.6 or otherwise.
SECTION 9.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article IX shall not be exclusive
<PAGE>
-21-
of any other right which any person may have or hereafter acquire under any
statute, provision of the Articles of Incorporation, By-Law, agreement, vote of
shareholders or disinterested directors or otherwise.
SECTION 9.8 INSURANCE.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee, fiduciary or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under Nevada law.
SECTION 9.9 CERTAIN DEFINITIONS.
For purposes of this Article IX, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors or officers, so that any person who is or
was a director or officer of such constituent corporation, or is or was a
director or officer of such constituent corporation serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of this
Article IX with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued. For purposes of this Article IX, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article IX.
SECTION 9.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by or granted
pursuant to, this Article IX shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee, fiduciary or agent and shall inure to the benefit of his heirs,
executors and administrators.
SECTION 9.11 LIMITATION ON INDEMNIFICATION.
<PAGE>
-22-
Notwithstanding anything contained in this Article IX to the contrary,
except as provided in Section 9.3, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized or consented to by the Board.
SECTION 9.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS.
The Corporation may, by action of the Board, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
SECTION 9.13 INDEMNIFICATION OF WITNESSES.
To the extent that any director, officer, employee, fiduciary or agent of
the Corporation is by reason of such position, or a position with another entity
at the request of the Corporation, a witness in any action, suit or proceeding,
he shall be indemnified against all costs and expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 9.14 INDEMNIFICATION AGREEMENTS.
The Corporation may enter into agreements with any director, officer,
employee, fiduciary or agent of the Corporation providing for indemnification to
the full extent permitted by Nevada law.
SECTION 9.15 DEFINITION OF BOARD.
For purposes of this Article IX, the term "Board" shall mean the Board of
Directors of the Corporation or, to the extent permitted by the laws of Nevada,
as the same exist or may hereafter be amended, its Executive Committee. On vote
of the Board, the Corporation may assent to the adoption of this Article IX by
any subsidiary, whether or not wholly owned.
SECTION 9.16 ACTIONS PRIOR TO ADOPTION OF ARTICLE IX.
The rights provided by this Article IX shall be available whether or not
the claim asserted against the director, officer, employee, fiduciary or agent
is based on matters which antedate the adoption of this Article IX.
SECTION 9.17 SEVERABILITY.
If any provision of this Article IX shall for any reason be determined to
be invalid, the remaining provisions hereof shall not be affected thereby but
shall remain in full force and effect.
SECTION 9.18 APPLICABILITY TO FEDERAL ELECTION CAMPAIGN ACT OF 1971, AS
AMENDED.
<PAGE>
-23-
The rights provided by this Article IX shall be applicable to the officers
(including without limitation the Chairman, Vice Chairman, treasurer and
assistant treasurer) appointed from time to time by the Chief Executive Officer
of the Corporation or his designee to serve in the administration and management
of any separate, segregated fund established for purposes of collecting and
distributing voluntary employee political contributions to federal election
campaigns pursuant to the Federal Election Campaign Act of 1971, as amended.
ARTICLE X
CORPORATE SEAL
The corporate seal shall be circular in form and shall have inscribed
thereon the name of the Corporation, and the date of its incorporation, and the
word "Nevada".
ARTICLE XI
INTERPRETATION
Reference in these By-Laws to any provision of the Nevada Revised Statutes
shall be deemed to include all amendments thereto and the effect of the
construction and determination of validity thereof by the Nevada Supreme Court.
ARTICLE XII
APPLICABILITY OF CONTROL SHARE ACT
The provisions of Nevada Revised Statutes Sections 78.378 to 78.3792,
inclusive, shall not apply to any acquisition of a controlling interest by OrNda
Healthcorp in the Corporation pursuant to the terms of that certain Stock Option
Agreement between the Corporation and OrNda Healthcorp, as the same may be
amended, modified, supplemented or otherwise changed.
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
TENET HEALTHCARE CORPORATION, as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
Dated as of October 30, 1995
Supplemental to Indenture, dated as of
March 1, 1995, relating to the Issuer's
9-5/8% Senior Notes Due 2002
<PAGE>
TABLE OF CONTENTS
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE ONE - DEFINITIONS AND OTHER GENERAL
PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2 Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3 Successors and Assigns. . . . . . . . . . . . . . . . . . .
SECTION 1.4 Separability Clause . . . . . . . . . . . . . . . . . . . .
SECTION 1.5 Benefits of First Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.7 Effectiveness . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE TWO - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE THREE - NOTICE, ENDORSEMENT AND CHANGE OF FORM
OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.1 Replacement of Exhibits . . . . . . . . . . . . . . . . . .
SECTION 3.2 Notation on Securities. . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of October 30,1995 (the "First
Supplemental Indenture"), between TENET HEALTHCARE CORPORATION, a Nevada
corporation (hereinafter called the "Company"), and THE BANK OF NEW YORK, as
trustee (hereinafter called the "Trustee"), under the Indenture (the
"Indenture"), dated as of March 1, 1995, between the Company and the Trustee
relating to the Company's 9-5/8% Senior Notes due 2002 (the "Securities").
RECITALS OF THE COMPANY
The Company proposes to offer (the "Offering") Exchangeable
Subordinated Notes due 2007 which are exchangeable for shares of common stock of
Vencor, Inc. (the "Exchangeable Notes").
In connection with the Offering, the Company is soliciting consents to
the amendments to the Indenture (the "Amendments") (all as described in the
Solicitation of Consents, dated October 20, 1995 (the "Consent Solicitation").
In accordance with Section 8.02 of the Indenture the Holders of a
majority of the outstanding principal amount of the Securities then outstanding
have consented to such Amendments.
The Board of Directors of the Company has duly authorized the
execution and delivery of this First Supplemental Indenture. The Company has
delivered an Officers' Certificate and an Opinion of Counsel to the Trustee
pursuant to Section 8.06 of the Indenture and has done all other things
necessary to make this First Supplemental Indenture a valid agreement of the
Company in accordance with the terms hereof and of the Indenture.
WHEREFORE, each party agrees as follows for the benefit of the other
party and for the equal or ratable benefit of the Holders of the Securities:
3
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
For all purposes of the Indenture and this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this First Supplemental
Indenture as a whole and not to any particular Article, Section or
subdivision; and
(2) certain capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings and the Table of Contents are for
convenience only and shall not affect the construction hereof. All references
to Sections in the Indenture shall remain unchanged.
SECTION 1.3 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this First Supplemental Indenture by
the Company shall bind its successors and assigns, or any other obligor on the
Securities, whether expressed or not.
SECTION 1.4 SEPARABILITY CLAUSE.
In case any provision in this First Supplemental Indenture 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.
4
<PAGE>
SECTION 1.5 BENEFITS OF FIRST SUPPLEMENTAL INDENTURE.
Nothing in this First Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders, any benefit or any legal or
equitable right, remedy or claim under this First Supplemental Indenture.
SECTION 1.6 GOVERNING LAW.
This First Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York and all rights and remedies
shall be governed by such law without reference to its conflict of laws
provision.
SECTION 1.7 EFFECTIVENESS.
This First Supplemental Indenture shall take effect on the date (the
"Effective Date") that each of the following conditions shall have been
satisfied:
(a) the Trustee shall have received an Opinion of Counsel and an
Officers' Certificate from the Company each dated the Effective Date and in the
form set forth in Section 8.06 of the Indenture.
(b) each of the parties hereto shall have executed and delivered
this First Supplemental Indenture.
ARTICLE II
THE AMENDMENTS
1. Section 1.01 of the Indenture is hereby amended, by including the
following between the definition of "Specified Assets" and the definition of
"Stockholders' Equity":
"SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof,
of any right to exchange such Indebtedness for shares of common stock of
Vencor, Inc. or any successor there-
5
<PAGE>
to or any other equity securities, other than Equity Interests of a
Subsidiary, owned by the Company as of October 11, 1995, or for any
securities or other property received with respect to such common stock or
equity securities, whether or not such right is subject to the Company's
ability to pay an amount in cash in lieu thereof.
2. Subsection (iii) of the first paragraph of Section 3.07 of the
Indenture is hereby amended and restated, in its entirety, to state the
following:
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Securities, except at the original final maturity date thereof or
pursuant to a Specified Exchange or the Refinancing;
ARTICLE III
NOTICE, ENDORSEMENT AND CHANGE OF FORM OF SECURITIES
SECTION 3.1 NOTICE TO SECURITYHOLDERS.
After the Amendments become effective, the Company shall mail to
Securityholders a notice briefly describing such Amendments in accordance with
Section 8.02 of the Indenture.
SECTION 3.2 NOTATION ON SECURITIES.
(a) Securities authenticated and delivered after the
effectiveness of this First Supplemental Indenture shall be affixed by the
Trustee with the following notation:
"The Company and the Trustee have entered
into a First Supplemental Indenture, dated as
of October 30, 1995, which amended the
covenant regarding limitations on restricted
payments. Reference is hereby made to such
First Supplemental Indenture, copies of which
are on file with The Bank of New York, Trustee."
6
<PAGE>
The Trustee may require holders of Securities authenticated and
delivered prior to the effectiveness of this First Supplemental Indenture to
deliver such Securities to the Trustee so that the Trustee may affix them with
the aforementioned notation.
(b) If the Company or the Trustee so determines, the Company, in
exchange for the Securities, shall issue and the Trustee shall authenticate new
Securities that reflect the changed terms.
* * * * *
7
<PAGE>
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one in the same
instrument.
Dated as of October 30, 1995
TENET HEALTHCARE CORPORATION
By: /s/ Maris Andersons
----------------------------
Name: Maris Andersons
Title: Senior Vice President
Attest:
(Seal)
/s/ Alan Lundgren
----------------------------
Name: Alan Lundgren
Title: Assistant Secretary
Dated as of October 30, 1995
THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
----------------------------
Name: Vivian Georges
Title: Assistant Vice President
Attest:
(Seal)
/s/ Paul Schmalzel
----------------------------
Name: Paul Schmalzel
Title: Assistant Treasurer
8
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
TENET HEALTHCARE CORPORATION, as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
Dated as of August 21, 1997
Supplemental to Indenture, dated as of
March 1, 1995, relating to the Issuer's
9-5/8% Senior Notes Due 2002
<PAGE>
TABLE OF CONTENTS
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE - DEFINITIONS AND OTHER GENERAL
PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Successors and Assigns. . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Separability Clause . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Benefits of Second Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.7 Effectiveness . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE TWO - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.1 Amendments to Section 1.01. . . . . . . . . . . . . . . . 3
SECTION 2.2 Amendment to Section 1.02 . . . . . . . . . . . . . . . . 8
SECTION 2.3 Amendment to Section 2.15 . . . . . . . . . . . . . . . . 8
SECTION 2.4 Amendment to Section 3.07 . . . . . . . . . . . . . . . . 8
SECTION 2.5 Amendment to Section 3.08 . . . . . . . . . . . . . . . .11
SECTION 2.6 Amendment to Section 3.09 . . . . . . . . . . . . . . . .13
SECTION 2.7 Amendment to Section 3.10 . . . . . . . . . . . . . . . .15
i
<PAGE>
SECTION 2.8 Amendment to Section 3.16 . . . . . . . . . . . . . . . .15
SECTION 2.9 Amendment to Section 9.02 . . . . . . . . . . . . . . . .15
ARTICLE THREE - NOTICE, ENDORSEMENT AND CHANGE OF FORM
OF SECURITIES . . . . . . . . . . . . . . . . . . . . . .16
SECTION 3.1 Notice to Securityholders . . . . . . . . . . . . . . . .16
SECTION 3.2 Notation on Securities. . . . . . . . . . . . . . . . . .16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ii
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of August 21, 1997 (the
"SECOND SUPPLEMENTAL INDENTURE"), between TENET HEALTHCARE CORPORATION, a Nevada
corporation (hereinafter called the "COMPANY"), and THE BANK OF NEW YORK, as
trustee (hereinafter called the "TRUSTEE"), under the Indenture (the
"INDENTURE"), dated as of March 1, 1995, between the Company and the Trustee
relating to the Company's 9-5/8% Senior Notes Due 2002 (the "SECURITIES").
RECITALS OF THE COMPANY
WHEREAS, the Company proposes to amend (the "AMENDMENTS") the
Indenture to conform the restrictive covenants contained therein to those
contained in the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 7-7/8% Senior
Notes due 2003, the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 8% Senior Notes
due 2005, and the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 8-5/8% Senior
Subordinated Notes due 2007.
WHEREAS, the Company has solicited consents to the Amendments from the
holders of record of the Securities outstanding at the close of business on
August 7, 1997.
WHEREAS, in accordance with Section 8.02 of the Indenture, the Holders
of a majority of the principal amount of the Securities then outstanding (other
than any Securities owned by the Company or any Affiliate of the Company) have
consented to such Amendments.
WHEREAS, the Board of Directors of the Company has duly authorized the
execution and delivery of this Second Supplemental Indenture, the Company has
delivered an Officers' Certificate and an Opinion of Counsel to the Trustee
pursuant to Section 8.06 of the Indenture and the Company has done all other
things necessary to make this Second Supplemental Indenture a valid agreement of
the Company in accordance with the terms hereof and of the Indenture.
NOW THEREFORE, the Company and Trustee agree as follows for the
benefit of the other party and for the equal and ratable benefit of the Holders
of the Securities:
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
For all purposes of the Indenture and this Second Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this Second Supplemental
Indenture as a whole and not to any particular Article, Section or
subdivision; and
(2) certain capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings and the Table of Contents of this
Second Supplemental Indenture are for convenience only and shall not affect the
construction hereof. Except as otherwise specifically set forth herein, all
references to Sections in the Indenture shall remain unchanged.
SECTION 1.3 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Second Supplemental Indenture by
the Company shall bind its successors and assigns, or any other obligor on the
Securities, whether expressed or not.
SECTION 1.4 SEPARABILITY CLAUSE.
In case any provision in this Second Supplemental Indenture 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.
2
<PAGE>
SECTION 1.5 BENEFITS OF SECOND SUPPLEMENTAL INDENTURE.
Nothing in this Second Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Second Supplemental Indenture.
SECTION 1.6 GOVERNING LAW.
This Second Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York and all rights and remedies
shall be governed by such law without reference to its conflict of laws
provision.
SECTION 1.7 EFFECTIVENESS.
This Second Supplemental Indenture shall take effect on the date (the
"EFFECTIVE DATE") that each of the following conditions shall have been
satisfied:
(a) the Trustee shall have received an Opinion of Counsel and an
Officers' Certificate from the Company each dated the Effective Date and
in accordance with Section 8.06 of the Indenture; and
(b) each of the parties hereto shall have executed and delivered
this Second Supplemental Indenture.
ARTICLE II
THE AMENDMENTS
SECTION 2.1 AMENDMENTS TO SECTION 1.01.
(a) The Definition of "ASSET SALE" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale
and leaseback) other than in the ordinary course of business consistent
3
<PAGE>
with past practices and (ii) the issuance or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries,
in the case of either clause (i) or (ii), whether in a single transaction
or a series of related transactions (a) that have a fair market value in
excess of $25.0 million or (b) for net proceeds in excess of $25.0 million.
Notwithstanding the foregoing: (a) a transfer of assets by the Company to a
Subsidiary or by a Subsidiary to the Company or another Subsidiary, (b) the
issuance of Equity Interests by a Subsidiary to the Company or to another
Subsidiary, (c) a Restricted Payment that is permitted by Section 3.07
hereof and (d) a Hospital Swap shall not be deemed to be an Asset Sale."
(b) The definition of "EXISTING INDEBTEDNESS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
""EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on January 30,1997, until such amounts are repaid, including all
reimbursement obligations with respect to letters of credit outstanding as
of January 30, 1997."
(c) The definition of "HOSPITAL" in Section 1.01 of the Indenture is
hereby amended to read in its entirety as follows:
""HOSPITAL" means a hospital, outpatient clinic, long-term care
facility or other facility or business that is used or useful in or related
to the provision of healthcare services."
(d) Section 1.01 of the Indenture is hereby amended by adding the
definition of "NEW CREDIT FACILITY" to read in its entirety as follows:
""NEW 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 $2.8 billion in aggregate
principal amount of Indebtedness, including any related notes, 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."
4
<PAGE>
(e) The definition of "PERMITTED LIENS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
""PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; PROVIDED that such Liens were in existence prior
to the contemplation of such merger, consolidation or acquisition (unless
such Liens secure Indebtedness that was incurred in connection with or in
contemplation of such acquisition and is used to refinance tax-exempt
Indebtedness) and do not extend to any assets or the Company or its
Subsidiaries other than those of the Person merged into or consolidated
with the Company or that becomes a Subsidiary of the Company; (iii) Liens
on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company; PROVIDED that such Liens were in existence
prior to the contemplation of such acquisition (unless such Liens secure
Indebtedness that was incurred in connection with or in contemplation of
such acquisition and is used to refinance tax-exempt Indebtedness); (iv)
Liens to secure the performance of statutory obligations, tender, bid,
performance, government contract, surety or appeal bonds or other
obligations of a like nature incurred in the ordinary course of business;
(v) Liens existing on January 30, 1997; (vi) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (vii) other Liens on assets of the Company or any
Subsidiary of the Company securing Indebtedness that is permitted by the
terms hereof to be outstanding having an aggregate principal amount at any
one time outstanding not to exceed 10% of the Stockholders' Equity of the
Company; and (viii) Liens to secure Permitted Refinancing Indebtedness
incurred to refinance Indebtedness that was secured by a Lien permitted
hereunder and that was incurred in accordance with the provisions hereof;
PROVIDED that such Liens do not extend to or cover any property or assets
of the Company or any Subsidiary other than assets or property securing the
Indebtedness so refinanced."
(f) The definition of "PERMITTED REFINANCING INDEBTEDNESS" in Section
1.01 of the Indenture is hereby amended to read in its entirety as follows:
5
<PAGE>
""PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used solely to extend, refinance, renew, replace,
defease, or refund, other Indebtedness of the Company or any of its
Subsidiaries; PROVIDED, that, except in the case of Indebtedness of the
Company issued in exchange for, or the net proceeds of which are used
solely to extend, refinance, renew, replace, defease, or refund,
Indebtedness of a Subsidiary of the Company: (i) the principal amount of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of any premiums paid and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Securities on subordination terms at least as favorable to the Holders of
the Securities as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iv) such Indebtedness is incurred by the Company if the Company
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (v) such Indebtedness is incurred by
the Company or a Subsidiary if a Subsidiary is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded."
(g) The definition of "REFINANCING" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""REFINANCING" has the meaning ascribed to it in the Prospectus dated
January 27, 1997 relating to the Senior Notes and the Senior Subordinated
Notes."
(h) The definition of "RELATED BUSINESS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
6
<PAGE>
""RELATED BUSINESS" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the
provision of healthcare services or information or the investment in
management, leasing or operation of a Hospital."
(i) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SENIOR NOTES" to read in its entirety as follows:
""SENIOR NOTES" means the 7 7/8% Senior Notes due 2003 and the 8%
Senior Notes due 2005 of the Company in an aggregate principal amount of
$1.3 billion, issued pursuant to the indentures dated as of January 15,
1997 between the Company and the Bank of New York, as trustee, as amended
or supplemented from time to time."
(j) The definition of "SENIOR SUBORDINATED NOTES" in Section 1.01 of
the Indenture is hereby amended to read in its entirety as follows:
""SENIOR SUBORDINATED NOTES" means the 8 5/8% Senior Subordinated Notes
due 2007 of the Company in an aggregate principal amount of $700.0 million,
issued pursuant to the Senior Subordinated Note Indenture."
(k) The definition of "SENIOR SUBORDINATED NOTE INDENTURE" in Section
1.01 of the Indenture is hereby amended to read in its entirety as follows:
""SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of
January 15, 1997 between the Company and The Bank of New York, as trustee,
as amended or supplemented from time to time, under which the Senior
Subordinated Notes were issued."
(l) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SPECIFIED EXCHANGE" to read in its entirety as follows:
""SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof,
of any right to exchange such Indebtedness for shares of common stock of
Vencor, Inc. or any successor thereto or any other equity securities, other
than Equity Interests of a Subsidiary, owned by the Company as of October
11, 1995, or for any securities or other property received
7
<PAGE>
with respect to such common stock or equity securities or cash in lieu
thereof, whether or not such right is subject to the Company's ability to
pay an amount in cash in lieu thereof."
(m) Section 1.01 of the Indenture is hereby amended, by including the
following definitions at the end thereof:
""2005 EXCHANGEABLE SUBORDINATED NOTES" means the 6% Exchangeable
Subordinated Notes due 2005 of the Company in an aggregate principal amount
of $320.0 million, issued pursuant to the Indenture dated as of January 10,
1996, between the Company and The Bank of New York, as trustee, as amended
or supplemented from time to time."
""2005 SENIOR SUBORDINATED NOTES" means the 10 1/8% Senior Subordinated
Notes due 2005 of the Company in an aggregate principal amount of $900.0
million, issued pursuant to the Indenture dated as of March 1, 1995,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time."
SECTION 2.2 AMENDMENT TO SECTION 1.02.
Section 1.02 of the Indenture is hereby amended to delete the
references therein to "Commencement Date," "Excess Proceeds," "Offer Amount,"
"Offer Period," "Purchase Price," and "Senior Asset Sale Offer."
SECTION 2.3 AMENDMENT TO SECTION 2.15.
Section 2.15 of the Indenture is hereby deleted in its entirety.
SECTION 2.4 AMENDMENT TO SECTION 3.07.
Section 3.07 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 3.07. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than (w) Physician Joint Venture Distributions, (x) divi-
8
<PAGE>
dends or distributions payable in Qualified Equity Interests of the
Company, (y) dividends or distributions payable to the Company or any
Subsidiary of the Company, and (z) dividends or distributions by any
Subsidiary of the Company payable to all holders of a class of Equity
Interests of such Subsidiary on a PRO RATA basis); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company;
or (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Securities, except at the original final maturity date thereof or
pursuant to a Specified Exchange or the Refinancing (all such payments and
other actions set forth in clauses (i) through (iii) above being
collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of
and after giving effect to such Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the fair market value (as
conclusively evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee within 60 days prior
to the date of such Restricted Payment) of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant
to such Restricted Payment):
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving PRO FORMA effect thereto as if such Restricted Payment had
been made at the beginning of the most recently ended four full fiscal
quarter period for which internal financial statements are available
immediately preceding the date of such Restricted Payment, have been
permitted to incur at least $ 1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 3.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after March 1,
1995 (excluding Restricted Payments permitted by clauses (ii), (iii) and
(iv) of the next succeeding paragraph), is less than the sum of (1) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after March 1, 1995 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements
9
<PAGE>
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), PLUS (2) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale (other than to a Subsidiary of the Company)
since March 1, 1995 of Qualified Equity Interests of the Company or of debt
securities of the Company or any of its Subsidiaries that have been
converted into or exchanged for such Qualified Equity Interests of the
Company, PLUS (3) $20.0 million.
If no Default or Event of Default has occurred and is continuing, or
would occur as a consequence thereof, the foregoing provisions shall not
prohibit the following Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would have complied with the provisions hereof;
(ii) the payment of cash dividends on any series of Disqualified
Stock issued after the January 30, 1997 in an aggregate amount
not to exceed the cash received by the Company since January
30, 1997 upon issuance of such Disqualified Stock;
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Subsidiary in
exchange for, or out of the net cash proceeds of, the
substantially concurrent sale (other than to a Subsidiary of
the Company) of Qualified Equity Interests of the Company;
PROVIDED that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(2) of
the preceding paragraph;
(iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or in exchange for or out
of the net cash proceeds from the substantially concurrent
sale (other than to a Subsidiary of the Company) of Qualified
Equity Interests of the Company; PROVIDED that the amount of
any such net cash proceeds that are utilized for
10
<PAGE>
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c)(2) of the preceding paragraph;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any
Subsidiary of the Company held by any member of the Company's
(or any of its Subsidiaries') management pursuant to any
management equity subscription agreement or stock option
agreement; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $15.0 million in any twelve-month period; and
(vi) the making and consummation of a Change of Control Offer with
respect to the Senior Subordinated Notes, the 2005 Senior
Subordinated Notes or the 2005 Exchangeable Subordinated Notes
in accordance with the provisions of the indentures relating
thereto.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed."
SECTION 2.5 AMENDMENT TO SECTION 3.08.
Section 3.08 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 3.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual Transfer Restriction, except for such
Transfer Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on January 30, 1997,
11
<PAGE>
(b) this Indenture and the indentures related to the Senior Notes and the
Senior Subordinated Notes,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition, unless such
Indebtedness was incurred in connection with or in contemplation of such
acquisition for the purpose of refinancing Indebtedness which was tax-exempt, or
in violation of Section 3.09 hereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, PROVIDED that
the Consolidated Cash Flow of such Person shall not be taken into account in
determining whether such acquisition was permitted by the terms hereof except to
the extent that such Consolidated Cash Flow would be permitted to be dividends
to the Company without the prior consent or approval of any third party,
(e) customary non-assignment provisions in leases entered into in the
ordinary course of business,
(f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the ability of any of the
Company's Subsidiaries to transfer the property so acquired to the Company or
any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, PROVIDED that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, or
(h) the New Credit Facility and related documentation as the same is in
effect on January 30, 1997 and as amended or replaced from time to time,
PROVIDED that no such amendment or replacement is more restrictive as to
Transfer Restrictions than the New Credit Facility and related documentation as
in effect on January 30, 1997."
12
<PAGE>
SECTION 2.6 AMENDMENT TO SECTION 3.09.
Section 3.09 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 3.09 LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE
OF PREFERRED STOCK
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, Guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "INCUR") after January 30, 1997 any
Indebtedness (including Acquired Debt), and the Company shall not issue any
Disqualified Stock and shall not permit any of its Subsidiaries to issue
any shares of preferred stock; PROVIDED, HOWEVER, that the Company may
incur Indebtedness (including Acquired Debt) and the Company may issue
shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.5 to l, determined on a PRO FORMA basis
(including a PRO FORMA application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter
period. Indebtedness consisting of reimbursement obligations in respect of
a letter of credit shall be deemed to be incurred when the letter of credit
is first issued.
The foregoing provisions shall not apply to:
(a) the incurrence by the Company of Indebtedness pursuant to the New
Credit Facility in an aggregate principal amount at any time outstanding
not to exceed an amount equal to $2.8 billion less the aggregate amount of
all mandatory repayments applied to permanently reduce the commitments with
respect to such Indebtedness;
(b) the incurrence by the Company of Indebtedness represented by the
Securities, the Senior Notes and the Senior Subordinated Notes;
13
<PAGE>
(c) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred
(including, without limitation, Existing Indebtedness);
(e) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate or currency
risk with respect to any fixed or floating rate Indebtedness that is
permitted by the terms hereof to be outstanding or any receivable or
liability the payment of which is determined by reference to a foreign
currency; PROVIDED that the notional principal amount of any such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its Subsidiaries of
Physician Support Obligations;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;
(h) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by tender, bid, performance, government contract,
surety or appeal bonds, standby letters of credit or warranty or
contractual service obligations of like nature, in each case to the extent
incurred in the ordinary course of business of the Company or such
Subsidiary;
(i) the incurrence by any Subsidiary of the Company of Indebtedness,
the aggregate principal amount of which, together with all other
Indebtedness of the Company's Subsidiaries at the time outstanding
(excluding the Existing Indebtedness until repaid or refinanced and
excluding Physician Support Obligations), does not exceed the greater of
(1) 10% of the Company's Stockholders' Equity as of the date of incurrence
or (2) $10.0 million; PROVIDED that, in the case of clause (l) only, the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
14
<PAGE>
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred would
have been at least 2.5 to 1, determined on a PRO FORMA basis (including a
PRO FORMA application of the net proceeds therefrom), as if such
Indebtedness had been incurred at the beginning of such four-quarter
period; and
(j) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this covenant) in an
aggregate principal amount at any time outstanding not to exceed $250.0
million."
SECTION 2.7 AMENDMENT TO SECTION 3.10.
Section 3.10 of the Indenture is hereby deleted in its entirety.
SECTION 2.8 AMENDMENT TO SECTION 3.16.
Section 3.16 of the Indenture is amended by replacing the amount "$10
million" in the last sentence with the amount "$25 million".
SECTION 2.9 AMENDMENT TO SECTION 9.02.
The address of the Company in Section 9.02 of the Indenture is hereby
amended to read in its entirety as follows:
"Tenet Healthcare Corporation
3820 State Street
Santa Barbara, California 93105
Telecopier No.: (805) 563-6846
Attention: Treasurer"
15
<PAGE>
ARTICLE III
NOTICE, ENDORSEMENT AND CHANGE OF FORM OF SECURITIES
SECTION 3.1 NOTICE TO SECURITYHOLDERS.
After the Effective Date, the Company shall mail to Securityholders a
notice briefly describing the Amendments in accordance with Section 8.02 of the
Indenture.
SECTION 3.2 NOTATION ON SECURITIES.
Securities authenticated and delivered after the Effective Date shall,
at the Company's expense, be affixed by the Trustee with the following notation:
"The Company and the Trustee have entered into a Second
Supplemental Indenture, dated as of August 21, 1997, which amended
certain covenants and eliminated the Company's obligation to offer to
repurchase Securities with the proceeds from certain asset sales.
Reference is hereby made to such Second Supplemental Indenture, copies
of which are on file with The Bank of New York, as Trustee."
The Trustee may, but shall not be required to, require holders of
Securities authenticated and delivered prior to the Effective Date to deliver
such Securities to the Trustee so that the Trustee may affix them with the
aforementioned notation.
* * * * *
16
<PAGE>
This Second Supplemental Indenture may be executed in counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Dated as of August 21, 1997
TENET HEALTHCARE CORPORATION
By: /s/ Raymond L. Mathiasen
------------------------------
Name: Raymond L. Mathiasen
Title: Senior Vice President
THE BANK OF NEW YORK,
AS TRUSTEE
By: /s/ Vivian Georges
------------------------------
Name: Vivian Georges
Title: Assistant Vice President
17
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
TENET HEALTHCARE CORPORATION, as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
Dated as of October 27, 1995
Supplemental to Indenture, dated as of
March 1, 1995, relating to the Issuer's
10-1/8% Senior Subordinated Notes Due 2005
<PAGE>
TABLE OF CONTENTS
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE ONE - DEFINITIONS AND OTHER GENERAL
PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2 Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3 Successors and Assigns. . . . . . . . . . . . . . . . . . .
SECTION 1.4 Separability Clause . . . . . . . . . . . . . . . . . . . .
SECTION 1.5 Benefits of First Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.7 Effectiveness . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE TWO - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE THREE - NOTICE, ENDORSEMENT AND CHANGE OF FORM
OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.1 Replacement of Exhibits . . . . . . . . . . . . . . . . . .
SECTION 3.2 Notation on Securities. . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of October 27,1995 (the "First
Supplemental Indenture"), between TENET HEALTHCARE CORPORATION, a Nevada
corporation (hereinafter called the "Company"), and THE BANK OF NEW YORK, as
trustee (hereinafter called the "Trustee"), under the Indenture (the
"Indenture"), dated as of March 1, 1995, between the Company and the Trustee
relating to the Company's 10-1/8% Senior Subordinated Notes Due 2005 (the
"Securities").
RECITALS OF THE COMPANY
The Company proposes to offer (the "Offering") Exchangeable
Subordinated Notes due 2007 which are exchangeable for shares of common stock of
Vencor, Inc. (the "Exchangeable Notes").
In connection with the Offering, the Company is soliciting consents to
the amendments to the Indenture (the "Amendments") (all as described in the
Solicitation of Consents, dated October 20, 1995 (the "Consent Solicitation").
In accordance with Section 8.02 of the Indenture the Holders of a
majority of the outstanding principal amount of the Securities then outstanding
have consented to such Amendments.
The Board of Directors of the Company has duly authorized the
execution and delivery of this First Supplemental Indenture. The Company has
delivered an Officers' Certificate and an Opinion of Counsel to the Trustee
pursuant to Section 8.06 of the Indenture and has done all other things
necessary to make this First Supplemental Indenture a valid agreement of the
Company in accordance with the terms hereof and of the Indenture.
WHEREFORE, each party agrees as follows for the benefit of the other
party and for the equal or ratable benefit of the Holders of the Securities:
3
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
For all purposes of the Indenture and this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this First Supplemental
Indenture as a whole and not to any particular Article, Section or
subdivision; and
(2) certain capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings and the Table of Contents are for
convenience only and shall not affect the construction hereof. All references
to Sections in the Indenture shall remain unchanged.
SECTION 1.3 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this First Supplemental Indenture by
the Company shall bind its successors and assigns, or any other obligor on the
Securities, whether expressed or not.
SECTION 1.4 SEPARABILITY CLAUSE.
In case any provision in this First Supplemental Indenture 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.
4
<PAGE>
SECTION 1.5 BENEFITS OF FIRST SUPPLEMENTAL INDENTURE.
Nothing in this First Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders, any benefit or any legal or
equitable right, remedy or claim under this First Supplemental Indenture.
SECTION 1.6 GOVERNING LAW.
This First Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York and all rights and remedies
shall be governed by such law without reference to its conflict of laws
provision.
SECTION 1.7 EFFECTIVENESS.
This First Supplemental Indenture shall take effect on the date (the
"Effective Date") that each of the following conditions shall have been
satisfied:
(a) the Trustee shall have received an Opinion of Counsel and an
Officers' Certificate from the Company each dated the Effective Date and in the
form set forth in Section 8.06 of the Indenture.
(b) each of the parties hereto shall have executed and delivered
this First Supplemental Indenture.
ARTICLE II
THE AMENDMENTS
1. Section 1.01 of the Indenture is hereby amended, by including the
following between the definition of "Specified Assets" and the definition of
"Stockholders' Equity":
"SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof,
of any right to exchange such Indebtedness for shares of common stock of
Vencor, Inc. or any successor there-
5
<PAGE>
to or any other equity securities, other than Equity Interests of a
Subsidiary, owned by the Company as of October 11, 1995, or for any
securities or other property received with respect to such common stock or
equity securities, whether or not such right is subject to the Company's
ability to pay an amount in cash in lieu thereof.
2. Subsection (iii) of the first paragraph of Section 3.07 of the
Indenture is hereby amended and restated, in its entirety, to state the
following:
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Securities, except at the original final maturity date thereof or
pursuant to a Specified Exchange or the Refinancing;
ARTICLE III
NOTICE, ENDORSEMENT AND CHANGE OF FORM OF SECURITIES
SECTION 1 NOTICE TO SECURITYHOLDERS.
After the Amendments become effective, the Company shall mail to
Securityholders a notice briefly describing such Amendments in accordance with
Section 8.02 of the Indenture.
SECTION 2 NOTATION ON SECURITIES.
(a) Securities authenticated and delivered after the
effectiveness of this First Supplemental Indenture shall be affixed by the
Trustee with the following notation:
"The Company and the Trustee have entered
into a First Supplemental Indenture, dated as
of October 27, 1995, which amended the covenant
regarding limitations on restricted payments.
Reference is hereby made to such First
Supplemental Indenture, copies of which are on
file with The Bank of New York, Trustee."
6
<PAGE>
The Trustee may require holders of Securities authenticated and
delivered prior to the effectiveness of this First Supplemental Indenture to
deliver such Securities to the Trustee so that the Trustee may affix them with
the aforementioned notation.
(b) If the Company or the Trustee so determines, the Company, in
exchange for the Securities, shall issue and the Trustee shall authenticate new
Securities that reflect the changed terms.
* * * * *
7
<PAGE>
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one in the same
instrument.
Dated as of October 27, 1995
TENET HEALTHCARE CORPORATION
By: /s/ Scott M. Brown
----------------------------
Name: Scott M. Brown
Title: Senior Vice President
Attest:
(Seal)
/s/ Alan Lundgren
----------------------------
Name: Alan Lundgren
Title: Assistant Secretary
Dated as of October 27, 1995
THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
----------------------------
Name: Vivian Georges
Title: Assistant Vice President
Attest:
(Seal)
/s/ Paul Schmalzel
----------------------------
Name: Paul Schmalzel
Title: Assistant Treasurer
8
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
TENET HEALTHCARE CORPORATION, as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
Dated as of August 21, 1997
Supplemental to Indenture, dated as of
March 1, 1995, relating to the Issuer's
10-1/8% Senior Subordinated Notes Due 2005
<PAGE>
TABLE OF CONTENTS
-----------------
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE - DEFINITIONS AND OTHER GENERAL
PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Successors and Assigns. . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Separability Clause . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Benefits of Second Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.7 Effectiveness . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE TWO - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.1 Amendments to Section 1.01. . . . . . . . . . . . . . . . 3
SECTION 2.2 Amendment to Section 1.02 . . . . . . . . . . . . . . . . 8
SECTION 2.3 Amendment to Section 3.09 . . . . . . . . . . . . . . . . 8
SECTION 2.4 Amendment to Section 4.07 . . . . . . . . . . . . . . . . 8
SECTION 2.5 Amendment to Section 4.08 . . . . . . . . . . . . . . . .11
SECTION 2.6 Amendment to Section 4.09 . . . . . . . . . . . . . . . .12
SECTION 2.7 Amendment to Section 4.10 . . . . . . . . . . . . . . . .15
i
<PAGE>
SECTION 2.8 Amendment to Section 4.16 . . . . . . . . . . . . . . . .15
SECTION 2.9 Amendment to Section 11.02. . . . . . . . . . . . . . . .15
ARTICLE THREE - NOTICE, ENDORSEMENT AND CHANGE OF FORM
OF SECURITIES . . . . . . . . . . . . . . . . . . . . . .16
SECTION 3.1 Notice to Securityholders . . . . . . . . . . . . . . . .16
SECTION 3.2 Notation on Securities. . . . . . . . . . . . . . . . . .16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ii
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of August 21, 1997 (the
"SECOND SUPPLEMENTAL INDENTURE"), between TENET HEALTHCARE CORPORATION, a Nevada
corporation (hereinafter called the "COMPANY"), and THE BANK OF NEW YORK, as
trustee (hereinafter called the "TRUSTEE"), under the Indenture (the
"INDENTURE"), dated as of March 1, 1995, between the Company and the Trustee
relating to the Company's 10-1/8% Senior Subordinated Notes Due 2005 (the
"SECURITIES").
RECITALS OF THE COMPANY
WHEREAS, the Company proposes to amend (the "AMENDMENTS") the
Indenture to conform the restrictive covenants contained therein to those
contained in the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 7 7/8% Senior
Notes due 2003, the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 8% Senior Notes
due 2005, and the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 8-5/8% Senior
Subordinated Notes due 2007.
WHEREAS, the Company has solicited consents to the Amendments from the
holders of record of the Securities outstanding at the close of business on
August 7, 1997.
WHEREAS, in accordance with Section 9.02 of the Indenture, the Holders
of a majority of the principal amount of the Securities then outstanding (other
than any Securities owned by the Company or any Affiliate of the Company) have
consented to such Amendments.
WHEREAS, the Board of Directors of the Company has duly authorized the
execution and delivery of this Second Supplemental Indenture, the Company has
delivered an Officers' Certificate and an Opinion of Counsel to the Trustee
pursuant to Section 9.06 of the Indenture and the Company has done all other
things necessary to make this Second Supplemental Indenture a valid agreement of
the Company in accordance with the terms hereof and of the Indenture.
NOW THEREFORE, the Company and Trustee agree as follows for the
benefit of the other party and for the equal and ratable benefit of the Holders
of the Securities:
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
For all purposes of the Indenture and this Second Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this Second Supplemental
Indenture as a whole and not to any particular Article, Section or
subdivision; and
(2) certain capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings and the Table of Contents of this
Second Supplemental Indenture are for convenience only and shall not affect the
construction hereof. Except as otherwise specifically set forth herein, all
references to Sections in the Indenture shall remain unchanged.
SECTION 1.3 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Second Supplemental Indenture by
the Company shall bind its successors and assigns, or any other obligor on the
Securities, whether expressed or not.
SECTION 1.4 SEPARABILITY CLAUSE.
In case any provision in this Second Supplemental Indenture 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.
2
<PAGE>
SECTION 1.5 BENEFITS OF SECOND SUPPLEMENTAL INDENTURE.
Nothing in this Second Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Second Supplemental Indenture.
SECTION 1.6 GOVERNING LAW.
This Second Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York and all rights and remedies
shall be governed by such law without reference to its conflict of laws
provision.
SECTION 1.7 EFFECTIVENESS.
This Second Supplemental Indenture shall take effect on the date (the
"EFFECTIVE DATE") that each of the following conditions shall have been
satisfied:
(a) the Trustee shall have received an Opinion of Counsel and an
Officers' Certificate from the Company each dated the Effective Date and in
accordance with Section 8.06 of the Indenture; and
(b) each of the parties hereto shall have executed and delivered this
Second Supplemental Indenture.
ARTICLE II
THE AMENDMENTS
SECTION 2.1 AMENDMENTS TO SECTION 1.01.
(a) The Definition of "ASSET SALE" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale
and leaseback) other than in the ordinary course of business consistent
3
<PAGE>
with past practices and (ii) the issuance or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries,
in the case of either clause (i) or (ii), whether in a single transaction
or a series of related transactions (a) that have a fair market value in
excess of $25.0 million or (b) for net proceeds in excess of $25.0 million.
Notwithstanding the foregoing: (a) a transfer of assets by the Company to a
Subsidiary or by a Subsidiary to the Company or another Subsidiary, (b) the
issuance of Equity Interests by a Subsidiary to the Company or to another
Subsidiary, (c) a Restricted Payment that is permitted by Section 3.07
hereof and (d) a Hospital Swap shall not be deemed to be an Asset Sale."
(b) The definition of "EXISTING INDEBTEDNESS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
""EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on January 30, 1997, until such amounts are repaid, including all
reimbursement obligations with respect to letters of credit outstanding as
of January 30, 1997."
(c) The definition of "HOSPITAL" in Section 1.01 of the Indenture is
hereby amended to read in its entirety as follows:
""HOSPITAL" means a hospital, outpatient clinic, long-term care
facility or other facility or business that is used or useful in or related
to the provision of healthcare services."
(d) Section 1.01 of the Indenture is hereby amended by adding the
definition of "NEW CREDIT FACILITY" to read in its entirety as follows:
""NEW 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 $2.8 billion in aggregate
principal amount of Indebtedness, including any related notes, 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."
4
<PAGE>
(e) The definition of "PERMITTED LIENS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
""PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; PROVIDED that such Liens were in existence prior
to the contemplation of such merger, consolidation or acquisition (unless
such Liens secure Indebtedness that was incurred in connection with or in
contemplation of such acquisition and is used to refinance tax-exempt
Indebtedness) and do not extend to any assets or the Company or its
Subsidiaries other than those of the Person merged into or consolidated
with the Company or that becomes a Subsidiary of the Company; (iii) Liens
on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company; PROVIDED that such Liens were in existence
prior to the contemplation of such acquisition (unless such Liens secure
Indebtedness that was incurred in connection with or in contemplation of
such acquisition and is used to refinance tax-exempt Indebtedness); (iv)
Liens to secure the performance of statutory obligations, tender, bid,
performance, government contract, surety or appeal bonds or other
obligations of a like nature incurred in the ordinary course of business;
(v) Liens existing on January 30, 1997; (vi) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (vii) other Liens on assets of the Company or any
Subsidiary of the Company securing Indebtedness that is permitted by the
terms hereof to be outstanding having an aggregate principal amount at any
one time outstanding not to exceed 10% of the Stockholders' Equity of the
Company; and (viii) Liens to secure Permitted Refinancing Indebtedness
incurred to refinance Indebtedness that was secured by a Lien permitted
hereunder and that was incurred in accordance with the provisions hereof;
PROVIDED that such Liens do not extend to or cover any property or assets
of the Company or any Subsidiary other than assets or property securing the
Indebtedness so refinanced."
(f) The definition of "PERMITTED REFINANCING INDEBTEDNESS" in Section
1.01 of the Indenture is hereby amended to read in its entirety as follows:
5
<PAGE>
""PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used solely to extend, refinance, renew, replace,
defease, or refund, other Indebtedness of the Company or any of its
Subsidiaries; PROVIDED, that, except in the case of Indebtedness of the
Company issued in exchange for, or the net proceeds of which are used
solely to extend, refinance, renew, replace, defease, or refund,
Indebtedness of a Subsidiary of the Company: (i) the principal amount of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of any premiums paid and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Securities on subordination terms at least as favorable to the Holders of
the Securities as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iv) such Indebtedness is incurred by the Company if the Company
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (v) such Indebtedness is incurred by
the Company or a Subsidiary if a Subsidiary is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded."
(g) The definition of "REFINANCING" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""REFINANCING" has the meaning ascribed to it in the Prospectus dated
January 27, 1997 relating to the Senior Notes and the Senior Subordinated
Notes."
(h) The definition of "RELATED BUSINESS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
6
<PAGE>
""RELATED BUSINESS" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the
provision of healthcare services or information or the investment in
management, leasing or operation of a Hospital."
(i) The definition of "SENIOR NOTES" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""SENIOR NOTES" means the 7 7/8% Senior Notes due 2003 and the 8%
Senior Notes due 2005 of the Company in an aggregate principal amount of
$1.3 billion, issued pursuant to the indentures dated as of January 15,
1997 between the Company and the Bank of New York, as trustee, as amended
or supplemented from time to time."
(j) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SENIOR SUBORDINATED NOTES" to read in its entirety as follows:
""SENIOR SUBORDINATED NOTES" means the 85/8% Senior Subordinated Notes
due 2007 of the Company in an aggregate principal amount of $700.0 million,
issued pursuant to the Senior Subordinated Note Indenture."
(k) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SENIOR SUBORDINATED NOTE INDENTURE" to read in its entirety as
follows:
""SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of
January 15, 1997 between the Company and The Bank of New York, as trustee,
as amended or supplemented from time to time, under which the Senior
Subordinated Notes were issued."
(j) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SPECIFIED EXCHANGE" to read in its entirety as follows:
""SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof,
of any right to exchange such Indebtedness for shares of common stock of
Vencor, Inc. or any successor thereto or any other equity securities, other
than Equity Interests of a Subsidiary, owned by the Company as of October
11, 1995, or for any securities or other property received
7
<PAGE>
with respect to such common stock or equity securities or cash in lieu
thereof, whether or not such right is subject to the Company's ability to
pay an amount in cash in lieu thereof."
(k) Section 1.01 of the Indenture is hereby amended, by including the
following definitions at the end thereof:
""2005 EXCHANGEABLE SUBORDINATED NOTES" means the 6% Exchangeable
Subordinated Notes due 2005 of the Company in an aggregate principal amount
of $320.0 million, issued pursuant to the Indenture dated as of January 10,
1996, between the Company and The Bank of New York, as trustee, as amended
or supplemented from time to time."
""2005 SENIOR SUBORDINATED NOTES" means the 10-1/8% Senior Notes due
2005 of the Company in an aggregate principal amount of $900.0 million,
issued pursuant to the Indenture dated as of March 1, 1995, between the
Company and The Bank of New York, as trustee, as amended or supplemented
from time to time."
SECTION 2.2 AMENDMENT TO SECTION 1.02.
Section 1.02 of the Indenture is hereby amended to delete the
references therein to "Commencement Date," "Excess Proceeds," "Offer Amount,"
"Offer Period," "Purchase Price," and "Senior Asset Sale Offer."
SECTION 2.3 AMENDMENT TO SECTION 3.09.
Section 3.09 of the Indenture is hereby deleted in its entirety.
SECTION 2.4 AMENDMENT TO SECTION 4.07.
Section 4.07 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 4.07. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than (w) Physician Joint Venture Distributions, (x) divi-
8
<PAGE>
dends or distributions payable in Qualified Equity Interests of the
Company, (y) dividends or distributions payable to the Company or any
Subsidiary of the Company, and (z) dividends or distributions by any
Subsidiary of the Company payable to all holders of a class of Equity
Interests of such Subsidiary on a PRO RATA basis); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company;
or (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Securities, except at the original final maturity date thereof or
pursuant to a Specified Exchange or the Refinancing (all such payments and
other actions set forth in clauses (i) through (iii) above being
collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of
and after giving effect to such Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the fair market value (as
conclusively evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee within 60 days prior
to the date of such Restricted Payment) of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant
to such Restricted Payment):
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving PRO FORMA effect thereto as if such Restricted Payment had
been made at the beginning of the most recently ended four full fiscal
quarter period for which internal financial statements are available
immediately preceding the date of such Restricted Payment, have been
permitted to incur at least $ 1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after March 1,
1995 (excluding Restricted Payments permitted by clauses (ii), (iii) and
(iv) of the next succeeding paragraph), is less than the sum of (1) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after March 1, 1995 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements
9
<PAGE>
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), PLUS (2) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale (other than to a Subsidiary of the Company)
since March 1, 1995 of Qualified Equity Interests of the Company or of debt
securities of the Company or any of its Subsidiaries that have been
converted into or exchanged for such Qualified Equity Interests of the
Company, PLUS (3) $20.0 million.
If no Default or Event of Default has occurred and is continuing, or
would occur as a consequence thereof, the foregoing provisions shall not
prohibit the following Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would have complied with the provisions hereof;
(ii) the payment of cash dividends on any series of Disqualified
Stock issued after the January 30, 1997 in an aggregate amount
not to exceed the cash received by the Company since January
30, 1997 upon issuance of such Disqualified Stock;
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Subsidiary in
exchange for, or out of the net cash proceeds of, the
substantially concurrent sale (other than to a Subsidiary of
the Company) of Qualified Equity Interests of the Company;
PROVIDED that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(2) of
the preceding paragraph;
(iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or in exchange for or out
of the net cash proceeds from the substantially concurrent
sale (other than to a Subsidiary of the Company) of Qualified
Equity Interests of the Company; PROVIDED that the amount of
any such net cash proceeds that are utilized for
10
<PAGE>
any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the
preceding paragraph;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any
Subsidiary of the Company held by any member of the Company's
(or any of its Subsidiaries') management pursuant to any
management equity subscription agreement or stock option
agreement; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $15.0 million in any twelve-month period; and
(vi) the making and consummation of a Change of Control Offer with
respect to the Senior Subordinated Notes, the 2005 Senior
Subordinated Notes or the 2005 Exchangeable Subordinated Notes
in accordance with the provisions of the indentures relating
thereto.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed."
SECTION 2.5 AMENDMENT TO SECTION 4.08.
Section 4.08 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 4.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual Transfer Restriction, except for such
Transfer Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on January 30, 1997,
11
<PAGE>
(b) this Indenture and the indentures related to the Senior Notes and
the Senior Subordinated Notes,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition, unless such
Indebtedness was incurred in connection with or in contemplation of such
acquisition for the purpose of refinancing Indebtedness which was tax-exempt, or
in violation of Section 4.09 hereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, PROVIDED that
the Consolidated Cash Flow of such Person shall not be taken into account in
determining whether such acquisition was permitted by the terms hereof except to
the extent that such Consolidated Cash Flow would be permitted to be dividends
to the Company without the prior consent or approval of any third party,
(e) customary non-assignment provisions in leases entered into in the
ordinary course of business,
(f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the ability of any of the
Company's Subsidiaries to transfer the property so acquired to the Company or
any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, or
(h) the New Credit Facility and related documentation as the same is
in effect on January 30, 1997 and as amended or replaced from time to time,
PROVIDED that no such amendment or replacement is more restrictive as to
Transfer Restrictions than the New Credit Facility and related documentation as
in effect on January 30, 1997."
12
<PAGE>
SECTION 2.6 AMENDMENT TO SECTION 4.09.
Section 4.09 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 4.09 LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE
OF PREFERRED STOCK
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, Guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "INCUR") after January 30, 1997 any
Indebtedness (including Acquired Debt), and the Company shall not issue any
Disqualified Stock and shall not permit any of its Subsidiaries to issue
any shares of preferred stock; PROVIDED, HOWEVER, that the Company may
incur Indebtedness (including Acquired Debt) and the Company may issue
shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.5 to l, determined on a PRO FORMA basis
(including a PRO FORMA application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter
period. Indebtedness consisting of reimbursement obligations in respect of
a letter of credit shall be deemed to be incurred when the letter of credit
is first issued.
The foregoing provisions shall not apply to:
(a) the incurrence by the Company of Indebtedness pursuant to the New
Credit Facility in an aggregate principal amount at any time outstanding not to
exceed an amount equal to $2.8 billion less the aggregate amount of all
mandatory repayments applied to permanently reduce the commitments with respect
to such Indebtedness;
(b) the incurrence by the Company of Indebtedness represented by the
Securities, the Senior Notes and the Senior Subordinated Notes;
13
<PAGE>
(c) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund, Indebtedness
that was permitted by this Indenture to be incurred (including, without
limitation, Existing Indebtedness);
(e) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate or currency risk
with respect to any fixed or floating rate Indebtedness that is permitted by the
terms hereof to be outstanding or any receivable or liability the payment of
which is determined by reference to a foreign currency; PROVIDED that the
notional principal amount of any such Hedging Obligation does not exceed the
principal amount of the Indebtedness to which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its Subsidiaries of
Physician Support Obligations;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;
(h) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by tender, bid, performance, government contract,
surety or appeal bonds, standby letters of credit or warranty or contractual
service obligations of like nature, in each case to the extent incurred in the
ordinary course of business of the Company or such Subsidiary;
(i) the incurrence by any Subsidiary of the Company of Indebtedness,
the aggregate principal amount of which, together with all other Indebtedness of
the Company's Subsidiaries at the time outstanding (excluding the Existing
Indebtedness until repaid or refinanced and excluding Physician Support
Obligations), does not exceed the greater of (1) 10% of the Company's
Stockholders' Equity as of the date of incurrence or (2) $10.0 million; PROVIDED
that, in the case of clause (l) only, the Fixed Charge Coverage Ratio for the
Company's most recently ended four full
14
<PAGE>
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred would have
been at least 2.5 to 1, determined on a PRO FORMA basis (including a PRO FORMA
application of the net proceeds therefrom), as if such Indebtedness had been
incurred at the beginning of such four-quarter period; and
(j) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this covenant) in an aggregate
principal amount at any time outstanding not to exceed $250.0 million."
SECTION 2.7 AMENDMENT TO SECTION 4.10.
Section 4.10 of the Indenture is hereby deleted in its entirety.
SECTION 2.8 AMENDMENT TO SECTION 4.16.
Section 4.16 of the Indenture is amended by replacing the amount "$10
million" in the last sentence with the amount "$25 million".
SECTION 2.9 AMENDMENT TO SECTION 11.02.
The address of the Company in Section 11.02 of the Indenture is hereby
amended to read in its entirety as follows:
"Tenet Healthcare Corporation
3820 State Street
Santa Barbara, California 93105
Telecopier No.: (805) 563-6846
Attention: Treasurer"
15
<PAGE>
ARTICLE III
NOTICE, ENDORSEMENT AND CHANGE OF FORM OF SECURITIES
SECTION 3.1 NOTICE TO SECURITYHOLDERS.
After the Effective Date, the Company shall mail to Securityholders a
notice briefly describing the Amendments in accordance with Section 8.02 of the
Indenture.
SECTION 3.2 NOTATION ON SECURITIES.
Securities authenticated and delivered after the Effective Date shall,
at the Company's expense, be affixed by the Trustee with the following notation:
"The Company and the Trustee have entered into a Second
Supplemental Indenture, dated as of August 21, 1997, which amended
certain covenants and eliminated the Company's obligation to offer to
repurchase Securities with the proceeds from certain asset sales.
Reference is hereby made to such Second Supplemental Indenture, copies
of which are on file with The Bank of New York, as Trustee."
The Trustee may, but shall not be required to, require holders of
Securities authenticated and delivered prior to the Effective Date to deliver
such Securities to the Trustee so that the Trustee may affix them with the
aforementioned notation.
* * * * *
16
<PAGE>
This Second Supplemental Indenture may be executed in counterparts,
each of which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Dated as of August 21, 1997
TENET HEALTHCARE CORPORATION
By: /s/ R. L. Mathiasen
------------------------
Name: Raymond L. Mathiasen
Title: Senior Vice President
THE BANK OF NEW YORK,
AS TRUSTEE
By: /s/ Vivian Georges
------------------------
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
TENET HEALTHCARE CORPORATION, as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
Dated as of October 30, 1995
Supplemental to Indenture, dated as of
October 16, 1995, relating to the Issuer's
8-5/8% Senior Notes Due 2003
<PAGE>
TABLE OF CONTENTS
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE ONE - DEFINITIONS AND OTHER GENERAL
PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2 Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3 Successors and Assigns. . . . . . . . . . . . . . . . . . .
SECTION 1.4 Separability Clause . . . . . . . . . . . . . . . . . . . .
SECTION 1.5 Benefits of First Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.7 Effectiveness . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE TWO - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE THREE - NOTICE, ENDORSEMENT AND CHANGE OF FORM
OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.1 Replacement of Exhibits . . . . . . . . . . . . . . . . . .
SECTION 3.2 Notation on Securities. . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of October 30,1995 (the "First
Supplemental Indenture"), between TENET HEALTHCARE CORPORATION, a Nevada
corporation (hereinafter called the "Company"), and THE BANK OF NEW YORK, as
trustee (hereinafter called the "Trustee"), under the Indenture (the
"Indenture"), dated as of October 16, 1995, between the Company and the Trustee
relating to the Company's 8-5/8% Senior Notes due 2003 (the "Securities").
RECITALS OF THE COMPANY
The Company proposes to offer (the "Offering") Exchangeable
Subordinated Notes due 2007 which are exchangeable for shares of common stock of
Vencor, Inc. (the "Exchangeable Notes").
In connection with the Offering, the Company is soliciting consents to
the amendments to the Indenture (the "Amendments") (all as described in the
Solicitation of Consents, dated October 20, 1995 (the "Consent Solicitation").
In accordance with Section 8.02 of the Indenture the Holders of a
majority of the outstanding principal amount of the Securities then outstanding
have consented to such Amendments.
The Board of Directors of the Company has duly authorized the
execution and delivery of this First Supplemental Indenture. The Company has
delivered an Officers' Certificate and an Opinion of Counsel to the Trustee
pursuant to Section 8.06 of the Indenture and has done all other things
necessary to make this First Supplemental Indenture a valid agreement of the
Company in accordance with the terms hereof and of the Indenture.
WHEREFORE, each party agrees as follows for the benefit of the other
party and for the equal or ratable benefit of the Holders of the Securities:
3
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
For all purposes of the Indenture and this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this First Supplemental
Indenture as a whole and not to any particular Article, Section or
subdivision; and
(2) certain capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings and the Table of Contents are for
convenience only and shall not affect the construction hereof. All references
to Sections in the Indenture shall remain unchanged.
SECTION 1.3 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this First Supplemental Indenture by
the Company shall bind its successors and assigns, or any other obligor on the
Securities, whether expressed or not.
SECTION 1.4 SEPARABILITY CLAUSE.
In case any provision in this First Supplemental Indenture 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.
4
<PAGE>
SECTION 1.5 BENEFITS OF FIRST SUPPLEMENTAL INDENTURE.
Nothing in this First Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders, any benefit or any legal or
equitable right, remedy or claim under this First Supplemental Indenture.
SECTION 1.6 GOVERNING LAW.
This First Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York and all rights and remedies
shall be governed by such law without reference to its conflict of laws
provision.
SECTION 1.7 EFFECTIVENESS.
This First Supplemental Indenture shall take effect on the date (the
"Effective Date") that each of the following conditions shall have been
satisfied:
(a) the Trustee shall have received an Opinion of Counsel and an
Officers' Certificate from the Company each dated the Effective Date and in the
form set forth in Section 8.06 of the Indenture.
(b) each of the parties hereto shall have executed and delivered
this First Supplemental Indenture.
5
<PAGE>
ARTICLE II
THE AMENDMENTS
1. Section 1.01 of the Indenture is hereby amended, by including the
following between the definition of "Specified Assets" and the definition of
"Stockholders' Equity":
"SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof,
of any right to exchange such Indebtedness for shares of common stock of
Vencor, Inc. or any successor thereto or any other equity securities, other
than Equity Interests of a Subsidiary, owned by the Company as of October
11, 1995, or for any securities or other property received with respect to
such common stock or equity securities, whether or not such right is
subject to the Company's ability to pay an amount in cash in lieu thereof.
2. Subsection (iii) of the first paragraph of Section 3.07 of the
Indenture is hereby amended and restated, in its entirety, to state the
following:
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Securities, except at the original final maturity date thereof or
pursuant to a Specified Exchange or the Refinancing;
ARTICLE III
NOTICE, ENDORSEMENT AND CHANGE OF FORM OF SECURITIES
SECTION 3.1 NOTICE TO SECURITYHOLDERS.
6
<PAGE>
After the Amendments become effective, the Company shall mail to
Securityholders a notice briefly describing such Amendments in accordance with
Section 8.02 of the Indenture.
SECTION 3.2 NOTATION ON SECURITIES.
(a) Securities authenticated and delivered after the
effectiveness of this First Supplemental Indenture shall be affixed by the
Trustee with the following notation:
"The Company and the Trustee have entered into a First Supplemental
Indenture, dated as of October 30, 1995, which amended the covenant
regarding limitations on restricted payments. Reference is hereby made to
such First Supplemental Indenture, copies of which are on file with The
Bank of New York, Trustee."
The Trustee may require holders of Securities authenticated and
delivered prior to the effectiveness of this First Supplemental Indenture to
deliver such Securities to the Trustee so that the Trustee may affix them with
the aforementioned notation.
(b) If the Company or the Trustee so determines, the Company, in
exchange for the Securities, shall issue and the Trustee shall authenticate new
Securities that reflect the changed terms.
* * * * *
7
<PAGE>
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one in the same
instrument.
Dated as of October 30, 1995
TENET HEALTHCARE CORPORATION
By: /s/ Maris Andersons
--------------------------
Name: Maris Andersons
Title: Senior Vice President
Attest:
(Seal)
/s/ Alan Lundgren
--------------------------
Name: Alan Lundgren
Title: Assistant Secretary
Dated as of October 30, 1995
THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
--------------------------
Name: Vivian Georges
Title: Assistant Vice President
Attest:
8
<PAGE>
(Seal)
/s/ Paul Schmalzel
--------------------------
Name: Paul Schmalzel
Title: Assistant Treasurer
9
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
TENET HEALTHCARE CORPORATION, as Issuer
AND
THE BANK OF NEW YORK,
as Trustee
Dated as of August 21, 1997
Supplemental to Indenture, dated as of
October 16, 1995, relating to the Issuer's
8-5/8% Senior Notes Due 2003
<PAGE>
TABLE OF CONTENTS
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE - DEFINITIONS AND OTHER GENERAL
PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Successors and Assigns. . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Separability Clause . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Benefits of Second Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.7 Effectiveness . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE TWO - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.1 Amendments to Section 1.01. . . . . . . . . . . . . . . . 3
SECTION 2.2 Amendment to Section 1.02 . . . . . . . . . . . . . . . . 8
SECTION 2.3 Amendment to Section 2.15 . . . . . . . . . . . . . . . . 8
SECTION 2.4 Amendment to Section 3.07 . . . . . . . . . . . . . . . . 8
SECTION 2.5 Amendment to Section 3.08 . . . . . . . . . . . . . . . .11
SECTION 2.6 Amendment to Section 3.09 . . . . . . . . . . . . . . . .13
SECTION 2.7 Amendment to Section 3.10 . . . . . . . . . . . . . . . .15
i
<PAGE>
SECTION 2.8 Amendment to Section 3.16 . . . . . . . . . . . . . . . .15
SECTION 2.9 Amendment to Section 9.02 . . . . . . . . . . . . . . . .15
ARTICLE THREE - NOTICE, ENDORSEMENT AND CHANGE OF FORM
OF SECURITIES . . . . . . . . . . . . . . . . . . . . . .16
SECTION 3.1 Notice to Securityholders . . . . . . . . . . . . . . . .16
SECTION 3.2 Notation on Securities. . . . . . . . . . . . . . . . . .16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ii
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of August 21, 1997 (the
"SECOND SUPPLEMENTAL INDENTURE"), between TENET HEALTHCARE CORPORATION, a Nevada
corporation (hereinafter called the "COMPANY"), and THE BANK OF NEW YORK, as
trustee (hereinafter called the "TRUSTEE"), under the Indenture (the
"INDENTURE"), dated as of October 16, 1995, between the Company and the Trustee
relating to the Company's 8-5/8% Senior Notes Due 2003 (the "SECURITIES").
RECITALS OF THE COMPANY
WHEREAS, the Company proposes to amend (the "AMENDMENTS") the
Indenture to conform the restrictive covenants contained therein to those
contained in the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 7-7/8% Senior
Notes due 2003, the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 8% Senior Notes
due 2005, and the Indenture, dated as of January 15, 1997, between the Company
and the Bank of New York, as Trustee, relating to the Company's 8-5/8% Senior
Subordinated Notes due 2007.
WHEREAS, the Company has solicited consents to the Amendments from the
holders of record of the Securities outstanding at the close of business on
August 7, 1997.
WHEREAS, in accordance with Section 8.02 of the Indenture, the Holders
of a majority of the principal amount of the Securities then outstanding (other
than any Securities owned by the Company or any Affiliate of the Company) have
consented to such Amendments.
WHEREAS, the Board of Directors of the Company has duly authorized the
execution and delivery of this Second Supplemental Indenture, the Company has
delivered an Officers' Certificate and an Opinion of Counsel to the Trustee
pursuant to Section 8.06 of the Indenture and the Company has done all other
things necessary to make this Second Supplemental Indenture a valid agreement of
the Company in accordance with the terms hereof and of the Indenture.
NOW THEREFORE, the Company and Trustee agree as follows for the
benefit of the other party and for the equal and ratable benefit of the Holders
of the Securities:
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
For all purposes of the Indenture and this Second Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Indenture and this Second Supplemental
Indenture as a whole and not to any particular Article, Section or
subdivision; and
(2) certain capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
SECTION 1.2 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings and the Table of Contents of this
Second Supplemental Indenture are for convenience only and shall not affect the
construction hereof. Except as otherwise specifically set forth herein, all
references to Sections in the Indenture shall remain unchanged.
SECTION 1.3 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Second Supplemental Indenture by
the Company shall bind its successors and assigns, or any other obligor on the
Securities, whether expressed or not.
SECTION 1.4 SEPARABILITY CLAUSE.
In case any provision in this Second Supplemental Indenture 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.
2
<PAGE>
SECTION 1.5 BENEFITS OF SECOND SUPPLEMENTAL INDENTURE.
Nothing in this Second Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Second Supplemental Indenture.
SECTION 1.6 GOVERNING LAW.
This Second Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York and all rights and remedies
shall be governed by such law without reference to its conflict of laws
provision.
SECTION 1.7 EFFECTIVENESS.
This Second Supplemental Indenture shall take effect on the date (the
"EFFECTIVE DATE") that each of the following conditions shall have been
satisfied:
(a) the Trustee shall have received an Opinion of Counsel and an
Officers' Certificate from the Company each dated the Effective Date and in
accordance with Section 8.06 of the Indenture; and
(b) each of the parties hereto shall have executed and delivered
this Second Supplemental Indenture.
ARTICLE II
THE AMENDMENTS
SECTION 2.1 AMENDMENTS TO SECTION 1.01.
(a) The Definition of "ASSET SALE" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale
and leaseback) other than in the ordinary course of business consistent
3
<PAGE>
with past practices and (ii) the issuance or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries,
in the case of either clause (i) or (ii), whether in a single transaction
or a series of related transactions (a) that have a fair market value in
excess of $25.0 million or (b) for net proceeds in excess of $25.0 million.
Notwithstanding the foregoing: (a) a transfer of assets by the Company to a
Subsidiary or by a Subsidiary to the Company or another Subsidiary, (b) the
issuance of Equity Interests by a Subsidiary to the Company or to another
Subsidiary, (c) a Restricted Payment that is permitted by Section 3.07
hereof and (d) a Hospital Swap shall not be deemed to be an Asset Sale."
(b) The definition of "EXISTING INDEBTEDNESS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
""EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on January 30, 1997, until such amounts are repaid, including all
reimbursement obligations with respect to letters of credit outstanding as
of January 30, 1997."
(c) The definition of "HOSPITAL" in Section 1.01 of the Indenture is
hereby amended to read in its entirety as follows:
""HOSPITAL" means a hospital, outpatient clinic, long-term care
facility or other facility or business that is used or useful in or related
to the provision of healthcare services."
(d) Section 1.01 of the Indenture is hereby amended by adding the
definition of "NEW CREDIT FACILITY" to read in its entirety as follows:
""NEW 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 $2.8 billion in aggregate
principal amount of Indebtedness, including any related notes, 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."
4
<PAGE>
(e) The definition of "PERMITTED LIENS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
""PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; PROVIDED that such Liens were in existence prior
to the contemplation of such merger, consolidation or acquisition (unless
such Liens secure Indebtedness that was incurred in connection with or in
contemplation of such acquisition and is used to refinance tax-exempt
Indebtedness) and do not extend to any assets or the Company or its
Subsidiaries other than those of the Person merged into or consolidated
with the Company or that becomes a Subsidiary of the Company; (iii) Liens
on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company; PROVIDED that such Liens were in existence
prior to the contemplation of such acquisition (unless such Liens secure
Indebtedness that was incurred in connection with or in contemplation of
such acquisition and is used to refinance tax-exempt Indebtedness); (iv)
Liens to secure the performance of statutory obligations, tender, bid,
performance, government contract, surety or appeal bonds or other
obligations of a like nature incurred in the ordinary course of business;
(v) Liens existing on January 30, 1997; (vi) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (vii) other Liens on assets of the Company or any
Subsidiary of the Company securing Indebtedness that is permitted by the
terms hereof to be outstanding having an aggregate principal amount at any
one time outstanding not to exceed 10% of the Stockholders' Equity of the
Company; and (viii) Liens to secure Permitted Refinancing Indebtedness
incurred to refinance Indebtedness that was secured by a Lien permitted
hereunder and that was incurred in accordance with the provisions hereof;
PROVIDED that such Liens do not extend to or cover any property or assets
of the Company or any Subsidiary other than assets or property securing the
Indebtedness so refinanced."
(f) The definition of "PERMITTED REFINANCING INDEBTEDNESS" in Section
1.01 of the Indenture is hereby amended to read in its entirety as follows:
5
<PAGE>
""PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used solely to extend, refinance, renew, replace,
defease, or refund, other Indebtedness of the Company or any of its
Subsidiaries; PROVIDED, that, except in the case of Indebtedness of the
Company issued in exchange for, or the net proceeds of which are used
solely to extend, refinance, renew, replace, defease, or refund,
Indebtedness of a Subsidiary of the Company: (i) the principal amount of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of any premiums paid and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Securities on subordination terms at least as favorable to the Holders of
the Securities as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iv) such Indebtedness is incurred by the Company if the Company
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (v) such Indebtedness is incurred by
the Company or a Subsidiary if a Subsidiary is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded."
(g) The definition of "REFINANCING" in Section 1.01 of the Indenture
is hereby amended to read in its entirety as follows:
""REFINANCING" has the meaning ascribed to it in the Prospectus dated
January 27, 1997 relating to the Senior Notes and the Senior Subordinated
Notes."
(h) The definition of "RELATED BUSINESS" in Section 1.01 of the
Indenture is hereby amended to read in its entirety as follows:
6
<PAGE>
""RELATED BUSINESS" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the
provision of healthcare services or information or the investment in
management, leasing or operation of a Hospital."
(i) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SENIOR NOTES" to read in its entirety as follows:
""SENIOR NOTES" means the 7 7/8% Senior Notes due 2003 and the 8%
Senior Notes due 2005 of the Company in an aggregate principal amount of
$1.3 billion, issued pursuant to the indentures dated as of January 15,
1997 between the Company and the Bank of New York, as trustee, as amended
or supplemented from time to time."
(j) The definition of "SENIOR SUBORDINATED NOTES" in Section 1.01 of
the Indenture is hereby amended to read in its entirety as follows:
""SENIOR SUBORDINATED NOTES" means the 8 5/8% Senior Subordinated Notes
due 2007 of the Company in an aggregate principal amount of $700.0 million,
issued pursuant to the Senior Subordinated Note Indenture."
(k) The definition of "SENIOR SUBORDINATED NOTE INDENTURE" in Section
1.01 of the Indenture is hereby amended to read in its entirety as follows:
""SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of
January 15, 1997 between the Company and The Bank of New York, as trustee,
as amended or supplemented from time to time, under which the Senior
Subordinated Notes were issued."
(l) Section 1.01 of the Indenture is hereby amended by adding the
definition of "SPECIFIED EXCHANGE" to read in its entirety as follows:
""SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof,
of any right to exchange such Indebtedness for shares of common stock of
Vencor, Inc. or any successor thereto or any other equity securities, other
than Equity Interests of a Subsidiary, owned by the Company as of October
11, 1995, or for any securities or other property received with respect to
such common stock or equity securities or cash in lieu
7
<PAGE>
thereof, whether or not such right is subject to the Company's ability to
pay an amount in cash in lieu thereof."
(m) Section 1.01 of the Indenture is hereby amended, by including the
following definitions at the end thereof:
""2005 EXCHANGEABLE SUBORDINATED NOTES" means the 6% Exchangeable
Subordinated Notes due 2005 of the Company in an aggregate principal amount
of $320.0 million, issued pursuant to the Indenture dated as of January 10,
1996, between the Company and The Bank of New York, as trustee, as amended
or supplemented from time to time."
""2005 SENIOR SUBORDINATED NOTES" means the 10 1/8% Senior Subordinated
Notes due 2005 of the Company in an aggregate principal amount of $900.0
million, issued pursuant to the Indenture dated as of March 1, 1995,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time."
SECTION 2.2 AMENDMENT TO SECTION 1.02.
Section 1.02 of the Indenture is hereby amended to delete the
references therein to "Commencement Date," "Excess Proceeds," "Offer Amount,"
"Offer Period," "Purchase Price," and "Senior Asset Sale Offer."
SECTION 2.3 AMENDMENT TO SECTION 2.15.
Section 2.15 of the Indenture is hereby deleted in its entirety.
SECTION 2.4 AMENDMENT TO SECTION 3.07.
Section 3.07 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 3.07. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than (w) Physician Joint Venture Distributions, (x)
dividends or distributions payable in Qualified Equity Interests of the
Compa-
8
<PAGE>
ny, (y) dividends or distributions payable to the Company or any Subsidiary
of the Company, and (z) dividends or distributions by any Subsidiary of the
Company payable to all holders of a class of Equity Interests of such
Subsidiary on a PRO RATA basis); (ii) purchase, redeem or otherwise acquire
or retire for value any Equity Interests of the Company; or (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Securities,
except at the original final maturity date thereof or pursuant to a
Specified Exchange or the Refinancing (all such payments and other actions
set forth in clauses (i) through (iii) above being collectively referred to
as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect
to such Restricted Payment (the amount of any such Restricted Payment, if
other than cash, shall be the fair market value (as conclusively evidenced
by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee within 60 days prior to the date of
such Restricted Payment) of the asset(s) proposed to be transferred by the
Company or such Subsidiary, as the case may be, pursuant to such Restricted
Payment):
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving PRO FORMA effect thereto as if such Restricted Payment had
been made at the beginning of the most recently ended four full fiscal
quarter period for which internal financial statements are available
immediately preceding the date of such Restricted Payment, have been
permitted to incur at least $ 1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 3.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after March 1,
1995 (excluding Restricted Payments permitted by clauses (ii), (iii) and
(iv) of the next succeeding paragraph), is less than the sum of (1) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after March 1, 1995 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consoli-
9
<PAGE>
dated Net Income for such period is a deficit, less 100% of such deficit),
PLUS (2) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale (other than to a Subsidiary of the Company) since
March 1, 1995 of Qualified Equity Interests of the Company or of debt
securities of the Company or any of its Subsidiaries that have been
converted into or exchanged for such Qualified Equity Interests of the
Company, PLUS (3) $20.0 million.
If no Default or Event of Default has occurred and is continuing, or
would occur as a consequence thereof, the foregoing provisions shall not
prohibit the following Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would have complied with the provisions hereof;
(ii) the payment of cash dividends on any series of Disqualified
Stock issued after the January 30, 1997 in an aggregate amount
not to exceed the cash received by the Company since January
30, 1997 upon issuance of such Disqualified Stock;
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Subsidiary in
exchange for, or out of the net cash proceeds of, the
substantially concurrent sale (other than to a Subsidiary of
the Company) of Qualified Equity Interests of the Company;
PROVIDED that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(2) of
the preceding paragraph;
(iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or in exchange for or out
of the net cash proceeds from the substantially concurrent
sale (other than to a Subsidiary of the Company) of Qualified
Equity Interests of the Company; PROVIDED that the amount of
any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acqui-
10
<PAGE>
sition shall be excluded from clause (c)(2) of the preceding
paragraph;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any
Subsidiary of the Company held by any member of the Company's
(or any of its Subsidiaries') management pursuant to any
management equity subscription agreement or stock option
agreement; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $15.0 million in any twelve-month period; and
(vi) the making and consummation of a Change of Control Offer with
respect to the Senior Subordinated Notes, the 2005 Senior
Subordinated Notes or the 2005 Exchangeable Subordinated Notes
in accordance with the provisions of the indentures relating
thereto.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed."
SECTION 2.5 AMENDMENT TO SECTION 3.08.
Section 3.08 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 3.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual Transfer Restriction, except for such
Transfer Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on January 30, 1997,
11
<PAGE>
(b) this Indenture and the indentures related to the Senior Notes and
the Senior Subordinated Notes,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, unless
such Indebtedness was incurred in connection with or in contemplation of
such acquisition for the purpose of refinancing Indebtedness which was
tax-exempt, or in violation of Section 3.09 hereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person,
so acquired, PROVIDED that the Consolidated Cash Flow of such Person shall
not be taken into account in determining whether such acquisition was
permitted by the terms hereof except to the extent that such Consolidated
Cash Flow would be permitted to be dividends to the Company without the
prior consent or approval of any third party,
(e) customary non-assignment provisions in leases entered into in the
ordinary course of business,
(f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the ability of any of the
Company's Subsidiaries to transfer the property so acquired to the Company
or any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Indebtedness being refinanced, or
(h) the New Credit Facility and related documentation as the same is
in effect on January 30, 1997 and as amended or replaced from time to time,
PROVIDED that no such amendment or replacement is more restrictive as to
Transfer Restrictions than the New Credit Facility and related
documentation as in effect on the January 30, 1997."
12
<PAGE>
SECTION 2.6 AMENDMENT TO SECTION 3.09.
Section 3.09 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 3.09 LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE
OF PREFERRED STOCK
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, Guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "INCUR") after January 30, 1997 any
Indebtedness (including Acquired Debt), and the Company shall not issue any
Disqualified Stock and shall not permit any of its Subsidiaries to issue
any shares of preferred stock; PROVIDED, HOWEVER, that the Company may
incur Indebtedness (including Acquired Debt) and the Company may issue
shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.5 to l, determined on a PRO FORMA basis
(including a PRO FORMA application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter
period. Indebtedness consisting of reimbursement obligations in respect of
a letter of credit shall be deemed to be incurred when the letter of credit
is first issued.
The foregoing provisions shall not apply to:
(a) the incurrence by the Company of Indebtedness pursuant to the New
Credit Facility in an aggregate principal amount at any time outstanding not to
exceed an amount equal to $2.8 billion less the aggregate amount of all
mandatory repayments applied to permanently reduce the commitments with respect
to such Indebtedness;
(b) the incurrence by the Company of Indebtedness represented by the
Securities, the Senior Notes and the Senior Subordinated Notes;
13
<PAGE>
(c) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund, Indebtedness
that was permitted by this Indenture to be incurred (including, without
limitation, Existing Indebtedness);
(e) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate or currency risk
with respect to any fixed or floating rate Indebtedness that is permitted by the
terms hereof to be outstanding or any receivable or liability the payment of
which is determined by reference to a foreign currency; PROVIDED that the
notional principal amount of any such Hedging Obligation does not exceed the
principal amount of the Indebtedness to which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its Subsidiaries of
Physician Support Obligations;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;
(h) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by tender, bid, performance, government contract,
surety or appeal bonds, standby letters of credit or warranty or contractual
service obligations of like nature, in each case to the extent incurred in the
ordinary course of business of the Company or such Subsidiary;
(i) the incurrence by any Subsidiary of the Company of Indebtedness,
the aggregate principal amount of which, together with all other Indebtedness of
the Company's Subsidiaries at the time outstanding (excluding the Existing
Indebtedness until repaid or refinanced and excluding Physician Support
Obligations), does not exceed the greater of (1) 10% of the Company's
Stockholders' Equity as of the date of incurrence or (2) $10.0 million; PROVIDED
that, in the case of clause (l) only, the Fixed Charge Coverage Ratio for the
Company's most recently ended four full
14
<PAGE>
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred would have
been at least 2.5 to 1, determined on a PRO FORMA basis (including a PRO FORMA
application of the net proceeds therefrom), as if such Indebtedness had been
incurred at the beginning of such four-quarter period; and
(j) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this covenant) in an aggregate
principal amount at any time outstanding not to exceed $250.0 million."
SECTION 2.7 AMENDMENT TO SECTION 3.10.
Section 3.10 of the Indenture is hereby deleted in its entirety.
SECTION 2.8 AMENDMENT TO SECTION 3.16.
Section 3.16 of the Indenture is amended by replacing the amount "$10
million" in the last sentence with the amount "$25 million".
SECTION 2.9 AMENDMENT TO SECTION 9.02.
The address of the Company in Section 9.02 of the Indenture is hereby
amended to read in its entirety as follows:
"Tenet Healthcare Corporation
3820 State Street
Santa Barbara, California 93105
Telecopier No.: (805) 563-6846
Attention: Treasurer"
15
<PAGE>
ARTICLE III
NOTICE, ENDORSEMENT AND CHANGE OF FORM OF SECURITIES
SECTION 3.1 NOTICE TO SECURITYHOLDERS.
After the Effective Date, the Company shall mail to Securityholders a
notice briefly describing the Amendments in accordance with Section 8.02 of the
Indenture.
SECTION 3.2 NOTATION ON SECURITIES.
Securities authenticated and delivered after the Effective Date shall,
at the Company's expense, be affixed by the Trustee with the following notation:
"The Company and the Trustee have entered into a Second Supplemental
Indenture, dated as of August 21, 1997, which amended certain covenants and
eliminated the Company's obligation to offer to repurchase Securities with
the proceeds from certain asset sales. Reference is hereby made to such
Second Supplemental Indenture, copies of which are on file with The Bank of
New York, as Trustee."
The Trustee may, but shall not be required to, require holders of
Securities authenticated and delivered prior to the Effective Date to deliver
such Securities to the Trustee so that the Trustee may affix them with the
aforementioned notation.
* * * * *
16
<PAGE>
This Second Supplemental Indenture may be executed in counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Dated as of August 21, 1997
TENET HEALTHCARE CORPORATION
By: /s/ Raymond Mathiasen
---------------------------------
Name: Raymond L. Mathiasen
Title: Senior Vice President
THE BANK OF NEW YORK,
AS TRUSTEE
By: /s/ Vivian Georges
---------------------------------
Name: Vivian Georges
Title: Assistant Vice President
17
<PAGE>
TENET HEALTHCARE CORPORATION
-------------------------------
$400,000,000
7 7/8 % SENIOR NOTES due 2003
-------------------------------
-------------------------------
INDENTURE
Dated as of January 15, 1997
-------------------------------
-------------------------------
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 . . . . . . . . . . . . . . . . . . . . 10
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA . . . . . . . . . . . . 10
SECTION 1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . 11
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITY. . . . . . . . . . . . 12
SECTION 2.03. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . . . 12
SECTION 2.04. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . . . . . 12
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . . . . . 13
SECTION 2.06. HOLDER LISTS. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.07. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . 13
SECTION 2.08. PERSONS DEEMED OWNERS . . . . . . . . . . . . . . . . . . 14
SECTION 2.09. REPLACEMENT SECURITIES. . . . . . . . . . . . . . . . . . 15
SECTION 2.10. OUTSTANDING SECURITIES. . . . . . . . . . . . . . . . . . 15
SECTION 2.11. TREASURY SECURITIES . . . . . . . . . . . . . . . . . . . 15
SECTION 2.12. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . 15
SECTION 2.13. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.14. DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . 16
SECTION 2.15. RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.16. CUSIP NUMBER. . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3
COVENANTS
SECTION 3.01. PAYMENT OF SECURITIES . . . . . . . . . . . . . . . . . . 17
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY . . . . . . . . . . . . . 17
SECTION 3.03. COMMISSION REPORTS. . . . . . . . . . . . . . . . . . . . 17
SECTION 3.04. COMPLIANCE CERTIFICATE. . . . . . . . . . . . . . . . . . 18
SECTION 3.05. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.06. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . . . . . 19
SECTION 3.07. LIMITATIONS ON RESTRICTED PAYMENTS. . . . . . . . . . . . 19
SECTION 3.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES . . . . . . . . . . . 21
SECTION 3.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS
AND ISSUANCE OF PREFERRED STOCK . . . . . . . . . . . . . 22
SECTION 3.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES . . . . . . . 23
SECTION 3.11. LIMITATIONS ON LIENS. . . . . . . . . . . . . . . . . . . 24
SECTION 3.12. CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . 24
-i-
<PAGE>
SECTION 3.13. CORPORATE EXISTENCE . . . . . . . . . . . . . . . . . . . 26
SECTION 3.14. LINE OF BUSINESS. . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.15. LIMITATIONS ON ISSUANCES OF GUARANTEES OF
INDEBTEDNESS BY SUBSIDIARIES. . . . . . . . . . . . . . . 26
SECTION 3.16. NO AMENDMENT TO SUBORDINATION PROVISIONS OF
SENIOR SUBORDINATED NOTE INDENTURE. . . . . . . . . . . . 26
ARTICLE 4
SUCCESSORS
SECTION 4.01. LIMITATIONS ON MERGERS, CONSOLIDATIONS
OR SALES OF ASSETS. . . . . . . . . . . . . . . . . . . . 27
SECTION 4.02. SUCCESSOR CORPORATION SUBSTITUTED . . . . . . . . . . . . 27
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.02. ACCELERATION. . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.04. WAIVER OF PAST DEFAULTS . . . . . . . . . . . . . . . . . 30
SECTION 5.05. CONTROL BY MAJORITY . . . . . . . . . . . . . . . . . . . 30
SECTION 5.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . 31
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. . . . . . . . . . . 31
SECTION 5.08. COLLECTION SUIT BY TRUSTEE. . . . . . . . . . . . . . . . 31
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . 31
SECTION 5.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . . . . 32
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.02. RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . 34
SECTION 6.04. TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . . . . . 34
SECTION 6.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . 34
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS . . . . . . . . . . . . . . 34
SECTION 6.07. COMPENSATION AND INDEMNITY. . . . . . . . . . . . . . . . 35
SECTION 6.08. REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . . . . . 35
SECTION 6.09. SUCCESSOR TRUSTEE OR AGENT BY MERGER, ETC.. . . . . . . . 36
SECTION 6.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . . . . 36
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY . . . . 37
ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.01. DEFEASANCE AND DISCHARGE OF THIS INDENTURE
AND THE SECURITIES. . . . . . . . . . . . . . . . . . . . 37
SECTION 7.02. LEGAL DEFEASANCE AND DISCHARGE. . . . . . . . . . . . . . 37
-ii-
<PAGE>
SECTION 7.03. COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . 37
SECTION 7.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. . . . . . . . 38
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 . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 8.01. WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . . 40
SECTION 8.02. WITH CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . 41
SECTION 8.03. COMPLIANCE WITH TIA . . . . . . . . . . . . . . . . . . . 42
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . . . . . 42
SECTION 8.05. NOTATION ON OR EXCHANGE OF SECURITIES . . . . . . . . . . 42
SECTION 8.06. TRUSTEE TO SIGN AMENDMENTS, ETC.. . . . . . . . . . . . . 43
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. TIA CONTROLS. . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS . . . . . . . 44
SECTION 9.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . 45
SECTION 9.06. RULES BY TRUSTEE AND AGENTS . . . . . . . . . . . . . . . 45
SECTION 9.07. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.08. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.09. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . . . . . 45
SECTION 9.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . 46
SECTION 9.12. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.14. COUNTERPART ORIGINALS . . . . . . . . . . . . . . . . . . 46
SECTION 9.15. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . 46
SIGNATURES
EXHIBIT A FORM OF SECURITY
EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE
-iii-
<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) . . . . . . . . . . . . . . . . . . . . 2.06
(b) . . . . . . . . . . . . . . . . . . . . 9.03
(c) . . . . . . . . . . . . . . . . . . . . 9.03
313 (a) . . . . . . . . . . . . . . . . . . . . 6.06
(b)(1). . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . 6.06
(c) . . . . . . . . . . . . . . . . . . . . 6.06; 9.02
(d) . . . . . . . . . . . . . . . . . . . . N.A.
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). . . . . . . . . . . . . . 2.11
(a)(1)(A) . . . . . . . . . . . . . . . . . . 5.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . 5.04
(a)(2). . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . 5.07
(c) . . . . . . . . . . . . . . . . . . . . 2.15; 8.04
317 (a)(1). . . . . . . . . . . . . . . . . . . . 5.08
(a)(2). . . . . . . . . . . . . . . . . . . . 5.09
(b) . . . . . . . . . . . . . . . . . . . . 2.05
- ---------------------
*This Cross-Reference Table is not part of the identure.
-iv-
<PAGE>
318 (a) . . . . . . . . . . . . . . . . . . . . 9.01
(b) . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . 9.01
N.A. means not applicable
-v-
<PAGE>
INDENTURE dated as of January 15, 1997 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 7-7/8% Senior
Notes due 2003 (the "SECURITIES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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.
"ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices and (ii) the issuance or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $25.0
million or (b) for net proceeds in excess of $25.0 million. Notwithstanding the
foregoing: (a) a transfer of assets by the Company to a Subsidiary or by a
Subsidiary to the Company or to another Subsidiary, (b) an issuance of Equity
Interests by a Subsidiary to the Company or to another Subsidiary, (c) a
Restricted Payment that is permitted by Section 3.07 hereof and (d) a Hospital
Swap shall not be deemed to be an Asset Sale.
"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.
<PAGE>
"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.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a
Change of Control and a Rating Decline.
"CLOSING DATE" means January 30, 1997.
"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 CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period PLUS (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), PLUS (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
PLUS (iii) the Fixed Charges of such Person and its Subsidiaries for such
period, to the extent that such Fixed Charges were deducted in computing such
Consolidated Net Income, PLUS (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization of, a Subsidiary of the referent
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
-2-
<PAGE>
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP but
excluding any one-time charge or expense incurred in order to consummate the
Refinancing; PROVIDED that (i) the Net Income of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"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
Closing Date 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 Closing Date 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.
"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.
"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.
"DEPOSITARY" means a clearing agency registered under the Exchange Act
that is designated to act as Depositary for the Securities.
"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 January
15, 2003.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the Closing Date, until such amounts are
-3-
<PAGE>
repaid, including all reimbursement obligations with respect to letters of
credit outstanding as of the Closing Date.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"),
then the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period, and (ii) the Consolidated Cash Flow and
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letters of credit or
bankers' acceptance financings, and net payments or receipts (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments (and non-
cash dividend payments in the case of a Person that is a Subsidiary) on any
series of preferred stock of such Person, TIMES (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"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.
"GLOBAL SECURITY" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 2.02.
"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
-4-
<PAGE>
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) forward 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.
"HOLDER" means a Person in whose name a Security is registered.
"HOSPITAL" means a hospital, outpatient clinic, long-term care
facility or other facility or business that is used or useful in or related to
the provision of healthcare services.
"HOSPITAL SWAP" means an exchange of assets by the Company or a
Subsidiary of the Company for one or more Hospitals and/or one or more Related
Businesses or for the Capital Stock of any Person owning one or more Hospitals
and/or one or more Related Businesses.
"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.
"INVESTMENT GRADE" means a rating of BBB- or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the
event that the Company shall select any other Rating Agency, the equivalent of
such ratings by such Rating Agency shall be used.
"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).
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii)
-5-
<PAGE>
any extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"NEW 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 $2.8 billion in aggregate principal amount
of Indebtedness, including any related notes, 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.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"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.
"PAYMENT DEFAULT" means, 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.
"PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; PROVIDED that such Liens were in existence prior to
the contemplation of such merger, consolidation or acquisition (unless such
Liens secure Indebtedness that was incurred in connection with or in
contemplation of such acquisition and is used to refinance tax-exempt
Indebtedness) and do not extend to any assets or the Company or its Subsidiaries
other than those of the Person merged into or consolidated with the Company or
that becomes a Subsidiary of the Company; (iii) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company;
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition (unless such Liens secure Indebtedness that was incurred in
connection with or in contemplation of such acquisition and is used to refinance
tax-exempt Indebtedness); (iv) Liens to secure the performance of statutory
obligations, tender, bid, performance, government contract, surety or appeal
bonds or other obligations of a like nature incurred in the ordinary course of
business; (v) Liens existing on the Closing Date; (vi) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (vii) other Liens on assets of the Company or any Subsidiary
of the Company securing Indebtedness that is permitted by the terms hereof to be
outstanding having an aggregate principal amount at any one time outstanding not
to exceed 10% of the Stockholders' Equity of the Company; and (viii) Liens to
secure Permitted Refinancing Indebtedness incurred to refinance Indebtedness
that was secured by a Lien permitted hereunder and that was incurred in
accordance with the provisions hereof; PROVIDED that such Liens do not extend to
or cover any property or
-6-
<PAGE>
assets of the Company or any Subsidiary other than assets or property securing
the Indebtedness so refinanced.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used solely to extend, refinance, renew, replace, defease or
refund, other Indebtedness of the Company or any of its Subsidiaries; PROVIDED
that, except in the case of Indebtedness of the Company issued in exchange for,
or the net proceeds of which are used solely to extend, refinance, renew,
replace, defease or refund, Indebtedness of a Subsidiary of the Company: (i)
the principal amount of such Permitted Refinancing Indebtedness does not exceed
the principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of any premiums paid and
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Securities, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Securities on subordination
terms at least as favorable to the Holders of Securities as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iv) such Indebtedness is incurred by
the Company if the Company is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (v) such Indebtedness
is incurred by the Company or a Subsidiary if a Subsidiary is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"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).
"PHYSICIAN JOINT VENTURE DISTRIBUTIONS" means distributions made by
the Company or any of its Subsidiaries to any physician, pharmacist or other
allied healthcare professional in connection with the unwinding, liquidation or
other termination of any joint venture or similar arrangement between any such
Person and the Company or any of its Subsidiaries.
"PHYSICIAN SUPPORT OBLIGATIONS" means any obligation or Guarantee
incurred in the ordinary course of business by the Company or a Subsidiary of
the Company in connection with any advance, loan or payment to, or on behalf of
or for the benefit of any physician, pharmacist or other allied healthcare
professional for the purpose of recruiting, redirecting or retaining the
physician, pharmacist or other allied healthcare professional to provide service
to patients in the service area of any Hospital or Related Business owned or
operated by the Company or any of its Subsidiaries; EXCLUDING, HOWEVER,
compensation for services provided by physicians, pharmacists or other allied
healthcare professionals to any Hospital or Related Business owned or operated
by the Company or any of its Subsidiaries.
"QUALIFIED EQUITY INTERESTS" shall mean all Equity Interests of the
Company other than Disqualified Stock of the Company.
"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, which shall be substituted for S&P or Moody's or both,
as the case may be.
-7-
<PAGE>
"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
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).
"REFINANCING" has the meaning ascribed to it in the prospectus dated
January 27, 1997 relating to the Company's 8% Senior Notes due 2005, the
Securities and the Senior Subordinated Notes.
"RELATED BUSINESS" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the provision
of healthcare services or information or the investment in, management, leasing
or operation of a Hospital.
"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.
"SENIOR SUBORDINATED NOTES" means the 8 5/8% Senior Subordinated Notes
due 2007 of the Company in an aggregate principal amount of $700.0 million,
issued pursuant to the Senior Subordinated Note Indenture.
"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of
January 15, 1997 between the Company and The Bank of New York, as trustee, as
amended or supplemented from time to time, under which the Senior Subordinated
Notes were issued.
-8-
<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 Closing Date.
"S&P" means Standard & Poor's Corporation and its successors.
"SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof, of any
right to exchange such Indebtedness for shares of common stock of Vencor, Inc.
or any successor thereto or any other equity securities, other than Equity
Interests of a Subsidiary, owned by the Company as of October 11, 1995, or for
any securities or other property received with respect to such common stock or
equity securities or cash in lieu thereof, whether or not such right is subject
to the Company's ability to pay an amount in cash in lieu thereof.
"STOCKHOLDERS' EQUITY" means, with respect to any Person as of any
date, the stockholders' equity of such Person determined in accordance with GAAP
as of the date of the most recent available internal financial statements of
such Person, and calculated on a PRO FORMA basis to give effect to any
acquisition or disposition by such Person consummated or to be consummated since
the date of such financial statements and on or prior to the date of such
calculation.
"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.
"TRANSFER RESTRICTION" means, with respect to the Company's
Subsidiaries, any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries, or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries.
"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.
"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.
-9-
<PAGE>
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
"2005 EXCHANGEABLE SUBORDINATED NOTES" means the 6% Exchangeable
Subordinated Notes due 2005 of the Company in an aggregate principal amount of
$320.0 million, issued pursuant to the Indenture dated as of January 10, 1996,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
"2005 SENIOR SUBORDINATED NOTES" means the 10c% Senior Subordinated
Notes due 2005 of the Company in an aggregate principal amount of
$900.0 million, issued pursuant to the Indenture dated as of March 1, 1995,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
- ---- ----------
"Affiliate Transaction". . . . . . . . . . . . . . 3.10
"Bankruptcy Law" . . . . . . . . . . . . . . . . . 5.01
"Change of Control Offer". . . . . . . . . . . . . 3.12
"Change of Control Payment". . . . . . . . . . . . 3.12
"Change of Control Payment Date" . . . . . . . . . 3.12
"Covenant Defeasance". . . . . . . . . . . . . . . 7.03
"Custodian". . . . . . . . . . . . . . . . . . . . 5.01
"Event of Default" . . . . . . . . . . . . . . . . 5.01
"incur". . . . . . . . . . . . . . . . . . . . . . 3.09
"Legal Defeasance" . . . . . . . . . . . . . . . . 7.02
"Legal Holiday". . . . . . . . . . . . . . . . . . 9.07
"Notice of Default". . . . . . . . . . . . . . . . 5.01
"Paying Agent" . . . . . . . . . . . . . . . . . . 2.03
"Registrar". . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments". . . . . . . . . . . . . . . 3.07
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;
-10-
<PAGE>
"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.
ARTICLE 2
THE SECURITIES
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. The Securities may be
Global Securities, as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITY.
Every Global Security authenticated and delivered hereunder shall bear
a legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee thereof. This Security may not be exchanged in whole or in part
for a Security registered, and no transfer of this Security in whole or in part
may be registered, in the name of any person other than such Depositary or a
nominee thereof, except in the limited circumstances described in the
Indenture."
-11-
<PAGE>
SECTION 2.03. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Securities for the Company by
manual or facsimile signature.
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 2.09 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.
Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
The Company initially appoints The Depository Trust Company as the
Depositary.
SECTION 2.04. 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 (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.
-12-
<PAGE>
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Securities.
SECTION 2.05. 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 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 2.06. 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 2.07. 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 2.12 or 8.05 hereof, which shall be paid by the Company).
-13-
<PAGE>
Notwithstanding the foregoing, a Global Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or any such nominee to a successor of the Depositary or a nominee of such
successor, unless:
(i) the Depositary is at any time unwilling or unable to
continue as depository or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act and a successor
depository is not appointed by the Company within 90 days,
(ii) an Event of Default under this Indenture with respect to the
Securities has occurred and is continuing and the beneficial owners
representing a majority in principal amount of the Securities advise the
Depositary to cease acting as depositary or
(iii) the Company, in its sole discretion, determines at any
time that the Securities shall no longer be represented by a Global
Security, the Company will issue individual Securities of the applicable
amount and in certificated form in exchange for a Global Security. In any
such instance, an owner of a beneficial interest in the Global Security
will be entitled to physical delivery of individual securities in
certificated form of like tenor, equal in principal amount to such
beneficial interest and to have such Securities in certificated form
registered in its name.
SECTION 2.08. PERSONS DEEMED OWNERS.
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 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.
So long as the Depositary or its nominee is the registered Holder of a
Global Security, the Depositary or its nominee, as the case may be, will be
treated as the sole owner of it for all purposes under the Indenture and the
beneficial owners of the Securities will be entitled only to those rights and
benefits afforded to them in accordance with the Depositary's regular operating
procedures. Except as provided in Section 2.07, owners of beneficial interests
in a Global Security will not be entitled to have Securities represented by a
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of Securities in certificated form and will not be
considered the registered Holders thereof under the Indenture.
None of the Company, the Trustee, any Paying Agent or the Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECTION 2.09. 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
-14-
<PAGE>
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 2.10. 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 2.09 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 2.11 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
SECTION 2.11. 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 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 2.12. 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 2.13. 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
-15-
<PAGE>
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 2.14. 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 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 2.15. 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
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.16. 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 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.
-16-
<PAGE>
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 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 2.04 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 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.
-17-
<PAGE>
(ii) The Trustee, at the Company's request and 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).
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.
-18-
<PAGE>
(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.
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. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than (w) Physician Joint Venture Distributions, (x) dividends
or distributions payable in Qualified Equity Interests of the Company,
(y) dividends or distributions payable to the Company or any Subsidiary of the
Company, and (z) dividends or distributions by any Subsidiary of the Company
payable to all holders of a class of Equity Interests of such Subsidiary on a
PRO RATA basis); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company; or (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Securities, except at the original
final maturity date thereof or pursuant to a Specified Exchange or the
Refinancing (all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "RESTRICTED PAYMENTS"),
unless, at the time of and after giving effect to such Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the fair
market value (as conclusively evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee within
60 days prior to the date of such Restricted Payment) of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to such Restricted Payment):
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving PRO FORMA effect thereto as if such Restricted Payment had
been made at the beginning of the most recently ended four full fiscal
quarter period for which internal financial statements are available
immediately preceding the date of such Restricted Payment, have been
permitted to incur at least
-19-
<PAGE>
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 3.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after March 1,
1995 (excluding Restricted Payments permitted by clauses (ii), (iii) and
(iv) of the next succeeding paragraph), is less than the sum of (1) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after March 1, 1995 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), PLUS (2) 100% of
the aggregate net cash proceeds received by the Company from the issue or
sale (other than to a Subsidiary of the Company) since March 1, 1995 of
Qualified Equity Interests of the Company or of debt securities of the
Company or any of its Subsidiaries that have been converted into or
exchanged for such Qualified Equity Interests of the Company, PLUS (3)
$20.0 million.
If no Default or Event of Default has occurred and is continuing, or
would occur as a consequence thereof, the foregoing provisions shall not
prohibit the following Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions hereof;
(ii) the payment of cash dividends on any series of Disqualified Stock
issued after the Closing Date in an aggregate amount not to exceed the cash
received by the Company since the Closing Date upon issuance of such
Disqualified Stock;
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Subsidiary in exchange for, or
out of the net cash proceeds of, the substantially concurrent sale (other
than to a Subsidiary of the Company) of Qualified Equity Interests of the
Company; PROVIDED that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or in exchange for or out of the net cash proceeds
from the substantially concurrent sale (other than to a Subsidiary of the
Company) of Qualified Equity Interests of the Company; PROVIDED that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(2) of the preceding paragraph;
(v) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or
stock option agreement; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $15.0 million in any twelve-month period; and
(vi) the making and consummation of (A) a senior subordinated asset
sale offer in accordance with the provisions of the indenture relating to
the 2005 Senior Subordinated Notes or (B) a Change of Control Offer with
respect to the Senior Subordinated Notes in accordance with
-20-
<PAGE>
the provisions of the Senior Subordinated Note Indenture or change of
control offer with respect to the 2005 Senior Subordinated Notes or the
2005 Exchangeable Subordinated Notes in accordance with the provisions of
the indentures relating thereto.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed.
SECTION 3.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual Transfer Restriction, except for such Transfer
Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the Closing Date,
(b) this Indenture, the Senior Subordinated Note Indenture and the
Indenture relating to the Company's 8% Senior Notes due 2005,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, unless
such Indebtedness was incurred in connection with or in contemplation of
such acquisition for the purpose of refinancing Indebtedness which was
tax-exempt, or in violation of Section 3.09 hereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person,
so acquired, PROVIDED that the Consolidated Cash Flow of such Person shall
not be taken into account in determining whether such acquisition was
permitted by the terms hereof except to the extent that such Consolidated
Cash Flow would be permitted to be dividends to the Company without the
prior consent or approval of any third party,
(e) customary non-assignment provisions in leases entered into in the
ordinary course of business,
(f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the ability of any of the
Company's Subsidiaries to transfer the property so acquired to the Company
or any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Indebtedness being refinanced, or
(h) the New Credit Facility and related documentation as the same is
in effect on the Closing Date and as amended or replaced from time to time,
PROVIDED that no such amendment or replacement is more restrictive as to
Transfer Restrictions than the New Credit Facility and related
documentation as in effect on the Closing Date.
-21-
<PAGE>
SECTION 3.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "INCUR") after the Closing Date any Indebtedness (including
Acquired Debt), and the Company shall not issue any Disqualified Stock and shall
not permit any of its Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired
Debt) and the Company may issue shares of Disqualified Stock if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.5 to 1, determined on a PRO FORMA
basis (including a PRO FORMA application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
Indebtedness consisting of reimbursement obligations in respect of a letter of
credit shall be deemed to be incurred when the letter of credit is first issued.
The foregoing provisions shall not apply to:
(a) the incurrence by the Company of Indebtedness pursuant to the New
Credit Facility in an aggregate principal amount at any time outstanding
not to exceed an amount equal to $2.8 billion less the aggregate amount of
all mandatory repayments applied to permanently reduce the commitments with
respect to such Indebtedness;
(b) the incurrence by the Company of Indebtedness represented by the
Securities, the 8% Senior Notes due 2005 and the Senior Subordinated Notes;
(c) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred
(including, without limitation, Existing Indebtedness);
(e) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate or currency
risk with respect to any fixed or floating rate Indebtedness that is
permitted by the terms hereof to be outstanding or any receivable or
liability the payment of which is determined by reference to a foreign
currency; PROVIDED that the notional principal amount of any such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its Subsidiaries of
Physician Support Obligations;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;
(h) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by tender, bid, performance, government contract,
surety or appeal bonds, standby
-22-
<PAGE>
letters of credit or warranty or contractual service obligations of like
nature, in each case to the extent incurred in the ordinary course of
business of the Company or such Subsidiary;
(i) the incurrence by any Subsidiary of the Company of Indebtedness,
the aggregate principal amount of which, together with all other
Indebtedness of the Company's Subsidiaries at the time outstanding
(excluding the Existing Indebtedness until repaid or refinanced and
excluding Physician Support Obligations), does not exceed the greater of
(1) 10% of the Company's Stockholders' Equity as of the date of incurrence
or (2) $10.0 million; PROVIDED that, in the case of clause (1) only, the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred would
have been at least 2.5 to 1, determined on a PRO FORMA basis (including a
PRO FORMA application of the net proceeds therefrom), as if such
Indebtedness had been incurred at the beginning of such four-quarter
period; and
(j) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this covenant) in an
aggregate principal amount at any time outstanding not to exceed
$250.0 million.
SECTION 3.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make any
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"),
unless (i) such Affiliate Transaction, is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that could have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction was approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $15.0
million, an opinion as to the fairness to the Company or such Subsidiary of such
Affiliate Transaction from a financial point of view issued by an investment
banking firm of national standing; PROVIDED that (x) transactions or payments
pursuant to any employment arrangements or employee or director benefit plans
entered into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (y) transactions between or among the Company and/or its
Subsidiaries and (z) transactions permitted under Section 3.07 hereof, in each
case, shall not be deemed to be Affiliate Transactions.
SECTION 3.11. LIMITATIONS ON LIENS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
(except Permitted Liens) on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom unless all payments due hereunder and under the Securities are secured
on an equal and ratable basis with the Obligations so secured until such time as
such Obligations are no longer secured by a Lien.
-23-
<PAGE>
SECTION 3.12. 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:
(1) that the Change of Control Offer is being made pursuant to this
Section 3.12 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
-24-
<PAGE>
(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 Triggering Event.
SECTION 3.13. CORPORATE EXISTENCE.
Subject to Section 3.12 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,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 3.14. LINE OF BUSINESS.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in any material extent in any business other than the ownership,
operation and management of Hospitals and Related Businesses.
SECTION 3.15. LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY
SUBSIDIARIES.
The Company shall not permit any Subsidiary, directly or indirectly,
to Guarantee or secure the payment of any other Indebtedness of the Company or
any of its Subsidiaries (except Indebtedness of a Subsidiary of such Subsidiary
or Physician Support Obligations) unless such Subsidiary
-25-
<PAGE>
simultaneously executes and delivers a supplemental indenture to this Indenture,
in substantially the form attached hereto as Exhibit B, providing for the
Guarantee of the payment of the Securities by such Subsidiary, which Guarantee
shall be senior to or PARI PASSU with such Subsidiary's Guarantee of or pledge
to secure such other Indebtedness. Notwithstanding the foregoing, any such
Guarantee by a Subsidiary of the Securities shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon the sale
or other disposition, by way of merger or otherwise, to any Person not an
Affiliate of the Company, of all of the Company's stock in, or all or
substantially all the assets of, such Subsidiary. The foregoing provisions
shall not be applicable to any one or more Guarantees that otherwise would be
prohibited of up to $25.0 million in aggregate principal amount of Indebtedness
of the Company or its Subsidiaries at any time outstanding.
SECTION 3.16. NO AMENDMENT TO SUBORDINATION PROVISIONS OF SENIOR SUBORDINATED
NOTE INDENTURE.
The Company shall not amend, modify or alter the Senior Subordinated
Note Indenture or the indentures relating to the 2005 Senior Subordinated Notes
or the 2005 Exchangeable Subordinated Notes in any way that would (i) increase
the principal of, advance the final maturity date of or shorten the Weighted
Average Life to Maturity of (a) any 2005 Senior Subordinated Notes or 2005
Exchangeable Subordinated Notes or (b) any Senior Subordinated Notes such that
the final maturity date of the Senior Subordinated Notes is earlier than the
91st day following the final maturity date of the Senior Notes or (ii) amend the
provisions of Article 10 of the Senior Subordinated Note Indenture (which
relates to subordination) or the subordination provisions of the indentures
relating to the 2005 Senior Subordinated Notes or the 2005 Exchangeable
Subordinated Notes or any of the defined terms used therein in a manner that
would be adverse to the Holders of the Securities.
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
-26-
<PAGE>
(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 (A) shall 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 and (B) shall, at the time of
such transaction and after giving PRO FORMA effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 3.09 hereof.
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 Sections
3.07, 3.09 or 3.12 hereof;
(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;
(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
-27-
<PAGE>
Guaranteed by the Company or any of its Significant Subsidiaries), whether
such Indebtedness or Guarantee exists on the Closing Date or is created
after the Closing Date, 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
(e) admits in writing its inability generally to pay its debts
as the same become due; and
(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.
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
-28-
<PAGE>
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."
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 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 also
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 January 15 of the years set forth below:
Year Percentage
---- ----------
1997 . . . . . . . . . . . . . . . . 107.875%
1998 . . . . . . . . . . . . . . . . 106.300%
1999 . . . . . . . . . . . . . . . . 104.725%
2000 . . . . . . . . . . . . . . . . 103.150%
2001 . . . . . . . . . . . . . . . . 101.575%
2002 . . . . . . . . . . . . . . . . 100.000%
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 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.
-29-
<PAGE>
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. 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 shall have the right to direct the time, method and place of
conducting any proceeding for exercising 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 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.
-30-
<PAGE>
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
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;
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.
-31-
<PAGE>
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 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.
-32-
<PAGE>
(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.
(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.
-33-
<PAGE>
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 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 Closing Date, 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.
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.
-34-
<PAGE>
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;
(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
-35-
<PAGE>
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.
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
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed 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
this Indenture (and the Trustee, on demand of and at the
-36-
<PAGE>
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 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 Sections 3.07, 3.08, 3.09, 3.10,
3.11, 3.12, 3.14, 3.15, and 3.16 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:
(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.
-37-
<PAGE>
(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
Closing Date, 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 before the
date that is one year prior to the final maturity of the Securities, 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 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 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.
-38-
<PAGE>
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 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 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
-39-
<PAGE>
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 any supplemental indenture required pursuant
to Section 3.15 hereof;
(iv) to provide for the assumption of the Company's obligations to
Holders of Securities in the case of a merger, consolidation or sale of
assets pursuant to Article 4 hereof;
(v) 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
(vi) 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 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 Section 8.01 and 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
-40-
<PAGE>
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):
(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) 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);
(v) make any Security payable in money other than that stated in the
Securities;
(vi) make any change in Section 5.04 or 5.07 hereof; or
(vii) 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
-41-
<PAGE>
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 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 2.06 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 class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
-42-
<PAGE>
If to the Company:
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, California 93105
Telecopier No.: (805) 563-7070
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, or by overnight air courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA. Failure to
mail a notice or 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.
-43-
<PAGE>
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;
(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.
-44-
<PAGE>
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 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.
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.
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.
-45-
<PAGE>
SIGNATURES
Dated as of January 15, 1997 TENET HEALTHCARE CORPORATION
By: /s/ Terence P. McMullen
---------------------------------------
Name: Terence P. McMullen
Title: Vice President
Attest:
/s/ Richard B. Silver (SEAL)
- ----------------------------
Richard B. Silver
Dated as of January 15, 1997 THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
---------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
Attest:
____________________________(SEAL)
By: /s/ Mary Jane Morrissey
------------------------
Authorized Signatory
-46-
<PAGE>
EXHIBIT A
(Face of Security)
7 7/8% Senior Note
due January 15, 2003
CUSIP: 88033G AE 0
No. $____________
TENET HEALTHCARE CORPORATION
promises to pay to
______________________________________________________________
or its registered assigns, the principal sum of_______________ Dollars on
January 15, 2003.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1997.
Record Dates: January 1 and July 1 (whether or not a Business Day).
[(If Security is a Global Security--) This Security is a Global Security within
the meaning of the Indenture hereinafter referred to and is registered in the
name of a Depositary or a nominee thereof. This Security may not be exchanged
in whole or in part for a Security registered, and no transfer of this Security
in whole or in part may be registered, in the name of any person other than such
Depositary or a nominee thereof, except in the limited circumstances described
in the Indenture.]
TENET HEALTHCARE CORPORATION
By: _________________________
(SEAL)
Dated: __________, ____
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
A-1
<PAGE>
(Back of Security)
7 7/8% SENIOR NOTE
due January 15, 2003
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 7 7/8%. The Company shall pay interest
semiannually in arrears on January 15 and July 15 of each year, commencing July
15, 1997 to Holders of record on the immediately preceding January 1 and July 1,
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 canceled 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
appropriate written 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.
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 January 15, 1997 (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 $400,000,000 in aggregate
principal amount.
A-2
<PAGE>
5. MANDATORY REDEMPTION. Subject to the Company's obligation to make an
offer to repurchase Securities under certain circumstances pursuant to Section
3.12 of the Indenture (as described in paragraph 6 below), the Company shall not
be required to make any mandatory redemption or sinking fund payments with
respect to the Securities.
6. 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.
7. 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.
8. 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 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.
9. 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 such 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 such 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): (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) 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); (v) make any Security
payable in money other than that stated in the Securities; (vi) 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 (vii) 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,
A-3
<PAGE>
defect or inconsistency, to provide for uncertificated Securities in addition to
or in place of certificated Securities, to provide for any supplemental
indenture required pursuant to Section 3.15 of the Indenture, to provide for the
assumption of the Company's obligations to Holders of Securities in the case of
a merger, consolidation or sale of assets pursuant to Article 4 of the
Indenture, 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 Commission in order to effect or maintain the qualification
of the Indenture under the TIA.
10. 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 of Sections 3.07, 3.09 or 3.12 of the Indenture; (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 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, which judgment or judgments are not paid, discharged or stayed
for a period of 60 days; and (vii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Significant Subsidiaries.
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 Securities
by written notice to the Company and the Trustee, may declare all the Securities
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 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 the
Holders' interest.
If an Event of Default occurs under the Indenture prior to maturity 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 the premium specified in
Section 5.02 of the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of such Securities.
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 the principal of, premium, if any,
or interest on the Securities.
A-4
<PAGE>
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.
11. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to incur additional indebtedness
and issue preferred stock, pay dividends or make other distributions, repurchase
Equity Interests or subordinated indebtedness, create certain liens, enter into
certain transactions with affiliates, issue or sell Equity Interests of the
Company's Subsidiaries, issue Guarantees of Indebtedness by the Company's
Subsidiaries and enter into certain mergers and consolidations.
12. 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.
13. 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
Securities 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.
14. AUTHENTICATION. This Security shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
15. 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).
16. 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
3820 State Street
Santa Barbara, California 93105
Attention: Treasurer
17. GOVERNING LAW. The internal laws of the State of New York shall
govern and be used to construe the Indenture and the Securities, without regard
to conflict of laws provisions thereof.
A-5
<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.*
- -------------------------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i) The
Securities Transfer Agent Medallion Program (Stamp); (ii) The New York Stock
Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee.
A-6
<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 3.12 of the Indenture, check the
box below:
/ / Section 3.12
(Change of Control)
If you want to have only part of the Security purchased by the Company
pursuant to Section 3.12 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.*
- -------------------------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i) The
Securities Transfer Agent Medallion Program (Stamp); (ii) The New York Stock
Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee.
A-7
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Guarantor"), a subsidiary of
Tenet Healthcare Corporation (or its successor), a Nevada corporation (the
"Company"), and The Bank of New York, as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of January 15, 1997, providing
for the issuance of an aggregate principal amount of $400,000,000 of 7 7/8%
Senior Notes due 2003 (the "Securities");
WHEREAS, Section 3.15 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall guarantee the payment of the Securities pursuant to a Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 8.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the holders of the Securities as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby unconditionally
guarantees to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Securities or the Obligations
of the Company hereunder and thereunder, that: (a) the principal of, premium, if
any, and interest on the Securities will be promptly paid in full when due,
whether at maturity, by acceleration, redemption or otherwise, and interest on
the overdue principal, premium, if any, and (to the extent permitted by law)
interest on any interest on the Securities and all other payment Obligations of
the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full, all in accordance with the terms hereof and thereof; and
(b) in case of any extension of time of payment or renewal of any Securities or
any of such other payment Obligations, that same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration, redemption or otherwise. Failing
payment when due of any amount so guaranteed for whatever reason the Guarantor
shall be obligated to pay the same immediately. An Event of Default under the
Indenture or the Securities shall constitute an event of default under this
Guarantee, and shall entitle the Holders of Securities to accelerate the
Obligations of the Guarantor hereunder in the same manner and to the same extent
as the Obligations of the Company. The Guarantor hereby agrees that its
Obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or the Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment against the
B-1
<PAGE>
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of the Guarantor.
The Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenant that this Guarantee will not be discharged
except by complete performance of the Obligations contained in the Securities
and the Indenture. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantor, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantor, any amount paid by either to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. The Guarantor agrees that it shall not be entitled to, and
hereby waives, any right of subrogation in relation to the Holders in respect of
any Obligations guaranteed hereby. The Guarantor further agrees that, as
between the Guarantor, on one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article 5 of the Indenture for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such Obligations as provided in
Article 5 of the Indenture, such Obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantor for the purpose of this
Guarantee.
3. EXECUTION AND DELIVERY OF GUARANTEE. To evidence its Guarantee set
forth in Section 2, the Guarantor hereby agrees that a notation of such
Guarantee substantially in the form of EXHIBIT A shall be endorsed by an officer
of such Guarantor on each Security authenticated and delivered by the Trustee
and that this Supplemental Indenture shall be executed on behalf of such
Guarantor, by manual or facsimile signature, by its President or one of its Vice
Presidents.
The Guarantor hereby agrees that its Guarantee set forth in Section 2
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee.
If an Officer whose signature is on this Supplemental Indenture or on
the Guarantee no longer holds that office at the time the Trustee authenticates
the Security on which a Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantors.
4. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Except as set forth in Articles 3 and 4 of the Indenture, nothing
contained in this Supplemental Indenture or in the Securities shall prevent any
consolidation or merger of the Guarantor with or into the Company or any
Subsidiary of the Company that has executed and delivered a supplemental
indenture substantially in the form hereof or shall prevent any sale or
conveyance of the property of the Guarantor as an entirety or substantially as
an entirety, to the Company or any such Subsidiary of the Company.
(b) Except as provided in Section 4(a) hereof or in a transaction
referred to in Section 5 hereof, the Guarantor shall not consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person unless (1)
either (x) the Guarantor shall be the surviving Person of such merger or
consolidation or (y) the surviving Person or transferee is a corporation,
partnership or trust organized and existing under the laws of the United States,
any state thereof or the District of Columbia and such surviving Person or
transferee shall expressly
B-2
<PAGE>
assume all the obligations of the Guarantor under this Guarantee and the
Indenture pursuant to a supplemental indenture substantially in the form
hereof; (2) immediately after giving effect to such transaction (including the
incurrence of any Indebtedness incurred or anticipated to be incurred in
connection with such transaction) no Default or Event of Default shall have
occurred and be continuing; and (3) the Company has delivered to the Trustee an
Officers' Certificate and Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with the Indenture, that the
surviving Person agrees to be bound thereby, and that all conditions precedent
in the Indenture relating to such transaction have been satisfied. For purposes
of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of related transactions) of all or substantially
all of the properties and assets of one or more Subsidiaries of the Guarantor,
the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Guarantor, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Guarantor.
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 Guarantor in accordance with this Section 4(b) hereof, the successor
corporation shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of the Guarantees to be
endorsed upon all of the Securities issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee. All
Guarantees so issued shall in all respects have the same legal rank and benefit
under the Indenture as the Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture as though all of such Guarantees had
been issued at the date of the execution hereof.
5. RELEASES FOLLOWING SALE OF ASSETS. Concurrently with any sale, lease,
conveyance or other disposition (by merger, consolidation or otherwise) of
assets of the Guarantor (including, if applicable, disposition of all of the
Capital Stock of the Guarantor), any Liens in favor of the Trustee in the assets
sold, leased, conveyed or otherwise disposed of shall be released. If the
assets sold, leased, conveyed or otherwise disposed of (by merger, consolidation
or otherwise) include all or substantially all of the assets of the Guarantor or
all of the Capital Stock of the Guarantor in each case, in compliance with the
terms of the Indenture, then the Guarantor shall be automatically and
unconditionally released from and relieved of its Obligations under its
Guarantee. Upon delivery by the Company to the Trustee of an Officers'
Certificate to the effect that such sale, lease, conveyance or other disposition
was made by the Company in accordance with the provisions of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of the Guarantor from its Obligations under its Guarantee.
6. LIMITATION ON GUARANTOR LIABILITY. For purposes hereof, the
Guarantor's liability will be that amount from time to time equal to the
aggregate liability of the Guarantor hereunder, but shall be limited to the
lesser of (i) the aggregate amount of the Obligations of the Company under the
Securities and the Indenture and (ii) the amount, if any, which would not have
(A) rendered the Guarantor "insolvent" (as such term is defined in the federal
Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or
(B) left it with unreasonably small capital at the time its Guarantee of the
Securities was entered into, after giving effect to the incurrence of existing
Indebtedness immediately prior to such time; PROVIDED that it shall be a
presumption in any lawsuit or other proceeding in which the Guarantor is a party
that the amount guaranteed pursuant to its Guarantee is the amount set forth in
clause (i) above unless any creditor, or representative of creditors of the
Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor,
otherwise proves in such a lawsuit that the aggregate liability of the Guarantor
is limited to the amount set forth in clause (ii). In making any determination
as to the solvency or sufficiency of capital of the Guarantor in accordance with
the previous sentence, the right of the Guarantor to contribution from other
Subsidiaries of the Company that have executed and delivered a
B-3
<PAGE>
supplemental indenture substantially in the form hereof and any other rights the
Guarantor may have, contractual or otherwise, shall be taken into account.
7. "TRUSTEE" TO INCLUDE PAYING AGENT. In case at any time any Paying
Agent other than the Trustee shall have been appointed by the Company and be
then acting under the Indenture, the term "Trustee" as used in this Supplemental
Indenture shall in each case (unless the context shall otherwise require) be
construed as extending to and including such Paying Agent within its meaning as
fully and for all intents and purposes as if such Paying Agent were named in
this Supplemental Indenture in place of the Trustee.
8. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantor under the Securities, any
Guarantees, the Indenture or this Supplemental 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.
9. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
10. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
11. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
B-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:
---------------------, ----
[Guarantor]
By:
------------------------------
Name:
Title:
The Bank of New York,
as Trustee
By:
------------------------------
Name:
Title:
B-5
<PAGE>
EXHIBIT A TO SUPPLEMENTAL INDENTURE
GUARANTEE
The Guarantor hereby unconditionally guarantees to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of the
Indenture, the Securities or the Obligations of the Company to the Holders or
the Trustee under the Securities or under the Indenture, that: (a) the principal
of, and premium, if any, and interest on the Securities will be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on overdue principal, premium, if any, and (to the extent permitted
by law) interest on any interest on the Securities and all other payment
Obligations of the Company to the Holders or the Trustee under the Indenture or
under the Securities will be promptly paid in full, all in accordance with the
terms thereof; and (b) in case of any extension of time of payment or renewal of
any Securities or any of such other payment Obligations, the same will be
promptly paid in full when due in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration, redemption or otherwise.
Failing payment when due of any amount so guaranteed, for whatever reason, the
Guarantor shall be obligated to pay the same immediately.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in a Supplemental Indenture, dated as of _________ __, ____ to the Indenture,
and reference is hereby made to the Indenture, as supplemented, for the precise
terms of this Guarantee.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its respective successors and
assigns to the extent set forth in the Indenture until full and final payment of
all of the Company's Obligations under the Securities and the Indenture and
shall inure to the benefit of the successors and assigns of the Trustee and the
Holders of Securities and, in the event of any transfer or assignment of rights
by any Holder of Securities or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This a
Guarantee of payment and not a guarantee of collection.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
For purposes hereof, the Guarantor's liability will be that amount
from time to time equal to the aggregate liability of the Guarantor hereunder,
but shall be limited to the lesser of (i) the aggregate amount of the
Obligations of the Company under the Securities and the Indenture and (ii) the
amount, if any, which would not have (A) rendered the Guarantor "insolvent" (as
such term is defined in the federal Bankruptcy Law and in the Debtor and
Creditor Law of the State of New York) or (B) left it with unreasonably small
capital at the time its Guarantee of the Securities was entered into, after
giving effect to the incurrence of existing Indebtedness immediately prior to
such time; PROVIDED that it shall be a presumption in any lawsuit or other
proceeding in which the Guarantor is a party that the amount guaranteed pursuant
to its Guarantee is the amount set forth in clause (i) above unless any
creditor, or representative of creditors of the Guarantor, or debtor in
possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a
lawsuit that the aggregate liability of the Guarantor is limited to the amount
set forth in clause (ii). The Indenture provides that, in making any
determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of the
B-6
<PAGE>
Guarantor to contribution from other Subsidiaries of the Company that have
become Guarantors and any other rights the Guarantor may have, contractual or
otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
[GUARANTOR]
By:
------------------------
Name:
Title:
B-7
<PAGE>
TENET HEALTHCARE CORPORATION
--------------------------------
$900,000,000
8% SENIOR NOTES due 2005
--------------------------------
-----------------------------
INDENTURE
Dated as of January 15, 1997
-----------------------------
--------------------------------
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 . . . . . . . . . . . . . . . . 10
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA . . . . . . . . 10
SECTION 1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . 11
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING . . . . . . . . . . . . . . . . . 11
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITY. . . . . . . . 11
SECTION 2.03. EXECUTION AND AUTHENTICATION. . . . . . . . . . . 12
SECTION 2.04. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . 12
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . 13
SECTION 2.06. HOLDER LISTS. . . . . . . . . . . . . . . . . . . 13
SECTION 2.07. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . 13
SECTION 2.08. PERSONS DEEMED OWNERS . . . . . . . . . . . . . . 14
SECTION 2.09. REPLACEMENT SECURITIES. . . . . . . . . . . . . . 14
SECTION 2.10. OUTSTANDING SECURITIES. . . . . . . . . . . . . . 15
SECTION 2.11. TREASURY SECURITIES . . . . . . . . . . . . . . . 15
SECTION 2.12. TEMPORARY SECURITIES. . . . . . . . . . . . . . . 15
SECTION 2.13. CANCELLATION. . . . . . . . . . . . . . . . . . . 16
SECTION 2.14. DEFAULTED INTEREST. . . . . . . . . . . . . . . . 16
SECTION 2.15. RECORD DATE . . . . . . . . . . . . . . . . . . . 16
SECTION 2.16. CUSIP NUMBER. . . . . . . . . . . . . . . . . . . 16
ARTICLE 3
COVENANTS
SECTION 3.01. PAYMENT OF SECURITIES . . . . . . . . . . . . . . 16
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY . . . . . . . . . 17
SECTION 3.03. COMMISSION REPORTS. . . . . . . . . . . . . . . . 17
SECTION 3.04. COMPLIANCE CERTIFICATE. . . . . . . . . . . . . . 18
SECTION 3.05. TAXES . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.06. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . 19
SECTION 3.07. LIMITATIONS ON RESTRICTED PAYMENTS. . . . . . . . 19
SECTION 3.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES . . . . . . 21
SECTION 3.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS
AND ISSUANCE OF PREFERRED STOCK . . . . . . . . 22
SECTION 3.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES . . . 23
-i-
<PAGE>
Page
----
SECTION 3.11. LIMITATIONS ON LIENS. . . . . . . . . . . . . . . 24
SECTION 3.12. CHANGE OF CONTROL . . . . . . . . . . . . . . . . 24
SECTION 3.13. CORPORATE EXISTENCE . . . . . . . . . . . . . . . 25
SECTION 3.14. LINE OF BUSINESS. . . . . . . . . . . . . . . . . 26
SECTION 3.15. LIMITATIONS ON ISSUANCES OF GUARANTEES OF
INDEBTEDNESS BY SUBSIDIARIES. . . . . . . . . . 26
SECTION 3.16. NO AMENDMENT TO SUBORDINATION PROVISIONS OF
SENIOR SUBORDINATED NOTE INDENTURE. . . . . . . 26
ARTICLE 4
SUCCESSORS
SECTION 4.01. LIMITATIONS ON MERGERS, CONSOLIDATIONS OR
SALES OF ASSETS . . . . . . . . . . . . . . . . 27
SECTION 4.02. SUCCESSOR CORPORATION SUBSTITUTED . . . . . . . . 27
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . 28
SECTION 5.02. ACCELERATION. . . . . . . . . . . . . . . . . . . 29
SECTION 5.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . 30
SECTION 5.04. WAIVER OF PAST DEFAULTS . . . . . . . . . . . . . 30
SECTION 5.05. CONTROL BY MAJORITY . . . . . . . . . . . . . . . 30
SECTION 5.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . 31
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. . . . . . . 31
SECTION 5.08. COLLECTION SUIT BY TRUSTEE. . . . . . . . . . . . 31
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . 31
SECTION 5.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . 32
SECTION 5.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . 32
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE . . . . . . . . . . . . . . . . 32
SECTION 6.02. RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . 33
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . 34
SECTION 6.04. TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . 34
SECTION 6.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . 34
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS . . . . . . . . . . 34
SECTION 6.07. COMPENSATION AND INDEMNITY. . . . . . . . . . . . 35
SECTION 6.08. REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . 35
SECTION 6.09. SUCCESSOR TRUSTEE OR AGENT BY MERGER, ETC.. . . . 36
SECTION 6.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . 36
-ii-
<PAGE>
Page
----
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.01. DEFEASANCE AND DISCHARGE OF THIS
INDENTURE AND THE SECURITIES. . . . . . . . . . 37
SECTION 7.02. LEGAL DEFEASANCE AND DISCHARGE. . . . . . . . . . 37
SECTION 7.03. COVENANT DEFEASANCE . . . . . . . . . . . . . . . 37
SECTION 7.04. CONDITIONS TO LEGAL OR COVENANT
DEFEASANCE. . . . . . . . . . . . . . . . . . . 38
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 . . . . . . . . . . . . . . . . . . 40
ARTICLE 8
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 8.01. WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . 40
SECTION 8.02. WITH CONSENT OF HOLDERS . . . . . . . . . . . . . 41
SECTION 8.03. COMPLIANCE WITH TIA . . . . . . . . . . . . . . . 42
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . 42
SECTION 8.05. NOTATION ON OR EXCHANGE OF SECURITIES . . . . . . 42
SECTION 8.06. TRUSTEE TO SIGN AMENDMENTS, ETC.. . . . . . . . . 43
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. TIA CONTROLS. . . . . . . . . . . . . . . . . . . 43
SECTION 9.02. NOTICES . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.03. COMMUNICATION BY HOLDERS WITH OTHER
HOLDERS . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT . . . . . . . . . . . . . . . . . . . 44
SECTION 9.05. STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.06. RULES BY TRUSTEE AND AGENTS . . . . . . . . . . . 45
SECTION 9.07. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . 45
SECTION 9.08. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND SHAREHOLDERS. . . . . . . . . . . 45
SECTION 9.09. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . 45
SECTION 9.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . 45
SECTION 9.11. NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS. . . . . . . . . . . . . . . . . . . 46
-iii-
<PAGE>
Page
----
SECTION 9.12. SUCCESSORS. . . . . . . . . . . . . . . . . . . . 46
SECTION 9.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . 46
SECTION 9.14. COUNTERPART ORIGINALS . . . . . . . . . . . . . . 46
SECTION 9.15. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . 46
SIGNATURES
EXHIBIT A FORM OF SECURITY
EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE
-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). . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
(b). . . . . . . . . . . . . . . . . . . . . . . . . . 9.03
(c). . . . . . . . . . . . . . . . . . . . . . . . . . 9.03
313 (a). . . . . . . . . . . . . . . . . . . . . . . . . . 6.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . 6.06
(c). . . . . . . . . . . . . . . . . . . . . . . . . . 6.06; 9.02
(d). . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
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) . . . . . . . . . . . . . . . . . . 2.11
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . 5.05
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . 5.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . . . 5.07
(c). . . . . . . . . . . . . . . . . . . . . . . . . . 2.15; 8.04
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 5.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . 5.09
(b). . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
- ---------------------------
*This Cross-Reference Table is not part of the indenture.
-v-
<PAGE>
318 (a). . . . . . . . . . . . . . . . . . . . . . . . . . 9.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . . . . . . . . . 9.01
N.A. means not applicable
-vi-
<PAGE>
INDENTURE dated as of January 15, 1997 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 8% Senior
Notes due 2005 (the "SECURITIES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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.
"ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices and (ii) the issuance or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $25.0
million or (b) for net proceeds in excess of $25.0 million. Notwithstanding the
foregoing: (a) a transfer of assets by the Company to a Subsidiary or by a
Subsidiary to the Company or to another Subsidiary, (b) an issuance of Equity
Interests by a Subsidiary to the Company or to another Subsidiary, (c) a
Restricted Payment that is permitted by Section 3.07 hereof and (d) a Hospital
Swap shall not be deemed to be an Asset Sale.
"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.
<PAGE>
"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.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a
Change of Control and a Rating Decline.
"CLOSING DATE" means January 30, 1997.
"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 CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period PLUS (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), PLUS (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
PLUS (iii) the Fixed Charges of such Person and its Subsidiaries for such
period, to the extent that such Fixed Charges were deducted in computing such
Consolidated Net Income, PLUS (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization of, a Subsidiary of the referent
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
-2-
<PAGE>
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP but
excluding any one-time charge or expense incurred in order to consummate the
Refinancing; PROVIDED that (i) the Net Income of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"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
Closing Date 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 Closing Date 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.
"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.
"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.
"DEPOSITARY" means a clearing agency registered under the Exchange Act
that is designated to act as Depositary for the Securities.
"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
January 15, 2005.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the Closing Date, until such amounts are
-3-
<PAGE>
repaid, including all reimbursement obligations with respect to letters of
credit outstanding as of the Closing Date.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"),
then the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period, and (ii) the Consolidated Cash Flow and
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letters of credit or
bankers' acceptance financings, and net payments or receipts (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments (and
non-cash dividend payments in the case of a Person that is a Subsidiary) on any
series of preferred stock of such Person, TIMES (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"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.
"GLOBAL SECURITY" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 2.02.
"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
-4-
<PAGE>
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) forward 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.
"HOLDER" means a Person in whose name a Security is registered.
"HOSPITAL" means a hospital, outpatient clinic, long-term care
facility or other facility or business that is used or useful in or related to
the provision of healthcare services.
"HOSPITAL SWAP" means an exchange of assets by the Company or a
Subsidiary of the Company for one or more Hospitals and/or one or more Related
Businesses or for the Capital Stock of any Person owning one or more Hospitals
and/or one or more Related Businesses.
"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.
"INVESTMENT GRADE" means a rating of BBB- or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the
event that the Company shall select any other Rating Agency, the equivalent of
such ratings by such Rating Agency shall be used.
"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).
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii)
-5-
<PAGE>
any extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"NEW 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 $2.8 billion in aggregate principal amount
of Indebtedness, including any related notes, 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.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"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.
"PAYMENT DEFAULT" means, 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.
"PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; PROVIDED that such Liens were in existence prior to
the contemplation of such merger, consolidation or acquisition (unless such
Liens secure Indebtedness that was incurred in connection with or in
contemplation of such acquisition and is used to refinance tax-exempt
Indebtedness) and do not extend to any assets or the Company or its Subsidiaries
other than those of the Person merged into or consolidated with the Company or
that becomes a Subsidiary of the Company; (iii) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company;
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition (unless such Liens secure Indebtedness that was incurred in
connection with or in contemplation of such acquisition and is used to refinance
tax-exempt Indebtedness); (iv) Liens to secure the performance of statutory
obligations, tender, bid, performance, government contract, surety or appeal
bonds or other obligations of a like nature incurred in the ordinary course of
business; (v) Liens existing on the Closing Date; (vi) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (vii) other Liens on assets of the Company or any Subsidiary
of the Company securing Indebtedness that is permitted by the terms hereof to be
outstanding having an aggregate principal amount at any one time outstanding not
to exceed 10% of the Stockholders' Equity of the Company; and (viii) Liens to
secure Permitted Refinancing Indebtedness incurred to refinance Indebtedness
that was secured by a Lien permitted hereunder and that was incurred in
accordance with the provisions hereof; PROVIDED that such Liens do not extend to
or cover any property or
-6-
<PAGE>
assets of the Company or any Subsidiary other than assets or property securing
the Indebtedness so refinanced.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used solely to extend, refinance, renew, replace, defease or
refund, other Indebtedness of the Company or any of its Subsidiaries; PROVIDED
that, except in the case of Indebtedness of the Company issued in exchange for,
or the net proceeds of which are used solely to extend, refinance, renew,
replace, defease or refund, Indebtedness of a Subsidiary of the Company: (i)
the principal amount of such Permitted Refinancing Indebtedness does not exceed
the principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of any premiums paid and
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Securities, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Securities on subordination
terms at least as favorable to the Holders of Securities as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iv) such Indebtedness is incurred by
the Company if the Company is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (v) such Indebtedness
is incurred by the Company or a Subsidiary if a Subsidiary is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"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).
"PHYSICIAN SUPPORT OBLIGATIONS" means any obligation or Guarantee
incurred in the ordinary course of business by the Company or a Subsidiary of
the Company in connection with any advance, loan or payment to, or on behalf of
or for the benefit of any physician, pharmacist or other allied healthcare
professional for the purpose of recruiting, redirecting or retaining the
physician, pharmacist or other allied healthcare professional to provide service
to patients in the service area of any Hospital or Related Business owned or
operated by the Company or any of its Subsidiaries; EXCLUDING, HOWEVER,
compensation for services provided by physicians, pharmacists or other allied
healthcare professionals to any Hospital or Related Business owned or operated
by the Company or any of its Subsidiaries.
"QUALIFIED EQUITY INTERESTS" shall mean all Equity Interests of the
Company other than Disqualified Stock of the Company.
"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, which shall be substituted for S&P or Moody's or both,
as the case may be.
-7-
<PAGE>
"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
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).
"REFINANCING" has the meaning ascribed to it in the prospectus dated
January 27, 1997 relating to the Company's 7 7/8% Senior Notes due 2003, the
Securities and the Senior Subordinated Notes.
"RELATED BUSINESS" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the provision
of healthcare services or information or the investment in, management, leasing
or operation of a Hospital.
"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.
"SENIOR SUBORDINATED NOTES" means the 8 5/8% Senior Subordinated Notes
due 2007 of the Company in an aggregate principal amount of $700.0 million,
issued pursuant to the Senior Subordinated Note Indenture.
"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of
January 15, 1997 between the Company and The Bank of New York, as trustee, as
amended or supplemented from time to time, under which the Senior Subordinated
Notes were issued.
-8-
<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 Closing Date.
"S&P" means Standard & Poor's Corporation and its successors.
"SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof, of any
right to exchange such Indebtedness for shares of common stock of Vencor, Inc.
or any successor thereto or any other equity securities, other than Equity
Interests of a Subsidiary, owned by the Company as of October 11, 1995, or for
any securities or other property received with respect to such common stock or
equity securities or cash in lieu thereof, whether or not such right is subject
to the Company's ability to pay an amount in cash in lieu thereof.
"STOCKHOLDERS' EQUITY" means, with respect to any Person as of any
date, the stockholders' equity of such Person determined in accordance with GAAP
as of the date of the most recent available internal financial statements of
such Person, and calculated on a PRO FORMA basis to give effect to any
acquisition or disposition by such Person consummated or to be consummated since
the date of such financial statements and on or prior to the date of such
calculation.
"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.
"TRANSFER RESTRICTION" means, with respect to the Company's
Subsidiaries, any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries, or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries.
"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.
"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.
-9-
<PAGE>
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
"2005 EXCHANGEABLE SUBORDINATED NOTES" means the 6% Exchangeable
Subordinated Notes due 2005 of the Company in an aggregate principal amount of
$320.0 million, issued pursuant to the Indenture dated as of January 10, 1996,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
"2005 SENIOR SUBORDINATED NOTES" means the 10 1/8% Senior Subordinated
Notes due 2005 of the Company in an aggregate principal amount of
$900.0 million, issued pursuant to the Indenture dated as of March 1, 1995,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
- ---- -----------
"Affiliate Transaction". . . . . . . . . . . . . . . . . . . . 3.10
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . 5.01
"Change of Control Offer". . . . . . . . . . . . . . . . . . . 3.12
"Change of Control Payment". . . . . . . . . . . . . . . . . . 3.12
"Change of Control Payment Date" . . . . . . . . . . . . . . . 3.12
"Covenant Defeasance". . . . . . . . . . . . . . . . . . . . . 7.03
"Custodian". . . . . . . . . . . . . . . . . . . . . . . . . . 5.01
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . 5.01
"incur". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . 7.02
"Legal Holiday". . . . . . . . . . . . . . . . . . . . . . . . 9.07
"Notice of Default". . . . . . . . . . . . . . . . . . . . . . 5.01
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Registrar". . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments". . . . . . . . . . . . . . . . . . . . . 3.07
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;
-10-
<PAGE>
"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.
ARTICLE 2
THE SECURITIES
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. The Securities may be
Global Securities, as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITY.
Every Global Security authenticated and delivered hereunder shall bear
a legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee thereof. This Security may not be exchanged in
whole or in part for a Security registered, and no transfer of this
Security in whole or in part may be registered, in the name of any person
other than such Depositary or a nominee thereof, except in the limited
circumstances described in the Indenture."
SECTION 2.03. EXECUTION AND AUTHENTICATION.
-11-
<PAGE>
An Officer of the Company shall sign the Securities for the Company by
manual or facsimile signature.
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 2.09 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.
Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
The Company initially appoints The Depository Trust Company as the
Depositary.
SECTION 2.04. 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 (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.
-12-
<PAGE>
SECTION 2.05. 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 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 2.06. 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 2.07. 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 2.12 or 8.05 hereof, which shall be paid by the Company).
Notwithstanding the foregoing, a Global Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or any such nominee to a successor of the Depositary or a nominee of such
successor, unless:
-13-
<PAGE>
(i) the Depositary is at any time unwilling or unable to continue
as depository or if at any time the Depositary ceases to be a clearing
agency registered under the Exchange Act and a successor depository is not
appointed by the Company within 90 days,
(ii) an Event of Default under this Indenture with respect to the
Securities has occurred and is continuing and the beneficial owners
representing a majority in principal amount of the Securities advise the
Depositary to cease acting as depositary or
(iii) the Company, in its sole discretion, determines at any time
that the Securities shall no longer be represented by a Global Security,
the Company will issue individual Securities of the applicable amount and
in certificated form in exchange for a Global Security. In any such
instance, an owner of a beneficial interest in the Global Security will be
entitled to physical delivery of individual securities in certificated form
of like tenor, equal in principal amount to such beneficial interest and to
have such Securities in certificated form registered in its name.
SECTION 2.08. PERSONS DEEMED OWNERS.
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 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.
So long as the Depositary or its nominee is the registered Holder of a
Global Security, the Depositary or its nominee, as the case may be, will be
treated as the sole owner of it for all purposes under the Indenture and the
beneficial owners of the Securities will be entitled only to those rights and
benefits afforded to them in accordance with the Depositary's regular operating
procedures. Except as provided in Section 2.07, owners of beneficial interests
in a Global Security will not be entitled to have Securities represented by a
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of Securities in certificated form and will not be
considered the registered Holders thereof under the Indenture.
None of the Company, the Trustee, any Paying Agent or the Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECTION 2.09. 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.
-14-
<PAGE>
SECTION 2.10. 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 2.09 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 2.11 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
SECTION 2.11. 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 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 2.12. 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 2.13. 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.
-15-
<PAGE>
SECTION 2.14. 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 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 2.15. 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
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.16. 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
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.
-16-
<PAGE>
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 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 2.04 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 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.
-17-
<PAGE>
(ii) The Trustee, at the Company's request and 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).
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.
-18-
<PAGE>
(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.
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. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than (w) Physician Joint Venture Distributions, (x) dividends
or distributions payable in Qualified Equity Interests of the Company,
(y) dividends or distributions payable to the Company or any Subsidiary of the
Company, and (z) dividends or distributions by any Subsidiary of the Company
payable to all holders of a class of Equity Interests of such Subsidiary on a
PRO RATA basis); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company; or (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Securities, except at the original
final maturity date thereof or pursuant to a Specified Exchange or the
Refinancing (all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "RESTRICTED PAYMENTS"),
unless, at the time of and after giving effect to such Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the fair
market value (as conclusively evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee within
60 days prior to the date of such Restricted Payment) of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to such Restricted Payment):
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving PRO FORMA effect thereto as if such Restricted Payment had
been made at the beginning of the most recently ended four full fiscal
quarter period for which internal financial statements are available
immediately preceding the date of such Restricted Payment, have been
permitted to incur at least
-19-
<PAGE>
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 3.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after March 1,
1995 (excluding Restricted Payments permitted by clauses (ii), (iii) and
(iv) of the next succeeding paragraph), is less than the sum of (1) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after March 1, 1995 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), PLUS (2) 100% of
the aggregate net cash proceeds received by the Company from the issue or
sale (other than to a Subsidiary of the Company) since March 1, 1995 of
Qualified Equity Interests of the Company or of debt securities of the
Company or any of its Subsidiaries that have been converted into or
exchanged for such Qualified Equity Interests of the Company, PLUS (3)
$20.0 million.
If no Default or Event of Default has occurred and is continuing, or
would occur as a consequence thereof, the foregoing provisions shall not
prohibit the following Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions hereof;
(ii) the payment of cash dividends on any series of Disqualified
Stock issued after the Closing Date in an aggregate amount not to exceed
the cash received by the Company since the Closing Date upon issuance of
such Disqualified Stock;
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Subsidiary in exchange for, or
out of the net cash proceeds of, the substantially concurrent sale (other
than to a Subsidiary of the Company) of Qualified Equity Interests of the
Company; PROVIDED that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or in exchange for or out of the net cash
proceeds from the substantially concurrent sale (other than to a
Subsidiary of the Company) of Qualified Equity Interests of the
Company; PROVIDED that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or
stock option agreement; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $15.0 million in any twelve-month period; and
(vi) the making and consummation of (A) a senior subordinated asset
sale offer in accordance with the provisions of the indenture relating to
the 2005 Senior Subordinated Notes or (B) a Change of Control Offer with
respect to the Senior Subordinated Notes in accordance with
-20-
<PAGE>
the provisions of the Senior Subordinated Note Indenture or change of
control offer with respect to the 2005 Senior Subordinated Notes or the
2005 Exchangeable Subordinated Notes in accordance with the provisions of
the indentures relating thereto.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed.
SECTION 3.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual Transfer Restriction, except for such Transfer
Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the Closing Date,
(b) this Indenture, the Senior Subordinated Note Indenture and the
Indenture related to the Company's 7 7/8% Senior Notes due 2003,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, unless
such Indebtedness was incurred in connection with or in contemplation of
such acquisition for the purpose of refinancing Indebtedness which was
tax-exempt, or in violation of Section 3.09 hereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person,
so acquired, PROVIDED that the Consolidated Cash Flow of such Person shall
not be taken into account in determining whether such acquisition was
permitted by the terms hereof except to the extent that such Consolidated
Cash Flow would be permitted to be dividends to the Company without the
prior consent or approval of any third party,
(e) customary non-assignment provisions in leases entered into in the
ordinary course of business,
(f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the ability of any of the
Company's Subsidiaries to transfer the property so acquired to the Company
or any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced, or
(h) the New Credit Facility and related documentation as the same is
in effect on the Closing Date and as amended or replaced from time to time,
PROVIDED that no such amendment or replacement is more restrictive as to
Transfer Restrictions than the New Credit Facility and related
documentation as in effect on the Closing Date.
-21-
<PAGE>
SECTION 3.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, Guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "INCUR") after the Closing Date any
Indebtedness (including Acquired Debt), and the Company shall not issue any
Disqualified Stock and shall not permit any of its Subsidiaries to issue any
shares of preferred stock; PROVIDED, HOWEVER, that the Company may incur
Indebtedness (including Acquired Debt) and the Company may issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least 2.5 to 1, determined on a PRO FORMA basis (including
a PRO FORMA application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period. Indebtedness
consisting of reimbursement obligations in respect of a letter of credit
shall be deemed to be incurred when the letter of credit is first issued.
The foregoing provisions shall not apply to:
(a) the incurrence by the Company of Indebtedness pursuant to the New
Credit Facility in an aggregate principal amount at any time outstanding
not to exceed an amount equal to $2.8 billion less the aggregate amount of
all mandatory repayments applied to permanently reduce the commitments with
respect to such Indebtedness;
(b) the incurrence by the Company of Indebtedness represented by the
Securities, the Senior 7f% Notes due 2003 and the Senior Subordinated
Notes;
(c) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred
(including, without limitation, Existing Indebtedness);
(e) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate or currency
risk with respect to any fixed or floating rate Indebtedness that is
permitted by the terms hereof to be outstanding or any receivable or
liability the payment of which is determined by reference to a foreign
currency; PROVIDED that the notional principal amount of any such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its Subsidiaries of
Physician Support Obligations;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;
(h) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by tender, bid, performance, government contract,
surety or appeal bonds, standby
-22-
<PAGE>
letters of credit or warranty or contractual service obligations of like
nature, in each case to the extent incurred in the ordinary course of
business of the Company or such Subsidiary;
(i) the incurrence by any Subsidiary of the Company of Indebtedness,
the aggregate principal amount of which, together with all other
Indebtedness of the Company's Subsidiaries at the time outstanding
(excluding the Existing Indebtedness until repaid or refinanced and
excluding Physician Support Obligations), does not exceed the greater of
(1) 10% of the Company's Stockholders' Equity as of the date of incurrence
or (2) $10.0 million; PROVIDED that, in the case of clause (1) only, the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred would
have been at least 2.5 to 1, determined on a PRO FORMA basis (including a
PRO FORMA application of the net proceeds therefrom), as if such
Indebtedness had been incurred at the beginning of such four-quarter
period; and
(j) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this covenant) in an
aggregate principal amount at any time outstanding not to exceed
$250.0 million.
SECTION 3.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make any
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"),
unless (i) such Affiliate Transaction, is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that could have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction was approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $15.0
million, an opinion as to the fairness to the Company or such Subsidiary of such
Affiliate Transaction from a financial point of view issued by an investment
banking firm of national standing; PROVIDED that (x) transactions or payments
pursuant to any employment arrangements or employee or director benefit plans
entered into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (y) transactions between or among the Company and/or its
Subsidiaries and (z) transactions permitted under Section 3.07 hereof, in each
case, shall not be deemed to be Affiliate Transactions.
SECTION 3.11. LIMITATIONS ON LIENS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
(except Permitted Liens) on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom unless all payments due hereunder and under the Securities are secured
on an equal and ratable basis with the Obligations so secured until such time as
such Obligations are no longer secured by a Lien.
-23-
<PAGE>
SECTION 3.12. 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:
(1) that the Change of Control Offer is being made pursuant to this
Section 3.12 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
-24-
<PAGE>
(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 Triggering Event.
SECTION 3.13. CORPORATE EXISTENCE.
Subject to Section 3.12 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,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 3.14. LINE OF BUSINESS.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in any material extent in any business other than the ownership,
operation and management of Hospitals and Related Businesses.
Subsidiary simultaneously executes and delivers a supplemental indenture to
this Indenture, in substantially the form attached hereto as Exhibit B,
providing for the Guarantee of the payment of the Securities by such Subsidiary,
which Guarantee shall be senior to or PARI PASSU with such Subsidiary's
Guarantee of or pledge to secure such other Indebtedness. Notwithstanding the
foregoing, any such Guarantee by a Subsidiary of the Securities shall provide by
its terms that it shall be automatically and unconditionally released and
discharged upon the sale or other disposition, by way of merger or otherwise,
-25-
<PAGE>
to any Person not an Affiliate of the Company, of all of the Company's stock in,
or all or substantially all the assets of, such Subsidiary. The foregoing
provisions shall not be applicable to any one or more Guarantees that otherwise
would be prohibited of up to $25.0 million in aggregate principal amount of
Indebtedness of the Company or its Subsidiaries at any time outstanding.
SECTION 3.15. LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY
SUBSIDIARIES.
The Company shall not permit any Subsidiary, directly or indirectly,
to Guarantee or secure the payment of any other Indebtedness of the Company or
any of its Subsidiaries (except Indebtedness of a Subsidiary of such Subsidiary
or Physician Support Obligations) unless such Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture, in substantially the
form attached hereto as Exhibit B, providing for the Guarantee of the payment of
the Securities by such Subsidiary, which Guarantee shall be senior to or PARI
PASSU with such Subsidiary's Guarantee of or pledge to secure such other
Indebtedness. Notwithstanding the foregoing, any such Guarantee by a Subsidiary
of the Securities shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon the sale or other disposition, by
way of merger or otherwise, to any Person not an Affiliate of the Company, of
all of the Company's stock in, or all or substantially all the assets of, such
Subsidiary. The foregoing provisions shall not be applicable to any one or more
Guarantees that otherwise would be prohibited of up to $25.0 million in
aggregate principal amount of Indebtedness of the Company or its Subsidiaries at
any time outstanding.
SECTION 3.16. NO AMENDMENT TO SUBORDINATION PROVISIONS OF SENIOR
SUBORDINATED NOTE INDENTURE.
The Company shall not amend, modify or alter the Senior Subordinated
Note Indenture or the indentures relating to the 2005 Senior Subordinated Notes
or the 2005 Exchangeable Subordinated Notes in any way that would (i) increase
the principal of, advance the final maturity date of or shorten the Weighted
Average Life to Maturity of (a) any 2005 Senior Subordinated Notes or 2005
Exchangeable Subordinated Notes or (b) any Senior Subordinated Notes such that
the final maturity date of the Senior Subordinated Notes is earlier than the
91st day following the final maturity date of the Senior Notes or (ii) amend the
provisions of Article 10 of the Senior Subordinated Note Indenture (which
relates to subordination) or the subordination provisions of the indentures
relating to the 2005 Senior Subordinated Notes or the 2005 Exchangeable
Subordinated Notes or any of the defined terms used therein in a manner that
would be adverse to the Holders of the Securities.
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
-26-
<PAGE>
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 (A) shall 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 and (B) shall, at the time of
such transaction and after giving PRO FORMA effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 3.09 hereof.
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;
-27-
<PAGE>
(iii) failure by the Company to comply with the provisions of
Sections 3.07, 3.09 or 3.12 hereof;
(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;
(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 evide nced 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 Subsidiari es), whether such Indebtedness or
Guarantee exists on the Closing Date or is created after the
Closing Date, 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
(e) admits in writing its inability generally to pay its
debts as the same become due; and
(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.
-28-
<PAGE>
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."
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 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 also
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 January 15 of the years set forth below:
Year Percentage
---- ----------
1997 . . . . . . . . . . . . 108.000%
1998 . . . . . . . . . . . . 106.857%
1999 . . . . . . . . . . . . 105.714%
2000 . . . . . . . . . . . . 104.571%
2001 . . . . . . . . . . . . 103.428%
2002 . . . . . . . . . . . . 102.285%
2003 . . . . . . . . . . . . 101.142%
2004 . . . . . . . . . . . . 100.000%
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 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.
-29-
<PAGE>
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. 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 shall have the right to direct the time, method and place of
conducting any proceeding for exercising 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 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.
-30-
<PAGE>
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
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;
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
-31-
<PAGE>
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 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
-32-
<PAGE>
(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.
(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.
-33-
<PAGE>
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 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 Closing Date, 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.
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.
-34-
<PAGE>
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;
(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
-35-
<PAGE>
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.
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
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed 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
-36-
<PAGE>
other obligations under such Securities and 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 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 Sections 3.07, 3.08, 3.09, 3.10,
3.11, 3.12, 3.14, 3.15, and 3.16 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:
(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.
-37-
<PAGE>
(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 Closing Date, 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 before the
date that is one year prior to the final maturity of the Securities, 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 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 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.
-38-
<PAGE>
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 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 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
-39-
<PAGE>
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 any supplemental indenture required pursuant to
Section 3.15 hereof;
(iv) to provide for the assumption of the Company's obligations to
Holders of Securities in the case of a merger, consolidation or sale of
assets pursuant to Article 4 hereof;
(v) 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
(vi) 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 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 Section 8.01 and 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
-40-
<PAGE>
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):
(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) 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);
(v) make any Security payable in money other than that stated in
the Securities;
(vi) make any change in Section 5.04 or 5.07 hereof; or
(vii) 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.
-41-
<PAGE>
The Company may, but shall not be obligated to, fix a record date for
determining which Holders must consent to such amendment or 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 2.06 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 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
3820 State Street
Santa Barbara, California 93105
Telecopier No.: (805) 563-7070
Attention: Treasurer
With a copy to:
-42-
<PAGE>
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, or by overnight air courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA. Failure to
mail a notice or 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
-43-
<PAGE>
(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;
(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.
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 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.
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.
-44-
<PAGE>
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.
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.
-45-
<PAGE>
SIGNATURES
Dated as of January 15, 1997 TENET HEALTHCARE CORPORATION
By: /s/ Terence P. McMullen
-------------------------------
Name: Terence P. McMullen
Title: Vice President
Attest:
/s/ Richard B. Silver (SEAL)
- -------------------------------------------
Richard B. Silver
Dated as of January 15, 1997 THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
-------------------------------
Name: Vivian Georges
Title: Assistant Vice President
Attest:
(SEAL)
- -------------------------------------------
By: /s/ Mary Jane Morrissey
--------------------------------
Authorized Signatory
-46-
<PAGE>
EXHIBIT A
(Face of Security)
8% Senior Note
due January 15, 2005
CUSIP: 88033G AF 7
No.$____________
TENET HEALTHCARE CORPORATION
promises to pay to
- --------------------------------------------------------------
or its registered assigns, the principal sum of_______________ Dollars on
January 15, 2005.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1997.
Record Dates: January 1 and July 1 (whether or not a Business Day).
[(If Security is a Global Security--) This Security is a Global Security within
the meaning of the Indenture hereinafter referred to and is registered in the
name of a Depositary or a nominee thereof. This Security may not be exchanged
in whole or in part for a Security registered, and no transfer of this Security
in whole or in part may be registered, in the name of any person other than such
Depositary or a nominee thereof, except in the limited circumstances described
in the Indenture.]
TENET HEALTHCARE CORPORATION
By:
------------------------
(SEAL)
Dated:
-------------, -----
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
A-1
<PAGE>
(Back of Security)
8% SENIOR NOTE
due January 15, 2005
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 8%. The Company shall pay interest
semiannually in arrears on January 15 and July 15 of each year, commencing July
15, 1997 to Holders of record on the immediately preceding January 1 and July 1,
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 canceled 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
appropriate written 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.
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 January 15, 1997 (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 $900,000,000 in aggregate
principal amount.
A-2
<PAGE>
5. MANDATORY REDEMPTION. Subject to the Company's obligation to make an
offer to repurchase Securities under certain circumstances pursuant to Section
3.12 of the Indenture (as described in paragraph 6 below), the Company shall not
be required to make any mandatory redemption or sinking fund payments with
respect to the Securities.
6. 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.
7. 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.
8. 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 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.
9. 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 such 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 such 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): (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) 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); (v) make any Security
payable in money other than that stated in the Securities; (vi) 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 (vii) 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
A-3
<PAGE>
Securities, to provide for any supplemental indenture required pursuant to
Section 3.15 of the Indenture, to provide for the assumption of the Company's
obligations to Holders of Securities in the case of a merger, consolidation
or sale of assets pursuant to Article 4 of the Indenture, 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
Commission in order to effect or maintain the qualification of the Indenture
under the TIA.
10. 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 of Sections 3.07, 3.09 or 3.12
of the Indenture; (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 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, which judgment or judgments are not paid, discharged or stayed for a
period of 60 days; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries.
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
Securities by written notice to the Company and the Trustee, may declare all
the Securities 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 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 the Holders' interest.
If an Event of Default occurs under the Indenture prior to maturity
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 the premium
specified in Section 5.02 of the Indenture shall also become immediately due
and payable to the extent permitted by law upon the acceleration of such
Securities.
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 the principal of,
premium, if any, or interest on the Securities.
A-4
<PAGE>
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.
11. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to incur additional
indebtedness and issue preferred stock, pay dividends or make other
distributions, repurchase Equity Interests or subordinated indebtedness,
create certain liens, enter into certain transactions with affiliates, issue
or sell Equity Interests of the Company's Subsidiaries, issue Guarantees of
Indebtedness by the Company's Subsidiaries and enter into certain mergers and
consolidations.
12. 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.
13. 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 Securities 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.
14. AUTHENTICATION. This Security shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
15. 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).
16. 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
3820 State Street
Santa Barbara, California 93105
Attention: Treasurer
17. GOVERNING LAW. The internal laws of the State of New York shall
govern and be used to construe the Indenture and the Securities, without regard
to conflict of laws provisions thereof.
A-5
<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.*
- ---------------------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guarancy Programs: (i) The
Securities Transfer Agent Medallion Program (Stamp); (ii) The New York Stock
Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee.
A-6
<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 3.12 of the Indenture, check the
box below:
/ / Section 3.12
(Change of Control)
If you want to have only part of the Security purchased by the
Company pursuant to Section 3.12 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.*
- ---------------------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guarancy Programs: (i) The
Securities Transfer Agent Medallion Program (Stamp); (ii) The New York Stock
Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee.
A-7
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Guarantor"), a subsidiary of
Tenet Healthcare Corporation (or its successor), a Nevada corporation (the
"Company"), and The Bank of New York, as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of January 15, 1997, providing
for the issuance of an aggregate principal amount of $900,000,000 of 8% Senior
Notes due 2005 (the "Securities");
WHEREAS, Section 3.15 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall guarantee the payment of the Securities pursuant to a Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 8.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the holders of the Securities as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby unconditionally
guarantees to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of
the validity and enforceability of the Indenture, the Securities or the
Obligations of the Company hereunder and thereunder, that: (a) the principal
of, premium, if any, and interest on the Securities will be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal, premium, if any, and (to the extent
permitted by law) interest on any interest on the Securities and all other
payment Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Securities or any of such other payment Obligations, that same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by
acceleration, redemption or otherwise. Failing payment when due of any
amount so guaranteed for whatever reason the Guarantor shall be obligated to
pay the same immediately. An Event of Default under the Indenture or the
Securities shall constitute an event of default under this Guarantee, and
shall entitle the Holders of Securities to accelerate the Obligations of the
Guarantor hereunder in the same manner and to the same extent as the
Obligations of the Company. The Guarantor hereby agrees that its Obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or the Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities
with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a
B-1
<PAGE>
legal or equitable discharge or defense of the Guarantor. The Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims
with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenant that this Guarantee will not be
discharged except by complete performance of the Obligations contained in the
Securities and the Indenture. If any Holder or the Trustee is required by any
court or otherwise to return to the Company, the Guarantor, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either
the Company or the Guarantor, any amount paid by either to the Trustee or
such Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. The Guarantor agrees that it shall not
be entitled to, and hereby waives, any right of subrogation in relation to
the Holders in respect of any Obligations guaranteed hereby. The Guarantor
further agrees that, as between the Guarantor, on one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article 5 of the
Indenture for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 5 of the Indenture,
such Obligations (whether or not due and payable) shall forthwith become due
and payable by the Guarantor for the purpose of this Guarantee.
3. EXECUTION AND DELIVERY OF GUARANTEE. To evidence its Guarantee set
forth in Section 2, the Guarantor hereby agrees that a notation of such
Guarantee substantially in the form of EXHIBIT A shall be endorsed by an
officer of such Guarantor on each Security authenticated and delivered by the
Trustee and that this Supplemental Indenture shall be executed on behalf of
such Guarantor, by manual or facsimile signature, by its President or one of
its Vice Presidents.
The Guarantor hereby agrees that its Guarantee set forth in Section
2 shall remain in full force and effect notwithstanding any failure to
endorse on each Security a notation of such Guarantee.
If an Officer whose signature is on this Supplemental Indenture or on
the Guarantee no longer holds that office at the time the Trustee authenticates
the Security on which a Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantors.
4. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Except as set forth in Articles 3 and 4 of the Indenture,
nothing contained in this Supplemental Indenture or in the Securities shall
prevent any consolidation or merger of the Guarantor with or into the Company
or any Subsidiary of the Company that has executed and delivered a
supplemental indenture substantially in the form hereof or shall prevent any
sale or conveyance of the property of the Guarantor as an entirety or
substantially as an entirety, to the Company or any such Subsidiary of the
Company.
(b) Except as provided in Section 4(a) hereof or in a transaction
referred to in Section 5 hereof, the Guarantor shall not consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person unless
(1) either (x) the Guarantor shall be the surviving Person of such merger or
consolidation or (y) the surviving Person or transferee is a corporation,
partnership or trust organized and existing under the laws of the United
States, any state thereof or the District of Columbia and such surviving
Person or transferee shall expressly assume all the obligations of the
Guarantor under this Guarantee and the Indenture pursuant to a supplemental
indenture substantially in the form hereof; (2) immediately after giving
effect to such
B-2
<PAGE>
transaction (including the incurrence of any Indebtedness incurred or
anticipated to be incurred in connection with such transaction) no Default or
Event of Default shall have occurred and be continuing; and (3) the Company
has delivered to the Trustee an Officers' Certificate and Opinion of Counsel,
each stating that such consolidation, merger or transfer complies with the
Indenture, that the surviving Person agrees to be bound thereby, and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied. For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related transactions)
of all or substantially all of the properties and assets of one or more
Subsidiaries of the Guarantor, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Guarantor, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Guarantor.
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 Guarantor in accordance with this Section 4(b) hereof,
the successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a Guarantor.
Such successor corporation thereupon may cause to be signed any or all of
the Guarantees to be endorsed upon all of the Securities issuable hereunder
which theretofore shall not have been signed by the Company and delivered to
the Trustee. All Guarantees so issued shall in all respects have the same
legal rank and benefit under the Indenture as the Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture as though all
of such Guarantees had been issued at the date of the execution hereof.
5. RELEASES FOLLOWING SALE OF ASSETS. Concurrently with any sale,
lease, conveyance or other disposition (by merger, consolidation or
otherwise) of assets of the Guarantor (including, if applicable, disposition
of all of the Capital Stock of the Guarantor), any Liens in favor of the
Trustee in the assets sold, leased, conveyed or otherwise disposed of shall
be released. If the assets sold, leased, conveyed or otherwise disposed of
(by merger, consolidation or otherwise) include all or substantially all of
the assets of the Guarantor or all of the Capital Stock of the Guarantor in
each case, in compliance with the terms of the Indenture, then the Guarantor
shall be automatically and unconditionally released from and relieved of its
Obligations under its Guarantee. Upon delivery by the Company to the Trustee
of an Officers' Certificate to the effect that such sale, lease, conveyance
or other disposition was made by the Company in accordance with the
provisions of the Indenture, the Trustee shall execute any documents
reasonably required in order to evidence the release of the Guarantor from
its Obligations under its Guarantee.
6. LIMITATION ON GUARANTOR LIABILITY. For purposes hereof, the
Guarantor's liability will be that amount from time to time equal to the
aggregate liability of the Guarantor hereunder, but shall be limited to the
lesser of (i) the aggregate amount of the Obligations of the Company under
the Securities and the Indenture and (ii) the amount, if any, which would not
have (A) rendered the Guarantor "insolvent" (as such term is defined in the
federal Bankruptcy Law and in the Debtor and Creditor Law of the State of New
York) or (B) left it with unreasonably small capital at the time its
Guarantee of the Securities was entered into, after giving effect to the
incurrence of existing Indebtedness immediately prior to such time; PROVIDED
that it shall be a presumption in any lawsuit or other proceeding in which
the Guarantor is a party that the amount guaranteed pursuant to its Guarantee
is the amount set forth in clause (i) above unless any creditor, or
representative of creditors of the Guarantor, or debtor in possession or
trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit
that the aggregate liability of the Guarantor is limited to the amount set
forth in clause (ii). In making any determination as to the solvency or
sufficiency of capital of the Guarantor in accordance with the previous
sentence, the right of the Guarantor to contribution from other Subsidiaries
of the Company that have executed and delivered a supplemental indenture
substantially in the form hereof and any other rights the Guarantor may have,
contractual or otherwise, shall be taken into account.
B-3
<PAGE>
7. "TRUSTEE" TO INCLUDE PAYING AGENT. In case at any time any Paying
Agent other than the Trustee shall have been appointed by the Company and be
then acting under the Indenture, the term "Trustee" as used in this
Supplemental Indenture shall in each case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within
its meaning as fully and for all intents and purposes as if such Paying Agent
were named in this Supplemental Indenture in place of the Trustee.
8. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Guarantor, as such, shall have any
liability for any obligations of the Company or the Guarantor under the
Securities, any Guarantees, the Indenture or this Supplemental 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.
9. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
10. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
11. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
B-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:
---------------------, ----
[Guarantor]
By:
------------------------------
Name:
Title:
The Bank of New York,
as Trustee
By:
------------------------------
Name:
Title:
B-5
<PAGE>
EXHIBIT A TO SUPPLEMENTAL INDENTURE
GUARANTEE
The Guarantor hereby unconditionally guarantees to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and enforceability
of the Indenture, the Securities or the Obligations of the Company to the
Holders or the Trustee under the Securities or under the Indenture, that: (a)
the principal of, and premium, if any, and interest on the Securities will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on overdue principal, premium, if any,
and (to the extent permitted by law) interest on any interest on the
Securities and all other payment Obligations of the Company to the Holders or
the Trustee under the Indenture or under the Securities will be promptly paid
in full, all in accordance with the terms thereof; and (b) in case of any
extension of time of payment or renewal of any Securities or any of such
other payment Obligations, the same will be promptly paid in full when due in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, redemption or otherwise. Failing payment when due
of any amount so guaranteed, for whatever reason, the Guarantor shall be
obligated to pay the same immediately.
The obligations of the Guarantor to the Holders of Securities and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in a Supplemental Indenture, dated as of _________ __, ____ to the
Indenture, and reference is hereby made to the Indenture, as supplemented,
for the precise terms of this Guarantee.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its respective successors
and assigns to the extent set forth in the Indenture until full and final
payment of all of the Company's Obligations under the Securities and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders of Securities and, in the event of any transfer or
assignment of rights by any Holder of Securities or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. This a Guarantee of payment and not a guarantee of
collection.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Security upon which this
Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized signatories.
For purposes hereof, the Guarantor's liability will be that amount
from time to time equal to the aggregate liability of the Guarantor
hereunder, but shall be limited to the lesser of (i) the aggregate amount of
the Obligations of the Company under the Securities and the Indenture and
(ii) the amount, if any, which would not have (A) rendered the Guarantor
"insolvent" (as such term is defined in the federal Bankruptcy Law and in the
Debtor and Creditor Law of the State of New York) or (B) left it with
unreasonably small capital at the time its Guarantee of the Securities was
entered into, after giving effect to the incurrence of existing Indebtedness
immediately prior to such time; PROVIDED that it shall be a presumption in
any lawsuit or other proceeding in which the Guarantor is a party that the
amount guaranteed pursuant to its Guarantee is the amount set forth in clause
(i) above unless any creditor, or representative of creditors of the
Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor,
otherwise proves in such a lawsuit that the aggregate liability of the
Guarantor is limited to the amount set forth in clause (ii). The Indenture
provides that, in making any determination as to the solvency or sufficiency
of capital of a Guarantor in accordance with the previous sentence, the right
of the Guarantor to contribution from other Subsidiaries of the Company that
have become Guarantors and any other rights the Guarantor may have,
contractual or otherwise, shall be taken into account.
B-6
<PAGE>
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
[GUARANTOR]
By:
---------------------------
Name:
Title:
B-7
<PAGE>
TENET HEALTHCARE CORPORATION
--------------------------------
$700,000,000
8 5/8% SENIOR SUBORDINATED NOTES due 2007
--------------------------------
-----------------------------
INDENTURE
Dated as of January 15, 1997
-----------------------------
--------------------------------
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 . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA . . . . . . . . . . . . . . .11
SECTION 1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . .11
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITY. . . . . . . . . . . . . . .12
SECTION 2.03. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . . . . . .12
SECTION 2.04. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . . . . . . . .13
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . . . . . . . .13
SECTION 2.06. HOLDER LISTS. . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 2.07. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . .14
SECTION 2.08. PERSONS DEEMED OWNERS . . . . . . . . . . . . . . . . . . . . .14
SECTION 2.09. REPLACEMENT SECURITIES. . . . . . . . . . . . . . . . . . . . .15
SECTION 2.10. OUTSTANDING SECURITIES. . . . . . . . . . . . . . . . . . . . .15
SECTION 2.11. TREASURY SECURITIES . . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.12. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.13. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.14. DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.15. RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.16. CUSIP NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . . .17
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. . . . . . . . . . . . .17
SECTION 3.03. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . .17
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . .18
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE . . . . . . . . . . . . . . . . . .18
SECTION 3.06. SECURITIES REDEEMED IN PART . . . . . . . . . . . . . . . . . .19
SECTION 3.07. OPTIONAL REDEMPTION . . . . . . . . . . . . . . . . . . . . . .19
SECTION 3.08. MANDATORY REDEMPTION. . . . . . . . . . . . . . . . . . . . . .19
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES . . . . . . . . . . . . . . . . . . . . .19
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY . . . . . . . . . . . . . . . .20
SECTION 4.03. COMMISSION REPORTS. . . . . . . . . . . . . . . . . . . . . . .20
SECTION 4.04. COMPLIANCE CERTIFICATE. . . . . . . . . . . . . . . . . . . . .21
SECTION 4.05. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 4.06. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . . . . . . . .22
SECTION 4.07. LIMITATIONS ON RESTRICTED PAYMENTS. . . . . . . . . . . . . . .22
SECTION 4.08. LIMITATIONS ON DIVIDEND AND OTHER
PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES . . . . . . . . . .24
SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS ANDISSUANCE
OF PREFERRED STOCK. . . . . . . . . . . . . . . . . . . . . . .25
SECTION 4.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES . . . . . . . . . .26
SECTION 4.11. LIMITATIONS ON LIENS. . . . . . . . . . . . . . . . . . . . . .27
SECTION 4.12. CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 4.13. CORPORATE EXISTENCE . . . . . . . . . . . . . . . . . . . . . .28
SECTION 4.14. LINE OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 4.15. LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
BY SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 4.16. NO SENIOR SUBORDINATED DEBT . . . . . . . . . . . . . . . . . .29
ARTICLE 5
SUCCESSORS
SECTION 5.01. LIMITATIONS ON MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED . . . . . . . . . . . . . . .30
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 6.02. ACCELERATION. . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 6.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 6.04. WAIVER OF PAST DEFAULTS . . . . . . . . . . . . . . . . . . . .33
SECTION 6.05. CONTROL BY MAJORITY . . . . . . . . . . . . . . . . . . . . . .33
SECTION 6.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . . . .34
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. . . . . . . . . . . . . .34
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. . . . . . . . . . . . . . . . . . .34
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . . . .34
SECTION 6.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 6.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . . . . . . .35
<PAGE>
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 7.02. RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . .37
SECTION 7.04. TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . . . . . . . .37
SECTION 7.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . .37
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS . . . . . . . . . . . . . . . . .37
SECTION 7.07. COMPENSATION AND INDEMNITY. . . . . . . . . . . . . . . . . . .38
SECTION 7.08. REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . . . . . . . .38
SECTION 7.09. SUCCESSOR TRUSTEE OR AGENT BY MERGER, ETC.. . . . . . . . . . .39
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . . . . . . .39
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY . . . . . . .40
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DEFEASANCE AND DISCHARGE OF THIS INDENTURE
AND THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . .40
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. . . . . . . . . . . . . . . . .40
SECTION 8.03. COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . .40
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. . . . . . . . . . .41
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO
BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. . . . . . . .42
SECTION 8.06. REPAYMENT TO COMPANY. . . . . . . . . . . . . . . . . . . . . .43
SECTION 8.07. REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . .43
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . .43
SECTION 9.02. WITH CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . . . .44
SECTION 9.03. COMPLIANCE WITH TIA . . . . . . . . . . . . . . . . . . . . . .45
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . . . . . . . .45
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES . . . . . . . . . . . . .46
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.. . . . . . . . . . . . . . . .46
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE. . . . . . . . . . . . . . . . . . . .46
SECTION 10.02. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . .46
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY. . . . . . . . . . . . . .47
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT . . . . . . . . . . . . . . .47
SECTION 10.05. ACCELERATION OF SECURITIES. . . . . . . . . . . . . . . . . . .48
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER . . . . . . . . . . . . . .48
SECTION 10.07. NOTICE BY COMPANY . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 10.08. SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . .48
<PAGE>
SECTION 10.09. RELATIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. . . . . . . . . .49
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. . . . . . . . . . . .49
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT. . . . . . . . . . . . . . .49
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION . . . . . . . . . . . . .50
SECTION 10.14. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TIA CONTROLS. . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 11.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS . . . . . . . . . .51
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . . .51
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . . . .52
SECTION 11.06. RULES BY TRUSTEE AND AGENTS . . . . . . . . . . . . . . . . . .52
SECTION 11.07. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 11.08. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . .52
SECTION 11.09. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . . . . . . . .52
SECTION 11.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 11.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . . . .53
SECTION 11.12. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 11.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 11.14. COUNTERPART ORIGINALS . . . . . . . . . . . . . . . . . . . . .53
SECTION 11.15. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . . . .53
SIGNATURES
EXHIBIT A FORM OF SECURITY
EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- --------------- -----------------
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . 7.10
(b). . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(c). . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a). . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b). . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c). . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a). . . . . . . . . . . . . . . . . . . . . . . . 2.06
(b). . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c). . . . . . . . . . . . . . . . . . . . . . . . 11.03
313 (a). . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . 7.06
(c). . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d). . . . . . . . . . . . . . . . . . . . . . . . N.A.
314 (a). . . . . . . . . . . . . . . . . . . . . . . . 4.03; 11.02
(b). . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . N.A.
(d). . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e). . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f). . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a). . . . . . . . . . . . . . . . . . . . . . . . 7.01(iii)(b)
(b). . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c). . . . . . . . . . . . . . . . . . . . . . . . 7.01(i)
(d). . . . . . . . . . . . . . . . . . . . . . . . 7.01(iii)
(e). . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . 2.11
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c). . . . . . . . . . . . . . . . . . . . . . . . 2.15; 9.04
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 6.09
(b). . . . . . . . . . . . . . . . . . . . . . . . 2.05
- --------------------
*This Cross-Reference Table is not part of the indenture.
<PAGE>
318 (a). . . . . . . . . . . . . . . . . . . . . . . . 11.01
(b). . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . . . . . . . 11.01
N.A. means not applicable
<PAGE>
INDENTURE dated as of January 15, 1997 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 8 5/8% Senior
Subordinated Notes due 2007 (the "SECURITIES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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.
"ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices and (ii) the issuance or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $25.0
million or (b) for net proceeds in excess of $25.0 million. Notwithstanding the
foregoing: (a) a transfer of assets by the Company to a Subsidiary or by a
Subsidiary to the Company or to another Subsidiary, (b) an issuance of Equity
Interests by a Subsidiary to the Company or to another Subsidiary, (c) a
Restricted Payment that is permitted by Section 4.07 hereof and (d) a Hospital
Swap shall not be deemed to be an Asset Sale.
"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.
<PAGE>
"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.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a
Change of Control and a Rating Decline.
"CLOSING DATE" means January 30, 1997.
"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 5 hereof and thereafter includes such successor.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period PLUS (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), PLUS (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
PLUS (iii) the Fixed Charges of such Person and its Subsidiaries for such
period, to the extent that such Fixed Charges were deducted in computing such
Consolidated Net Income, PLUS (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization of, a Subsidiary of the referent
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
-2-
<PAGE>
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP but
excluding any one-time charge or expense incurred in order to consummate the
Refinancing; PROVIDED that (i) the Net Income of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"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
Closing Date 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 Closing Date 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.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"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.
"DEPOSITARY" means a clearing agency registered under the Exchange Act
that is designated to act as Depositary for the Securities.
"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
January 15, 2007.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the Closing Date, until such amounts are
-3-
<PAGE>
repaid, including all reimbursement obligations with respect to letters of
credit outstanding as of the Closing Date.
"EXISTING SENIOR NOTES" means the 2002 Senior Notes and the 2003
Senior Notes.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"),
then the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period, and (ii) the Consolidated Cash Flow and
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letters of credit or
bankers' acceptance financings, and net payments or receipts (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments (and non-
cash dividend payments in the case of a Person that is a Subsidiary) on any
series of preferred stock of such Person, TIMES (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"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.
"GLOBAL SECURITY" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 2.02.
"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.
-4-
<PAGE>
"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) forward 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.
"HOLDER" means a Person in whose name a Security is registered.
"HOSPITAL" means a hospital, outpatient clinic, long-term care
facility or other facility or business that is used or useful in or related to
the provision of healthcare services.
"HOSPITAL SWAP" means an exchange of assets by the Company or a
Subsidiary of the Company for one or more Hospitals and/or one or more Related
Businesses or for the Capital Stock of any Person owning one or more Hospitals
and/or one or more Related Businesses.
"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.
"INVESTMENT GRADE" means a rating of BBB- or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the
event that the Company shall select any other Rating Agency, the equivalent of
such ratings by such Rating Agency shall be used.
"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).
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions
-5-
<PAGE>
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Subsidiaries and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"NEW 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 $2.8 billion in aggregate principal amount
of Indebtedness, including any related notes, 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.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"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.
"PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; PROVIDED that such Liens were in existence prior to
the contemplation of such merger, consolidation or acquisition (unless such
Liens secure Indebtedness that was incurred in connection with or in
contemplation of such acquisition and is used to refinance tax-exempt
Indebtedness) and do not extend to any assets or the Company or its Subsidiaries
other than those of the Person merged into or consolidated with the Company or
that becomes a Subsidiary of the Company; (iii) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company;
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition (unless such Liens secure Indebtedness that was incurred in
connection with or in contemplation of such acquisition and is used to refinance
tax-exempt Indebtedness); (iv) Liens to secure the performance of statutory
obligations, tender, bid, performance, government contract, surety or appeal
bonds or other obligations of a like nature incurred in the ordinary course of
business; (v) Liens existing on the Closing Date; (vi) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (vii) other Liens on assets of the Company or any Subsidiary
of the Company securing Indebtedness that is permitted by the terms hereof to be
outstanding having an aggregate principal amount at any one time outstanding not
to exceed 10% of the Stockholders' Equity of the Company; and (viii) Liens to
secure Permitted Refinancing Indebtedness incurred to refinance Indebtedness
that was secured by a Lien permitted hereunder and that was incurred in
accordance with the provisions hereof; PROVIDED that such Liens do not extend to
or cover any property or assets of the Company or any Subsidiary other than
assets or property securing the Indebtedness so refinanced.
-6-
<PAGE>
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used solely to extend, refinance, renew, replace, defease or
refund, other Indebtedness of the Company or any of its Subsidiaries; PROVIDED
that, except in the case of Indebtedness of the Company issued in exchange for,
or the net proceeds of which are used solely to extend, refinance, renew,
replace, defease or refund, Indebtedness of a Subsidiary of the Company: (i)
the principal amount of such Permitted Refinancing Indebtedness does not exceed
the principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of any premiums paid and
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Securities, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Securities on subordination
terms at least as favorable to the Holders of Securities as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iv) such Indebtedness is incurred by
the Company if the Company is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (v) such Indebtedness
is incurred by the Company or a Subsidiary if a Subsidiary is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"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).
"PHYSICIAN JOINT VENTURE DISTRIBUTIONS" means distributions made by
the Company or any of its Subsidiaries to any physician, pharmacist or other
allied healthcare professional in connection with the unwinding, liquidation or
other termination of any joint venture or similar arrangement between any such
Person and the Company or any of its Subsidiaries.
"PHYSICIAN SUPPORT OBLIGATIONS" means any obligation or Guarantee
incurred in the ordinary course of business by the Company or a Subsidiary of
the Company in connection with any advance, loan or payment to, or on behalf of
or for the benefit of any physician, pharmacist or other allied healthcare
professional for the purpose of recruiting, redirecting or retaining the
physician, pharmacist or other allied healthcare professional to provide service
to patients in the service area of any Hospital or Related Business owned or
operated by the Company or any of its Subsidiaries; EXCLUDING, HOWEVER,
compensation for services provided by physicians, pharmacists or other allied
healthcare professionals to any Hospital or Related Business owned or operated
by the Company or any of its Subsidiaries.
"QUALIFIED EQUITY INTERESTS" shall mean all Equity Interests of the
Company other than Disqualified Stock of the Company.
"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, 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
-7-
<PAGE>
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
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).
"REFINANCING" has the meaning ascribed to it in the prospectus dated
January 27, 1997 relating to the Senior Notes and the Securities.
"RELATED BUSINESS" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the provision
of healthcare services or information or the investment in, management, leasing
or operation of a Hospital.
"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.
"SENIOR NOTES" means the 7 7/8% Senior Notes due 2003 and the 8%
Senior Notes due 2005 of the Company in an aggregate principal amount of $1.3
billion, issued pursuant to the indentures dated as of January 15, 1997
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
"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 Closing Date.
"S&P" means Standard & Poor's Corporation and its successors.
"SPECIFIED EXCHANGE" means any retirement of Indebtedness upon the
exercise by a holder of such Indebtedness, pursuant to the terms thereof, of any
right to exchange such Indebtedness for shares
-8-
<PAGE>
of common stock of Vencor, Inc. or any successor thereto or any other equity
securities, other than Equity Interests of a Subsidiary, owned by the Company as
of October 11, 1995, or for any securities or other property received with
respect to such common stock or equity securities or cash in lieu thereof,
whether or not such right is subject to the Company's ability to pay an amount
in cash in lieu thereof.
"STOCKHOLDERS' EQUITY" means, with respect to any Person as of any
date, the stockholders' equity of such Person determined in accordance with GAAP
as of the date of the most recent available internal financial statements of
such Person, and calculated on a PRO FORMA basis to give effect to any
acquisition or disposition by such Person consummated or to be consummated since
the date of such financial statements and on or prior to the date of such
calculation.
"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 9.03 hereof.
"TRANSFER RESTRICTION" means, with respect to the Company's
Subsidiaries, any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries, or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries.
"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.
"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.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
"2002 SENIOR NOTES" means the 9 5/8% Senior Notes due 2002 of the
Company in an aggregate principal amount of $300.0 million, issued pursuant
to the Indenture dated as of March 1, 1995, between the Company and The Bank
of New York, as trustee, as amended or supplemented from time to time.
-9-
<PAGE>
"2003 SENIOR NOTES" means the 8 5/8% Senior Notes due 2003 of the
Company in an aggregate principal amount of $500.0 million, issued pursuant to
the Indenture dated as of October 16, 1995, between the Company and The Bank of
New York, as trustee, as amended or supplemented from time to time.
"2005 EXCHANGEABLE SUBORDINATED NOTES" means the 6% Exchangeable
Subordinated Notes due 2005 of the Company in an aggregate principal amount of
$320.0 million, issued pursuant to the Indenture dated as of January 10, 1996,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
"2005 SENIOR SUBORDINATED NOTES" means the 10 1/8% Senior Subordinated
Notes due 2005 of the Company in an aggregate principal amount of
$900.0 million, issued pursuant to the Indenture dated as of March 1, 1995,
between the Company and The Bank of New York, as trustee, as amended or
supplemented from time to time.
SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
- ---- ----------
"Affiliate Transaction". . . . . . . . . . . . . . . . . . . 4.10
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . 6.01
"Change of Control Offer". . . . . . . . . . . . . . . . . . 4.12
"Change of Control Payment". . . . . . . . . . . . . . . . . 4.12
"Change of Control Payment Date" . . . . . . . . . . . . . . 4.12
"Covenant Defeasance". . . . . . . . . . . . . . . . . . . . 8.03
"Designated Senior Debt" . . . . . . . . . . . . . . . . . . 10.02
"Custodian". . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default" . . . . . . . . . . . . . . . . . . . . . 6.01
"incur". . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . 8.02
"Legal Holiday". . . . . . . . . . . . . . . . . . . . . . . 11.07
"Notice of Default". . . . . . . . . . . . . . . . . . . . . 6.01
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice". . . . . . . . . . . . . . . . . . 10.04
"Registrar". . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Representative" . . . . . . . . . . . . . . . . . . . . . . 10.02
"Restricted Payments". . . . . . . . . . . . . . . . . . . . 4.07
"Senior Debt". . . . . . . . . . . . . . . . . . . . . . . . 10.02
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;
-10-
<PAGE>
"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.
ARTICLE 2
THE SECURITIES
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. The Securities may be
Global Securities, as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITY.
Every Global Security authenticated and delivered hereunder shall bear
a legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee thereof. This Security may not be exchanged in
whole or in part for a Security registered, and no transfer of this
-11-
<PAGE>
Security in whole or in part may be registered, in the name of any person
other than such Depositary or a nominee thereof, except in the limited
circumstances described in the Indenture."
SECTION 2.03. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Securities for the Company by
manual or facsimile signature.
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 2.09 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.
Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
The Company initially appoints The Depository Trust Company as the
Depositary.
SECTION 2.04. 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 (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
-12-
<PAGE>
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 7.07 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 2.05. 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 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 2.06. 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 2.07. 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 (i)
register the transfer or exchange of Securities during a period beginning at the
opening of business on a Business Day 15 days before the day of mailing of a
notice of redemption of Securities for redemption under Section 3.03 hereof and
ending at the close of business on the day of such mailing, (ii) register the
transfer or exchange of any Security selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part or
(iii) register the transfer or exchange of a Security between the record date
and the next succeeding interest payment date.
-13-
<PAGE>
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 2.12 or 9.05 hereof, which shall be paid by the Company).
Notwithstanding the foregoing, a Global Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or any such nominee to a successor of the Depositary or a nominee of such
successor, unless:
(i) the Depositary is at any time unwilling or unable to
continue as depository or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act and a successor
depository is not appointed by the Company within 90 days,
(ii) an Event of Default under this Indenture with respect to
the Securities has occurred and is continuing and the beneficial owners
representing a majority in principal amount of the Securities advise the
Depositary to cease acting as depositary or
(iii) the Company, in its sole discretion, determines at any
time that the Securities shall no longer be represented by a Global
Security, the Company will issue individual Securities of the applicable
amount and in certificated form in exchange for a Global Security. In any
such instance, an owner of a beneficial interest in the Global Security
will be entitled to physical delivery of individual securities in
certificated form of like tenor, equal in principal amount to such
beneficial interest and to have such Securities in certificated form
registered in its name.
SECTION 2.08. PERSONS DEEMED OWNERS.
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 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.
So long as the Depositary or its nominee is the registered Holder of a
Global Security, the Depositary or its nominee, as the case may be, will be
treated as the sole owner of it for all purposes under the Indenture and the
beneficial owners of the Securities will be entitled only to those rights and
benefits afforded to them in accordance with the Depositary's regular operating
procedures. Except as provided in Section 2.07, owners of beneficial interests
in a Global Security will not be entitled to have Securities represented by a
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of Securities in certificated form and will not be
considered the registered Holders thereof under the Indenture.
None of the Company, the Trustee, any Paying Agent or the Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECTION 2.09. REPLACEMENT SECURITIES.
-14-
<PAGE>
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 2.10. 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 2.09 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 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
Subject to Section 2.11 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
SECTION 2.11. 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 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 2.12. 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 2.13. CANCELLATION.
-15-
<PAGE>
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 2.14. 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 4.01 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 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 2.15. 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
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.16. 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
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 3.07 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.
If the Company is required to make an offer to purchase Securities
pursuant to the provisions of Section 4.12 hereof, it shall furnish to the
Trustee an Officers' Certificate setting forth (i) the Section of this Indenture
pursuant to which the purchase shall occur, (ii) the purchase date, (iii) the
principal amount of Securities to be purchased, (iv) the purchase price and (v)
a statement to the effect that
-16-
<PAGE>
a Change of Control has occurred and the conditions set forth in Section 4.12
hereof have been satisfied, as applicable.
SECTION 3.02. 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 the 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 Holders, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03. 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 (including
CUSIP number) and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Security is being redeemed in part, the portion 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.
-17-
<PAGE>
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 40 days prior to the
redemption date, unless the Trustee shall agree to a shorter period, 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.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
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 3.05. 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 by 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 whoso 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 the rate
provided in the Securities and in Section 4.01 hereof.
SECTION 3.06. 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 3.07. OPTIONAL REDEMPTION.
On or after January 15, 2002, the Company may redeem all or any
portion of the Securities at the redemption prices (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.
The redemption price (expressed as a percentage of the principal
amount) shall be as follows, if the Securities are redeemed during the
twelve-month period beginning on January 15 of the following years:
-18-
<PAGE>
Year Percentage
---- ----------
2002 104.313%
2003 102.876%
2004 101.438%
2005 and thereafter 100.000%
SECTION 3.08. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to repurchase
Securities under certain circumstances pursuant to Section 4.12 hereof, the
Company shall not be required to make any mandatory redemption or sinking fund
payments with respect to the Securities.
ARTICLE 4
COVENANTS
SECTION 4.01. 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 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 4.02. 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 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,
-19-
<PAGE>
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 2.04 hereof.
SECTION 4.03. 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 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 4.03(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 request and expense, shall
promptly mail copies of all such annual reports, information, documents and
other reports provided to the Trustee pursuant to Section 4.03(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 4.03.
-20-
<PAGE>
(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).
SECTION 4.04. 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 4.03 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 4 or of Article 5 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
6.01(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.
SECTION 4.05. 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 4.06. STAY, EXTENSION AND USURY LAWS.
-21-
<PAGE>
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 4.07. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than (w) Physician Joint Venture Distributions, (x) dividends
or distributions payable in Qualified Equity Interests of the Company,
(y) dividends or distributions payable to the Company or any Subsidiary of the
Company, and (z) dividends or distributions by any Subsidiary of the Company
payable to all holders of a class of Equity Interests of such Subsidiary on a
PRO RATA basis); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company; or (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Securities, except at the original
final maturity date thereof or pursuant to a Specified Exchange or the
Refinancing (all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "RESTRICTED PAYMENTS"),
unless, at the time of and after giving effect to such Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the fair
market value (as conclusively evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee within
60 days prior to the date of such Restricted Payment) of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to such Restricted Payment):
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving PRO FORMA effect thereto as if such Restricted Payment had
been made at the beginning of the most recently ended four full fiscal
quarter period for which internal financial statements are available
immediately preceding the date of such Restricted Payment, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Subsidiaries after
March 1, 1995 (excluding Restricted Payments permitted by clauses (ii),
(iii) and (iv) of the next succeeding paragraph), is less than the sum of
(1) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after March 1, 1995 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), PLUS (2) 100% of
the aggregate net cash proceeds received by the Company from the issue or
sale (other than to a Subsidiary of the Company) since March 1, 1995 of
Qualified Equity Interests of the Company or of debt securities of the
Company or any of its Subsidiaries that have been converted into or
exchanged for such Qualified Equity Interests of the Company, PLUS (3)
$20.0 million.
-22-
<PAGE>
If no Default or Event of Default has occurred and is continuing, or
would occur as a consequence thereof, the foregoing provisions shall not
prohibit the following Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions hereof;
(ii) the payment of cash dividends on any series of Disqualified
Stock issued after the Closing Date in an aggregate amount not to exceed
the cash received by the Company since the Closing Date upon issuance of
such Disqualified Stock;
(iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Subsidiary in exchange for, or
out of the net cash proceeds of, the substantially concurrent sale (other
than to a Subsidiary of the Company) of Qualified Equity Interests of the
Company; PROVIDED that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or in exchange for or out of the net cash proceeds
from the substantially concurrent sale (other than to a Subsidiary of the
Company) of Qualified Equity Interests of the Company; PROVIDED that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(2) of the preceding paragraph;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or
stock option agreement; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $15.0 million in any twelve-month period; and
(vi) the making and consummation of (A) a senior subordinated asset
sale offer in accordance with the provisions of the indenture relating to
the 2005 Senior Subordinated Notes or (B) a Change of Control Offer with
respect to the Securities in accordance with the provisions of this
Indenture or change of control offer with respect to the 2005 Senior
Subordinated Notes or the 2005 Exchangeable Subordinated Notes in
accordance with the provisions of the indentures relating thereto.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed.
SECTION 4.08. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual Transfer Restriction, except for such Transfer
Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the Closing Date,
-23-
<PAGE>
(b) this Indenture and the Indentures relating to the Senior Notes,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, unless
such Indebtedness was incurred in connection with or in contemplation of
such acquisition for the purpose of refinancing Indebtedness which was
tax-exempt, or in violation of Section 4.09 hereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person,
so acquired, PROVIDED that the Consolidated Cash Flow of such Person shall
not be taken into account in determining whether such acquisition was
permitted by the terms hereof except to the extent that such Consolidated
Cash Flow would be permitted to be dividends to the Company without the
prior consent or approval of any third party,
(e) customary non-assignment provisions in leases entered into in
the ordinary course of business,
(f) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the ability of any
of the Company's Subsidiaries to transfer the property so acquired to the
Company or any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Indebtedness being refinanced, or
(h) the New Credit Facility and related documentation as the same
is in effect on the Closing Date and as amended or replaced from time to
time, PROVIDED that no such amendment or replacement is more restrictive as
to Transfer Restrictions than the New Credit Facility and related
documentation as in effect on the Closing Date.
SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "INCUR") after the Closing Date any Indebtedness (including
Acquired Debt), and the Company shall not issue any Disqualified Stock and shall
not permit any of its Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired
Debt) and the Company may issue shares of Disqualified Stock if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.5 to 1, determined on a PRO FORMA
basis (including a PRO FORMA application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
Indebtedness consisting of reimbursement obligations in respect of a letter of
credit shall be deemed to be incurred when the letter of credit is first issued.
The foregoing provisions shall not apply to:
-24-
<PAGE>
(a) the incurrence by the Company of Indebtedness pursuant to the
New Credit Facility in an aggregate principal amount at any time
outstanding not to exceed an amount equal to $2.8 billion less the
aggregate amount of all mandatory repayments applied to permanently reduce
the commitments with respect to such Indebtedness;
(b) the incurrence by the Company of Indebtedness represented by
the Securities and the Senior Notes;
(c) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred
(including, without limitation, Existing Indebtedness);
(e) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate or currency
risk with respect to any fixed or floating rate Indebtedness that is
permitted by the terms hereof to be outstanding or any receivable or
liability the payments of which are determined by reference to a foreign
currency; PROVIDED that the notional principal amount of any such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its Subsidiaries of
Physician Support Obligations;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;
(h) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by tender, bid, performance, government contract,
surety or appeal bonds, standby letters of credit or warranty or
contractual service obligations of like nature, in each case to the extent
incurred in the ordinary course of business of the Company or such
Subsidiary;
(i) the incurrence by any Subsidiary of the Company of
Indebtedness, the aggregate principal amount of which, together with all
other Indebtedness of the Company's Subsidiaries at the time outstanding
(excluding the Existing Indebtedness until repaid or refinanced and
excluding Physician Support Obligations), does not exceed the greater of
(1) 10% of the Company's Stockholders' Equity as of the date of incurrence
or (2) $10.0 million; PROVIDED that, in the case of clause (1) only, the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred would
have been at least 2.5 to 1, determined on a PRO FORMA basis (including a
PRO FORMA application of the net proceeds therefrom), as if such
Indebtedness had been incurred at the beginning of such four-quarter
period; and
(j) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this covenant) in an
aggregate principal amount at any time outstanding not to exceed
$250.0 million.
-25-
<PAGE>
SECTION 4.10. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make any
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that could have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction was approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of $15.0
million, an opinion as to the fairness to the Company or such Subsidiary of such
Affiliate Transaction from a financial point of view issued by an investment
banking firm of national standing; PROVIDED that (x) transactions or payments
pursuant to any employment arrangements or employee or director benefit plans
entered into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (y) transactions between or among the Company and/or its
Subsidiaries and (z) transactions permitted under Section 4.07 hereof, in each
case, shall not be deemed to be Affiliate Transactions.
SECTION 4.11. LIMITATIONS ON LIENS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien to
secure Indebtedness that is PARI PASSU with or subordinated in right of payment
to the Securities (except Permitted Liens) on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom unless all payments due hereunder and under the
Securities are secured on an equal and ratable basis with the Obligations so
secured until such time as such Obligations are no longer secured by a Lien.
SECTION 4.12. 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:
-26-
<PAGE>
(1) that the Change of Control Offer is being made pursuant to this
Section 4.12 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
(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. Prior to complying
with the provisions of this Section 4.12, but in any event within 90 days
following a Change of Control Triggering Event, the Company shall either repay
all
-27-
<PAGE>
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of
Securities required by this Section 4.12. 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 Triggering Event.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Section 4.12 and Article 5 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,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 4.14. LINE OF BUSINESS.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in any material extent in any business other than the ownership,
operation and management of Hospitals and Related Businesses.
SECTION 4.15. LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY
SUBSIDIARIES.
The Company shall not permit any Subsidiary, directly or indirectly,
to Guarantee or secure the payment of any other Indebtedness of the Company or
any of its Subsidiaries (except Indebtedness of a Subsidiary of such Subsidiary
or Physician Support Obligations) unless such Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture, in substantially the
form attached hereto as Exhibit B, providing for the Guarantee of the payment of
the Securities by such Subsidiary, which Guarantee shall be subordinated to such
Subsidiary's Guarantee of or pledge to secure such other Indebtedness to the
same extent as the Securities are subordinated to such other Indebtedness under
this Indenture. Notwithstanding the foregoing, such Guarantee by a Subsidiary
of the Securities shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon the sale or other disposition, by
way of merger or otherwise, to any Person not an Affiliate of the Company, of
all of the Company's stock in, or all or substantially all the assets of, such
Subsidiary. The foregoing provisions shall not be applicable to any one or more
Guarantees that otherwise would be prohibited of up to $25.0 million in
aggregate principal amount of Indebtedness of the Company or its Subsidiaries at
any time outstanding.
-28-
<PAGE>
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect in right
of payment to the Securities.
ARTICLE 5
SUCCESSORS
SECTION 5.01. 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 (A) shall 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 and (B) shall, at the time of
such transaction and after giving PRO FORMA effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof.
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.
-29-
<PAGE>
SECTION 5.02. 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 5.01 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 6
DEFAULTS AND REMEDIES
SECTION 6.01. 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, whether or not such payment is prohibited by the provisions of
Article 10 hereof;
(ii) default in payment when due of the principal of or premium, if
any, on the Securities, at maturity or otherwise, whether or not such
payment is prohibited by the provisions of Article 10 hereof;
(iii) failure by the Company to comply with the provisions of
Sections 4.07, 4.09 or 4.12 hereof;
(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;
(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 Closing Date or is created after the Closing
Date, which default (a) constitutes a failure to pay principal at final
maturity or (b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness that has not been paid at final maturity 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;
-30-
<PAGE>
(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
(e) admits in writing its inability generally to pay its
debts as the same become due; and
(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.
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."
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (vii) or (viii) of Section 6.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in 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 6.01 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.
-31-
<PAGE>
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Securities pursuant to
Section 3.07 hereof, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Securities.
If an Event of Default occurs under this Indenture prior to January
15, 2002 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 January 15, 2002 pursuant to Section 3.07
hereof, 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 also 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 January 15 of the years set forth
below:
Year Percentage
---- ----------
1997. . . . . . . . . . . . . . . . 108.625%
1998. . . . . . . . . . . . . . . . 107.547%
1999. . . . . . . . . . . . . . . . 106.469%
2000. . . . . . . . . . . . . . . . 105.391%
2001. . . . . . . . . . . . . . . . 104.313%
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 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 7.01 hereof, the Trustee shall be
entitled to rely on the determination set forth in any such resolutions
delivered to the Trustee.
SECTION 6.03. 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 6.04. 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. 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.
-32-
<PAGE>
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for exercising 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 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 6.06. 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 6.07. 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 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(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
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 7.07 hereof, including the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
-33-
<PAGE>
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 7.07 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 7.07 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 6.10. 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 7.07, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
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 6.10 upon five Business Days prior notice to
the Company.
SECTION 6.11. 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 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
-34-
<PAGE>
ARTICLE 7
TRUSTEE
SECTION 7.01. 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 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 6.05 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.
-35-
<PAGE>
(vii) The Trustee shall not be deemed to have knowledge of any matter
unless such matter is actually known to a Responsible Officer.
SECTION 7.02. 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 7.03. 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 7.10 and 7.11 hereof.
SECTION 7.04. 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 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 7.05. 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
-36-
<PAGE>
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 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each December 31 beginning with the December 31
following the Closing Date, 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 7.07. 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.
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 7.07 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 6.01(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.
-37-
<PAGE>
SECTION 7.08. 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 7.10 hereof;
(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 7.10 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 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. 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.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
-38-
<PAGE>
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
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. 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 8.02 or 8.03 hereof be applied to
all outstanding Securities upon compliance with the conditions set forth below
in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, 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 8.05 hereof and the other
Sections of this Indenture referred to in clauses (i) and (ii) of this Section
8.02, and to have satisfied all its other obligations under such Securities and
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 8.04 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 and 4.02 hereof, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 7.07 hereof, and the Company's obligations in
connection therewith and (iv) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof with
respect to the Securities.
SECTION 8.03. COVENANT DEFEASANCE.
-39-
<PAGE>
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.14, 4.15, and 4.16 and Article 5 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 6.01(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 8.01 hereof of the option applicable to this Section
8.03, Sections 6.01(iv) through 6.01(vi) hereof shall not constitute Events of
Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
8.02 or Section 8.03 hereof to the outstanding Securities:
(i) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article 8 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 8.02 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 Closing Date, 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 8.03 hereof before the
date that is one year prior to the final maturity of the Securities, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States confirming that the Holders of the outstanding
-40-
<PAGE>
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 Section 6.01(vii) or 6.01(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 8.02 or 8.03 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 stating that all conditions precedent provided for relating to
either the Legal Defeasance under Section 8.02 hereof or the Covenant
Defeasance under Section 8.03 hereof (as the case may be) have been
complied with as contemplated by this Section 8.04.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 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 8.05, the
"Trustee") pursuant to Section 8.04 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 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 8.04 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.
-41-
<PAGE>
Anything in this Article 8 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 8.04 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
8.04(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 8.06. 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 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Dollars or
non-callable Government Securities in accordance with Section 8.02 or 8.03
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 8.02 or 8.03 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 8.02 or
8.03 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 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. 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;
-42-
<PAGE>
(iii) to provide for any supplemental indenture required pursuant to
Section 4.15 hereof;
(iv) to provide for the assumption of the Company's obligations to
Holders of Securities in the case of a merger, consolidation or sale of
assets pursuant to Article 5 hereof;
(v) 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
(vi) 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 9.06
hereof, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this 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 9.02. WITH CONSENT OF HOLDERS.
Except as provided in Section 9.01 and 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 9.06 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 9.02 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 6.04 and 6.07 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
-43-
<PAGE>
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):
(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 or alter the provisions with respect to the redemption of the
Securities (other than provisions relating to the covenants in Section 4.12
hereof);
(iii) reduce the rate of or change the time for payment of interest
on any Security;
(iv) 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);
(v) make any Security payable in money other than that stated in
the Securities;
(vi) make any change in Section 6.04 or 6.07 hereof;
(vii) waive a redemption payment with respect to any Security (other
than a payment required under Section 4.12 hereof); or
(viii) make any change in this sentence of this Section 9.02.
Notwithstanding the foregoing, any amendment to the provisions of
Article 10 hereof shall require the consent of the Holders of at least 75% in
aggregate principal amount of the Securities then outstanding if such amendment
would adversely affect the rights of Holders of Securities.
SECTION 9.03. 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 9.04. 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 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 2.06 hereof or (ii) such other date as the Company shall
designate.
-44-
<PAGE>
SECTION 9.05. 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 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 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 7.01, 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 10
SUBORDINATION
SECTION 10.01 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 10, to the
prior payment in full of all Senior Debt (whether outstanding on the Closing
Date or created, incurred, assumed or Guaranteed after the Closing Date), and
that the subordination is for the benefit of the holders of Senior Debt.
SECTION 10.02. CERTAIN DEFINITIONS.
"Designated Senior Debt" means (i) so long as any Obligations are
outstanding under the New Credit Facility, such Obligations and (ii) thereafter,
any other Senior 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 Debt".
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Senior Debt" means (i) Indebtedness under the New Credit Facility,
(ii) the Senior Notes, Existing Senior Notes and any other Indebtedness
permitted to be incurred by the Company under the terms of this Indenture,
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 (iii) all Obligations with respect to any of the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include (v) the Senior Subordinated Notes, the 2005 Senior Subordinated Notes
and the 2005 Exchangeable Subordinated Notes, (w) any liability for federal,
state, local or other
-45-
<PAGE>
taxes owed or owing by the Company, (x) any Indebtedness of the Company to any
of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of this Indenture.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
SECTION 10.03. 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, the holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest accruing after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt, whether or not allowed or allowable as
a claim in such proceeding) before the Holders shall be entitled to receive any
payment with respect to the Securities, and until all Obligations with respect
to Senior Debt are paid in full, any distribution to which the Holders would be
entitled shall be made to the holders of Senior Debt (except (a) that Holders
may receive securities that (i) are subordinated at least to the same extent as
the Securities to Senior Debt and any securities issued in exchange for Senior
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 Debt
under the New Credit Facility pursuant to a plan of reorganization or
readjustment, and (b) payments made from the trust described in Section 8.04).
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment upon or in respect of the
Securities (except in securities that (i) are subordinated to at least the same
extent as the Securities to Senior Debt and any securities issued in exchange
for Senior 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 Debt under the New Credit Facility pursuant to a plan or
reorganization or readjustment or from the trust described in Section 8.04
hereof) if;
(i) a default in the payment of the principal of, premium, if any
or interest on Designated Senior Debt occurs and is continuing beyond any
applicable period of grace in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of the Designated Senior 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 New Credit Facility, from the
Representative thereunder and, thereafter, from the holders or Representative of
any Designated Senior Debt. 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.
-46-
<PAGE>
The Company may and shall resume payments on the Securities:
(1) in the case of a payment default, upon the date on which such
default is cured or waived, and
(2) in the case of a nonpayment default referred to in Section
10.04(ii) hereof, 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 Debt
has been accelerated.
SECTION 10.05. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 10.06. 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 is prohibited
by Section 10.04 hereof, such payment shall be held by the Trustee or such
Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which such Senior Debt may have been issued, as
their respect interests may appear, for application for the payment of all
Obligations with respect to Senior 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
Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior 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 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 Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.07. 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 Debt
as provided in this Article.
SECTION 10.08. SUBROGATION.
After all Senior 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
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made
-47-
<PAGE>
under this Article 10 to holders of Senior 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 10.09. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior 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 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 Debt to receive distributions and payments otherwise
payable to Holders.
If the Company fails because of this Article 10 to pay principal of or
interest on a Security on the due date, the failure is still a Default or Event
of Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior 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 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior 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 10, 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 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 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provisions 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 10. Only the Company or
a
-48-
<PAGE>
Representative may give the notice. Nothing to this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 10.13. 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 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes.
SECTION 10.14. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. 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 11.02. 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 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
3820 State Street
Santa Barbara, California 93105
Telecopier No.: (805) 563-7070
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:
-49-
<PAGE>
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, or by overnight air courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA. Failure to
mail a notice or 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 11.03. 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 11.04. 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 11.05 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 11.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
-50-
<PAGE>
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;
(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 11.06. 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 11.07. 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.
SECTION 11.08. 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 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.
SECTION 11.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 11.10. 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.
-51-
<PAGE>
SECTION 11.11. 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 11.12. 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 11.13. 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.
SECTION 11.14. 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 11.15. 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.
-52-
<PAGE>
SIGNATURES
Dated as of January 15, 1997 TENET HEALTHCARE CORPORATION
By: /s/ Terence P. McMullen
-------------------------------------
Name: Terence P. McMullen
Title: Vice President
Attest:
/s/ Richard B. Silver (SEAL)
- ------------------------------
Richard B. Silver
Dated as of January 15, 1997 THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
-------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
Attest:
(SEAL)
- ------------------------------
By: /s/ Mary Jane Morrissey
---------------------------
Authorized Signatory
-53-
<PAGE>
EXHIBIT A
(Face of Security)
8 5/8% Senior Subordinated Note
due January 15, 2007
CUSIP: 88033G AG 5
No. $
-----------
TENET HEALTHCARE CORPORATION
promises to pay to
- --------------------------------------------------------------------------------
or its registered assigns, the principal sum of_______________ Dollars on
January 15, 2007.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1997.
Record Dates: January 1 and July 1 (whether or not a Business Day).
[(If Security is a Global Security--) This Security is a Global Security within
the meaning of the Indenture hereinafter referred to and is registered in the
name of a Depositary or a nominee thereof. This Security may not be exchanged
in whole or in part for a Security registered, and no transfer of this Security
in whole or in part may be registered, in the name of any person other than such
Depositary or a nominee thereof, except in the limited circumstances described
in the Indenture.]
TENET HEALTHCARE CORPORATION
By:
---------------------------
(SEAL)
Dated: ,
--------------- ---
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
A-1
<PAGE>
(Back of Security)
8 5/8% SENIOR SUBORDINATED NOTE
due January 15, 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 8 5/8%. The Company shall pay interest
semiannually in arrears on January 15 and July 15 of each year, commencing July
15, 1997 to Holders of record on the immediately preceding January 1 and July 1,
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 canceled 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
appropriate written 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.
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 January 15, 1997 (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 $700,000,000 in aggregate
principal amount.
A-2
<PAGE>
5. OPTIONAL REDEMPTION. On or after January 15, 2002, 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.
The redemption price as a percentage of the principal amount shall be
as follows, if the Securities are redeemed during the twelve-month period
beginning on January 15 of the following years:
Year Percentage
---- ----------
2002 104.313%
2003 102.876%
2004 101.438%
2005 and thereafter 100.000%
6. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least
30 days and 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 part 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.
7. MANDATORY REDEMPTION. Subject to the Company's obligation to make an
offer to repurchase Securities under certain circumstances pursuant to
Section 4.12 of the Indenture (as described in paragraph 8 below), the Company
shall not be required to make any mandatory redemption or sinking fund payments
with respect to the Securities.
8. 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.
9. SUBORDINATION. The Securities are subordinated to Senior Debt (as
defined in the Indenture), which includes any Indebtedness arising under or in
connection with (a) the New Credit Facility, (b) the Senior Notes, the Existing
Senior Notes and any other Indebtedness permitted by the Indenture, 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
(c) all Obligations of the Company with respect to any of the foregoing. To the
extent provided in the Indenture, Senior Debt must be paid 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.
10. 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.
A-3
<PAGE>
11. 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 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.
12. 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 such 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 such 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): (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 or alter the provisions with respect to the
redemption of the Securities (other than provisions relating to Section 4.12 of
the Indenture); (iii) reduce the rate of or change the time for payment of
interest on any Security; (iv) 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); (v) make any Security
payable in money other than that stated in the Securities; (vi) 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; (vii) waive a redemption payment with
respect to any Security (other than a payment required under Section 4.12 of the
Indenture); or (viii) make any change in the foregoing amendment and waiver
provisions.
Any amendment to the provisions of Article 10 of the Indenture shall
require the consent of the Holders of at least 75% in principal amount of the
Securities then outstanding if such amendment would adversely affect the rights
of the Holders of the Securities.
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 any supplemental indenture required pursuant to Section 4.15 of
the Indenture, to provide for the assumption of the Company's obligations to
Holders of Securities in the case of a merger, consolidation or sale of assets
pursuant to Article 5 of the Indenture, 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 Commission in order to effect or maintain the
qualification of the Indenture under the TIA.
13. 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,
whether or not such payment is prohibited by the provisions of Article 10 of the
Indenture; (ii) a default in payment when due of the principal of or premium, if
any, on the Securities, at maturity or otherwise, whether or not such payment is
prohibited by the provisions of Article 10 of the Indenture; (iii) a failure by
the Company to comply with the provisions of Sections 4.07, 4.09 or 4.12 of
Indenture; (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
A-4
<PAGE>
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 failure to pay
principal at final maturity 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 that has not been paid at final maturity 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, which judgment or judgments are not
paid, discharged or stayed for a period of 60 days; and (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries.
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 Securities
by written notice to the Company and the Trustee, may declare all the Securities
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 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 the
Holders' interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Securities pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Securities. If an Event of Default occurs under
the Indenture prior to January 15, 2002 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 January
15, 2002, then the premium specified in Section 6.02 of the Indenture shall also
become immediately due and payable to the extent permitted by law upon the
acceleration of such Securities.
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 the principal of, premium, if any,
or interest on 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.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to incur additional indebtedness
and issue preferred stock, pay dividends or
A-5
<PAGE>
make other distributions, repurchase Equity Interests or subordinated
indebtedness, create certain liens, enter into certain transactions with
affiliates, issue or sell Equity Interests of the Company's Subsidiaries, issue
Guarantees of Indebtedness by the Company's Subsidiaries and enter into certain
mergers and consolidations.
15. 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.
16. 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
Securities 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.
17. AUTHENTICATION. This Security shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. 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).
19. 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
3820 State Street
Santa Barbara, California 93105
Attention: Treasurer
20. GOVERNING LAW. The internal laws of the State of New York shall
govern and be used to construe the Indenture and the Securities, without regard
to conflict of laws provisions thereof.
A-6
<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.*
- -------------------------
*NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i) The
Securities Transfer Agent Medallion Program (Stamp); (ii) the New York Stock
Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee.
A-7
<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 4.12 of the Indenture, check the
box below:
/ / Section 4.12
(Change of Control)
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.12 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.*
- -------------------------
*NOTICE: The signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i) The
Securities Transfer Agent Medallion Program (Stamp); (ii) the New York Stock
Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee.
A-8
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Guarantor"), a subsidiary of
Tenet Healthcare Corporation (or its successor), a Nevada corporation (the
"Company"), and The Bank of New York, as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of January 15, 1997,
providing for the issuance of an aggregate principal amount of $700,000,000
of 8 5/8% Senior Subordinated Notes due 2007 (the "Securities");
WHEREAS, Section 4.15 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall guarantee the payment of the Securities pursuant to a Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the holders of the Securities as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby unconditionally
guarantees to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Securities or the Obligations
of the Company hereunder and thereunder, that: (a) the principal of, premium, if
any, and interest on the Securities will be promptly paid in full when due,
whether at maturity, by acceleration, redemption or otherwise, and interest on
the overdue principal, premium, if any, and (to the extent permitted by law)
interest on any interest on the Securities and all other payment Obligations of
the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full, all in accordance with the terms hereof and thereof; and
(b) in case of any extension of time of payment or renewal of any Securities or
any of such other payment Obligations, that same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration, redemption or otherwise. Failing
payment when due of any amount so guaranteed for whatever reason the Guarantor
shall be obligated to pay the same immediately. An Event of Default under the
Indenture or the Securities shall constitute an event of default under this
Guarantee, and shall entitle the Holders of Securities to accelerate the
Obligations of the Guarantor hereunder in the same manner and to the same extent
as the Obligations of the Company. The Guarantor hereby agrees that its
Obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or the Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment against the
B-1
<PAGE>
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of the Guarantor.
The Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenant that this Guarantee will not be discharged
except by complete performance of the Obligations contained in the Securities
and the Indenture. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantor, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantor, any amount paid by either to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. The Guarantor agrees that it shall not be entitled to, and
hereby waives, any right of subrogation in relation to the Holders in respect of
any Obligations guaranteed hereby. The Guarantor further agrees that, as
between the Guarantor, on one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such Obligations as provided in
Article 6 of the Indenture, such Obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantor for the purpose of this
Guarantee.
3. EXECUTION AND DELIVERY OF GUARANTEE. To evidence its Guarantee set
forth in Section 2, the Guarantor hereby agrees that a notation of such
Guarantee substantially in the form of EXHIBIT A shall be endorsed by an officer
of such Guarantor on each Security authenticated and delivered by the Trustee
and that this Supplemental Indenture shall be executed on behalf of such
Guarantor, by manual or facsimile signature, by its President or one of its Vice
Presidents.
The Guarantor hereby agrees that its Guarantee set forth in Section 2
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee.
If an Officer whose signature is on this Supplemental Indenture or on
the Guarantee no longer holds that office at the time the Trustee authenticates
the Security on which a Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantors.
4. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 of the Indenture, nothing
contained in this Supplemental Indenture or in the Securities shall prevent any
consolidation or merger of the Guarantor with or into the Company or any
Subsidiary of the Company that has executed and delivered a supplemental
indenture substantially in the form hereof or shall prevent any sale or
conveyance of the property of the Guarantor as an entirety or substantially as
an entirety, to the Company or any such Subsidiary of the Company.
(b) Except as provided in Section 4(a) hereof or in a transaction
referred to in Section 5 hereof, the Guarantor shall not consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person unless (1)
either (x) the Guarantor shall be the surviving Person of such merger or
consolidation or (y) the surviving Person or transferee is a corporation,
partnership or trust organized and existing under the laws of the United States,
any state thereof or the District of Columbia and such surviving Person or
transferee shall expressly
B-2
<PAGE>
assume all the obligations of the Guarantor under this Guarantee and the
Indenture pursuant to a supplemental indenture substantially in the form
hereof; (2) immediately after giving effect to such transaction (including the
incurrence of any Indebtedness incurred or anticipated to be incurred in
connection with such transaction) no Default or Event of Default shall have
occurred and be continuing; and (3) the Company has delivered to the Trustee an
Officers' Certificate and Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with the Indenture, that the
surviving Person agrees to be bound thereby, and that all conditions precedent
in the Indenture relating to such transaction have been satisfied. For purposes
of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of related transactions) of all or substantially
all of the properties and assets of one or more Subsidiaries of the Guarantor,
the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Guarantor, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Guarantor.
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 Guarantor in accordance with this Section 4(b) hereof, the successor
corporation shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of the Guarantees to be
endorsed upon all of the Securities issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee. All
Guarantees so issued shall in all respects have the same legal rank and benefit
under the Indenture as the Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture as though all of such Guarantees had
been issued at the date of the execution hereof.
5. RELEASES FOLLOWING SALE OF ASSETS. Concurrently with any sale, lease,
conveyance or other disposition (by merger, consolidation or otherwise) of
assets of the Guarantor (including, if applicable, disposition of all of the
Capital Stock of the Guarantor), any Liens in favor of the Trustee in the assets
sold, leased, conveyed or otherwise disposed of shall be released. If the
assets sold, leased, conveyed or otherwise disposed of (by merger, consolidation
or otherwise) include all or substantially all of the assets of the Guarantor or
all of the Capital Stock of the Guarantor in each case, in compliance with the
terms of the Indenture, then the Guarantor shall be automatically and
unconditionally released from and relieved of its Obligations under its
Guarantee. Upon delivery by the Company to the Trustee of an Officers'
Certificate to the effect that such sale, lease, conveyance or other disposition
was made by the Company in accordance with the provisions of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of the Guarantor from its Obligations under its Guarantee.
6. LIMITATION ON GUARANTOR LIABILITY. For purposes hereof, the
Guarantor's liability will be that amount from time to time equal to the
aggregate liability of the Guarantor hereunder, but shall be limited to the
lesser of (i) the aggregate amount of the Obligations of the Company under the
Securities and the Indenture and (ii) the amount, if any, which would not have
(A) rendered the Guarantor "insolvent" (as such term is defined in the federal
Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or
(B) left it with unreasonably small capital at the time its Guarantee of the
Securities was entered into, after giving effect to the incurrence of existing
Indebtedness immediately prior to such time; PROVIDED that it shall be a
presumption in any lawsuit or other proceeding in which the Guarantor is a party
that the amount guaranteed pursuant to its Guarantee is the amount set forth in
clause (i) above unless any creditor, or representative of creditors of the
Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor,
otherwise proves in such a lawsuit that the aggregate liability of the Guarantor
is limited to the amount set forth in clause (ii). In making any determination
as to the solvency or sufficiency of capital of the Guarantor in accordance with
the previous sentence, the right of the Guarantor to contribution from other
Subsidiaries of the Company that have executed and delivered a
B-3
<PAGE>
supplemental indenture substantially in the form hereof and any other rights the
Guarantor may have, contractual or otherwise, shall be taken into account.
7. "TRUSTEE" TO INCLUDE PAYING AGENT. In case at any time any Paying
Agent other than the Trustee shall have been appointed by the Company and be
then acting under the Indenture, the term "Trustee" as used in this Supplemental
Indenture shall in each case (unless the context shall otherwise require) be
construed as extending to and including such Paying Agent within its meaning as
fully and for all intents and purposes as if such Paying Agent were named in
this Supplemental Indenture in place of the Trustee.
8. SUBORDINATION. The Obligations of the Guarantor to the Holders of the
Securities and to the Trustee pursuant to this Guarantee are subordinated to the
Guarantor's Guarantee of or pledge to secure [the Indebtedness giving rise to
the requirement to execute this Guarantee pursuant to Section 4.15 of the
Indenture] to the same extent as the Securities are subordinated to such other
Indebtedness under the Indenture.
9. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantor under the Securities, any
Guarantees, the Indenture or this Supplemental 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.
10. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
11. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
12. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
B-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ,
------------------- ---
[Guarantor]
By:
---------------------------
Name:
Title:
The Bank of New York,
as Trustee
By:
---------------------------
Name:
Title:
B-5
<PAGE>
EXHIBIT A TO SUPPLEMENTAL INDENTURE
GUARANTEE
The Guarantor hereby unconditionally guarantees to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of the
Indenture, the Securities or the Obligations of the Company to the Holders or
the Trustee under the Securities or under the Indenture, that: (a) the principal
of, and premium, if any, and interest on the Securities will be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on overdue principal, premium, if any, and (to the extent permitted
by law) interest on any interest on the Securities and all other payment
Obligations of the Company to the Holders or the Trustee under the Indenture or
under the Securities will be promptly paid in full, all in accordance with the
terms thereof; and (b) in case of any extension of time of payment or renewal of
any Securities or any of such other payment Obligations, the same will be
promptly paid in full when due in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration, redemption or otherwise.
Failing payment when due of any amount so guaranteed, for whatever reason, the
Guarantor shall be obligated to pay the same immediately.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in a Supplemental Indenture, dated as of _________ __, ____ to the Indenture,
and reference is hereby made to the Indenture, as supplemented, for the precise
terms of this Guarantee.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its respective successors and
assigns to the extent set forth in the Indenture until full and final payment of
all of the Company's Obligations under the Securities and the Indenture and
shall inure to the benefit of the successors and assigns of the Trustee and the
Holders of Securities and, in the event of any transfer or assignment of rights
by any Holder of Securities or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This a
Guarantee of payment and not a guarantee of collection.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
For purposes hereof, the Guarantor's liability will be that amount
from time to time equal to the aggregate liability of the Guarantor hereunder,
but shall be limited to the lesser of (i) the aggregate amount of the
Obligations of the Company under the Securities and the Indenture and (ii) the
amount, if any, which would not have (A) rendered the Guarantor "insolvent" (as
such term is defined in the federal Bankruptcy Law and in the Debtor and
Creditor Law of the State of New York) or (B) left it with unreasonably small
capital at the time its Guarantee of the Securities was entered into, after
giving effect to the incurrence of existing Indebtedness immediately prior to
such time; PROVIDED that it shall be a presumption in any lawsuit or other
proceeding in which the Guarantor is a party that the amount guaranteed pursuant
to its Guarantee is the amount set forth in clause (i) above unless any
creditor, or representative of creditors of the Guarantor, or debtor in
possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a
lawsuit that the aggregate liability of the Guarantor is limited to the amount
set forth in clause (ii). The Indenture provides that, in making any
determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of the
B-6
<PAGE>
Guarantor to contribution from other Subsidiaries of the Company that have
become Guarantors and any other rights the Guarantor may have, contractual or
otherwise, shall be taken into account.
The Obligations of the Guarantor to the Holders of the Securities and
to the Trustee pursuant to this Guarantee are subordinated to the Guarantor's
Guarantee of or pledge to secure [the Indebtedness giving rise to the
requirement to execute this Guarantee pursuant to Section 4.15 of the Indenture]
to the same extent as the Securities are subordinated to such other Indebtedness
under the Indenture.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
[GUARANTOR]
By:
------------------------------------
Name:
Title:
B-7
<PAGE>
AMENDMENT NO. 2 TO REIMBURSEMENT AGREEMENT
AMENDMENT No. 2 dated as of January 30, 1997 to the Amended and
Restated Letter of Credit and Reimbursement Agreement dated as of February 28,
1995, as heretofore amended (as so amended, the "Reimbursement Agreement"),
among TENET HEALTHCARE CORPORATION, as account party, BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, THE BANK OF NEW YORK, and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Banks, and THE BANK OF NEW YORK, as Issuing Bank.
WHEREAS, the Reimbursement Agreement incorporates by reference, or
otherwise refers to, certain provisions of the 1996 Credit Agreement (as defined
therein);
WHEREAS, the 1996 Credit Agreement is to be replaced by a new credit
agreement (the "1997 Credit Agreement"); and
WHEREAS, the parties hereto desire to amend the Reimbursement
Agreement so that it refers to the relevant provisions of the 1997 Credit
Agreement rather than the 1996 Credit Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS, REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Reimbursement
Agreement has the meaning assigned to such term in the Reimbursement Agreement.
Each reference to "hereof", "hereunder", "herein", and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Reimbursement Agreement shall, after this Agreement
becomes effective, refer to the Reimbursement Agreement as amended hereby.
SECTION 2. AMENDMENT OF DEFINITIONS. The definitions in Section
1.01 of the Reimbursement Agreement are amended as follows:
(a) The definition of "Letter of Credit Fee Rate" is deleted and
replaced by the following definition:
"Letter of Credit Fee Rate" means a rate per annum equal to the
LC Fee Rate determined in accordance with the Pricing Schedule
attached to the 1997 Credit Agreement.
(b) The following new definitions are added immediately after the
definition of "1996 Credit Agreement":
"1997 Closing Date" means the "Closing Date", as such term is
defined in the 1997 Credit Agreement.
<PAGE>
"1997 Credit Agreement" means the Credit Agreement dated as of
January 30, 1997 among the Company, the Lenders, Managing Agents and
Co-Agents party thereto, The Bank of New York and The Bank of Nova
Scotia, as Documentation Agents, Bank of America National Trust and
Savings Association, as Syndication Agent, and Morgan Guaranty Trust
Company of New York as Administrative Agent, as such agreement may be
amended from time to time.
(c) The definition of "Termination Date" is amended to read as
follows:
"Termination Date" means the date which is five Business Days
prior to the "Termination Date" under and as defined in the 1997
Credit Agreement.
SECTION 3. LETTER OF CREDIT FEE. Section 3.01(a) of the
Reimbursement Agreement is amended to read as follows:
(a) LETTER OF CREDIT FEE. For the account of the Banks, a letter of
credit fee calculated for each day at the Letter of Credit Fee Rate for
such day on the aggregate outstanding face amount of the Series A L/C and
the Series B L/C on such day. Such letter of credit fee shall accrue from
and including the 1997 Closing Date to and including the Termination Date
and shall be payable quarterly in arrears on the last Business Day of each
March, June, September and December and on the Termination Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Section 4.03 of the
Reimbursement Agreement is amended to read as follows:
SECTION 4.03 REPRESENTATIONS TO BE UPDATED. In connection with any
extension of the Letters of Credit after the 1997 Closing Date, the Company will
update the following representations and warranties as provided in Section
5.02(b) hereof:
(i) the representations and warranties made by the Company in
Section 4.01 of this Agreement;
(ii) the representations and warranties made by the Company in
Sections 4.04 through 4.14 of the 1997 Credit Agreement (defined terms
used therein having the meanings assigned to such terms in the 1997
Credit Agreement except that, for purposes of this Agreement, (A) the
term "Financing Documents" shall include this Agreement, the Lease
Guaranty and the Letters of Credit and (B) the terms "this Agreement"
and "hereby" contained in Section 4.12 thereof shall include this
Agreement);
(iii) the representations and warranties made by the Company
in the Securities Pledge and Security Agreement; and
2
<PAGE>
(iv) any other representations and warranties made by the Company
in any certificate, document or financial or other statement furnished
at any time hereunder or in connection herewith.
SECTION 5. CONDITIONS TO EXTENSIONS OF LETTERS OF CREDIT. Section
5.02(b) of the Reimbursement Agreement is amended to read as follows:
(b) the fact that each of the representations and warranties
referred to in Section 4.03 hereof will be true and correct on and as of
the date of extension of the Letters of Credit as if made on and as of such
date (except that representations and warranties made with respect to
specified dates or periods will be true and correct as of such specified
dates or for such specified periods, as the date may be); and
SECTION 6. INCORPORATION OF COVENANTS BY REFERENCE. Section 6.01
of the Reimbursement Agreement is amended to read as follows:
SECTION 6.01 INCORPORATION BY REFERENCE. The Company agrees that,
so long as any Commitment remains in effect, any amount remains available for
drawing under any Letter of Credit or any amount is owing to any Bank or the
Issuing Bank hereunder, the Company shall observe and perform each of its
covenants and undertakings set forth in Article 5 of the 1997 Credit Agreement
and such covenants and undertakings are hereby incorporated herein by reference.
Defined terms used in Article 5 of the 1997 Credit Agreement have the meanings
assigned such terms in the 1997 Credit Agreement; PROVIDED that, for purposes of
this Section 6.01, (i) the term "Lenders" shall mean the Banks, (ii) the term
"Financing Documents" shall include this Agreement, the Lease Guaranty and the
Letters of Credit, (iii) the term "Required Lenders" shall mean the Required
Banks, (iv) the term "Default" shall mean a Default as such term is defined
herein, and (v) the term "Administrative Agent" shall mean the Issuing Bank.
SECTION 7. CROSS DEFAULT. Section 7.01(e) of the Reimbursement
Agreement is amended to read as follows:
(e) An Event of Default under and as defined in the 1997 Credit
Agreement shall have occurred and be continuing; or
SECTION 8. AMENDMENTS AND WAIVERS. Section 11.05(B) of the
Reimbursement Agreement is amended to read as follows:
(B) Any amendment or waiver of any provision of Articles 4 and 5 (or
any related definition) of the 1997 Credit Agreement shall be effective for
purposes of Articles IV and VI of this Agreement if signed by the Company
and the Required Banks hereunder in their respective capacities as
"Lenders" under the 1997 Credit Agreement.
3
<PAGE>
SECTION 9. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 10. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
Company represents and warrants that, on the 1997 Closing Date, the
representations and warranties made by the Company in Section 4.03 of the
Reimbursement Agreement are true in all material respects, and no Default has
occurred and is continuing.
SECTION 11. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effective as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective and binding on the parties
hereto when:
(i) the Issuing Bank shall have received from each of the Company,
the Banks and the Issuing Bank either a counterpart hereof signed by such
party or telex, facsimile or other written confirmation satisfactory to it
that such party has signed a counterpart hereof;
(ii) the Issuing Bank shall have received a coy of the 1997 Credit
Agreement in the form signed by all the parties thereto and the 1997 Credit
Agreement shall have become effective; and
(iii) the Company shall have paid to the Issuing Bank (A) all fees
accrued for the account of the Banks to but excluding the 1997 Closing Date
pursuant to Section 3.01(a) of the Reimbursement Agreement and (B) all
Reimbursement Obligations and other amounts (if any) due and payable to the
Issuing Bank on or before the 1997 Closing Date.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the date and year
first above written.
TENET HEALTHCARE CORPORATION
By: /S/ SCOTT M. BROWN
-----------------------------------
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /S/ WYATT R. RITCHIE
-----------------------------------
Title: Managing Director
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /S/ DIANA H. IMHOF
-----------------------------------
Title: Vice President
THE BANK OF NEW YORK, as a Bank
By: /S/ LISA Y. BROWN
-----------------------------------
Title: Vice President
THE BANK OF NEW YORK, as Issuing Bank
By: /S/ LISA Y. BROWN
-----------------------------------
Title: Vice President
5
<PAGE>
SCHEDULE I
LIST OF COMMITMENTS
AS OF 1997 CLOSING DATE
BANK COMMITMENT
- ---- ----------
The Bank of New York $28,983,333.34
Bank of America National Trust and 28,983,333.33
Savings Association
Morgan Guaranty Trust Company of New York 28,983,333.33
-------------
TOTAL $86,950,000.00
--------------
--------------
<PAGE>
Exhibit 10(f)
Amendment to Credit
Agreement
CONFORMED COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of July 25, 1997 to the Credit Agreement dated as of
January 30, 1997 (the "CREDIT AGREEMENT") among TENET HEALTHCARE CORPORATION
(the "BORROWER"), the LENDERS, MANAGING AGENTS and CO-AGENTS party thereto, the
SWINGLINE BANK party thereto, THE BANK OF NEW YORK and THE BANK OF NOVA SCOTIA,
as Documentation Agents, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Syndication Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement to (i)
modify the definition of Consolidated EBITDA so that certain charges incurred by
the Borrower in the third and fourth quarters of 1997 and certain non-cash and
merger-related charges that may be incurred by the Borrower will be excluded in
calculating the amount thereof, (ii) exclude the effect of certain charges
incurred in the third and fourth quarters of 1997 on the Borrower's Consolidated
Net Worth for purposes of compliance with the minimum Consolidated Net Worth
covenant and (iii) permit the Borrower to prepay, defease or redeem certain Debt
that is subordinated in right of payment to the Loans;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS; REFERENCES. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. CONSOLIDATED EBITDA. The definition of "Consolidated EBITDA" in
Section 1.01 of the Credit Agreement is amended to read as follows:
<PAGE>
"Consolidated EBITDA" means, for any period of four consecutive Fiscal
Quarters, the sum of (i) the consolidated net income of the Borrower and
its Subsidiaries for such period plus (ii) to the extent deducted in
determining such consolidated net income, the sum of (A) interest expense,
(B) income taxes, (C) depreciation and amortization expenses, (D) other
non-cash charges (other than those non-cash charges that reflect a past
expenditure of cash (such as prepaid expenses and other similar charges) or
future expenditure of cash) and (E) merger-related charges, all determined
on a Pro Forma Basis; PROVIDED that Consolidated EBITDA shall be calculated
so as to exclude the effect of (w) any gain or loss that is classified as
extraordinary in accordance with GAAP, (x) any gain or loss from any sale
or other disposition of any Healthcare Facility, any Healthcare Business or
any Equity Interest in any Person and (y) non-recurring charges recorded by
the Borrower in the third and fourth Fiscal Quarters of 1997.
SECTION 3. CONSOLIDATED NET WORTH. Section 5.10 of the Credit Agreement is
amended to read as follows:
Section 5.10. CONSOLIDATED NET WORTH. Consolidated Net Worth will at
no time be less than the sum of (i) $2,750,000,000 PLUS (ii) 75% of the
consolidated net income of the Borrower and its Subsidiaries for each
Fiscal Quarter ended after November 30, 1996, if such consolidated net
income for such Fiscal Quarter is positive (PROVIDED that, for any Fiscal
Quarter when consolidated net income of the Borrower and its Subsidiaries
was reduced as a result of a charge included in clause (iv), consolidated
net income for such Fiscal Quarter shall be calculated to exclude the
after-tax effect of such charge), PLUS (iii) 100% of the amount by which
the consolidated stockholders' equity of the Borrower and its Subsidiaries
is increased after November 30, 1996 as a result of any issuance or sale of
Equity Interests by the Borrower (other than the issuance of common stock
of the Borrower as consideration for the Acquisition), MINUS (iv) the
amount of non-recurring charges (calculated on an after-tax basis) recorded
by the Borrower in the third and fourth Fiscal Quarters of 1997.
SECTION 4. RESTRICTION ON PREPAYING SUBORDINATED DEBT. Section 5.15 of the
Credit Agreement is amended to read as follows:
Section 5.15. RESTRICTION ON PREPAYING SUBORDINATED DEBT. Neither
the Borrower nor any Subsidiary will prepay, defease or purchase, prior to
the date on which it is required by its terms to be repaid, repurchased or
otherwise retired, all or any portion of any Debt of the
2
<PAGE>
Borrower that is subordinated in right of payment to the Loans; PROVIDED
that (x) the Borrower may prepay, defease or repurchase such Debt in an
aggregate amount not in excess of the net cash proceeds received by the
Borrower from the issue and sale or incurrence of additional subordinated
Debt in the 12 month period prior to, or substantially concurrently with,
such prepayment, defeasance or repurchase, so long as such additional
subordinated Debt has a final maturity after the final maturity of, and a
weighted average life that is longer than the weighted average life of, the
subordinated Debt prepaid, defeased or repurchased, and (y) in addition to
any subordinated Debt prepaid, defeased or repurchased pursuant to clause
(x), the Borrower may prepay, defease or repurchase such Debt so long as
the aggregate cash (or value of property) used therefor, plus the aggregate
amount of Restricted Payments made in accordance with Section 5.12, does
not at any time exceed the sum of (i) $500,000,000 and (ii) 50% of the
Borrower's cumulative consolidated net income for the period (treated as a
single accounting period) commencing June 1, 1998 and ending on the last
day of the last Fiscal Quarter ended prior to the date of such prepayment,
defeasance or repurchase.
SECTION 5. REPRESENTATIONS OF BORROWER. The Borrower represents and
warrants that (i) the representations and warranties of the Borrower set forth
in Article 4 of the Credit Agreement will be true on and as of the Amendment
Effective Date and (ii) no Default will have occurred and be continuing on such
date.
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 8. EFFECTIVENESS. This Amendment shall become effective on the date
(the "AMENDMENT EFFECTIVE DATE") when the Administrative Agent shall have
received from each of the Borrower and the Required Lenders a counterpart hereof
signed by such party or facsimile or other written confirmation (in form
satisfactory to the Administrative Agent) that such party has signed a
counterpart hereof.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
TENET HEALTHCARE CORPORATION
By: /s/ T.P. McMullen
---------------------------------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
---------------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Anthony L. Trunzo
---------------------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Lisa Yee Brown
---------------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Christopher Johnson
---------------------------------------------
Title: Senior Relationship Manager
4
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By: /s/ Carl-Eric Benzinger
---------------------------------------------
Title: Senior Vice President
ABN AMRO BANK N.V.
LOS ANGELES INTERNATIONAL BRANCH
By: /s/ Paul K. Stimpfl
---------------------------------------------
Title: Vice President
By: /s/ Matthew S. Thomson
---------------------------------------------
Title: Group Vice President/Director
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Jeb Beckwith
---------------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Dawn Lee Lum
---------------------------------------------
Title: Vice President
5
<PAGE>
DEUTSCHE BANK NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By: /s/ Andreas Dirnagl
---------------------------------------------
Title: Vice President
By: /s/ Iain Stewart
---------------------------------------------
Title: Vice Presidnet
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ T. Morgan Edwards
---------------------------------------------
Title: Deputy General Manager
NATIONSBANK OF TEXAS, N.A.
By: /s/ Elizabeth C. Gould
---------------------------------------------
Title: Vice President
PNC BANK, N.A.
By: /s/ Karin M. George
---------------------------------------------
Title: Vice President
6
<PAGE>
THE SANWA BANK LIMITED, DALLAS AGENCY
By: /s/ Toru Sakamuro
---------------------------------------------
Title: Vice President
SOCIETE GENERALE
By: /s/ J. Staley Stewart
---------------------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Goro Hirai
---------------------------------------------
Title: Joint General Manager
TORONTO DOMINION (TEXAS), INC.
By: /s/ Darlene Riedel
---------------------------------------------
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ T. Ashby Watts, IV
---------------------------------------------
Title: Vice President
7
<PAGE>
COMMERZBANK AG
LOS ANGELES BRANCH
By: /s/ John Korthuis
---------------------------------------------
Title: Vice President
By: /s/ Carl Kemmerer
---------------------------------------------
Title: Assistant Treasurer
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Farboud Tavangar
---------------------------------------------
Title: First Vice President
THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
By: /s/ Masatsugu Morishita
---------------------------------------------
Title: Senior Vice President & Joint
General Manager
THE FUJI BANK, LIMITED
By: /s/ N. Umemura
---------------------------------------------
Title: Joint General Manager
8
<PAGE>
KREDIETBANK N.V.
By: /s/ Robert Snauffer
---------------------------------------------
Title: Vice President
By: /s/ Todd R. Angus
---------------------------------------------
Title: Vice President
BANK OF MONTREAL
By: /s/ Peter W. Steelman
---------------------------------------------
Title: Director
BANQUE PARIBAS
By: /s/ Sean T. Conlon
---------------------------------------------
Title: Vice President
By: /s/ Stanley P. Berkman
---------------------------------------------
Title: General Manager
CORESTATES BANK, N.A.
By: /s/ Deirdre L. McAleer
---------------------------------------------
Title: Vice President and Team Leader
9
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: /s/ David J. Worthington
---------------------------------------------
Title: Managing Director
By: /s/ Mark A. Swanson
---------------------------------------------
Title: Vice President
SUMITOMO BANK OF CALIFORNIA
By: /s/ Shuji Ito
---------------------------------------------
Title: Vice President
THE ROYAL BANK OF SCOTLAND plc
By: /s/ D. Dougan
---------------------------------------------
Title: Vice President
HIBERNIA NATIONAL BANK
By: /s/ Christopher B. Pitre
---------------------------------------------
Title: Assistant Vice President
THE SUMITOMO TRUST & BANKING
COMPANY LTD. NEW YORK BRANCH
By: /s/ Suraj P. Bhatia
---------------------------------------------
Title: Senior Vice President, Manager
Corporate Finance Department
10
<PAGE>
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By: /s/ Daniel Touffu
---------------------------------------------
Title: First VP and Regional Manager
By: /s/ Iain A. Whyte
---------------------------------------------
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Dan Dobrjanskyj
---------------------------------------------
Title: Assistant Vice President
By: /s/ John D. Sykes
---------------------------------------------
Title: Assistant Vice President
MICHIGAN NATIONAL BANK
By: /s/ Draga B. Palincas
---------------------------------------------
Title: Vice President/Relationship Manager
THE TOYO TRUST & BANKING CO., Ltd.
By: /s/ Kenji Fujikawa
---------------------------------------------
Title: General Manager
11
<PAGE>
THE TOKAI BANK LIMITED, LOS ANGELES AGENCY
By: /s/ Kosuke Furukawa
---------------------------------------------
Title: Joint General Manager
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Dale Parshall
---------------------------------------------
Title: Vice President
12
<PAGE>
THIRD AMENDMENT TO
TENET HEALTHCARE CORPORATION
BOARD OF DIRECTORS RETIREMENT PLAN
I, Scott M. Brown, the Secretary of Tenet Healthcare Corporation ("THC"),
hereby certify that on July 30, 1997, the Board of Directors of THC approved the
following amendment to the Tenet Healthcare Corporation Board of Directors
Retirement Plan (the "Plan"):
1. Section 3 of the Plan is hereby amended by the addition of the following
Section 3.7 at the end thereof:
"3.7 ELECTION OF JOINT AND SURVIVOR ANNUITY.
(a) Instead of receiving the benefit under this Plan in
monthly installments over a ten-year period as provided in Section
3.1(a), a Participant may elect to receive the benefit in the form a
Joint and Survivor Annuity, provided that, subject to Section 3.7(c)
below, the Participant elects payment in such form at least one year
prior to the date on which the Participant is entitled to commence
receiving Plan benefits (the `Benefit Commencement Date'). The
election shall be made by providing written notice of the election to
the Committee on a form prescribed by the Committee. The election
shall be revoked if: (i) the Participant provides written notice of
such revocation to the Committee at least one year prior to the
Benefit Commencement Date; or (ii) the Participant dies prior to the
Benefit Commencement Date. If the Participant fails to make an
election, the Participant shall receive the Normal Retirement benefit
in monthly installments over a ten-year period as provided in Section
3.1(a).
(b) For purposes of this Section 3.7, the term `Joint and
Survivor Annuity' shall mean an annuity for the life of the
Participant with a survivor annuity for the life of the Participant's
Surviving Spouse. Each Participant electing a Joint and Survivor
Annuity shall specify, at the time that the election under Section
3.7(a) above is made, whether the survivor annuity portion of the
Joint and Survivor Annuity shall be equal to (i) fifty percent (50%),
or (ii) one hundred percent (100%), of the amount of the annuity that
is payable monthly to the Participant during the joint lives of the
Participant and spouse. Without limiting the generality of the
foregoing, if neither the Participant nor the Surviving Spouse
survives for at least ten years from the date of the Participant's
retirement, following the death of the later to die of the Participant
and the Surviving Spouse, the survivor annuity portion of the Joint
and Survivor Annuity shall be paid for the remainder of such ten-year
period following the Participant's retirement to a beneficiary
designated by the Participant or, if no beneficiary is designated by
the Participant, to the estate of the later to die of the Participant
and the Surviving Spouse; provided, however, that the foregoing
1
<PAGE>
provisions in no way shall affect the right of the Surviving Spouse to
continue to receive the Joint and Survivor Annuity for the remainder of the
Surviving Spouse's life beyond such ten-year period. The Joint and
Survivor Annuity shall be actuarially equivalent to the benefit that
otherwise would be payable under the foregoing provisions of this Section
3. Actuarial equivalence shall be determined using an interest rate,
mortality table and other factors selected by the Committee. Payments
under the Joint and Survivor Annuity shall commence on the Benefit
Commencement Date. No other benefits shall be paid under this Plan with
respect to a Participant who has made the election described in paragraph
(a) above.
(c) If a Participant, who has a vested interest under Section
3.2, dies after Termination of Service but at death is not receiving any
Retirement Benefits under this Plan, the Surviving Spouse shall be entitled
following the Participant's death to receive the survivor annuity portion
of the Joint and Survivor Annuity for the life of the Surviving Spouse. If
the Surviving Spouse dies during the ten-year period following the
Participant's retirement, the beneficiary designated by the Participant or,
if no beneficiary has been designated by the Participant, the Surviving
Spouse's estate, shall be entitled following the Surviving Spouse's death
to receive the survivor annuity portion of the Joint and Survivor Annuity
for the remainder of such ten-year period following the Participant's
retirement. The Participant shall be deemed to have retired on the day
before the Participant's death.
(d) The provisions of Sections 3.3(c), 3.4 and 3.5 shall not
apply to any Participant who makes the Joint and Survivor Annuity election
under this Section 3.7.
(e) If a Participant's Benefit Commencement Date is within
one year after the date on which the Board of Directors adopts the
amendment to the Plan which includes this Section 3.7 (the `Adoption
Date'), the Participant may make the election described in paragraph
(a) above within 30 days following the Adoption Date."
2. Section 4.3 of the Plan is amended in its entirety to read as follows:
"4.3 RECIPIENTS OF PAYMENTS. All payments made by Tenet under this
Plan shall be made to the Participant during the Participant's lifetime.
All subsequent payments under the Plan shall be made by Tenet to the
Participant's Surviving Spouse. Eligible Children or their guardian, if
applicable, or the beneficiary designated by the Participant or the
Surviving Spouse's estate, as the case may be.
3. Section 5.2 of the Plan is hereby amended in its entirety to read as
follows:
"5.2 NO RIGHT TO ASSETS. Neither a Participant nor any other
person shall acquire by reason of the Plan any right in or title to
any assets, funds or property of Tenet and its subsidiaries whatsoever
including, without limiting the
2
<PAGE>
generality of the foregoing, any specific funds or assets which Tenet, in
its sole discretion, may set aside in anticipation of a liability
thereunder. A Participant shall have only an unsecured contractual right to
the amounts, if any, payable hereunder. Tenet may, in its sole discretion,
establish a grantor trust subject to subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, to
provide a source of funds to assist Tenet in the meeting of its obligations
under the Plan. Any assets held in such trust shall be subject to the
claims of general creditors of Tenet in accordance with the terms of such
trust. Tenet shall have no obligation to pay any benefits under the Plan
to the extent such benefits are provided from such trust."
IN WITNESS WHEREOF, I have caused this certificate to be executed as of
August 15, 1997.
TENET HEALTHCARE CORPORATION
By: /s/ Scott M. Brown
-------------------------
Scott M. Brown, Secretary
<PAGE>
THIRD AMENDMENT TO TENET HEALTHCARE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Third Amendment to the Tenet Healthcare Corporation Supplemental
Executive Retirement Plan (the "Amendment") is made, entered into and effective
as of January 28, 1997.
RECITALS
A. Tenet Healthcare Corporation, a Nevada corporation formerly known as
National Medical Enterprises, Inc. ("Tenet") adopted the Supplemental Executive
Retirement Plan (the "Plan") on November 1, 1984, and amended the Plan on May
21, 1986, April 24, 1994, and July 25, 1994.
B. Section 5.4 of the Plan provides that Tenet reserves the right, in its
sole discretion, to amend the Plan.
C. Tenet desires to amend the Plan as more particularly described below.
NOW, THEREFORE, intending to be legally bound, Tenet hereby amends the Plan
as follows:
AMENDMENT
1. Section 2.10 of the Plan is hereby amended by deleting such Section in
its entirety and replacing it with the following:
"2.10 EARNINGS. "Earnings" means the base salary paid to a
Participant by Tenet or a Subsidiary, excluding bonuses, car
and other allowances and other cash and non-cash
compensation. However, for all Participants actively at
work on or after February 1, 1997 as full-time, regular
employees, "Earnings" means the base salary and annual cash
bonus paid to a Participant by Tenet or a Subsidiary
excluding car and other allowances and other cash and non-
cash compensation."
2. Section 2.14 is hereby amended by deleting such Section in its
entirety and replacing it with the following:
"2.14 EXISTING RETIREMENT BENEFIT PLANS ADJUSTMENT FACTOR.
"Existing Retirement Benefit Plans Adjustment Factor or
Factors" means the assumed benefit the Participant would be
eligible for under Social Security and all retirement plans
of Tenet and its Subsidiaries whether
<PAGE>
or not he participates in such plans. This Factor will be used for
calculating all benefits under the Plan and is a projection of the
benefits payable under the Social Security regulations in effect June
1, 1984, and retirement plans of Tenet in effect on June 1, 1984, or
the participant's Date of Enrollment in the Plan, if later. Once
established for a Participant this Factor will not thereafter be
altered to reflect any reduction in benefits under Social Security.
This Factor will be adjusted to reflect changes in benefits under
Tenet retirement plans if a Participant is transferred to different
retirement plans or the Company contribution to a retirement plan is
increased or decreased from the percentage used for original
calculation of the Participant's Factor or the Participant becomes
eligible for other retirement plans adopted by the Company which would
provide benefits greater or less than the Plan considered in
calculating the Participant's original Factor, except that such Factor
for Participant's who are regular, full-time employees actively at
work with the Company on April 1, 1994, with the corporate office or a
division or Subsidiary that is not announced as a discontinued
operation shall be revised based upon the Participant's actual base
salary as of April 1, 1994, but no Factor will be increased as a
result of revision of the Factor to use the base salary as of April 1,
1994; provided, however, for a Participant who is a full-time, regular
employee actively at work on or after February 1, 1997, the Existing
Retirement Benefit Plans Adjustment Factor shall be applied only to
the base salary component of Final Average Earnings."
3. Section 2.15 of the Plan is hereby amended by deleting such Section in
its entirety and replacing it with the following:
"2.15 FINAL AVERAGE EARNINGS. "Final Average Earnings"
means the lesser of (i) Actual Final Average Earnings, or
(ii) if the Participant has completed at least sixty (60)
months of service, Projected Final Average Earnings;
however, for a Participant who is actively at work as a
full-time, regular employee on or after February 1, 1997
"Final Average Earnings" means Actual Final Average
Earnings."
4. Section 3.2(a)(iii) is hereby amended by deleting such Section in its
entirety and replacing it with the following:
"3.2(a)(iii) To arrive at the payments to commence at age
65 for a Participant whose termination occurs prior to
February 1, 1997 the amount calculated under paragraphs a(i)
and a(ii) of this Section 3.2 will be reduced by 0.42% for
each month Early Retirement commences before age 62. To
arrive at the payments to commence
<PAGE>
at age 65 for a Participant who is actively at work as a
full-time, regular employee on or after February 1, 1997,
the amount calculated under paragraphs a(i) and a(ii) of
this Section 3.2 will be reduced by 0.25% for each month
Early Retirement commences before age 62."
5. Section 3.2(b) is hereby amended by deleting such Section in its
entirety and replacing it with the following:
"3.2(b) Upon the written request of a Participant prior to
termination of employment, the Committee, in its sole and
absolute discretion, may authorize payment of the Early
Retirement Benefit at a date prior to the Participant's
attainment of age 65; provided, however, that in such event
the amount calculated under paragraphs a(i) and a(iii) of
this Section 3.2 shall be further reduced by 0.42% for each
month that the date of the commencement of payment precedes
the date on which the Participant will attain age 62;
however, for a Participant who is actively at work as a
full-time, regular employee on or after February 1, 1997,
the amount of further reduction under paragraphs a(i) and
a(iii) of this Section 3.2 shall be 0.25% for each month
that the date of commencement of payment precedes the date
on which the Participant will attain age 62."
6. Section 3.4(c)(iii) is hereby amended by deleting such Section in its
entirety and replacing it with the following:
"3.4(c)(iii) If a Participant, who has a vested interest
under Section 3.3, dies while still actively employed by
Tenet or a Subsidiary or on Disability before he was
eligible for Early Retirement, his Surviving Spouse or
Eligible Children shall be entitled at the Participant's
death to receive 50% of the Retirement Benefit (in
accordance with Sections 3.5 and 3.6) calculated as if the
Participant was age 55 and eligible for Early Retirement on
the day before the Participant's death; provided, however,
that the combined reductions for Early Retirement and early
payment shall not exceed 21% of the amount calculated under
paragraphs a(i) and a(ii) of Section 3.2."
7. Section 3.4(d) is hereby amended by deleting such Section in its
entirety and replacing it with the following:
"3.4(d) To arrive at the payments to commence at age 65, the
amount calculated under paragraphs (a), (b), (c)(i) and
(c)(ii) of this Section 3.4 will be reduced by the maximum
percentage reduction for Early Retirement at age 55 (i.e.,
21%)."
<PAGE>
8. Section 3.8(b) is hereby amended by deleting such Section in its
entirety and replacing it with the following:
"3.8(b) For a Participant who is a regular, full-time
employee actively at work on April 1, 1994, with the
corporate office or a division or a Subsidiary which has not
been declared to be a discontinued operation, who has not
yet begun to receive benefit payments under the Plan and
whose employment is Terminated without cause or who
voluntarily Terminates Employment following (a) a material
downward change in the functions, duties, or
responsibilities which reduce the rank or position of the
Participant, (b) (i) a reduction in the Participant's annual
base salary, or (ii) a material reduction in the
Participant's annual incentive plan bonus payment other than
for financial performance as it broadly applies to all
similarly situated active Participants in the same plan, or
(iii) a material reduction in the Participant's retirement
or supplemental retirement benefits that does not broadly
apply to all active Participant's in the same plan, or (c) a
transfer of a Participant's office to a location that is
more than fifty (50) miles from the Participant's current
principal office location, if such Termination of Employment
occurs within two years following a Change of Control of
Tenet while this Plan remains in effect, the provisions of
Section 3.8(a) above shall not apply and (i) a Participant's
Early or Normal Retirement Benefits under this Plan (a) will
be determined on the basis of (I) receiving full Prior
Service Credit under Sections 3.1 and 3.2 for all Years of
Service prior to his or her Date of Enrollment and (II)
being credited with three additional years to his or her
Years of Service (with total Years of Service not to exceed
20 years) and (b) will be fully vested in the Participant
without regard to his or her Years of Service with Tenet and
its Subsidiaries, (ii) will be determined by replacing the
definition of "Earnings" under Section 2.10 hereof with the
following "the base salary and the annual cash bonus paid to
a Participant by Tenet or a Subsidiary, excluding (A) any
cash bonus paid under the LTIP, (B) any car and other
allowances and (C) other cash and non-cash compensation",
and (iii) notwithstanding any other provision of this Plan
to the contrary, a Participant will be entitled to receive
the Normal Retirement Benefit on or after the age of 60,
without reduction, and after the age of 55 with a reduction
of 0.25% per month for each month for which the benefit
commences to be paid prior to the Participant's attaining
the age of 60 and after the age of 50 with the foregoing
reduction from age 60 to age 55 and with a reduction to
0.56% per month for each month for which the benefit
commences to be paid prior to the Participant's attaining
the age of 55. No other reductions set forth in Sections
3.2(a)(iii) and 3.2(b) will apply."
<PAGE>
9. The Plan, as amended by this Amendment, remains in full force and
effect.
IN WITNESS WHEREOF, Tenet has signed this Amendment as of the date set
forth above.
Tenet Healthcare Corporation
By: /s/ Richard B. Silver
-------------------------------------
Name: Richard B. Silver
Title: Assistant Secretary
<PAGE>
1997
A N N U A L R E P O R T
TENET
HEALTHCARE CORPORATION
[LOGO]
<PAGE>
TENET IS 130 HOSPITALS, SPECIALTY CARE FACILITIES, OUTPATIENT CENTERS, HOME
HEALTH AGENCIES AND MANY OTHER RELATED BUSINESSES. WE HAVE 105,000 DEDICATED
PEOPLE -- INCLUDING PHYSICIANS, NURSES AND SUPPORT STAFF -- PROVIDING QUALITY,
COST-EFFECTIVE MEDICAL CARE TO THEIR COMMUNITIES.
CONTENTS
1 LETTER TO SHAREHOLDERS
7 FINANCIAL SUMMARY
8 MANAGEMENT'S DISCUSSION AND ANALYSIS
17 CONSOLIDATED STATEMENTS OF OPERATIONS
18 CONSOLIDATED BALANCE SHEETS
19 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
20 CONSOLIDATED STATEMENTS OF CASH FLOWS
22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
40 REPORT OF INDEPENDENT AUDITORS
41 DIRECTORS AND MANAGEMENT
43 SUPPLEMENTARY FINANCIAL INFORMATION
44 CORPORATE INFORMATION
<PAGE>
LETTER TO OUR SHAREHOLDERS
JEFFREY C. BARBAKOW [PHOTO] MICHEAL H. FOCHT SR.
It's remarkable how quickly a year passes. Equally remarkable is how much
we have accomplished at Tenet during the span of only 12 months.
As the fiscal year closed on May 31, 1997, we had a great deal to
celebrate. The company completed the acquisition of OrNda HealthCorp well ahead
of schedule. We achieved another year of solid financial results that testified
to the strength of our healthcare delivery networks and the effectiveness of our
overall business strategy. Through a major refinancing, we reduced Tenet's
financing costs. During the course of the fiscal year, Tenet enhanced its
networks across the country by acquiring three nonprofit hospitals and entering
into long-term lease agreements for two more. At the same time, we were
exploring or establishing a number of innovative new partnerships with the
not-for-profit, academic and investor-owned sectors. We also began to put in
place our new Economic Value Added system, designed to better measure financial
performance throughout the company and spur our managers to add additional value
to our organization for our shareholders.
Our momentum as a company has continued into fiscal 1998 - and not just in
the area of acquisitions. Shortly after the beginning of the new fiscal year,
we launched an important initiative -- unprecedented, we believe, in this
industry -- to narrow the gap between us and our not-for-profit colleagues and
to explore ways in which we can, together, lead the healthcare industry into
the 21st century.
THE ORNDA ACQUISITION
While we have much to be proud of in fiscal 1997, the OrNda acquisition was
clearly the year's seminal event. It would be difficult to overestimate the
impact of melding the nation's second- and third-largest healthcare companies.
The numbers alone are impressive.
On January 30, 1997, more than a month ahead of the original schedule,
Tenet successfully completed its acquisition of OrNda, adding 50 OrNda acute
care hospitals to the 77 that Tenet already owned. More impressive was the fact
that 32 of the OrNda facilities complemented Tenet's existing healthcare
delivery networks. Overnight, Tenet became the largest healthcare provider in
Southern California.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
1
<PAGE>
LETTER TO OUR SHAREHOLDERS (CONTINUED)
In South Florida, the acquisition added four acute care hospitals to Tenet South
Florida HealthSystem, our South Florida integrated network, bringing the total
count to 12. In Texas, the OrNda acquisition added eight acute care hospitals to
Tenet's 12 existing hospitals, enhancing the company's presence in important
areas like the greater Dallas and Houston areas. The OrNda acquisition also
introduced Tenet to important new markets. OrNda's five acute care hospitals in
Arizona gave Tenet a presence in one of the nation's fastest-growing regions.
The acquisition also created new opportunities for the company in other states,
including Massachusetts.
It was not only the bricks and mortar of the two companies that fit so well
together. Tenet and OrNda also shared the same commitment to delivering quality,
community--based healthcare.
An interesting thing started to happen shortly after the decision to
acquire OrNda was announced in October 1996. An increasing number of
not--for-profit hospitals and health systems began to contact us, inquiring
about possible partnerships or outright acquisitions. The acquisition of OrNda,
it seemed, had sent the message that Tenet was here to stay and that it had
become a far more powerful force in redefining healthcare delivery. Now, there
was another reason to become part of a Tenet network.
Tenet, we believe, already enjoyed the reputation for having the healthcare
industry's most comprehensive corporate integrity program. And its practice of
allowing its hospitals to carry on the missions they had pursued as
not-for-profit institutions was being appreciated by more and more
not-for-profits. The enhanced networks and additional financial strength that
came with the OrNda acquisition was yet another reason for them to reach out to
Tenet.
Following the completion of the OrNda acquisition, we realigned Tenet's
operational structure to accommodate the OrNda facilities, primarily by creating
a new "super region" in Southern California and a new Arizona Region for former
OrNda facilities in Arizona and several other Western states. We also unified
our company's quality assurance functions into a single new Quality Management
department, consolidated all acquisition and development activity into one
larger department, and expanded our compliance and audit departments. In
addition, we began moving a number of legal, reimbursement and business office
staff from our Dallas Operations Center to the regional offices to better serve
the company's facilities.
Upon completing the OrNda acquisition, Tenet put into place new short-- and
long-term financing. Although we had originally intended to issue $1.3 billion
in public debt and obtain a $2.5 billion line of credit, demand from investors
was so strong that we increased the amounts to $2 billion and $2.8 billion,
respectively, to better position ourselves for future growth. The borrowings,
portions of which were used to repurchase OrNda's public debt and to repay old
lines of credit for Tenet and OrNda, are at more favorable rates than our
previous debt.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
2
<PAGE>
L E T T E R
TO OUR SHAREHOLDERS
FISCAL 1997 RESULTS
For the fiscal year ended May 31, 1997, Tenet reported earnings per share
from continuing operations -- excluding unusual or non-recurring items -- of
$1.46. That's compared with $1.27 in the prior year, a gain of 15 percent.
Results for both years are restated to reflect the pooling-of-interests merger
with OrNda HealthCorp on January 30, 1997.
Net operating revenues for the fiscal year were $8.7 billion, an increase
of 12.8 percent from $7.7 billion in the 1996 fiscal year. Income from
continuing operations, excluding the effect of all unusual or non-recurring
items, was $445 million in fiscal 1997, compared with $370 million in the
previous fiscal year, an increase of 20.1 percent.
The strong revenue growth in the year reflects improved patient volumes at
Tenet's hospitals. Total admissions at Tenet's acute care hospitals increased
10.2 percent for the year. Admissions increased 1.3 percent on a same-facility
basis for the year. Total outpatient visits increased 22.3 percent for the year.
On a same-facility basis, outpatient visits increased 11 percent for the year.
Providing a strong finish to what has been a very successful and eventful
year for Tenet, the company reported earnings from continuing operations, before
unusual or non-recurring items, in the fourth quarter of fiscal 1997 of 41 cents
per share, a 17 percent increase compared with 35 cents in the fourth quarter of
the prior year. Total admissions at Tenet's acute care hospitals increased 14.5
percent in the quarter -- 2.9 percent on a same-facility basis. Total outpatient
visits increased 24.8 percent in the quarter -- 11.2 percent on a same-facility
basis.
Results for the year include a number of unusual or non-recurring items
totaling $517 million after tax. For a more complete discussion of these items
and the company's financial results, turn to the Financial Statements and the
Management's Discussion and Analysis sections later in this report.
GROWING THROUGH ACQUISITIONS
In fiscal 1997, we continued to focus on expanding and strengthening
operations in our existing markets by acquiring or leasing hospitals that
enhance our integrated delivery networks. On June 1, 1996, the first day of the
fiscal year, we acquired Hialeah Hospital, a 378-bed acute care facility near
Miami. The addition of Hialeah to Tenet South Florida HealthSystem particularly
enhanced Tenet's presence in North Dade County, a highly competitive area with
heavy managed care activity. In early October 1996, Tenet acquired Lloyd Noland
Hospital & Health System, a 319-bed, acute care hospital and health system in
Birmingham, Ala., strengthening Tenet's presence in Birmingham and helping
establish the foundation for a statewide integrated delivery system. Tenet also
owns 586-bed Brookwood Medical Center in Birmingham and has a 50 percent
interest in St. Clair Regional Hospital, an 82-bed hospital located just outside
of Birmingham and managed by Tenet's 50 percent partner.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
3
<PAGE>
In January 1997, Tenet further enhanced its South Florida network by
acquiring North Shore Medical Center, a 357-bed hospital in Miami. Also in
January, Tenet entered into a 30-year lease of Brookside Hospital in San Pablo,
Calif. Brookside, a 233-bed facility, faced potential closure until Tenet
proposed combining its operations with Doctors Hospital of Pinole, a 137-bed
facility that Tenet operates in nearby Pinole. And in May, Tenet assumed a
30-year lease of Desert Hospital, a 388-bed hospital in Palm Springs, Calif. The
transaction pairs Desert with John F. Kennedy Memorial Hospital, a Tenet-owned
130-bed acute care community hospital in nearby Indio, to form a regional
healthcare delivery system serving the entire Coachella Valley.
The pace of acquisitions continued into the new fiscal year. In July, Tenet
completed its acquisition of 1,030-bed Deaconess Incarnate Word Health System,
Inc. in St. Louis. The system, which includes three acute care hospitals and
numerous related services, will form the foundation of an integrated healthcare
delivery system for the greater St. Louis area, where Tenet already owns 408-bed
Lutheran Medical Center. Also in July, Tenet assumed the remaining four years of
a five-year lease of county-owned Sylvan Grove Hospital in Jackson, Ga. Sylvan
Grove, a 25-bed acute care hospital providing general medical services, will be
paired with Tenet's Spalding Regional Hospital, a 160-bed acute care community
hospital in nearby Griffin.
BUILDING PARTNERSHIPS
During fiscal 1997, Tenet continued to demonstrate its willingness to enter
into partnerships with other healthcare providers, not-for-profit and
investor-owned alike, that help the company expand its business. In April 1997,
for example, Tenet and MedPartners, Inc., the nation's largest manager of
physician practices, announced a letter of intent to form a partnership to
create Southern California's largest healthcare contracting network. Under the
agreement, Tenet will acquire MedPartners' 99-bed Pioneer Hospital in Artesia,
Calif. The hospital will concentrate on ambulatory services, while the 100,000
HMO members currently served by Pioneer will receive healthcare services at
other Tenet acute care hospitals under a 10-year, full-risk, capitated
arrangement. Additionally, MedPartner's 1.2 million Southern California HMO
members will have access to Tenet hospitals.
In June 1997, Tenet South Florida HealthSystem and the renowned Cleveland
Clinic received approval from the state of Florida to jointly build a 150-bed
acute care hospital in Weston, one of South Florida's fastest-growing areas.
Cleveland Clinic Florida will oversee clinical care, research and educational
programs, and Tenet will manage the operations of the Broward County hospital.
Upon completion of the jointly owned hospital, Cleveland Clinic Florida will
become part of the Tenet South Florida network.
Tenet's affiliations with prestigious academic medical centers also grew in
fiscal 1997. In July 1996, Tenet's Board of Directors and Louisiana State
University approved an affiliation agreement between LSU Medical Center and two
New Orleans-area Tenet hospitals - Kenner Regional Medical Center and Memorial
Medical Center. In addition to creating a teaching affiliation between LSU and
the two hospitals, the agreement calls for centers of excellence offering
specialized tertiary and quaternary
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
4
<PAGE>
L E T T E R
TO OUR SHAREHOLDERS
medical services to be established at both Kenner and Memorial and for Tenet to
provide diagnostic services at the planned Stanley S. Scott Cancer Center at
LSU. Tenet's two other major academic affiliations are with Creighton University
School of Medicine in Omaha, Neb., and the University of Southern California
School of Medicine in Los Angeles.
In June 1997, shortly after the end of the fiscal year, Tenet's USC
University Hospital in Los Angeles reached an agreement with the University of
Southern California to manage the USC/Norris Cancer Hospital, a private facility
owned and operated by USC. USC/Norris Cancer Hospital is part of the USC/Norris
Comprehensive Cancer Center, one of only 26 such centers in the United States
designated by the National Cancer Institute to lead the nation in cancer
research, treatment, education and prevention.
We believe that establishing relationships with nationally known teaching
and research institutions like these enhances the quality of care we are able to
offer our patients.
ECONOMIC VALUE ADDED PERFORMANCE MEASUREMENT
At the beginning of fiscal 1998, we began implementing an Economic Value
Added (EVA) performance measurement system that eventually will be adopted
throughout the company. By tying operating performance to the cost of capital
required to generate that performance, EVA strengthens Tenet's ability to
measure real financial performance at every level of the company.
Because this capital allocation discipline takes into account all business
costs, EVA is a more complete measure of profitability than traditional measures
such as EBITDA (earnings before interest, taxes, depreciation and amortization),
EBIT (earnings before interest and taxes) or ROI (return on investment).
Moreover, we have incorporated EVA into Tenet's incentive compensation
programs, giving us a vital new dimension that will help us achieve superior
performance for shareholders.
BUILDING AN OPEN WORLD
But what about the future?
We believe a new order in healthcare is emerging, one in which consumers
are likely to insist upon a more open healthcare system that provides a greater
choice of services at reasonable costs. As this change occurs, we anticipate
many new opportunities for nontraditional growth, particularly in the provision
of new healthcare services. We want Tenet to be among the leaders in these
emerging areas.
All of this has profound implications for Tenet's strategy today. If the
healthcare industry is, in fact, headed for an open world, we must prepare for
it now. We must expand our thinking to entertain fresh, innovative partnership
models with other institutions in this industry.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
5
<PAGE>
Nothing is more vital to the development of this open world -- and nothing
is more important to Tenet -- than bridging the gap with not-for-profit
hospitals and health systems.
They need us; we need them. They hold key links that will allow us to
complete our delivery systems, through acquisitions, partnerships or other
innovative relationships. In return, Tenet has much to offer them -- for
example, access to our well-respected accounts receivable and collections
capabilities, powerful group-purchasing programs and managed care networks.
To help bridge the gap, we have joined the American Hospital Association,
the premier not-for-profit trade organization in the hospital industry. This
puts us side-by-side with our not-for-profit colleagues.
Tenet has an historic opportunity to break down the artificial barrier that
separates us from our not-for-profit colleagues. If our efforts are successful,
they will open a vast new world of opportunity for Tenet while literally
reshaping our industry for the better.
At a time when this industry is searching for alternatives and society is
looking for more open, customer-friendly healthcare services, we believe Tenet
is better positioned than anyone to deliver.
Tenet can be a remarkable instrument of change. If we stay the course, we
can transform this industry in a profoundly positive way that will directly
benefit not just you, our shareholders, but also healthcare in the United
States.
/s/ Jeffrey Barbakow
Jeffrey C. Barbakow
Chairman and Chief Executive Officer
/s/ Michael H. Focht Sr.
Michael H. Focht Sr.
President and Chief Operating Officer
August 1, 1997
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
6
<PAGE>
FINANCIAL SUMMARY
SELECTED FINANCIAL DATA
CONTINUING OPERATIONS(1)
<TABLE>
<CAPTION>
Years Ended May 31,
------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1993 1994 1995(2) 1996 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net operating revenues $4,140 $4,218 $ 5,161 $ 7,706 $ 8,691
Operating expenses:
Salaries and benefits 1,908 1,868 2,170 3,130 3,574
Supplies 462 498 668 1,056 1,197
Provision for doubtful accounts 178 193 260 431 494
Other operating expenses 899 942 1,178 1,646 1,829
Depreciation 185 199 232 319 335
Amortization 23 25 44 100 108
Merger, facility consolidation and
other non-recurring charges 52 110 37 86 740
------------------------------------------------------------------
Operating income 433 383 572 938 414
Interest expense, net of
capitalized portion (144) (157) (251) (425) (417)
Investment earnings 24 31 32 27 26
Equity in earnings of
unconsolidated affiliates 13 27 43 25 1
Minority interests (15) (12) (10) (30) (27)
Net gain (loss) on disposals of
facilities and long-term
investments 122 42 31 346 (18)
------------------------------------------------------------------
Income (loss) from continuing
operations before income taxes 433 314 417 881 (21)
Taxes on income (156) (145) (151) (383) (52)
------------------------------------------------------------------
Income (loss) from continuing
operations $ 277 $ 169 $ 266 $ 498 $ (73)
------------------------------------------------------------------
------------------------------------------------------------------
Earnings (loss) per common
share from continuing
operations, fully diluted $ 1.24 $ 0.75 $ 1.08 $ 1.70 $ (0.24)
------------------------------------------------------------------
------------------------------------------------------------------
Cash dividends per common share $ 0.48 $ 0.12 $ -- $ -- $ --
------------------------------------------------------------------
------------------------------------------------------------------
<CAPTION>
As of May 31,
-------------------------------------------------------------------
1993 1994 1995 (2) 1996 1997
-------------------------------------------------------------------
BALANCE SHEET DATA:(1)
Working capital (deficit) $ 182 $ (190) $ 273 $ 499 $ 522
Total assets 5,379 5,543 9,787 10,768 11,705
Long-term debt, excluding
current portion 1,598 1,290 4,287 4,421 5,022
Shareholders' equity 1,964 1,648 2,379 3,277 3,224
Book value per common share $ 9.24 $ 7.33 $ 9.13 $ 11.13 $ 10.65
</TABLE>
(1) On January 30, 1997, Tenet Healthcare Corporation (together with its
subsidiaries "Tenet" or the "Company") acquired OrNda HealthCorp (together
with its subsidiaries, "OrNda") by issuing 81,439,910 shares of its common
stock in a tax-free exchange for all of OrNda's outstanding common stock.
The transaction has been accounted for as a pooling-of-interests and,
accordingly, the consolidated financial statements and all statistical data
shown herein prior to the combination have been restated to include the
accounts and results of operations of OrNda for all periods presented.
(2) On March 1, 1995, Tenet acquired, in a transaction accounted for as a
purchase, all the outstanding common stock of American Medical Holdings,
Inc. (together with its subsidiaries, "AMH") for $1.5 billion in cash and
33.2 million shares of Tenet's common stock valued at approximately $488
million (the "AMH Merger").
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE ORNDA MERGER
On January 30, 1997, Tenet Healthcare Corporation (together with its
subsidiaries, "Tenet" or the "Company") acquired OrNda HealthCorp (together with
its subsidiaries, "OrNda"). The OrNda Merger has been accounted for as a
pooling-of-interests and, accordingly, the consolidated financial statements and
all statistical data shown herein for prior years have been restated to include
the accounts and results of operations of OrNda for all periods presented.
Tenet's subsidiaries operated 77 general hospitals and OrNda's subsidiaries
operated 50 general hospitals at January 30, 1997. Management believes that
joining together Tenet's general hospitals and related healthcare operations
with OrNda's has created a stronger, more geographically diverse company that is
better able to compete in certain key geographic areas, such as Southern
California and South Florida, and to grow through strategic acquisitions and
partnerships. The OrNda Merger also expanded Tenet's operations into several new
geographic areas, including Arizona, Iowa, Massachusetts, Mississippi, Nevada,
Oregon and Washington.
The healthcare industry has undergone, and continues to undergo, tremendous
change, including cost-containment pressures by government payors, managed care
providers and others, as well as technological advances that require increased
capital expenditures. The combined company will continue to emphasize the
creation of strong integrated healthcare delivery systems to address those
changes. The OrNda Merger is expected to enable the combined company to realize
certain cost savings before any costs related to the merger and facility
consolidations. No assurances can be made as to the amount of cost savings, if
any, that actually will be recognized. In connection with the OrNda Merger, the
Company repaid $2.3 billion in debt. The debt retirements were financed by
borrowings under the Company's new $2.8 billion revolving bank credit agreement
and the public issuance of $2.0 billion in new debt securities.
THE AMERICAN MEDICAL HOLDINGS MERGER
On March 1, 1995, in a transaction accounted for as a purchase, the Company
acquired American Medical Holdings, Inc. (together with its subsidiaries, "AMH")
for $1.5 billion in cash and 33.2 million shares of the Company's common stock
valued at $488 million (the "AMH Merger"). In connection with the acquisition,
the Company also repaid $1.8 billion of debt. Both the acquisition and debt
retirements were financed by borrowings under the Company's then-existing credit
agreement and the public issuance of $1.2 billion in new debt securities.
Prior to the AMH Merger, Tenet (excluding OrNda) operated 33 domestic general
hospitals with 6,620 licensed beds in six states and a small number of skilled
nursing facilities, rehabilitation hospitals and psychiatric hospitals located
on or near general hospital campuses. With the AMH Merger, the Company acquired
37 domestic general hospitals with 8,831 beds, bringing its domestic general
hospital complement at that time to 70 hospitals with 15,451 licensed beds in 13
states. The acquisition also included ancillary facilities at or nearby many AMH
hospitals, including outpatient surgery centers, rehabilitation units,
long-term-care facilities, a psychiatric hospital, home healthcare programs and
ambulatory, occupational and rural healthcare clinics.
Management believes that the AMH Merger strengthened the Company in its
then-existing markets and enhanced its ability to deliver quality,
cost-effective healthcare services in new markets. The consolidation of Tenet
and AMH has resulted in certain cost savings, estimated to be at least $60
million annually,
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
8
<PAGE>
MANAGEMENT'S
DISCUSSION
beginning in the fiscal year ended May 31, 1996. These savings are before any
severance or other costs of implementing certain efficiencies and have been
realized through (i) elimination of duplicate corporate overhead expenses, (ii)
reduced supplies expense through the incorporation of the acquired facilities
into the Company's existing group-purchasing program, (iii) achievement of lower
information system costs through consolidation and outsourcing and (iv) improved
collection of the acquired AMH facilities' accounts receivable.
RESULTS OF OPERATIONS
Income from continuing operations before income taxes was $417 million in 1995
and $881 million in 1996. The Company reported a pretax loss from continuing
operations of $21 million in 1997. The most significant transactions affecting
the results of continuing operations were (i) the acquisition of AMH, (ii) the
acquisition by OrNda of Summit Health Ltd. ("Summit"), (iii) the financing of
the AMH Merger, which added more than $250 million annually in interest expense,
(iv) a series of other acquisitions and divestitures during fiscal 1995, 1996
and 1997 (see Note 3 of Notes to Consolidated Financial Statements herein), and
(v) merger, facility consolidation and other non-recurring charges recorded in
all three fiscal years (See Note 4 of Notes to Consolidated Financial Statements
herein).
Fiscal 1995 includes the sale of a 75% interest in Total Renal Care Holdings,
Inc. ("TRC"). Fiscal 1996 includes the sales of the Company's interests in its
hospitals and related healthcare businesses in Singapore, Australia, Malaysia
and Thailand, its interest in Westminster Health Care Holdings, PLC
("Westminster"), the sale of the Company's investment in preferred stock of The
Hillhaven Corporation ("Hillhaven"), and the exchange of its interest in the
common stock of Hillhaven for 8,301,067 shares of common stock of Vencor, Inc.
("Vencor"). Fiscal 1997 includes a noncash charge relating to increases in the
index value of certain of the Company's long-term debt. These transactions and
other unusual pretax items relating to the OrNda Merger, facility consolidation
and other non-recurring charges are shown below:
(in millions) 1995 1996 1997
-------------------------
Gain (loss) on sales of facilities and
long-term investments $(1) $329 $ (18)
Gains on sales of subsidiary's common stock 32 17 -
Merger, facility consolidation and other
non-recurring charges (37) (86) (740)
-------------------------
Net unusual pretax items (after tax, fully
diluted per share: ($0.02) in 1995, $0.43
in 1996 and ($1.70) in 1997) $(6) $260 $(758)
-------------------------
Excluding the unusual items in the table above, income from continuing
operations before income taxes would have been $423 million in 1995, $621
million in 1996 and $737 million in 1997 and fully diluted earnings per share
from continuing operations would have been $1.10, $1.27 and $1.46, respectively.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
9
<PAGE>
The following is a summary of continuing operations for the past three fiscal
years:
<TABLE>
<CAPTION>
1995 1996 1997 1995 1996 1997
---------------------------------------- ------------------------------------
(PERCENTAGE OF
(DOLLARS IN MILLIONS) NET OPERATING REVENUES)
<S> <C> <C> <C> <C> <C> <C>
Net Operating Revenues:
Domestic general hospitals(3) $ 4,536 $7,183 $7,932 87.9% 93.2% 91.3%
Other domestic operations (1), (3) 394 472 759 7.6% 6.1% 8.7%
International operations 214 51 - 4.2% 0.7% -
Divested operations (2) 17 - - 0.3% - -
---------------------------------------- ------------------------------------
$ 5,161 $7,706 $8,691 100.0% 100.0% 100.0%
---------------------------------------- ------------------------------------
Operating Expenses:
Salaries and benefits (2,170) (3,130) (3,574) 42.0% 40.6% 41.1%
Supplies (668) (1,056) (1,197) 13.0% 13.7% 13.8%
Provision for doubtful accounts (260) (431) (494) 5.0% 5.6% 5.7%
Other operating expenses (1,178) (1,646) (1,829) 22.8% 21.4% 21.0%
Depreciation (232) (319) (335) 4.5% 4.1% 3.9%
Amortization (44) (100) (108) 0.9% 1.3% 1.2%
---------------------------------------- ------------------------------------
Operating income before merger,
facility consolidation and other
non-recurring charges 609 1,024 1,154 11.8% 13.3% 13.3%
Merger, facility consolidation
and other non-recurring charges (37) (86) (740) 0.7% 1.1% 8.5%
---------------------------------------- ------------------------------------
Operating income $ 572 $ 938 $ 414 11.1% 12.2% 4.8%
---------------------------------------- ------------------------------------
---------------------------------------- ------------------------------------
</TABLE>
(1) NET OPERATING REVENUES OF OTHER DOMESTIC OPERATIONS CONSIST PRIMARILY OF
REVENUES FROM (I) PHYSICIAN PRACTICES; (II) A SMALL NUMBER OF
REHABILITATION HOSPITALS, LONG-TERM-CARE FACILITIES AND PSYCHIATRIC
HOSPITALS THAT ARE LOCATED ON OR NEAR THE SAME CAMPUSES AS THE COMPANY'S
GENERAL HOSPITALS; (III) HEALTHCARE JOINT VENTURES OPERATED BY THE COMPANY;
(VI) SUBSIDIARIES OF THE COMPANY OFFERING MANAGED CARE AND INDEMNITY
PRODUCTS; AND (IV) REVENUES EARNED BY THE COMPANY IN CONSIDERATION OF THE
GUARANTEES OF CERTAIN INDEBTEDNESS AND LEASES OF VENCOR AND OTHER THIRD
PARTIES.
(2) NET OPERATING REVENUES OF DIVESTED OPERATIONS CONSIST OF REVENUES FROM (I)
TRC PRIOR TO THE AUGUST 1994 SALE OF AN APPROXIMATELY 75% EQUITY INTEREST
IN TRC.
(3) CERTAIN RECLASSIFICATIONS HAVE BEEN MADE TO THE FINANCIAL INFORMATION
PREVIOUSLY SEPARATELY REPORTED BY ORNDA TO BE CONSISTENT WITH THE COMPANY'S
MANNER OF PRESENTATION.
Net operating revenues were $5.2 billion in 1995, $7.7 billion in 1996 and $8.7
billion in 1997. Fiscal 1996 includes revenues attributable to facilities
acquired in the AMH Merger. Fiscal 1995 includes three months of revenues
attributable to the facilities acquired in the AMH Merger.
Operating income before merger, facility consolidation and other non-recurring
charges increased by 68.1% from $609 million in 1995 to $1,024 million in 1996,
and by 12.7% to $1,154 million in 1997. The operating margin on this basis
increased from 11.8% in 1995 to 13.3% in 1996 and in 1997. The table below sets
forth certain selected historical operating statistics for the Company's
domestic general hospitals:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
1995 1996 1997 1996 to 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
Number of hospitals (at end of period) 114 122 128 6
Licensed beds (at end of period) 23,250 25,699 27,959 8.8%
Net inpatient revenues (in millions) $ 3,049 $ 4,744 $ 5,227 10.2%
Net outpatient revenues (in millions) $ 1,399 $ 2,283 $ 2,515 10.2%
Admissions 470,027 714,058 786,887 10.2%
Equivalent admissions (1) 640,931 1,017,514 1,124,397 10.5%
Average length of stay (days) 5.5 5.3 5.2 (0.1)*
Patient days 2,569,427 3,771,928 4,099,709 8.7%
Equivalent patient days (2) 3,478,485 5,432,612 5,817,251 7.1%
Net inpatient revenues per patient day $ 1,187 $ 1,258 $ 1,275 1.4%
Net inpatient revenues per admission $ 6,487 $ 6,643 $ 6,643 -
Utilization of licensed beds 42.8% 41.6% 42.5% 0.9%*
Outpatient visits 4,115,716 8,174,002 9,997,266 22.3%
</TABLE>
* THE % CHANGE IS THE DIFFERENCE BETWEEN THE 1996 AND 1997 PERCENTAGES SHOWN.
(1) EQUIVALENT ADMISSIONS REPRESENTS ACTUAL ADMISSIONS ADJUSTED TO INCLUDE
OUTPATIENT AND EMERGENCY ROOM SERVICES BY MULTIPLYING ACTUAL ADMISSIONS BY
THE SUM OF GROSS INPATIENT REVENUE AND OUTPATIENT REVENUE AND DIVIDING THE
RESULT BY GROSS INPATIENT REVENUE.
(2) EQUIVALENT PATIENT DAYS REPRESENTS ACTUAL PATIENT DAYS ADJUSTED TO INCLUDE
OUTPATIENT AND EMERGENCY ROOM SERVICES BY MULTIPLYING ACTUAL PATIENT DAYS
BY THE SUM OF GROSS INPATIENT REVENUE AND OUTPATIENT REVENUE AND DIVIDING
THE RESULT BY GROSS INPATIENT REVENUE.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
10
<PAGE>
MANAGEMENT'S
DISCUSSION
The table below sets forth certain selected operating statistics for the
Company's domestic general hospitals, on a same-facility basis:
Increase
1996 1997 (Decrease)
----------------------------------
Number of hospitals 107 107 -
Average licensed beds 22,248 22,327 0.4%
Patient days 3,464,652 3,483,065 0.5%
Net inpatient revenue per patient day $ 1,267 $ 1,283 1.3%
Admissions 655,248 663,890 1.3%
Net inpatient revenue per admission $ 6,699 $ 6,731 0.5%
Outpatient visits 7,535,242 8,361,152 11.0%
Average length of stay (days) 5.3 5.2 (0.1)*
*THE % CHANGE IS THE DIFFERENCE BETWEEN 1996 AND 1997 PERCENTAGES SHOWN.
The Company continues to experience increases in inpatient acuity and intensity
of services as less intensive services shift from an inpatient to an outpatient
basis or to alternative healthcare delivery services because of technological
and pharmaceutical improvements and continued pressures by payors to reduce
admissions and lengths of stay.
The Medicare program accounted for approximately 38% of the net patient revenues
of the Company's domestic general hospitals in 1995 and 40% in 1996 and 1997.
Historically, rates paid under Medicare's prospective payment system ("PPS") for
inpatient services have increased, but such increases have been less than cost
increases. Under the Balanced Budget Act of 1997 (the "1997 Act"), there will be
no increases in the rates paid to general hospitals under the PPS through
September 30, 1998. Payments for Medicare outpatient services provided at
general hospitals, home health services and all services provided at
rehabilitation hospitals historically have been reimbursed based on costs,
subject to certain limits. The 1997 Act requires that the reimbursement for
those services be converted to a PPS, which will be phased in over time.
The Company believes that the foregoing changes and other changes in
reimbursement mandated by the 1997 Act, as well as certain proposed changes to
various states' Medicaid programs, will reduce payments as the changes are
phased in. Such reduced payments, however, are not likely to have a material
adverse effect on the Company's results of operations. The 1997 Act also
contains various provisions that create new opportunities for the Company.
Certain of those provisions, such as those allowing for creation of Provider
Service Organizations, allow providers such as Tenet to contract directly with
the federal government for the provision of medical care to Medicare
beneficiaries on a fully capitated basis. Under capitation, the Company receives
a certain amount from the federal government for each Medicare beneficiary
enrolled in its plans and assumes the risks and rewards of meeting the
healthcare needs of those enrolled in its plans. The Company may purchase
insurance to cover all or a portion of the cost of meeting the healthcare needs
of those covered. The Company cannot predict at this time what the ultimate
effect of these opportunities will be.
To address the effect of reduced payments for services, while continuing to
provide quality care to patients, the Company has implemented hospital
cost-control programs and overhead reduction plans and continues to form
integrated healthcare delivery systems in an effort to reduce inefficiencies,
create synergies, obtain additional business and control costs. As a result of
these efforts, such reduced payments are not expected to have a material adverse
effect on the Company's results of operations. Pressures to control healthcare
costs have resulted in an increase in the percentage of revenues attributable to
managed care payors. The percentage of the Company's net patient revenues of the
domestic general hospitals attributable to managed care was approximately 24.6%
in 1995, 27.6% in 1996 and 29.5% in 1997. The Company anticipates that its
managed care business will continue to increase in the future. The Company
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
11
<PAGE>
generally receives lower payments from managed care payors than it does from
traditional indemnity insurers. The Company also increasingly is assuming a
greater share of risk by entering into capitated arrangements with managed care
payors and employers.
The general hospital industry in the United States and the Company's general
hospitals continue to have significant unused capacity, and thus there is
substantial competition for patients. Inpatient utilization continues to be
negatively affected by payor-required pre-admission authorization and by payor
pressure to maximize outpatient and alternative healthcare delivery services for
less acutely ill patients. Increased competition, admission constraints and
payor pressures are expected to continue.
Net operating revenues from the Company's other domestic operations were $394
million in 1995, compared with $472 million in 1996 and $759 million in 1997.
The 19.8% increase from 1995 to 1996 primarily reflects continued growth of the
Company's subsidiaries offering health insurance products and growth of its
physician practices. The 60.8% increase from 1996 to 1997 is primarily related
to the continued growth of the Company's physician practices. The Company
currently owns or manages over 900 physician practices.
The $163 million decrease in net operating revenues from the Company's
international operations in fiscal 1996 compared to fiscal 1995 is attributable
to the sales of the Company's hospitals and related healthcare businesses in
Singapore and Australia.
Operating expenses, which include salaries and benefits, supplies, provision for
doubtful accounts, depreciation and amortization, and merger, facility
consolidation and other non-recurring charges, were $4.6 billion in 1995, $6.8
billion in 1996 and $8.3 billion in 1997. Operating expenses for fiscal 1996
include 12 months of operating expenses from the facilities acquired in the AMH
Merger, while fiscal 1995 includes only three months and, to that extent, the
1995 and 1996 periods are not comparable. Fiscal 1995 also includes the
operating expenses of the international and other divested operations discussed
above.
Salaries and benefits expense as a percentage of net operating revenues was
42.0% in 1995, 40.6% in 1996 and 41.1% in 1997. The improvement in 1996 is
attributable primarily to reductions in staffing levels in the Company's
hospitals and corporate offices, implemented following the AMH Merger in 1995.
The increase in 1997 over the prior year is primarily attributable to an
increase in salaries and benefits in the same-store facilities acquired in the
OrNda Merger and to other recent acquisitions of not-for-profit hospitals.
Supplies expense as a percentage of net operating revenues was 13.0% in 1995,
13.7% in 1996 and 13.8% in 1997. The increases over the prior two years are
attributable primarily to higher supplies expense in the facilities acquired in
the AMH Merger and subsequent acquisitions. The increase is also attributable to
the sales of the Company's international operations. Supplies expense as a
percentage of net operating revenues at the international facilities was
substantially less than supplies expense as a percentage of net operating
revenues at the domestic general hospital operations. The Company expects to
continue to focus on reducing supplies expense through incorporating acquired
facilities into the Company's existing group-purchasing program and by
developing and expanding various programs designed to improve the purchasing and
utilization of supplies.
The provision for doubtful accounts as a percentage of net operating revenues
was 5.0% in 1995, 5.6% in 1996 and 5.7% in 1997. The increase in 1996 was
attributable primarily to higher bad debt experience at the facilities acquired
in the AMH Merger and subsequent acquisitions. The increase in 1997 over the
prior year is primarily related to acquisitions and an increase in days
outstanding in accounts receivable. The Company, through its collection
subsidiary, Syndicated Office Systems, has established improved follow-up
collection systems by consolidating the collection of accounts receivable in all
the Company's facilities.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
12
<PAGE>
MANAGEMENT'S
DISCUSSION
Other operating expenses as a percentage of net operating revenues were 22.8% in
1995, 21.4% in 1996 and 21.0% in 1997. The improvements in 1996 and 1997 reflect
the effects of the cost-control programs and overhead-reduction plans mentioned
herein.
Depreciation and amortization expense was $276 million in 1995, $419 million in
1996 and $443 million in 1997. The increases in 1995 and 1996 were due primarily
to the AMH Merger, the Summit acquisition and various other acquisitions by both
Tenet and OrNda, as described in Note 3 to the Consolidated Financial
Statements. In addition, amortization of intangibles increased as a result of
acquired businesses. Goodwill amortization associated with the AMH Merger is
approximately $64 million annually.
Merger, facility consolidation and other non-recurring charges of $37 million,
$86 million and $740 million were recorded in fiscal 1995, 1996 and 1997,
respectively. The fiscal 1995 $37 million charge included severance payments and
outplacement services for involuntary terminations of former employees of the
Company and other costs related to consolidating the operations of AMH and
Tenet. Fiscal 1996 and 1997 include impairment losses of $86 million and $413
million, respectively, in which certain facilities owned by the Company in 1996
and certain facilities acquired in the OrNda Merger were written down to their
estimated fair values. The 1997 charge also included losses related to the
planned closure, sale or conversion to alternate uses of certain of the
Company's facilities and services in order to eliminate duplication of services
and excess capacity following the OrNda acquisition and the write-off of
goodwill and other assets related to certain of the Company's physician
practices. In fiscal 1997, the Company also recorded non-recurring charges in
connection with the OrNda Merger of $309 million which included: investment
banking and other professional fees, other transaction costs, severance payments
for substantially all of OrNda's corporate and regional employees, costs to
terminate or convert other employee benefit programs, closure of OrNda's
Corporate office and other regional offices, reorganization of operations,
information systems consolidation, (primarily related to the buy-out of vendor
contracts and the write-down of computer equipment and capitalized software),
estimated costs to settle a government investigation of OrNda and other OrNda
litigation, and other expenses, primarily related to conforming accounting
practices of the two companies used for estimating the allowance for doubtful
accounts and self-insurance reserves.
Interest expense, net of capitalized interest, was $251 million in 1995, $425
million in 1996 and $417 million in 1997. The increase between 1995 and 1996 was
due primarily to the acquisition of AMH and the notes and bank loans used to
finance the acquisition and to retire debt in connection with the AMH Merger.
The reduction in 1997 compared to 1996 is primarily due to the refinancing of
debt in connection with the OrNda Merger at lower interest rates.
Investment earnings were $32 million in 1995, $27 million in 1996 and $26
million in 1997 and were derived primarily from notes receivable and investments
in debt securities.
Equity in earnings of unconsolidated affiliates was $43 million in 1995, $25
million in 1996 and $1 million in 1997. Substantially all of the decrease
between 1995 and 1996 is due to the exchange of the Company's investment in
Hillhaven for common stock in Vencor and the purchase of a majority interest in
Houston Northwest Medical Center. During 1995 and 1996 (through the date of the
exchange), the Company's equity in the earnings of Hillhaven was $16 million and
$7 million, respectively. The Company's equity in the earnings of Houston
Northwest Medical Center was $14 million in 1995 and $9 million in 1996. The
Company's equity in the earnings of Westminster Health Care Holdings PLC
("Westminster") was $6 million in 1995 and $7 million in 1996. The Company sold
its investment in Westminster in May 1996.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
13
<PAGE>
Minority interests in income of consolidated subsidiaries decreased in the
current year due to reduced operating results at consolidated but not wholly
owned facilities and increased in 1996 due to the effects of minority interests
recorded at facilities acquired in the AMH Merger and other acquisitions.
Minority interest expense was $10 million in 1995, $30 million in 1996 and $27
million in 1997.
The Company's tax provision in 1995 and 1996 includes the benefit of the
realization of certain prior-year operating losses of OrNda. The tax provision
in 1996 includes additional amortization of goodwill resulting from the AMH
Merger and gains from the sales of international operations. The amortization
expense arising from the AMH Merger is a noncash charge but provides no income
tax benefits. The tax charge in 1997 is due primarily to certain nondeductible
merger costs and impairment charges which provide no tax benefits, partially
offset by the benefit of prior years' operating losses of OrNda. The Company
expects its normal tax rate in 1998 to approximate 40%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity for the year ended May 31, 1997 was derived principally
from the cash proceeds from operating activities, the proceeds from the sale of
public debt and borrowings under the Company's secured and unsecured bank credit
agreements. Net cash provided by operating activities for the years ended May
31, 1995, 1996 and 1997 was $126 million, $349 million and $404 million,
respectively. Net expenditures for discontinued operations, merger, facility
consolidation and other non-recurring charges were $427 million in 1995, $97
million in 1996 and $108 million in 1997, and are estimated to be approximately
$366 million in 1998. Cash flows from operating activities during the year ended
May 31, 1997 also have been adversely affected due to the following principal
reasons: (i) billing delays resulting from conversions of patient accounting
systems at several hospitals; (ii) delays in cash flows at recently acquired
facilities where accounts receivable were not purchased; (iii) temporary
slowdowns in the collection of Medicare receivables due to changes in fiscal
intermediaries for recently acquired facilities; and (iv) a general slowdown of
payments from other payors. Management believes that future cash flows from
operations will continue to be positive. This liquidity, along with the
availability of credit under the Company's current unsecured credit agreement,
should be adequate to meet debt-service requirements and to finance planned
capital expenditures and other known operating needs over the short term (up to
18 months) and the long term (18 months to three years).
The Company's cash and cash equivalents at May 31, 1996 were $107 million, a
decrease of $53 million from May 31, 1995. The Company's cash and cash
equivalents at May 31, 1997 were $35 million, a decrease of $72 million from May
31, 1996. Working capital at May 31, 1995 was $273 million, compared to $499
million at May 31, 1996 and $522 million at May 31, 1997. One of the factors
increasing working capital in both years is a decrease in the current portion of
long-term debt as new credit agreements, described below, eliminated previously
required quarterly payments of debt and amounts available under the new credit
agreement were earmarked for the redemption of other currently maturing
long-term debt.
Net proceeds from the sales of facilities, investments and other assets were
$191 million in 1995, compared to $551 million during 1996 and $50 million
during 1997. In June 1996, the Company sold its former corporate headquarters
building in Santa Monica, Calif. The proceeds in 1996 were primarily from the
sales of the Company's international operations.
In January 1997, in connection with the OrNda Merger, the Company entered into a
new five-year, $2.8 billion unsecured revolving credit agreement (the "New
Credit Agreement") with Morgan Guaranty Trust Company of New York, Bank of
America NT&SA, The Bank of New York and the Bank of Nova Scotia and a syndicate
of other lenders. The New Credit Agreement replaced the Company's March 1996
five-year $1.55 billion unsecured revolving credit agreement. Borrowings under
the New Credit
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
14
<PAGE>
MANAGEMENT'S
DISCUSSION
Agreement are unsecured and will mature on January 31, 2002. The Company
generally may repay or prepay loans made under the New Credit Agreement and may
reborrow at any time prior to the maturity date. The New Credit Agreement
provides lower interest margins and generally has less restrictive covenants
than the former agreement. The New Credit Agreement, among other requirements,
has limitations on other borrowings, liens, investments, the sale of all or
substantially all assets and prepayment of subordinated debt, a prohibition
against the Company declaring or paying a dividend or purchasing its stock
unless its senior long-term unsecured debt securities are rated BBB- or higher
by Standard and Poors' Ratings Services and Baa3 or higher by Moody's Investors
Services, Inc., and covenants regarding maintenance of net worth, debt ratios
and fixed charge coverages. Current debt ratings on the Company's senior debt
securities are BB by Standard and Poors and Ba1 by Moody's. The Company's unused
borrowing capacity under the New Credit Agreement was $2.0 billion at May
31,1997.
In connection with the OrNda Merger and related refinancing, the Company on
January 30, 1997 sold $400 million of 7 7/8% Senior Notes due January 15, 2003,
$900 million of 8% Senior Notes due January 15, 2005 and $700 million of 8 5/8%
Senior Subordinated Notes due January 15, 2007. The proceeds to the Company were
$1.95 billion, after underwriting discounts and commissions.
Proceeds from borrowings amounted to $3.5 billion in 1995, $3.3 billion in 1996
and $5.1 billion in 1997. In 1996, the proceeds consisted primarily of
borrowings of $2.1 billion under the Company's bank credit agreements and $487
million in net proceeds from the sale of public debt. In 1997 these proceeds
consisted of $3.1 billion in borrowings under the Company's bank credit
agreements, and $2.0 billion in net proceeds from the sale of public debt. Loan
repayments were $2.2 billion in 1995, $3.3 billion in 1996 and $4.5 billion
during 1997.
Cash payments for property and equipment were $336 million in fiscal 1995, $472
million in fiscal 1996 and $406 million in fiscal 1997. The Company expects to
spend approximately $400 million to $500 million annually on capital
expenditures, before any significant acquisitions of facilities and other
healthcare operations and before an estimated $275 million commitment to fund
the construction of a new replacement facility for one of its hospitals. Such
capital expenditures relate primarily to the development of healthcare service
networks in selected geographic areas, design and construction of new buildings,
expansion and renovation of existing facilities, equipment additions and
replacements, introduction of new medical technologies and various other capital
improvements.
During fiscal 1996 and 1997, the Company spent $841 million and $787 million,
respectively, for purchases of new businesses, net of cash acquired. These
include 18 general hospitals and a number of other healthcare-related
businesses. These acquisitions were financed primarily by borrowings under the
Company's credit agreements.
The Company's strategy includes the pursuit of growth through acquisitions and
partnerships, including the development of integrated healthcare systems in
certain strategic geographic areas, general hospital acquisitions and
partnerships and physician practice acquisitions and partnerships. All or
portions of this growth may be financed through available credit under the New
Credit Agreement or, depending on capital market conditions, sale of additional
debt or equity securities or other bank borrowings.
BUSINESS OUTLOOK
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
15
<PAGE>
The challenge facing the Company and the healthcare industry is to continue to
provide quality patient care in an environment of rising costs, strong
competition for patients, and a general reduction of reimbursement by both
private and government payors. Because of national, state and private industry
efforts to reform healthcare delivery and payment systems, the healthcare
industry as a whole faces increased uncertainty. The Company is unable to
predict whether any further healthcare legislation at the federal and/or state
level will be passed in the future, but it continues to monitor all proposed
legislation and analyze its potential impact in order to formulate the Company's
future business strategies.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report, including, without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions, both national and in the regions in
which the Company operates; industry capacity; demographic changes; existing
laws and government regulations and changes in, or the failure to comply with
laws and governmental regulations; legislative proposals for healthcare reform;
the ability to enter into managed care provider arrangements on acceptable
terms; a shift from fee-for-service payment to capitated and other risk-based
payment systems; changes in Medicare and Medicaid reimbursement levels;
liability and other claims asserted against the Company; competition; the loss
of any significant customers; technological and pharmaceutical improvements that
increase the cost of providing, or reduce the demand for, healthcare; changes in
business strategy or development plans; the ability to attract and retain
qualified personnel, including physicians; the significant indebtedness of the
Company; the lack of assurance that the synergies expected from the OrNda Merger
will be achieved; and the availability and terms of capital to fund the
expansion of the Company's business, including the acquisition of additional
facilities. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. Tenet disclaims any
obligation to update any such factors or to publicly announce the results of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
16
<PAGE>
CONSOLIDATED STATEMENTS
OF OPERATIONS
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE Years ended May 31,
------------------------------------
AND SHARE AMOUNTS) 1995 1996 1997
------------------------------------
<S> <C> <C> <C>
Net operating revenues $ 5,161 $ 7,706 $ 8,691
------------------------------------
Operating expenses:
Salaries and benefits 2,170 3,130 3,574
Supplies 668 1,056 1,197
Provision for doubtful accounts 260 431 494
Other operating expenses 1,178 1,646 1,829
Depreciation 232 319 335
Amortization 44 100 108
Merger, facility consolidation and
other non-recurring charges 37 86 740
------------------------------------
Operating income 572 938 414
------------------------------------
Interest expense, net of
capitalized portion (251) (425) (417)
Investment earnings 32 27 26
Equity in earnings of unconsolidated
affiliates 43 25 1
Minority interests in income of
consolidated subsidiaries (10) (30) (27)
Net gain (loss) on disposals of
facilities and long-term investments 31 346 (18)
------------------------------------
Income (loss) from continuing operations
before income taxes 417 881 (21)
Taxes on income (151) (383) (52)
------------------------------------
Income (loss) from continuing operations 266 498 (73)
Discontinued operations (10) (25) (134)
Extraordinary charges from early
extinguishment of debt (20) (23) (47)
------------------------------------
Net income (loss) 236 450 (254)
Preferred stock dividend requirements (2) - -
------------------------------------
Net income (loss) applicable to common
shareholders $ 234 $ 450 $ (254)
------------------------------------
------------------------------------
Earnings (loss) per common and common
equivalent share:
Primary:
Continuing operations $1.10 $1.73 $(0.24)
Discontinued operations (0.04) (0.09) (0.44)
Extraordinary charges (0.08) (0.08) (0.16)
------------------------------------
$0.98 $1.56 $(0.84)
------------------------------------
------------------------------------
Fully diluted:
Continuing operations $1.08 $1.70 $(0.24)
Discontinued operations (0.04) (0.08) (0.44)
Extraordinary charges (0.08) (0.08) (0.16)
------------------------------------
$0.96 $1.54 $(0.84)
------------------------------------
------------------------------------
Weighted average number of shares and
share equivalents outstanding (in thousands):
Primary 237,964 287,129 303,860
Fully diluted 254,105 295,062 304,153
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
17
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
--------------------
(DOLLAR AMOUNTS ARE EXPRESSED IN MILLIONS) 1996 1997
--------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 107 $ 35
Short-term investments in debt securities 112 116
Accounts receivable, less allowance for doubtful
accounts ($205 in 1996 and $224 in 1997) 1,040 1,346
Inventories of supplies, at cost 170 193
Deferred income taxes 312 294
Other current assets 299 407
-------------------
Total current assets 2,040 2,391
-------------------
Investments and other assets 588 678
Property and equipment, net 4,984 5,490
Costs in excess of net assets acquired, less accumulated
amortization ($116 in 1996 and $180 in 1997) 3,072 3,072
Other intangible assets, at cost, less accumulated
amortization ($43 in 1996 and $46 in 1997) 84 74
-------------------
$ 10,768 $ 11,705
-------------------
-------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 120 $ 28
Accounts payable 530 540
Employee compensation and benefits 173 309
Accrued interest payable 84 144
Reserves related to discontinued operations
and other non-recurring charges 70 423
Other current liabilities 564 425
-------------------
Total current liabilities 1,541 1,869
-------------------
Long-term debt, net of current portion 4,421 5,022
Other long-term liabilities and minority interests 1,097 1,282
Deferred income taxes 432 308
Commitments and contingencies
Shareholders' equity:
Common stock, $0.075 par value; authorized 450,000,000
shares at May 31, 1996 and 700,000,000 shares at
May 31, 1997; 297,352,251 shares issued at May 31, 1996
and 305,501,379 shares issued at May 31, 1997 22 23
Additional paid-in capital 2,171 2,311
Unrealized gains on investments in debt and equity securities 28 110
Retained earnings 1,096 819
Less common stock in treasury, at cost, 2,790,967 shares at
May 31, 1996 and 2,676,091 shares at May 31, 1997 (40) (39)
-------------------
Total shareholders' equity 3,277 3,224
-------------------
$ 10,768 $ 11,705
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
18
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON STOCK PREFERRED STOCK
--------------------- ----------------
(DOLLAR AMOUNTS ARE ADDITIONAL
EXPRESSED IN MILLIONS, SHARE OUTSTANDING ISSUED ISSUED PAID-IN UNREALIZED RETAINED TREASURY
AMOUNTS IN THOUSANDS) SHARES AMOUNT SHARES AMOUNT CAPITAL GAINS EARNINGS STOCK
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, May 31, 1994 224,739 $18 1,310 $ 20 $1,412 $ 71 $ 410 $(282)
Net income 236
Shares issued in
connection with:
AMH Merger 33,156 3 485
Other acquisitions 561 5
Paid-in-kind dividends 134 2 (2)
Conversion of convertible
preferred stock 154 (114) (2) 2
Stock options exercised 1,917 10 10
Restricted share
cancellations (4)
Decrease in unrealized
gains on investments in
debt and equity securities,
net of income taxes (19)
----------------------------------------------------------------------------------------
Balances, May 31, 1995 260,523 21 1,330 20 1,912 52 646 (272)
Net income 450
Performance investment
plan options exercised 13,499 39 196
Paid-in-kind dividends 33
Issuance of common stock 15,588 1 191
Conversion of convertible
preferred stock 1,831 (1,356) (20) 20
Redemption of preferred
stock (7)
Stock options exercised 3,120 9 36
Net change in unrealized
gains from changes in
market value of investments in
debt and equity securities, net
of income taxes (24)
----------------------------------------------------------------------------------------
Balances, May 31, 1996 294,561 22 -- -- 2,171 28 1,096 (40)
Net loss (254)
Issuance of common stock 1,171 22 1
Stock options exercised 7,093 1 118
Increase in unrealized
gains on investments in
debt and equity securities,
net of income taxes 82
Elimination of the effect of
including OrNda's results
of operations for the
three months ended
August 31, 1996 in both
years ended May 31, 1996
and 1997 (23)
----------------------------------------------------------------------------------------
Balances, May 31, 1997 302,825 $ 23 -- $ -- $2,311 $ 110 $ 819 $ (39)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
19
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31,
--------------------------
(DOLLAR AMOUNTS ARE EXPRESSED IN MILLIONS) 1995 1996 1997
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 236 $ 450 $ (254)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 276 419 443
Provision for doubtful accounts 260 431 494
Deferred income taxes 83 247 (219)
Net loss (gain) on disposals of facilities and
long-term investments (31) (346) 18
Additions to reserves for discontinued
operations, merger, facility consolidation
and other non-recurring charges 51 127 955
Extraordinary charges from early
extinguishment of debt 20 23 47
Other items (17) 35 26
Increases (decreases) in cash from changes in
operating assets and liabilities, net of effects
from purchases of new businesses:
Accounts receivable (400) (709) (791)
Inventories and other current assets (36) (91) (7)
Accounts payable, income
taxes payable
and other current liabilities (10) (100) (141)
Other long-term liabilities and minority
interests 121 (40) (59)
Net expenditures for discontinued
operations, merger, facility consolidation
and other non-recurring charges (427) (97) (108)
-------------------------
Net cash provided by operating activities 126 349 404
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (336) (472) (406)
Purchases of new businesses, net of cash
acquired (1,489) (841) (787)
Proceeds from sales of facilities, long-term
investments and other assets 191 551 50
Other items 11 (38) 18
-------------------------
Net cash used in investing activities (1,623) (800) (1,125)
-------------------------
-------------------------
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
20
<PAGE>
Consolidated Statements of Cash Flows
YEARS ENDED MAY 31,
----------------------------
(DOLLAR AMOUNTS ARE EXPRESSED IN MILLIONS) 1995 1996 1997
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,546 3,278 5,117
Loan payments (2,234) (3,307) (4,512)
Proceeds from exercises of performance
investment plan options -- 203 --
Proceeds from exercises of stock options 11 37 59
Proceeds from sales of common stock -- 192 12
Other items 3 (5) (23)
----------------------------
Net cash provided by financing activities 1,326 398 653
----------------------------
Net increase (decrease) in cash and
cash equivalents (171) (53) (68)
Cash and cash equivalents at beginning of year 331 160 107
Pooling adjustment to beginning of period
balance to conform fiscal years -- -- (4)
----------------------------
Cash and cash equivalents at end
of year $ 160 $ 107 $ 35
----------------------------
----------------------------
SUPPLEMENTAL DISCLOSURES:
The Company paid interest (net of amounts capitalized) of $222 million, $386
million and $273 million for the years ended May 31, 1995, 1996 and 1997,
respectively. Income taxes paid during the same years amounted to $47 million,
$57 million and $147 million, respectively. The fair value of common stock
issued for acquisitions of hospitals and other assets was $493 million in 1995
and $11 million in 1997.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accounting and reporting policies of Tenet Healthcare Corporation (together
with its subsidiaries, "Tenet" or the "Company") conform to generally accepted
accounting principles and prevailing practices for investor-owned entities
within the healthcare industry. Certain prior-year amounts have been
reclassified to conform to current-year classifications.
On January 30, 1997, the Company acquired OrNda HealthCorp (together with its
subsidiaries, "OrNda"), a provider of healthcare services operating general
hospitals, surgery centers, outpatient and specialty clinics, a psychiatric
hospital and a managed healthcare Medicaid plan, when a subsidiary of the
Company was merged into OrNda (the "OrNda Merger"), leaving OrNda and all of its
subsidiaries as direct and indirect wholly owned subsidiaries of the Company.
The OrNda Merger was accounted for as a pooling-of-interests and, accordingly,
the consolidated financial statements and all statistical data shown herein
prior to the OrNda Merger have been restated to include the accounts and results
of operations of OrNda for all periods presented. (See Note 3 for further
details pertaining to the OrNda Merger.)
Prior to the OrNda Merger, OrNda's fiscal year ended August 31. In recording the
pooling-of-interests combination, OrNda's consolidated financial statements for
the years ended August 31, 1995 and 1996 have been combined with Tenet's
consolidated financial statements for the years ended May 31, 1995 and 1996.
OrNda's consolidated financial statements for the 12 months ended May 31, 1997
have been combined with Tenet's consolidated financial statements for the same
period and an adjustment has been made to shareholders' equity as of May 31,
1997, to eliminate the effect of including OrNda's results of operations for the
three months ended August 31, 1996 in both years ended May 31, 1997 and 1996.
OrNda's unaudited results of operations for the three months ended August 31,
1996 included net operating revenues of $552 million and net income of $23
million.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
A. THE COMPANY
Tenet is an investor-owned healthcare services company that owns or operates,
through its subsidiaries and affiliates, general hospitals and related
healthcare facilities serving urban and rural communities in 22 states and holds
investments in other healthcare companies. At May 31, 1997, the Company's
subsidiaries operated 128 domestic general hospitals, with a total of 27,959
licensed beds in 22 states. The largest concentrations of hospitals are in
California (35.2%), Texas (15.6%) and Florida (13.3%). The concentrations of
hospitals in these three states increases the risk that any adverse economic,
regulatory or other developments that may occur in such states may adversely
affect the Company's results of operations or financial condition.
The Company is subject to changes in government legislation that could impact
Medicare and Medicaid reimbursement levels and is also subject to increased
levels of managed care penetration and changes in payor patterns that may impact
the level and timing of payments for services rendered.
At May 31, 1997, the Company's subsidiaries and affiliates also owned or
operated various ancillary healthcare businesses, as well as a small number of
rehabilitation hospitals, specialty hospitals, long-term-care facilities and
psychiatric facilities located on the same campus as, or nearby, the Company's
general hospitals.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
22
<PAGE>
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tenet and its
wholly owned and majority-owned subsidiaries. Significant investments in other
affiliated companies generally are accounted for using the equity method.
Intercompany accounts and transactions are eliminated in consolidation. The
results of operations of acquired businesses in purchase transactions are
included from their respective acquisition dates.
C. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management of the Company to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
D. NET OPERATING REVENUES
Net operating revenues consist primarily of net patient-service revenues, which
are based on the hospitals' established billing rates less allowances and
discounts principally for patients covered by Medicare, Medicaid and other
contractual programs. Payments under these programs are based on either
predetermined rates or the costs of services. Settlements for retrospectively
determined rates are estimated in the period the related services are rendered
and are adjusted in future periods as final settlements are determined.
Management believes that adequate provision has been made for adjustments that
may result from final determination of amounts earned under these programs.
These contractual allowances and discounts are deducted from accounts receivable
in the accompanying consolidated balance sheets. Approximately 43% of
consolidated net operating revenues were from participation of the Company's
hospitals in Medicare and Medicaid programs in 1995. It was approximately 45% in
each of 1996 and 1997.
The Company provides care to patients who meet certain financial or economic
criteria without charge or at amounts substantially less than its established
rates. Because the Company does not pursue collection of amounts determined to
qualify as charity care, they are not reported in net operating revenues or in
operating and administrative expenses.
E. CASH EQUIVALENTS
The Company treats highly liquid investments with an original maturity of three
months or less as cash equivalents. The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents approximate fair
value.
F. INVESTMENTS IN DEBT AND EQUITY SECURITIES
Investments in debt and equity securities are classified as available-for-sale,
held-to-maturity or as part of a trading portfolio. At May 31, 1997, the Company
had no significant investments in securities classified as either held-to-
maturity or trading. Securities classified as available-for-sale are carried at
fair value if unrestricted and their unrealized gains and losses, net of tax,
are reported as an adjustment to shareholders' equity. Realized gains or losses
are included in net income on the specific identification method, and are
immaterial for all years presented.
G. INTEREST RATE SWAP AGREEMENTS
The differentials to be paid or received under interest rate swap agreements are
accrued as the interest rates change and are recognized over the lives of the
agreements as adjustments to interest expense.
H. INDEXED DEBT INSTRUMENTS
Changes in liability resulting from increases or decreases in the index value of
the Company's indexed long-term debt instrument (its 6% Exchangeable
Subordinated Notes) are accounted for as adjustments of the carrying amount of
the related debt obligation with corresponding charges (or credits) to earnings.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
23
<PAGE>
I. LONG-LIVED ASSETS
Property and Equipment: The Company uses the straight-line method of
depreciation for buildings, building improvements and equipment over their
estimated useful lives as follows: buildings and improvements, 25 to 40 years;
equipment, three to 15 years. Capital leases are recorded at the beginning of
the lease term as assets and liabilities at the lower of the present value of
the minimum lease payments or the fair value of the assets, and such assets,
including improvements, are amortized over the shorter of the lease term or
their useful life. The Company capitalizes interest costs related to
construction projects. Capitalized interest was $8 million in 1995. It was $12
million in 1996 and 1997.
Intangible Assets: Preopening costs are amortized over one year. Costs in excess
of the fair value of the net assets of purchased businesses (goodwill) generally
are amortized over 20 to 40 years. The straight-line method is used to amortize
most intangible assets. Deferred financing costs are amortized over the lives of
the related loans using the interest method.
Impairment of long-lived assets, including goodwill related to such assets, is
recognized whenever events or changes in circumstances indicate that the
carrying amount of the asset, or related groups of assets, may not be fully
recoverable from estimated future cash flows. The Company also assesses the
recoverability of goodwill at the enterprise level in a similar manner.
Measurement of the amount of impairment may be based on appraisal, market values
of similar assets or estimates of future discounted cash flows resulting from
use and ultimate disposition of the asset.
J. SALES OF COMMON STOCK OF SUBSIDIARIES
At the time a subsidiary or equity affiliate sells existing or newly issued
common stock to unrelated parties at a price in excess of its book value, the
Company records a gain reflecting its share of the change in the subsidiary's
shareholders' equity resulting from the sale.
K. EARNINGS PER SHARE
Primary earnings (or loss) per share of common stock is based on after-tax
income (or loss) applicable to common stock and the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period as appropriate. Fully diluted earnings-per-share calculations are based
on the assumption that all dilutive convertible debentures issued by Tenet (and,
through December 8, 1995, redeemable convertible preferred shares issued by
OrNda) are converted into shares of Tenet common stock as of the beginning of
the year, or as of the issue date if later, and (i) that those shares are added
to the weighted average number of common shares and share equivalents
outstanding used in the calculation of primary earnings per share, and (ii) that
after-tax income (or loss) is adjusted accordingly.
The Financial Accounting Standards Board ("FASB") recently issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which is
required to be adopted for financial statements issued for periods ending after
December 15, 1997. This statement establishes new, simplified standards for
computing and presenting earnings per share. It replaces the traditional
presentations of primary earnings per share and fully diluted earnings per share
with presentations of basic earnings per share and diluted earnings per share,
respectively. When adopted by the Company, during the quarter ending February
28, 1998, basic earnings per share is expected to increase slightly from primary
earnings per share and diluted earnings per share is expected to approximate
fully diluted earnings per share.
L. STOCK-BASED COMPENSATION
Compensation cost for stock-based employee compensation plans is recognized
based on the difference, if any, between the quoted market price of the
Company's common stock on the option grant date and the amount the employee must
pay to acquire the stock, in accordance with Accounting Principles Board Opinion
No. 25.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 ACQUISITIONS AND DISPOSALS OF FACILITIES
MERGER WITH ORNDA:
On January 30, 1997, the Company acquired OrNda by issuing 81,439,910 shares of
its common stock in a tax-free exchange for all of OrNda's outstanding common
stock which has been accounted for as a pooling-of-interests.
The results of operations previously reported by the separate companies and the
combined amounts presented in the accompanying consolidated statements of
operations are summarized below (in millions).
<TABLE>
<CAPTION>
Prior to Merger Subsequent to Merger
-------------------------------------- --------------------------------------
Fiscal Fiscal 06/01/96 01/30/97
Year Year to to Merger- Year
ended ended 01/29/97 05/31/97 Related ended
05/31/95 05/31/96 (unaudited) (unaudited) Expenses 05/31/97
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues:
Tenet $ 3,318 $ 5,559 $ 3,983 $ 3,074 -- $ 7,057
OrNda 1,843 2,147 1,637 -- -- 1,637
Conforming
reclassifications -- -- (3) -- -- (3)
-------------------------------------- --------------------------------------
Combined $ 5,161 $ 7,706 $ 5,617 $ 3,074 $ -- $ 8,691
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
Extraordinary charges:
Tenet $ (20) $ (23) -- -- $ (47) $ (47)
OrNda -- -- -- -- -- --
-------------------------------------- --------------------------------------
Combined $ (20) $ (23) $ -- $ -- $ (47) $ (47)
-------------------------------------- --------------------------------------
Net income (loss):
Tenet $ 165 $ 350 $ 221 $ (339) $ (208) $ (326)
OrNda 71 100 72 -- -- 72
-------------------------------------- --------------------------------------
Combined $ 236 $ 450 $ 293 $ (339) $ (208) $ (254)
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
</TABLE>
MERGER WITH AMH:
In March 1995, in a transaction accounted for as a purchase, Tenet acquired all
the outstanding common stock of American Medical Holdings, Inc. (together with
its subsidiaries, "AMH") for $1.5 billion in cash and 33,156,614 shares of
Tenet's common stock valued at $488 million. The total purchase price was
allocated to the assets and liabilities of AMH based on their estimated fair
values. The total purchase price exceeded the fair value of the net assets
acquired by approximately $2.5 billion.
OTHER DOMESTIC:
Tenet's subsidiaries, including OrNda, acquired seven general hospitals in
fiscal 1996 and 11 general hospitals in fiscal 1997.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
25
<PAGE>
The Company also acquired a number of physician practices, home health agencies
and other healthcare operations during the three years ended May 31, 1997. All
of these transactions have been accounted for as purchases. The results of
operations of the acquired businesses, which are not material in the aggregate,
have been included in the Company's consolidated statements of operations,
shareholders' equity and cash flows from the dates of acquisition.
INTERNATIONAL:
In fiscal 1996, the Company sold its interests in hospitals and related
healthcare businesses in Singapore, Australia, Malaysia and Thailand for net
cash consideration of approximately $344 million. These transactions resulted in
gains of approximately $158 million. Also in fiscal 1996, the Company sold its
approximately 42% interest in Westminster Health Care Holdings PLC for a gain of
$34 million.
NOTE 4 MERGER, FACILITY CONSOLIDATION AND OTHER NON-RECURRING CHARGES
In the year ended May 31, 1995, the Company recorded restructuring charges of
approximately $37 million ($0.09 per share) associated with the relocation of
substantially all of its hospital support activities previously located in
Southern California and Florida to Dallas, Texas.
In the year ended May 31, 1996, the Company recorded an impairment loss of
approximately $86 million, before tax benefits of approximately $32 million
($0.18 per fully diluted share). The assets deemed to be impaired consisted of
three rehabilitation hospitals, four general hospitals and a parcel of
undeveloped land. In the case of the rehabilitation hospitals, the principal
facts and circumstances leading to the impairment included recent and forecast
reductions in hospital admissions and payment rates caused by payor-driven
shifts in care from traditional rehabilitation services to lower-cost skilled
nursing facilities. The impairment of the general hospitals was the result of
(i) a change in the use of one of the facilities from acute care to less intense
specialty care, (ii) lower patient volumes, and (iii) adverse changes in payor
mix.
In the year ended May 31, 1997, the Company recorded merger, facility
consolidation and other non-recurring charges totaling $740 million ($506
million after taxes or $1.66 per share). These charges consist of the following:
A. MERGER-RELATED EXPENSES
The Company recorded non-recurring charges of $309 million in connection with
the OrNda Merger. The after-tax effect of these expenses was $208 million or
$0.68 per share. These expenses included (in millions):
Investment banking, professional fees and other transaction costs $ 27
Severance for identified employees and costs to terminate or
convert employee benefit programs 83
Closure of OrNda's corporate and regional offices,
consolidation of operations 90
Information systems consolidations, primarily related to the
buy-out of vendor contracts and the write-down of computer
equipment and capitalized software 15
Estimated costs to settle a government investigation of OrNda
and other OrNda litigation 32
Other, primarily related to conforming accounting practices
used for estimating allowances for self-insurance
reserves and doubtful accounts 62
------
$ 309
------
------
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. FACILITY CONSOLIDATION AND OTHER IMPAIRMENT LOSSES
The Company recorded $413 million ($287 million after taxes or $0.94 per share)
for asset impairment losses in 1997 related to the (in millions):
Plan to close seven general hospitals and to sell eight general
hospitals and one other healthcare business, in order to
eliminate the duplication of services and excess capacity
following the OrNda Merger $219
Impairment of the carrying values of long-lived assets
of four general hospitals and nine medical office buildings
acquired from OrNda to their estimated fair values 134
Write-off of goodwill and other long-lived assets
related to some of the Company's physician practices
which are not deemed fully recoverable based on the
trend of operating results 60
----
$413
----
----
Three of the hospitals to be closed will be converted to alternate uses. The
aggregate operating results of the facilities to be closed or sold were not
significant. The Company expects to complete this consolidation plan by May 31,
1998. The asset impairments resulted primarily from declining patient volumes
and adverse changes in payor mix at the general hospitals and excess capacity in
the medical office buildings. In determining the amount of asset impairment
losses, the related assets' fair values were determined by specific market
appraisals, reference to definitive agreements or recent sales prices of
comparable facilities, either on a per-bed or earnings multiple basis, or by
discounted expected future cash flows.
C. OTHER
The Company recorded $18 million ($11 million after taxes or $0.04 per share)
for restructuring its physician practices. These non-recurring charges include
severance, write-off of computer equipment and software, physician contract
terminations, and the reorganization of regional management service
organizations.
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists of the following:
(IN MILLIONS) 1996 1997
---------------------
Land $ 429 $ 443
Buildings and improvements 3,884 4,176
Construction in progress 149 345
Equipment 1,842 1,958
---------------------
6,304 6,922
Less accumulated depreciation and amortization 1,320 1,432
Net property and equipment $ 4,984 $ 5,490
---------------------
---------------------
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
27
<PAGE>
NOTE 6 LONG-TERM DEBT AND LEASE OBLIGATIONS
A. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
(IN MILLIONS) 1996 1997
----------------------
<S> <C> <C>
Loans payable to banks - unsecured $ 975 $ 779
Loans payable to banks - secured 692 --
9 5/8% Senior Notes due 2002, $300 million face value,
net of $5 million unamortized discount 294 295
8 5/8% Senior Notes due 2003, $500 million face value,
net of $11 million unamortized discount 488 489
7 7/8% Senior Notes due 2003, $400 million face value,
net of $8 million unamortized discount -- 392
8% Senior Notes due 2005, $900 million face value,
net of $23 million unamortized discount -- 877
10 1/8% Senior Subordinated Notes due 2005, $900 million
face value, net of $20 million unamortized discount 878 880
8 5/8% Senior Subordinated Notes due 2007, $700 million
face value, net of $16 million unamortized discount -- 684
11 3/8 and 12 1/4% Senior Subordinated Notes repaid in 1997 525 --
6% Exchangeable Subordinated Notes due 2005,
$320 million face value, stated at indexed value,
net of $8 million unamortized discount 311 330
Zero-coupon guaranteed bonds due 1997 and 2002, $131 million
face value, net of $19 million unamortized discount 102 110
Notes and capital lease obligations, secured by property and equipment,
weighted average interest rate of approximately 11.5% in 1996
and 11.4% in 1997, payable in installments to 2009 188 188
Other notes, primarily unsecured 88 26
----------------------
4,541 5,050
Less current portion (120) (28)
----------------------
$ 4,421 $ 5,022
----------------------
----------------------
</TABLE>
Loans Payable to Banks - In January 1997, in connection with the OrNda Merger,
the Company entered into a new revolving credit agreement (the "New Credit
Agreement") with a syndicate of banks that allows the Company to borrow, repay
and reborrow up to $2.8 billion prior to the agreement's January 31, 2002
maturity date. This agreement replaced the Company's five-year $1.55 billion
unsecured revolving credit agreement with a syndicate of banks. As a result of
this refinancing, as well as the refinancing of OrNda's then-existing credit
facility, its 12 1/4% Senior Subordinated Notes and its 11 3/8% Senior
Subordinated Notes, the Company recorded an extraordinary charge from early
extinguishment of debt in the amount of $47 million, net of taxes of $29
million.
Loans under the New Credit Agreement are unsecured and generally bear interest
at a base rate equal to the prime rate or, if higher, the federal funds rate
plus 0.50%, or, at the option of the Company, an adjusted London interbank
offered rate ("LIBOR") for one-, two-, three- or six-month periods plus an
interest margin of from 22.50 to 68.75 basis points. The Company has agreed to
pay the lenders under the New Credit Agreement an annual facility fee on the
total loan commitment at rates ranging from 12.50 to 31.25 basis points. The
interest margins and facility fee rates are based on the ratio of the Company's
consolidated total debt to net earnings before interest, taxes, depreciation,
amortization and certain non-recurring charges. During the year ended May 31,
1997, the weighted average interest rate on the loans payable to banks was 6.1%.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SENIOR NOTES AND SENIOR SUBORDINATED NOTES - The Company sold, on March 1, 1995,
$300 million of 9 5/8% Senior Notes due September 1, 2002 and $900 million of 10
1/8% Senior Subordinated Notes due March 1, 2005. The senior notes are not
redeemable by the Company prior to maturity. Subject to certain limitations in
the New Credit Agreement, the senior subordinated notes are redeemable at the
option of the Company, in whole or from time to time in part, at any time after
March 1, 2000, at redemption prices ranging from 105.063% in 2000 to 100% in
2003 and thereafter.
In October 1995, the Company sold $500 million of Senior Notes due December
2003. The notes have a coupon of 8 5/8%. The notes are not redeemable by the
Company prior to maturity.
In connection with the OrNda Merger and related refinancing, the Company issued,
on January 30, 1997, $400 million of 7 7/8% Senior Notes due January 15, 2003,
$900 million of 8% Senior Notes due January 15, 2005 and $700 million of 8 5/8%
Senior Subordinated Notes due January 15, 2007. The proceeds to the Company were
$1.95 billion, after underwriting discounts and commissions. The senior notes
are not redeemable by the Company prior to maturity. Subject to certain
limitations in the New Credit Agreement, the senior subordinated notes are
redeemable at the option of the Company, in whole or from time to time in part,
at any time on or after January 15, 2002, at redemption prices ranging from
104.313% in 2002 to 100% in 2005 and thereafter.
The senior notes are unsecured obligations of the Company ranking senior to all
subordinated indebtedness of the Company, including the senior subordinated
notes, and equally in right of payment with all other indebtedness of the
Company, including borrowings under the New Credit Agreement described above.
The senior subordinated notes also are unsecured obligations of the Company
subordinated in right of payment to all existing and future senior debt,
including the senior notes and borrowings under the New Credit Agreement.
6% EXCHANGEABLE SUBORDINATED NOTES - In January 1996, the Company issued $320
million of 6% Exchangeable Subordinated Notes due 2005 that will be exchangeable
at the option of the holder for shares of common stock of Vencor, Inc.
("Vencor") at any time on or after November 6, 1997 at an exchange rate of
25.9403 shares per $1,000 principal amount of the notes, subject to the
Company's right to pay an amount in cash equal to the market price of the shares
of Vencor common stock in lieu of delivery of such shares. The exchange price
equivalent to the exchange rate is $38.55 per share. Subject to certain
limitations in the New Credit Agreement, the notes are redeemable at the option
of the Company at any time on or after January 15, 1999 at the redemption prices
set forth in the indenture, plus accrued and unpaid interest. The notes also are
unsecured obligations of the Company subordinated in right of payment to all
existing and future senior and senior subordinated debt and borrowings under the
New Credit Agreement.
To the extent that the fair market value of the Company's investment in the
common stock of Vencor exceeds the carrying value of the notes at the end of any
accounting period, the Company adjusts the carrying value of the notes to the
fair market value of the investment through a charge or credit to earnings.
Corresponding adjustments to the carrying value of the investment in Vencor are
credited or charged directly to shareholders' equity as unrealized gains or
losses. At May 31, 1997, the market price of Vencor's common stock was $40.75
per share, or $2.20 per share over the exchange price of the stock. The Company
accordingly recognized a pretax, noncash charge to earnings in the amount of $18
million ($11 million after-tax, or $0.04 per share). This charge has been
included with the net gain (or loss) on disposals of facilities and long-term
investments in the accompanying consolidated statement of operations for the
year ended May 31, 1997.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
29
<PAGE>
LOAN COVENANTS - The New Credit Agreement and the indentures governing the
Company's outstanding public debt have, among other requirements, limitations on
borrowings by, and liens on the assets of, the Company or its subsidiaries,
investments, the sale of all or substantially all assets and prepayment of
subordinated debt, a prohibition against the Company declaring or paying
dividends on or purchasing its stock unless its senior long-term unsecured debt
securities are rated BBB- or higher by Standard and Poors' Rating Services and
Baa3 or higher by Moody's Investors Service, Inc., and covenants regarding
maintenance of specified levels of net worth, debt ratios and fixed-charge
coverage ratios. Because of the dividend restrictions, all of the Company's
retained earnings are restricted. The Company is in compliance with its loan
covenants. There are no compensating balance requirements for any credit line or
borrowing.
B. LONG-TERM DEBT MATURITIES AND LEASE OBLIGATIONS
Future long-term debt cash maturities and minimum operating lease payments are
as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 LATER YEARS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt $ 28 $ 33 $ 35 $ 218 $ 672 $ 4,174
Long-term leases 201 168 120 103 84 315
</TABLE>
Rental expense under operating leases, including short-term leases, was $170
million in 1995, $239 million in 1996 and $253 million in 1997.
NOTE 7 INCOME TAXES
Taxes on income from continuing operations consist of the following amounts:
(IN MILLIONS) 1995 1996 1997
---------------------------------
Currently payable:
Federal $ 116 $ 217 $ 131
State 23 44 27
Foreign 9 5 --
---------------------------------
148 266 158
Deferred:
Federal (4) 80 (132)
State 2 14 (6)
---------------------------------
(2) 94 (138)
---------------------------------
Other 5 23 32
---------------------------------
$ 151 $ 383 $ 52
---------------------------------
---------------------------------
A reconciliation between the amount of reported income tax expense (benefit) and
the amount computed by multiplying income (loss) before tax by the statutory
Federal income tax rate is shown below:
(IN MILLIONS OF DOLLARS) 1995 1996 1997
---------------------------------
Tax provision at statutory
federal rate of 35% $146 $308 $(7)
State income taxes, net of
federal income tax benefit 17 37 15
Goodwill amortization 8 27 26
Gain on sale of foreign operations - 30 -
Nondeductible OrNda Merger costs - - 14
Nondeductible asset impairment charges - - 29
Benefit of prior-year
net operating losses (21) (24) (19)
Other 1 5 (6)
---------------------------------
Taxes on income from
continuing operations $151 $383 $52
---------------------------------
---------------------------------
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Deferred tax assets and liabilities as of May 31, 1996 and 1997 relate to the following:
1996 1997
------------------------------------------------------------
(IN MILLIONS) ASSETS LIABILITIES ASSETS LIABILITIES
------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation and fixed-asset basis differences $ -- $ 652 $ -- $ 661
Reserves related to discontinued operations, merger,
facility consolidation and other non-recurring charges 87 -- 203 --
Receivables-doubtful accounts and adjustments 144 -- 112 --
Cash-basis accounting change -- 9 -- --
Accruals for insurance risks 103 -- 103 --
Intangible assets 4 -- 1 --
Other long-term liabilities 86 -- 50 --
Benefit plans 78 -- 91 --
Other accrued liabilities 79 -- 40 --
Investments and other assets -- 87 -- 43
Federal and state net operating loss carryforwards 69 -- 58 --
Other items 17 -- 53 --
------------------------------------------------------------
$ 667 $ 748 $ 711 $ 704
Valuation allowance (41) -- (22) -
------------------------------------------------------------
$ 626 $ 748 $ 689 $ 704
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
The valuation allowance was reduced by $19 million in fiscal 1997 upon
consummation of the OrNda Merger to conform the accounting practices of the two
companies. Management believes that realization of the deferred tax assets in
excess of the valuation allowance recorded at May 31, 1997 is more likely than
not to occur as temporary differences reverse against future taxable income.
The following schedule summarizes approximate tax attribute carryforwards from
prior tax returns for OrNda which are available to offset future federal net
taxable income:
(IN MILLIONS) AMOUNT EXPIRATION PERIODS
----------------------------
Net operating loss $167 1999-2009
General business credits 4 1998-2001
Alternative minimum tax 5 None
Allowable federal deductions relating to net operating losses of OrNda and
certain of its subsidiaries are subject to annual limitations.These limitations
are not expected to significantly affect the ability of the Company to
ultimately recognize the benefit of these net operating loss deductions in
future years.
NOTE 8 CLAIMS AND LAWSUITS
A. PROFESSIONAL AND GENERAL LIABILITY INSURANCE
In its normal course of business, the Company is subject to claims and lawsuits
relating to injuries arising from patient treatment. The Company believes that
its liability for damages resulting from such claims and lawsuits is adequately
covered by insurance or is adequately provided for in its consolidated financial
statements.
The Company insures substantially all of its professional and comprehensive
general liability risks in excess of self-insured retentions, which vary by
hospital and by policy period from $500,000 to $3 million per occurrence,
through a majority-owned insurance subsidiary. A significant portion of these
risks is, in turn, reinsured with major independent insurance companies.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
31
<PAGE>
Prior to fiscal 1995, the Company insured its professional and comprehensive
general liability risks related to its psychiatric and rehabilitation hospitals
through a wholly owned insurance subsidiary, which 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 several coverage years. In addition, damages, if any, arising from
fraud and conspiracy claims in psychiatric malpractice cases may not be insured.
In addition to the reserves recorded by the above insurance subsidiaries, the
Company maintains an unfunded reserve based on actuarial estimates for the self-
insured portion of its professional liability risks. Reserves for losses and
related expenses are estimated using expected loss-reporting patterns and have
been discounted to their present value using a weighted average discount rate of
approximately 8%. Adjustments to the reserves are included in results of
operations.
B. SIGNIFICANT LEGAL PROCEEDINGS
The Company has been involved in significant legal proceedings of an unusual
nature related principally to its discontinued psychiatric business. During the
years ended May 31, 1995, 1996 and 1997, the Company recorded provisions to
estimate the cost of the ultimate disposition of all of these proceedings and to
estimate the legal fees that it expected to incur. The Company has settled the
most significant of these matters. The remaining reserves for unusual litigation
costs that relate to matters that had not been settled as of May 31, 1997 and an
estimate of the legal fees to be incurred subsequent to May 31, 1997 represent
management's estimate of the remaining net costs of the ultimate disposition of
these matters. There can be no assurance, however, that the ultimate liability
will not exceed such estimates. Although, based upon information currently
available to it, management believes that the amount of damages, if any, in
excess of its reserves for unusual litigation costs that may be awarded in any
of the following unresolved legal proceedings cannot reasonably be estimated,
management does not believe it is likely that any such damages will have a
material adverse effect on the Company's results of operations, liquidity or
capital resources. All of the costs associated with these legal proceedings are
classified in discontinued operations.
PSYCHIATRIC MALPRACTICE CASES - The Company continues to defend a greater-than-
normal level of litigation relating to certain of its subsidiaries' former
psychiatric operations. The majority of the lawsuits filed contain allegations
of medical malpractice as well as allegations of fraud and conspiracy against
the Company and certain of its subsidiaries and former employees. Also named as
defendants are numerous doctors and other healthcare professionals. The Company
believes that the increase in litigation arose primarily from advertisements by
certain lawyers seeking former psychiatric patients in order to file claims
against the Company and certain of its subsidiaries. The advertisements focused,
in many instances, on the Company's settlement of past disputes involving the
operations of its discontinued psychiatric business subsidiaries, including the
Company's 1994 resolution of the Federal government's investigation and a
corresponding criminal plea agreement involving such discontinued psychiatric
business of the Company. From June 1, 1994 to the present, approximately 1,000
cases alleging fraud and conspiracy have been filed against the Company and
certain of its subsidiaries. Most of the cases have been filed in Texas and
Washington, D.C. To date, the Company has resolved approximately 700 of these
cases.
The Company expects that additional lawsuits with similar allegations will be
filed. The Company believes it has a number of defenses to each of these actions
and will defend these and any additional lawsuits vigorously. Until the lawsuits
are resolved, however, the Company will continue to incur substantial legal
expenses.
SHAREHOLDER LAWSUITS - Two federal class actions filed in August 1993 were
consolidated into one action. This consolidated action is on behalf of a
purported class of shareholders who purchased or sold stock
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the Company between January 14, 1993 and August 26, 1993, and alleges
violations of the securities laws by the Company and certain of its executive
officers. After unsuccessful mediation, the parties agreed in May 1995 to
proceed with the litigation. In June 1995, the defendants filed a motion to
dismiss and to strike plaintiffs' complaint. Although in March 1997 the
defendants' motion was denied, the Company believes it has meritorious defenses
to this action and will continue to defend this litigation vigorously.
C. ORNDA INVESTIGATION
An agreement has been executed with the Department of Justice resolving the
investigation related to certain physician relationships at 12 of the hospitals
acquired by OrNda in its April 1994 acquisition of Summit Health Ltd. ("Summit")
and one OrNda hospital outside of the group acquired from Summit.
NOTE 9 SHAREHOLDERS' EQUITY
A. PREFERRED STOCK PURCHASE RIGHTS AND PREFERRED STOCK
In 1988, Tenet distributed Preferred Stock Purchase Rights to holders of Tenet's
common stock and authorized the issuance of additional rights for common stock
issued after that date. The rights expire in December 1998 unless previously
exercised or redeemed and do not entitle the holders thereof to vote as
shareholders or receive dividends.
The Company may redeem the rights at $.025 per right at any time up to the 10th
business day after a public announcement that a person has acquired 20% or more
of the Company's common stock in a transaction or transactions not approved by
the Board of Directors. The rights are not exercisable until after the date on
which the Company's right to redeem the rights has expired. When exercisable,
each right entitles the holder thereof to purchase from the Company one two-
thousandth of a share of Series A Junior Participating Preferred Stock ("Series
A Preferred Stock") at a price of $40.61, subject to adjustment.
Subject to the foregoing, in the event the Company is acquired in a merger or
other business combination transaction in which shares of the Company's common
stock are exchanged for shares of another company or more than 50% of the
Company's assets are sold, each holder of a right generally will be entitled
upon exercise to purchase, for the then-current exercise price of the right,
common stock of the surviving company having a market value equal to two times
the exercise price of the rights. The plan also provides that, in the event of
certain other mergers or business combinations, certain self-dealing
transactions or the acquisition by a person of stock having 30% or more of the
Company's general voting power, each holder of a right generally will be
entitled to purchase upon exercise, for the then-current exercise price of the
right, the number of shares of Series A Preferred Stock having a market value
equal to two times the exercise price of the rights.
The Series A Preferred Stock for which the Preferred Stock Purchase Rights may
be exchanged is nonredeemable and has a par value of $0.15 per share. On January
27, 1997, in connection with the OrNda Merger, the Board of Directors approved
an increase in the number of preferred shares authorized from 225,000 to
350,000. None of the 350,000 authorized shares are outstanding.
B. WARRANTS
At May 31, 1997, there were warrants outstanding to purchase 124,064 shares of
common stock at an exercise price of $13.25 per share. These warrants can be
exercised through April 30, 2000.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
33
<PAGE>
NOTE 10 STOCK BENEFIT PLANS
The Company has four stock-based compensation plans, which are described below.
The Company applies Accounting Principles Board Opinion No.25 and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock options under the plans.
Under its 1991 and 1995 Stock Incentive Plans, the Company may grant fixed stock
options and performance-based incentive stock awards to key employees, advisors
and consultants for up to 23 million shares of common stock remaining available
for issuance under such plans. No new stock awards may be made under the
Company's 1983 Stock Incentive Plan. Under all three plans, the exercise price
of each option generally equals the market price of the Company's stock on the
date of grant and options are normally exercisable at the rate of one-third per
year beginning one year from the date of grant. Stock options generally expire
10 years from the date of grant. No performance-based incentive stock awards
have been made since fiscal 1994.
The Company has a Directors Stock Option Plan which makes available for issuance
to nonemployee directors options to purchase 500,000 shares of common stock.
This plan, adopted in September 1994, replaced the Company's 1991 Director
Restricted Share Plan which in turn had replaced the Company's 1985 Director
Stock Option Plan. Awards made under the 1985 and 1991 plans remain outstanding,
but new awards are made only under the 1994 plan. Under this plan each
nonemployee director receives a stock option for 5,000 common shares upon
initially being elected to the Board of Directors and on each January
thereafter. Awards have an exercise price equal to the fair market value of the
Company's shares on the date of grant, vest one year after the date of grant and
expire 10 years after the date of grant. In March 1997, the Board of Directors
approved an amendment to the Directors Stock Option Plan increasing the initial
and annual grant of options under the plan to 7,500 options. The amendment will
become effective if approved by the shareholders at the Annual Meeting of
Shareholders scheduled for October 1, 1997.
All awards granted under the foregoing plans will vest under circumstances
defined in the plans or under certain employment arrangements, including, with
the consent of the Compensation and Stock Option Committee of the Board of
Directors, upon a change in control of the Company.
The following table summarizes certain information about the Company's stock
options outstanding at May 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
PRICES OPTIONS LIFE PRICE OPTIONS PRICE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.56 to $ 9.50 2,856,938 5.7 years $ 9.18 2,856,938 $ 9.18
$ 9.63 to $ 14.88 9,702,535 7.2 $ 12.97 7,998,426 $ 12.77
$15.88 to $ 21.50 4,465,342 8.2 $ 20.26 2,167,881 $ 19.85
$21.63 to $ 26.38 7,825,975 8.6 $ 23.80 1,427,425 $ 22.44
---------- ----------
$ 3.56 to $ 26.38 24,850,790 7.6 $ 17.25 14,450,670 $ 14.08
---------- ----------
</TABLE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
34
<PAGE>
A summary of the status of the Company's stock incentive plans as of May 31,
1995, 1996 and 1997, and changes during the years ending on those dates, is
presented below:
<TABLE>
<CAPTION>
1995 1996 1997
-----------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 23,087,133 $ 14.56 25,742,932 $ 14.22 26,299,166 $ 15.05
Granted 6,527,950 $ 13.88 5,782,921 $ 19.23 6,436,800 $ 24.07
Exercised (1,917,773) $ 5.47 (3,120,462) $ 11.69 (7,093,224) $ 13.85
Forfeited (1,954,378) $ 17.11 (2,106,225) $ 20.05 (791,952) $ 19.92
----------- ---------- -----------
Outstanding at
end of year 25,742,932 $ 13.17 26,299,166 $ 14.20 24,850,790 $ 17.25
----------- ---------- -----------
Options exercisable
at year-end 12,612,236 $ 16.11 13,403,495 $ 14.12 14,450,670 $ 14.08
----------- ---------- -----------
Weighted average
fair value of options
granted during
the past two years $ 10.12 $ 11.62
------- -------
</TABLE>
The fair values of the option grants in the table above, and for purposes of the
pro forma disclosures in the table below, have been estimated as of the date of
each grant using a Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in fiscal 1996 and 1997,
respectively: expected volatility of 39% and 40%, risk-free interest rates of
5.7% and 6.5%, expected lives of 6.2 and 5.8 years, and dividend yield of 0% for
both years.
Had compensation cost for the Company's stock options been determined based on
these fair values for awards granted during the past two years, the Company's
net income (loss) and earnings (loss) per share would have been reduced
(increased) to the pro forma amounts indicated below:
(IN MILLIONS) 1996 1997
-----------------------
Net income (loss):
As reported $ 450 $ (254)
Pro forma $ 447 $ (260)
Primary earnings (loss) per share:
As reported $ 1.56 $ (0.84)
Pro forma $ 1.56 $ (0.86)
Fully diluted earnings (loss) per share:
As reported $ 1.54 $ (0.84)
Pro forma $ 1.53 $ (0.86)
These pro forma disclosures are not likely to be representative of the pro forma
results for future years, because the options vest over three years and
additional awards are generally made each year.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
35
<PAGE>
NOTE 11 EMPLOYEE STOCK PURCHASE PLAN
On September 27, 1995, the Company's shareholders approved its 1995 Employee
Stock Purchase Plan under which the Company is authorized to issue up to
2,000,000 shares of common stock to eligible employees of the Company or its
designated subsidiaries who customarily work at least 20 hours per week and six
months per year. Under the terms of the plan, employees can elect to have
between 1% and 10% of their base earnings withheld each calendar quarter to
purchase, on the last day of the quarter, shares of the Company's common stock
at a purchase price equal to 85% of the lower of the closing price on the first
day of the quarter or its closing price on the last day of the quarter. The plan
commenced on April 1, 1996. OrNda had a similar plan between March 1, 1996 and
January 21, 1997. It was terminated as a result of the OrNda Merger.
Approximately 6,200 employees have participated in both plans since their
respective inceptions. Under the plans, the Company sold 727,954 shares to
employees in the year ended May 31, 1997 at a weighted average price of $17.64
per share. In July 1997, the Board of Directors approved an amendment to the
Employee Stock Purchase Plan increasing the number of shares available for
purchase under the Employee Stock Purchase Plan from 2,000,000 to 5,000,000. The
amendment will become effective if approved by the shareholders at the Annual
Meeting of Shareholders scheduled for October 1, 1997.
NOTE 12 EMPLOYEE RETIREMENT PLANS
Substantially all domestic employees who are employed by the Company or its
subsidiaries, upon qualification, are eligible to participate in defined
contribution 401(k) plans. Employees who elect to participate generally make
mandatory contributions from 1% to 16% of their eligible compensation, and the
Company matches such contributions up to a maximum percentage. Company
contributions to the plan were approximately $22 million for 1995, and $32
million for fiscal 1996 and 1997.
NOTE 13 INVESTMENTS
In fiscal 1996, Vencor Inc. ("Vencor") acquired all of the outstanding common
stock of The Hillhaven Corporation ("Hillhaven"). As a result of the
transaction, the shares of Hillhaven common stock that had been owned by the
Company were exchanged for 8,301,067 shares of Vencor common stock. In addition,
the Company received approximately $92 million in cash for its Hillhaven Series
C and Series D preferred stock. The exchange and sale of preferred stock
resulted in a gain of approximately $176 million. The Company classifies its
investment in Vencor as "available for sale" whereby the carrying value of the
unrestricted Vencor shares is adjusted to market value at the end of each
accounting period through a credit or charge, net of income taxes, to
shareholders' equity. At May 31, 1996 and 1997, the market value of the
investment was approximately $263 million and $338 million, respectively. (See
Note 6.)
The Company is contingently liable under various guarantees for $113 million of
Vencor's obligations to third parties, including $107 million of lease
obligations and $6 million of long-term debt obligations. The Company also is
contingently liable for approximately $55 million in lease obligations relating
to certain rehabilitation facilities sold in 1994.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
36
<PAGE>
In fiscal 1995, the Company completed the sale of a controlling interest in
Total Renal Care Holdings, Inc. ("TRC"), an operator of outpatient renal
dialysis centers. This transaction resulted in a $32 million gain to the
Company. As part of the transaction, the Company also received a $75 million
cash distribution from TRC prior to the sale and retained 3 million shares of
TRC common stock (after a 2-for-3 reverse stock split). In October 1995, TRC
completed an initial public offering of 6,000,000 shares of its common stock,
which resulted in an additional gain to the Company of approximately $17
million.
The Company also classifies its investment in TRC as "available for sale."
At May 31, 1996, the Company's aggregate carrying value in its investment in
TRC was $49 million and the aggregate fair market value of the investment was
$124 million. At May 31, 1997, both the carrying value and fair market value
of the investment were approximately $108 million.
NOTE 14 DISCONTINUED OPERATIONS -
PSYCHIATRIC HOSPITAL BUSINESS
In November 1993, the Company decided to discontinue its psychiatric hospital
business and adopted a plan to dispose of its psychiatric hospitals and
substance abuse recovery facilities. All operating results and gains or
losses on disposals of facilities for the discontinued business for periods
subsequent to November 30, 1993 have been charged to the reserve for
estimated losses during the phase-out period. In addition, the Company has
incurred the following additional charges related to the psychiatric
hospitals: (1) in the fourth quarter of fiscal 1995, the Company recorded $16
million of estimated litigation costs (less income tax benefits of $7
million), (ii) in the fourth quarter of fiscal 1996, the Company recorded $16
million (less income tax benefits of $6 million) for additional estimated
legal costs and $25 million (less tax benefits of $10 million) to increase
the reserves of the Company's wholly owned insurance subsidiary for
professional liability claims, all of which related to the former psychiatric
hospitals, and (iii) in the fourth quarter of fiscal 1997, the Company
recorded $215 million (less income tax benefits of $81 million) to reflect
the recent settlements of patient and other litigation and to record the
estimated future costs to settle the remaining liigation related to certain
of its former psychiatric hospitals and to increase the reserves of its
wholly owned insurance subsidiary by an additional $42 million.
NOTE 15 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, short-
term borrowings and notes, current portion of long-term debt, accounts payable
and interest payable approximate fair value because of the short maturity of
these instruments. The carrying values of investments, both short-term and long-
term (excluding investments accounted for by the equity method), long-term
receivables and long-term debt are not materially different from the estimated
fair values of these instruments.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
37
<PAGE>
NOTE 16 DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. These derivatives are nonleveraged
and involve little complexity. They are used to manage well-defined interest
rate risks. The notional amounts of derivatives in the tables below do not
represent amounts exchanged by the parties and, thus, are not a measure of the
exposure of the Company through its use of derivatives. There are no cash or
collateral requirements in connection with these agreements.
INTEREST RATE SWAPS - These derivative financial instruments allow the Company
to make long-term borrowings at floating rates and then swap them into fixed
rates that are lower than those available to the Company if fixed-rate
borrowings were made directly. Under interest rate swaps, the Company agrees
with other parties to exchange, at specified intervals, the difference between
fixed-rate and floating-rate interest amounts calculated by reference to an
agreed notional principal amount. Cross-currency interest rate swaps allow
borrowings to be made in foreign currencies, gaining access to additional
sources of financing while limiting foreign exchange risk. The Company's
exposure to credit loss under these agreements is limited to the interest rate
spread in the event of nonperformance by the other parties. Because the other
parties are creditworthy financial institutions, generally commercial banks, the
Company does not expect nonperformance. The Company terminated its two cross-
currency swaps in November 1996. The original maturity dates for these contracts
were in October 1998. Proceeds to the Company as a result of the terminations
were $742 thousand.
The following table shows the Company's interest rate swaps and their weighted
average interest rates as of the end of the most recent two fiscal years.
Variable interest rates may change significantly, affecting future cash flows.
<TABLE>
<CAPTION>
(IN MILLIONS) 1996 1997
----------------------------------
<S> <C> <C>
Notional amount for agreements under which the Company
receives fixed rates $ 29 $ 29
Average receive rate 7.0% 7.0%
Average pay rate 6.0% 5.6%
Contract duration 1 year matured
Notional amount for agreements under which the Company
pays fixed rates $ 69 $ 69
Average pay rate 8.7% 8.7%
Average receive rate 5.8% 5.5%
Contract duration 3-4 years 2-3 years
</TABLE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
38
<PAGE>
NOTE 17 RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued two new Statements
of Financial Accounting Standards ("SFAS") which are effective for financial
statements for periods beginning after December 15, 1997 and which will apply to
the Company beginning with its fiscal year ending May 31, 1999:
SFAS No.130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Comprehensive income includes net
income and is defined as the change in net assets of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity during a period except those
from investments by owners and distributions to owners. Examples of
comprehensive income, other than net income, include unrealized gains and losses
on certain investments in debt and equity securities and foreign currency items.
SFAS No.131, "Disclosures About Segments of an Enterprise and Related
Information," establishes standards for the way that public enterprises report
information about operating segments in annual financial statements. It also
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. Under existing
accounting standards, the Company has reported its operations as one line of
business since fiscal 1993 because substantially all of its revenues and
operating profits from continuing operations since then have been derived from
its general hospitals and closely related ancillary services. The Company is
presently evaluating the new standard in order to determine its effect, if any,
on the way the Company might report its operations in the future.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
39
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
TENET HEALTHCARE CORPORATION:
We have audited the accompanying consolidated balance sheets of Tenet Healthcare
Corporation and subsidiaries as of May 31, 1996 and 1997, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended May 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tenet Healthcare
Corporation and subsidiaries as of May 31, 1996 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended May 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARRICK LLP
Los Angeles, California
July 25, 1997
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
40
<PAGE>
DIRECTORS AND MANAGEMENT
BOARD OF DIRECTORS
JEFFREY C. BARBAKOW 1,4
CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
TENET HEALTHCARE CORPORATION
MICHAEL H. FOCHT SR. 1,5
PRESIDENT AND CHIEF OPERATING OFFICER,
TENET HEALTHCARE CORPORATION
BERNICE B. BRATTER 1,3,4
PRESIDENT,
LOS ANGELES WOMEN'S FOUNDATION
MAURICE J. DEWALD 1,2,3
CHAIRMAN, VERITY FINANCIAL GROUP, INC.
PETER DE WETTER 1,6*
RETIRED EXECUTIVE VICE PRESIDENT,
TENET HEALTHCARE CORPORATION
EDWARD EGBERT, M.D. 4,5,6
RETIRED PHYSICIAN
RAYMOND A. HAY 2,4,5
CHAIRMAN, ABERDEEN ASSOCIATES
LESTER B. KORN 1,3,6
CHAIRMAN, KORN TUTTLE CAPITAL GROUP
RICHARD S. SCHWEIKER 2,5
RETIRED PRESIDENT,
AMERICAN COUNCIL OF LIFE INSURANCE
BOARD COMMITTEES
1. EXECUTIVE COMMITTEE
2. AUDIT COMMITTEE
3. COMPENSATION AND STOCK OPTION COMMITTEE
4. NOMINATING COMMITTEE
5. ETHICS AND QUALITY ASSURANCE COMMITTEE
6. PENSION COMMITTEE
PRINCIPAL MANAGEMENT
JEFFREY C. BARBAKOW
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MICHAEL H. FOCHT SR.
PRESIDENT AND CHIEF OPERATING OFFICER
TREVOR FETTER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
THOMAS B. MACKEY
EXECUTIVE VICE PRESIDENT,
WESTERN OPERATIONS
DAVID R. MAYEUX
EXECUTIVE VICE PRESIDENT,
ACQUISITION & DEVELOPMENT
BARRY P. SCHOCHET
EXECUTIVE VICE PRESIDENT, OPERATIONS
W. RANDOLPH SMITH
EXECUTIVE VICE PRESIDENT,
EASTERN OPERATIONS
NORMAN S. BOBES, M.D.
CHIEF MEDICAL OFFICER
SCOTT M. BROWN
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND CORPORATE SECRETARY
STEPHEN F. BROWN
SENIOR VICE PRESIDENT AND
CHIEF INFORMATION OFFICER
ALAN R. EWALT
SENIOR VICE PRESIDENT, HUMAN RESOURCES
T. DENNIS JORGENSEN
SENIOR VICE PRESIDENT, ADMINISTRATION
RAYMOND L. MATHIASEN
SENIOR VICE PRESIDENT AND
CHIEF ACCOUNTING OFFICER
CHRISTI R. SULZBACH
SENIOR VICE PRESIDENT, PUBLIC AFFAIRS, AND
ASSOCIATE GENERAL COUNSEL
SENIOR VICE PRESIDENTS, OPERATIONS
JIM BILTZ
TEXAS REGION
WILLIAM L. BRADLEY
CENTRAL STATES REGION
DENNIS M. BROWN
NORTHERN REGION
MICHAEL W. GALLO
FINANCE, WESTERN DIVISION
REYNOLD J. JENNINGS
GULF STATES REGION
BEN F. KING
FINANCE, EASTERN DIVISION
WILLIAM M. MURRAY
ARIZONA REGION
NEIL M. SORRENTINO
CHIEF EXECUTIVE OFFICER,
SOUTHERN CALIFORNIA REGION
DON S. STEIGMAN
FLORIDA REGION
EDWARD TUDANGER
SOUTHEAST REGION
VICE PRESIDENTS
WILLIAM A. BARRETT
ASSISTANT GENERAL COUNSEL
JOEL M. BERGENFELD
OPERATIONS,
WEST LOS ANGELES,
SOUTHERN CALIFORNIA REGION
STEVEN R. BLAKE
FINANCE, NORTHERN REGION
SANFORD M. BRAGMAN
RISK MANAGEMENT
* RETIRING FROM THE BOARD OCT. 1, 1997
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
41
<PAGE>
MARK H. BRYAN
FINANCE, FLORIDA REGION
ROGER L. BURKE
MANAGED CARE BUSINESS DEVELOPMENT
THOMAS E. CASADAY
OPERATIONS, TEXAS REGION
ALAN N. CRANFORD
INFORMATION SYSTEMS
DAVID S. DEARMAN
FINANCE, TEXAS REGION
LEE DOMANICO
OPERATIONS, EAST LOS ANGELES,
SOUTHERN CALIFORNIA REGION
STEVE DOMINGUEZ
GOVERNMENT PROGRAMS
WILLIAM R. DURHAM
FINANCE, GULF STATES REGION
EDWARD A. ELLIOTT
FINANCIAL PROJECTS
DEBORAH J. ETTINGER
BUSINESS DEVELOPMENT, WESTERN DIVISION
STEPHEN D. FARBER
FINANCE
MICHAEL J. FIRNENO
ALTERNATIVE DELIVERY SYSTEMS
RICHARD W. FISKE
ACQUISITION & DEVELOPMENT
RICHARD S. FREEMAN
OPERATIONS, GULF STATES REGION
MICHAEL FRENCH
OPERATIONS, SOUTHEAST REGION
DOUGLAS FRITSCHE
FINANCE, ARIZONA REGION
NEIL B. HADLEY
ETHICS & BUSINESS CONDUCT
LYNN S. HART
GOVERNMENT RELATIONS
JEFF HEINEMANN
PHYSICIAN SERVICES
LAWRENCE G. HIXON
CORPORATE REPORTING
MICHAEL S. HONGOLA
INFORMATION SYSTEMS
JOSEPH L. JACKSON
HUMAN RESOURCES
BRUCE L. JOHNSON
INTERNAL AUDIT
DAVID W. LAYNE
ASSOCIATE GENERAL COUNSEL
WILLIAM W. LEYHE
INTEGRATED DELIVERY SYSTEMS,
WESTERN DIVISION
WILLIAM LOORZ
CONSTRUCTION AND DESIGN
KENNETH B. LOVE, JR.
FINANCE, SOUTHERN CALIFORNIA REGION
JOHN A. LYNN
COMPENSATION
DEBORAH A. MAICACH
INFORMATION SYSTEMS
DAVID S. MCADAM
COMMUNICATIONS
TERENCE P. MCMULLEN
TREASURER
JUDITH G. NOVAK
OPERATIONS, TEXAS REGION
PAUL O'NEILL
ACQUISITION & DEVELOPMENT
MARTIN J. PARIS, M.D., M.P.H.
MEDICAL AFFAIRS
KAREN S. POOLE
OPERATIONS, ARIZONA REGION
TIMOTHY L. PULLEN
CONTROLLER
DOUGLAS E. RABE
TAXATION
JAMES S. RICHARDSON
FINANCE, EASTERN DIVISION
DAVID C. RICKER
MATERIAL RESOURCE MANAGEMENT
JACQUELINE D. RISSOTTO
EMPLOYEE BENEFITS
LEONARD H. ROSENFELD
QUALITY MANAGEMENT
PAUL J. RUSSELL
INVESTOR RELATIONS
RICHARD B. SILVER
ASSOCIATE GENERAL COUNSEL
CHARLES R. SLATON
OPERATIONS, CENTRAL STATES REGION
DONALD W. THAYER
ACQUISITION & DEVELOPMENT
JACINTA E. TITIALII
ACQUISITION & DEVELOPMENT
MICHAEL E. TYSON
FINANCE, CENTRAL STATES REGION
DAVIS L. WATTS
BUSINESS OFFICE SERVICES
KENNETH K. WESTBROOK
OPERATIONS, CENTRAL ORANGE COUNTY,
SOUTHERN CALIFORNIA REGION
ANTHONY P. WHITEHEAD
FINANCE, SOUTHEAST REGION
WILLIAM R. WILSON
FINANCE, WESTERN DIVISION
BARRY A. WOLFMAN
OPERATIONS,
SOUTH LOS ANGELES/NORTH ORANGE COUNTY,
SOUTHERN CALIFORNIA REGION
SUBSIDIARY MANAGEMENT
ARNOLD M. ROBIN
PRESIDENT, SYNDICATED OFFICE SYSTEMS
G. MICHAEL SHELEY
CHIEF EXECUTIVE OFFICER,
NATIONAL HEALTH PLANS
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
42
<PAGE>
SUPPLEMENTARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In millions, except Fiscal 1996 Quarters Fiscal 1997 Quarters
------------------------------------------------- ---------------------------------------------
per share amounts) First Second Third Fourth First Second Third Fourth
------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating
revenues $1,767 $ 1,863 $ 1,973 $ 2,028 $ 1,991 $ 2,112 $ 2,237 $ 2,351
Income (loss) from
continuing
operations $ 134 $ 203 $ 98 $ 56 $ 96 $ 103 $ (66) $ (206)
Net income (loss) $ 134 $ 203 $ 98 $ 8 $ 96 $ 103 $ (113) $ (340)
------------------------------------------------- ---------------------------------------------
------------------------------------------------- ---------------------------------------------
Earnings (loss)
per share from
continuing
operations:
Primary $ 0.51 $ 0.75 $ 0.33 $ 0.19 $ 0.32 $ 0.34 $(0.21) $(0.67)
Fully diluted $ 0.49 $ 0.72 $ 0.33 $ 0.19 $ 0.32 $ 0.34 $(0.21) $(0.67)
------------------------------------------------- --------------------------------------------
------------------------------------------------- ---------------------------------------------
</TABLE>
The quarterly financial information in the table above, for periods prior to the
OrNda Merger, combines the three-month periods in Tenet's fiscal years with
OrNda's corresponding three-month periods, respectively. Quarterly operating
results are not necessarily representative of operations for a full year. For
example, unusual items in fiscal 1996 include a $124 million gain on asset
disposals in the first quarter, a $171 million gain on asset disposals in the
second quarter, a $17 million gain from the sale of a subsidiary's common stock
in the second quarter, impairment losses of $86 million and asset disposal gains
of $34 million in the fourth quarter, as well as a $25 million net charge to
discontinued operations and a $23 million extraordinary charge from early
extinguishment of debt in the fourth quarter. Fiscal 1997 includes non-recurring
expenses of $272 million recorded in the third quarter and $37 million recorded
in the fourth quarter in connection with the OrNda Merger, and restructuring
charges of $18 million, impairment losses of $413 million and $18 million for
the additional liability related to the Company's indexed debt instruments,
recorded in the fourth quarter, as well as a $47 million extraordinary charge
from early extinguishment of debt in the third quarter and a $134 million net
charge to discontinued operations in the fourth quarter.
COMMON STOCK INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal 1996 Quarters Fiscal 1997 Quarters
----------------------------------- ------------------------------------
First Second Third Fourth First Second Third Fourth
------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price range:
High 17 18 1/2 22 1/2 22 1/2 22 5/8 23 1/4 28 7/8 29 5/8
Low 13 3/8 15 5/8 17 7/8 18 1/8 18 1/2 20 3/8 21 3/8 23 1/4
</TABLE>
At May 31, 1997, there were approximately 15,700 holders of record of the
Company's common stock. The Company's common stock is listed and traded on the
New York and Pacific stock exchanges. The stock prices above are the high and
low sales prices as reported in the NYSE Composite Tape for the last two fiscal
years. The Company's credit facility currently prohibits the payment of
dividends.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
43
<PAGE>
CORPORATE INFORMATION
COMMON STOCK TRANSFER AGENT
AND REGISTRAR
For information on stock certificates or for change of address, please contact:
The Bank of New York
101 Barclay Street
New York, NY 10286
(800) 524-4458
National Medical Enterprises, Inc. (NME) stock certificates remain valid and do
not need to be exchanged for Tenet certificates. Former shareholders of American
Medical Holdings, Inc. (AMI) and OrNda HealthCorp who have not yet redeemed
their AMI or OrNda stock for cash and Tenet stock should contact The Bank of New
York at (800) 507-9357.
For all other shareholder inquiries, contact Paul J. Russell, Vice President,
Investor Relations, at (805) 563-7188.
Headquarters Office
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, CA 93105
(805) 563-7000
COMMON STOCK LISTING
The Company's common stock is listed under the symbol THC on the New York and
Pacific stock exchanges
Debt securities listed on the New York Stock Exchange:
7 7/8% SENIOR NOTES DUE 2003
9 5/8% SENIOR NOTES DUE 2002
8 5/8% SENIOR NOTES DUE 2003
8% SENIOR NOTES DUE 2005
10 1/8% SENIOR SUBORDINATED NOTES DUE 2005
8 5/8% SENIOR SUBORDINATED NOTES DUE 2007
6% EXCHANGEABLE SUBORDINATED NOTES DUE 2005
7 3/8% MEDIUM TERM NOTES DUE 1997
TRUSTEE/REGISTRAR
The Bank of New York
101 Barclay Street
New York, NY 10286
(800) 524-4458
ANNUAL MEETING
The annual meeting of the shareholders of Tenet Healthcare Corp. will be held at
10 a.m. Oct. 1, 1997, at the Regent Beverly Wilshire Hotel, 9500 Wilshire
Boulevard, Beverly Hills, Calif.
FORM 10-K
The company reports annually to the Securities and Exchange Commission on Form
10-K.
You may obtain a copy at no charge by writing to Tenet Investor Relations or by
telephoning
(805) 563-6868.
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
44
<PAGE>
[Logo]
TENET HEALTHCARE CORPORATION
3820 STATE STREET, SANTA BARBARA, CALIFORNIA 93105
<PAGE>
All of the following subsidiaries are 100% owned by Tenet Healthcare Corporation
unless otherwise indicated.
<TABLE>
<S><C>
Tenet Healthsystem Holdings, Inc.
(a) Tenet HealthSystem Medical, Inc.
(b) Tenet Management Services, Inc.
(c) Tenet Health Integrated Services, Inc.
(c) Quality Medical Management, Inc.
(c) Mid-Orange Medical Management, Inc.
(c) Alexa Integrated Medical Management, Inc.
(b) Alabama Health Connection, Inc.
(b) Alabama Medical Group, Inc.
(b) American Medical (Central), Inc.
(c) Amisub (Heights), Inc.(1)
(c) Tenet Texas Employment, Inc.
(c) Amisub of Texas, Inc.(1) OWNERSHIP - LIFEMARK HOSPITAL, INC. (63.68%)
TENET HEALTHSYSTEM MEDICAL, INC. (19.75%)
BROOKWOOD HEALTH SERVICES, INC. (5.10%)
AMI INFORMATION SYSTEMS GROUP, INC. (.42%)
AMERICAN MEDICAL (CENTRAL), INC. (11.05%)
(c) Amisub (Twelve Oaks), Inc.(1)
(c) Lifemark Hospitals, Inc.
(d) Tenet Healthcare, Ltd. - OWNERSHIP - LIFEMARK HOSPITALS, GP (1%)
AMISUB OF TEXAS, INC., LP (70.1%)
AMISUB (HEIGHTS), INC., LP (10.3%)
AMISUB (TWELVE OAKS), INC., LP (18.6%)
(e) Odessa Hospital, Ltd. - OWNERSHIP - TENET HEALTHCARE LTD., GP (78.125%);
INDIVIDUAL PHYSICIANS, LP (21.875%)
(e) Texas Healthcare Physician Services, Inc.
(e) 6103 Webb Road Ltd. - OWNERSHIP - LIFEMARK HOSPITALS, INC.(88%)
PHYSICIANS DEVELOPMENT, INC. + EPP (9%)
DR. ROBERT SHERRILL (3%)
(d) Lifemark Hospitals of Florida, Inc.
(e) Palmetto Medical Plan, Inc.
(e) Pain Management Center of Tampa, Inc.
(e) T&C and USF Ob/Gyn Center, Inc.
(e) Hospital Constructors - OWNERSHIP - LIFEMARK HOSPITALS OF FLORIDA, INC. (88%)
EASTERN PROFESSIONAL PROPERTIES, INC. (12%)
(d) Lifemark Hospitals of Louisiana, Inc.
(e) Kenner Regional Clinical Services, Inc.
(d) Lifemark Hospitals of Missouri, Inc.
(e) Lifemark RMP Joint Venture - OWNERSHIP - LIFEMARK HOSPITALS OF MISSOURI, INC. (50%),
RMP, L.L.C. (50%)
(e) Procare Network II, Inc.
(d) Regional Alternative Health Services, Inc.
(e) Mid-Missouri Lithotripter Center - OWNERSHIP - PHYSICIANS (68.33%)
REGIONAL ALTERNATIVE HEALTH SERVICES, INC. (31.67%)
(d) Houston Specialty Hospital, Inc.
(d) Memphis Specialty Hospital, Inc.
(d) Tenet Investments-Kenner, Inc.
(c) Texas Southwest Healthservices, Inc.
(d) Diagnostic and Theraputic Cardiology Services, L.P. - OWNERSHIP - PHYSICIANS (7.143%)
TEXAS SOUTHWEST HEALTHSERVICES,INC. (92.857%)
- ------------------------
(1) Mailing address: c/o Woodburn & Wedge, First Interstate Bank Building, One East First Street, Suite 1600, Reno, Nevada
89501.
<PAGE>
(b) American Medical Finance Company
(b) American Medical Home Care, Inc.
(b) American Purchasing Services, Inc.
(b) AMI Ambulatory Centres, Inc.
(c) Surgical Services, Inc. - OWNERSHIP - AMI AMBULATORY CENTRES, INC. (80%)
RANDY PHILLIPS (20%)
(d) Ambulatory Care - Broward Development Corp.
(d) Surgical Services of West Dade, Inc.
(e) Am-Med Associates - OWNERSHIP - SURGICAL SERVICES OF WEST DADE, INC. (50%)
PALMED ASSOCIATES (50%)
(b) AMI Arkansas, Inc.
(c) Healthstar Properties Limited Partnership - OWNERSHIP-AMI ARKANSAS, INC., G.P (1%), LP (49%)
ST. VINCENT TOTALHEALTH CORPORATION, G.P (1%), L.P. (49%)
(d) Healthstar Ultima, L.L.C.- OWNERSHIP - HEALTHSTAR PROPERTIES LIMITED PARTNERSHIP (70 UNITS)
ARKANSAS CHILDREN'S HOSPITAL (1 UNIT)
QUORUM HEALTH RESOURCES, INC. (1 UNIT)
NORTHWEST MEDICAL CENTER (1 UNIT)
REBSAM REGIONAL MEDICAL CENTER (1 UNIT)
(b) AMI Brokerage Services, Inc.
(b) AMI Diagnostic Services, Inc.
(c) UCSD Medical Center Magnetic Resonance Diagnostic Center - OWNERSHIP -
AMI DIAGNOSTIC SERVICES, INC. (50%)
THE REGENTS OF THE UNIVERSTIY OF CALIFORNIA (50%)
(b) AMI Information Systems Group, Inc.
(c) American Medical International B.V.
(d) American Medical International N.V.
(b) AMI/HTI Tarzana Encino Joint Venture - OWNERSHIP - TENET HEALTHSYSTEM MEDICAL, INC. (30%)
AMISUB OF CALIFORNIA, INC. (26%)
NEW H ACUTE, INC. (12%)
AMI INFORMATION SYSTEMS GROUP, INC. (7%)
ENCINO HOSPITAL CORPORATION (25%)
(b) Tenet System Services, Inc.
(b) Amisub (American Hospital), Inc.
(b) Amisub (Culver Union Hospital), Inc.
(c) Choice Care Network, Inc.
(b) Amisub Development of South Carolina, Inc.
(c) Hilton Head Clinics, Inc.
(c) Hilton Head Health Systems, L.P. - OWNERSHIP - AMISUB DEVELOPMENT OF SOUTH CAROLINA, INC. (21%)
AMISUB (HILTON HEAD), INC.(49%)
HILTON HEAD HEALTH FOUNDATION (30%)
(d) Beaufort Hilton Head Healthcare System, L.L.C. - OWNERSHIP -
HILTON HEAD HEALTH SYSTEM, L.P. (50%)
BROAD RIVER HEALTHCARE, INC. (50%)
(d) Hilton Head Home Care Services, Inc.
(c) Piedmont Medical Equipment, G.P. - OWNERSHIP - AMISUB OF SOUTH CAROLINA, INC. (50%)
AMERICA HOME PATIENT, INC. (50%)
(c) Rock Hill Surgery Center, L.P. - OWNERSHIP - AMISUB OF SOUTH CAROLINA, INC. (72%)
SURGICAL CENTER OF ROCK HILL (28%)
(b) Amisub (Florida Ventures), Inc.
(c) PBG Outpatient Services, Inc.
(c) Brookwood Diagnostic Center of Tampa, Inc.
(c) Clinical Services, Inc.
(c) Ft. Lauderdale Surgery Center, Inc.
(c) Tampa MOB 107, Inc.
(c) Tampa MOB 104, Inc.
(c) Tampa 8313 West Hillsborough, Inc.
(c) Tampa 4802 Gunn Highway, Inc.
<PAGE>
(c) Center for Quality Care, Inc.
(c) Tampa 418 W. Platt St., Inc.
(b) Amisub (GTS), Inc.(2)
(b) Amisub (Hilton Head), Inc.
(b) Amisub (Irvine Medical Center), Inc.
(b) Tenet HealthSystem Spalding, Inc.
(c) Health International, Inc.
(c) Tenet Primary Care Clinic, Inc.
(c) Spalding Health System, L.L.C. - OWNERSHIP - TENET HEALTHSYSTEM SPALDING, INC. (50%)
PHYSICIANS (50%)
(b) Amisub (North Ridge Hospital), Inc.
(c) FL Health Complex, Inc.
(c) North Ridge Carenet, Inc.
(c) North Ridge Partners, Inc.
(d) SFHCA Walk-In Centers, G.P. - OWNERSHIP - NORTHRIDGE PARTNERS, INC. (50%)
SOUTH FLORIDA HEALTH CARE ASSOCIATES (50%)
(b) Amisub of California, Inc.
(c) Valley Doctors' Hospital
(d) Family Medical Services
(d) L.A. Surgery Center, Ltd. - OWNERSHIP - VALLEY DOCTORS' HOSPITAL (30.3%)
OTHERS (69.7%)
(c) Physician Practice Management Corporation
(c) Park Plaza Retail Pharmacy, Inc.
(c) Tarzana Regional Medical Center MRI Center - OWNERSHIP - AMISUB OF CALIFORNIA, INC. (7.8%)
NON-TENET ENTITY (92.2%)
(c) AMI (Canada), Ltd.
(b) Amisub of North Carolina, Inc.
(b) Central Carolina Management Services Organization, Inc.
(b) Amisub (SMHS), Inc.
(b) Amisub of South Carolina, Inc.
(c) Piedmont Medical Services Company
(c) Piedmont One, Inc.
(c) Piedmont Two, Inc.
(c) Piedmont Three, Inc.
(c) Piedmont Fourth, Inc.
(c) Piedmont Five, Inc.
(c) Piedmont Six, Inc.
(c) Piedmont Seven, Inc.
(c) Piedmont Eight, Inc.
(c) Piedmont Nine, Inc.
(c) Tenet Piedmont West Urgent Care Center, Inc.
(b) Amisub (Saint Joseph Hospital), Inc.
(c) Creighton Saint Joseph Regional HealthCare System, L.L.C. - OWNERSHIP -
AMISUB (SAINT JOSEPH HOSPITAL), INC. (73.82%)
CREIGHTON HEALTHCARE, INC. (26.18%)
(d) Home-based Psychiatric Services, Inc.- OWNERSHIP - CREIGHTON SAINT JOSEPH REGIONAL HEALTHCARE
SYSTEM, L.L.C. (75%)
JAMES T. WHITE PH.D. (25%)
(c) Saint Joseph Mental Health Plans, Inc.
(c) Saint Joseph Mental Health Physicians, Inc.
(b) Amisub (SFH), Inc.
(b) Amisub (Sierra Vista), Inc.
- ---------------------------
(2) Mailing Address: 1325 Airmotive Way, Suite 130, Reno, Nevada 89052
<PAGE>
(c) MRI of San Louis Obispo, G.P. - OWNERSHIP - AMISUB (SIERRA VISTA), INC. (45%)
MEDIQ (55%)
(b) Tenet Finance Corp.(3)
(b) Arkansas Healthcare Services, Inc.
(b) Brookwood Center Development Corporation
(c) BWP Associates, Ltd. - OWNERSHIP- BROOKWOOD CENTER DEVELOPMENT CORPORATION (80%)
W+R, INC. (20%)
(c) Med Plex Land Associates - OWNERSHIP - BROOKWOOD CENTER DEVELOPMENT CORPORATION (49%)
HOOVER DOCTORS' GROUP II (51%)
(c) Medplex Outpatient Surgery Center, Ltd. - OWNERSHIP -
BROOKWOOD CENTER DEVELOPMENT CORPORATION (83%)
OTHERS (17%)
(c) Hoover Doctors Group, Inc.
(c) Medplex Outpatient Medical Centers, Inc.
(b) Brookwood Development, Inc.
(c) Alabama Health Services, Inc. - OWNERSHIP - BROOKWOOD DEVELOPMENT, INC. (33 1/3%)
EASTERN HEALTH SYSTEM, INC. (33 1/3%)
ST. VINCENT'S HOSPITAL (33 1/3%)
(c) Alabama Health Services (St. Clair), L.L.C. - OWNERSHIP -
BROOKWOOD DEVELOPMENT, INC. (50%)
HEALTH SERVICES, INC. (50%)
(c) Group Administrators, Inc. - OWNERSHIP - BROOKWOOD DEVELOPMENT, INC. (33 1/3%)
TENET HEALTHSYSTEM LLOYD NOLAND PROPERTIES, INC. (33 1/3%)
EASTSIDE VENTURES, INC. (33 1/3%)
(b) Brookwood Health Services, Inc.
(c) Brookwood Medical Center of Tampa, Inc.
(d) Memorial Hospital of Tampa, L.P. - OWNERSHIP -
BROOKWOOD MEDICAL CENTER OF TAMPA, INC. (76%)
EASTERN PROFESSIONAL PROPERTIES, INC. (24%)
(c) Brookwood - Riverchase Primary Care Center, Inc.
(c) Estes Health Care Centers, Inc.
(b) Central Arkansas Hospital, Inc.
(c) Amisub (Central Arkansas), Inc.
(b) Central Care, Inc.
(b) Columbia Land Development, Inc.
(b) Culver Health Network, Inc.
(b) Cumming Medical Ventures, Inc.
(b) East Cooper Community Hospital, Inc.
(c) Charleston Health Services Organization, Inc.
(b) Eastern Professional Properties, Inc.
(b) Florida Health Network, Inc.
(b) Frye Regional Medical Center, Inc.
(c) Frye Home Infusion, Inc.
(c) Piedmont Health Alliance, Inc. - OWNERSHIP - FRYE REGIONAL MEDICAL CENTER, INC. (50%);
PHYSICIANS (50%)
(c) Frye Home Care Services, Inc.
(c) Tenet Claims Processing, Inc.
(c) Ten Broeck/Frye Partnership - OWNERSHIP - FRYE REGIONAL MEDICAL CENTER, INC. (50%)
UNITED MED CORP. OF NC (50%)
(c) Uniform MSO, L.L.C. - OWNERSHIP - FRYE REGIONAL MEDICAL CENTER, INC. (33%)
CALDWELL MEMORIAL HOSPITAL, INC. (67%)
- --------------------------
(3) Mailing address: c/o Woodburn & Wedge, First Interstate Bank Building, One East First Street, Suite 1600, Reno, Nevada 89051
<PAGE>
(b) Georgia Health Services, Inc.
(b) Heartland Corporation
(c) Prairie Medical Clinic, Inc.
(c) Heartland Physicians, Inc.
(b) Inhalation Therapy Services, Inc.
(b) Kenner Regional Medical Center, Inc.
(b) Lucy Lee Hospital, Inc.
(c) HMS, L.P. - OWNERSHIP - LUCY LEE HOSPITAL, INC. (35%); HOME MEDICAL OF P.B. (65%)
(b) Medical Center of Garden Grove
(c) Orange County Kidney Stone Center, L.P. - OWNERSHIP -
MEDICAL CENTER OF GARDEN GROVE, INC. (42.5805%)
OCKSC ASSOC. + INC. + 11 OTHERS (57.4195%)
(c) Orange County Kidney Stone Center Assoc., G. P. - OWNERSHIP - PHYSICIANS (67.9%)
MEDICAL CENTER OF GARDEN GROVE (32.1%)
(b) Medical Collections, Inc.
(b) Mid-Continent Medical Practices, Inc.
(b) Missouri Health Services, Inc.
(b) National Park Medical Center, Inc.
(c) NPMC Healthcenter - The Heart Clinic, Inc.
(c) NPMC Healthcenter - National park Surgery Clinic, Inc.
(c) NPMC Healthcenter - Cardiology Services, Inc.
(c) NPMC Healthcenter - Physicians for Women, Inc.
(c) NPMC Healthcenter - Cardiology Care Center, Inc.
(c) NPMC Healthcenter - Hot Springs Village, Inc.
(c) NPMC Heatlhcenter - Malvern, Inc.
(c) NPMC Healthcenter - Family Healthcare Clinic, Inc.
(c) NPMC Healthcenter - Gastroenterology Center of Hot Springs, Inc.
(c) NPMC Heatlhcenter - Hunter Anesthesiology, Inc.
(c) Tenet HealthSystem NPMC Hamilton West, Inc.
(c) Hot Springs Outpatient Surgery, G.P. - OWNERSHIP - NATIONAL PARK MEDICAL CENTER, INC. (50%)
HOT SPRINGS OUTPATIENT SURGERY (50%)
(b) New H Holdings Corp. - OWNERSHIP - TENET HEALTHSYSTEM MEDICAL, INC. (99%)
AMISUB OF CALIFORNIA, INC. (.5%)
BROOKWOOD HEALTH SERVICES, INC. (.5%)
(c) New H Acute, Inc.
(d) New H South Bay, Inc.
(b) North Carolina Health Services, Inc.
(b) North Fulton Imaging Ventures, Inc.
(b) North Fulton Medical Center, Inc.
(c) North Fulton Health Care Associates, Inc.
(c) North Fulton Regional Cancer Center, Inc.
(c) North Fulton 001, Inc.
(c) North Fulton 002, Inc.
(c) North Fulton 003, Inc.
(c) North Fulton 004, Inc.
(c) North Fulton 005, Inc.
(c) North Fulton 006, Inc.
(c) North Fulton 007, Inc.
(c) North Fulton 008, Inc.
(c) North Fulton 009, Inc.
(c) North Fulton 010, Inc.
(c) North Fulton 011, Inc.
(c) North Fulton 012, Inc.
(b) North Fulton MOB Ventures, Inc.
(c) North Fulton Professional Building I, L.P. - OWNERSHIP -
NORTH FULTON MOB VENTURES, INC. (15.4917%)
NORTH FULTON MEDICAL VENTURES, INC. (84.5083%)
<PAGE>
(b) Occupational Health Medical Services of Florida, Inc.
(b) Palm Beach Gardens Community Hospital, Inc.
(b) Partners in Service, Inc.(4)
(b) Physicians Development, Inc.
(b) Piedmont Home Health, Inc.
(b) Piedmont Rehab Center, Inc.
(b) Pinnacle Healthcare Services, Inc.
(b) Professional Healthcare Systems Licensing Corporation
(b) ProMed Pharmicenter, Inc.
(b) Roswell Medical Ventures, Inc.
(c) North Fulton Parking Deck, L.P. - OWNERSHIP - ROSWELL MEDICAL VENTURES, INC. (89.9361%)
NORTH FULTON PROFESSIONAL BUILDING I, L.P. (10.1639%)
(b) Saint Joseph Mental Health Physicians, Inc.
(b) San Dimas Community Hospital
(b) SEMO Medical Management Company, Inc.
(b) Sierra Vista Hospital, Inc.
(c) Tenet HealthSystem Sierra Vista Venture I, Inc.
(c) Tenet HealthSystem Sierra Vista Ventures II, Inc.
(b) South Carolina Health Services, Inc.
(b) Southern Medical Holding Corporation
(b) St. Mary's Regional Medical Center, Inc.
(c) Amisub (St Mary's), Inc.
(d) Priority Industrial Physical Therapy Sports Rehab, G.P. - OWNERSHIP -
AMISUB (ST. MARY'S), INC. (51%)
DANNY LYONS (43%); LARRY ENGLA (6%)
(c) St. Mary's Medical Group, Inc.
(c) Dedicated Health PHO, Inc.
(b) Tenet (Brookwood Development), Inc.
(c) Health Advantage Plans, Inc. - OWNERSHIP - TENET (BROOKWOOD DEVELOPMENT), INC. (33 1/3%)
TENET HEALTHSYSTEM LLOYD NOLAND PROPERTIES, INC. (33 1/3%)
EASTSIDE VENTURES, INC. (33 1/3%)
(b) Tennessee Health Services, Inc.
(b) Texas Healthcare Services, Inc.
(b) Texas Professional Properties, Inc.
(b) Tenet Ashley River OB/GYN, Inc.
(b) Tenet Caldwell Family Physicians, Inc.
(b) Tenet Catawba Nurse Midwives, Inc.
(b) Tenet Choices, Inc. - OWNERSHIP - TENET HEALTHSYSTEM MEDICAL, INC.(50%)
RICHARD FREEMAN (1%); ROGER FRIEND (1%)
(b) Tenet Claremont Medical Center, Inc.
(b) Tenet DeLaine Adult Medical Care, Inc.
(b) Tenet East Cooper Spine Center, Inc.
(b) Tenet Health Choices Operating Corporation
(b) Tenet Health Network, Inc.
(b) Tenet HealthSystem Lloyd Noland Medical, Inc.
(b) Tenet HealthSystem Lloyd Noland Properties, Inc.
(b) Tenet HealthSystem North Shore, Inc.
(c) Tenet HealthSystem North Shore (BME), Inc.
(b) Tenet HealthSystem Partners, Inc.
(b) Tenet HealthSystem SGH, Inc.
(b) Tenet HomeCare Information Systems, Inc.
(b) Tenet Home Care of South Florida, Inc.
- ---------------------------
(4) Mailing address: 900 Market Street, Wilmington, Delaware 19801
<PAGE>
(b) Tenet Home Care Tampa/St. Pete, Inc.
(b) Tenet Lincolnton Medical Specialists Center, Inc.
(b) Tenet McDonough Primary Care, Inc.
(b) Tenet Robertson Family Practice, Inc.
(b) Tenet Physician Services - East Cooper, Inc.
(b) Tenet Physician Services of the Southeast, Inc.
(b) Tenet Physician Partners, L.L.C.
(b) Brookwood Parking Associates, Ltd. - OWNERSHIP - TENET HEALTHSYSTEM MEDICAL, INC. (99%)
BROOKWOOD PARKING, INC. (1%)
(b) Northwind Medical Building Associcates, Ltd. - OWNERSHIP - TENET HEALTHSYSTEM MEDICAL INC. (1.44%)
OTHERS (98.56%)
HUG Services, Inc. (77%)(5)
Assured Investors Life Company
(a) Stanislaus Life Insurance Company
H.F.I.C. Management Company, Inc.
(a) Health Facilities Insurance Corp., Ltd. - Bermuda
International-NME, Inc.
(a) N.M.E. International (Cayman) Limited - Cayman Islands, B.W.I.
(b) B.V. Hospital Management - Netherlands
(b) Pacific Medical Enterprises Sdn. Bhd. - Malaysia
(c) Hyacinth Sdn. Bhd.
(a) Medicalia International, B.V. - Netherlands
(a) NME Spain, S.A.
(a) NME UK Properties Limited
Tenet Healthcare (Australia) Pty., Limited
NME Headquarters, Inc.
(a) Ortega Development Group
Tenet HealthSystem Hospitals, Inc.
(a) Brookhaven Hospital, Inc.
(b) Brookhaven Pavilion, Inc.
(a) Manteca Medical Management, Inc.
(a) Tenetsub Texas, Inc.
(a) Tenet D.C., Inc.
(a) Tenet Hospitals Limited - OWNERSHIP - TENET HEALTHSYSTEM HOSPITALS, INC. G.P. (1%)
TENETSUB TEXAS, INC., L.P. (99%)
(b) Providence Community Care Network
(b) Providence Physicians Health Network, Inc.
(b) Greater El Paso Healthcare Enterprises
(a) National Managed Med, Inc.
(a) National Med, Inc.
(a) National Medical Hospital of Tullahoma, Inc.
(b) Harton Medical Group, Inc.
(a) National Medical Hospital of Wilson County, Inc.
(b) Wilson County Management Services, Inc.
(a) National Medical Services, Inc.
(b) Barron, Barron & Roth, Inc.
(a) National Medical Services II, Inc.
(a) National Medical Ventures, Inc.
(b) Litho I - LP - OWNERSHIP - NATIONAL MEDICAL VENTURES, INC. (63.75%); PHYSICIANS (36.75%)
(b) McHenry Surgery Center Partners, Ltd - LP - OWNERSHIP - NATIONAL MEDICAL VENTURES, INC. (49.75%)
PHYSICIANS (50.25%)
(b) Redding Surgicenter - LP - OWNERSHIP - NATIONAL MEDICAL VENTURES, INC.(52.857%)
- -------------------------
(5) Mailing address: 25 Century Boulevard, Suite 300, Nashville, Tennessee 37214
<PAGE>
PHYSICIANS (47.143%)
(a) Tenet El Mirador Surgical Center, Inc.
(a) Tenet Hialeah HealthSystem, Inc.
(b) Hialeah Real Properties, Inc.
(b) Tenet Hialeah (H.H.A.) HealthSystem, Inc.
(b) Tenet Hialeah (ASC) HealthSystem, Inc.
(b) Edgewater Provider Insurance Company, Ltd. (25%)
(a) NM Ventures - California, Inc.
(a) NM Ventures of North County, Inc.
(b) North County Outpatient Surgery Center, Ltd. - OWNERSHIP - PHYSICIANS (35.47%)
NM VENTURES OF NORTH COUNTY, INC. (64.53%)
(a) Tenet HealthSystem Hospitals Dallas, Inc.
(a) NME Medical de Mexico, S.A. de C.V.
(a) NMV Hollywood, Inc.
(a) NMV - Tennessee, Inc.
(a) Physician Network Corporation of Louisiana
(a) Laughlin Pavilion, Inc.
(a) NMV- II, Inc.
(b) Delray Outpatient Surgery and Care Center, Ltd. - OWNERSHIP - NMV-II, INC. (10%); OTHERS (90%)
(a) Preferred Medical Systems of California, Inc.
(a) Rehabilitative Driving Resources, Inc.
(a) West Coast PT Clinic, Inc.
(a) Tenet HealthSystem Desert, Inc.
(a) Tenet HealthSystem DI, Inc.
(b) Deaconess College of Nursing Student Government Association
(a) Tenet HealthSystem DI-SNF, Inc.
(a) Tenet HealthSystem DI-TPS, Inc.
(a) Tenet HealthSystem Memorial Medical Center, Inc.
(a) Tenet HealthSystem Metroplex Hospitals, Inc.
(a) Tenet Healthcare-Florida, Inc.
(a) Tenet Beaumont Healthsystem, Inc.
(b) Baptist/Tenet JV - OWNERSHIP - TENET BEAUMONT HEALTHSYSTEM, INC. (50%)
BAPTIST HEALTHCARE SYSTEM, L.L.C. (50%)
(a) Tenet Network Management, Inc.
(a) South Bay Practice Administrators, Inc.
(a) Tenet Missouri JV, Inc.
(a) Tenet Birmingham Management, Inc.
(a) Practice Partners, Inc.
(a) MHJ, Inc.
(b) Jonesboro Health Services, L.L.C. - OWNERSHIP - MHJ, INC. (95%)
ST. VINCENT TOTAL HEALTH CORPORATION (5%)
(c) Starcare of Jonesboro, Inc.
(a) Tenet California Medical Ventures I, Inc.
(a) LMC Physician Clinics, Inc.
(a) Diagnostic Imaging Services, Inc.
(a) Metro Physicians Management Organization, Inc.
(a) Tenet Louisiana Medical Ventures I, Inc.
(a) Tenet Rehab Venture I, Inc.
(a) Northeast Texas Healthcare Enterprises
(a) Mid-Tennessee Health Partners, L.L.C. - OWNERSHIP - TENET HEALTHSYSTEM HOSPITALS, INC. (50%)
SMITHVILLE HEALTHCARE VENTURES, L.P. (50%)
NME Properties Corp.
(a) Cascade Insurance Company, Ltd.
(a) NME Properties, Inc.
(b) Lake Health Care Facilities, Inc.
(b) NME Properties West, Inc.
(a) NME Property Holding Co., Inc.
<PAGE>
NME Rehabilitation Properties, Inc.
(a) R.H.S.C. Prosthetics, Inc.
(a) Rehabilitation Facility at San Ramon, Inc.
(a) Rehabilitation Facility at San Diego
(a) R.H.S.C. Modesto, Inc.
(a) Pinecrest Rehabilitation Hospital, Inc.
(a) R.H.S.C. El Paso, Inc.
(a) Tenet HealthSystem Pinecrest Rehab, Inc.
NME Specialty Hospitals, Inc.
(a) National Medical Specialty Hospital of Redding
(a) NME Management Services, Inc.
(a) NME New Beginnings, Inc.
(b) Addiction Treatment Centers of Maryland, Inc.
(b) Alcoholism Treatment Centers of New Jersey, Inc.
(b) Health Institutes,Inc.
(c) Fenwick Hall, Inc.
(c) Health Insitutes Investments, Inc.
(b) NME New Beginnings-Western, Inc.
(c) Norquest/RCA-W Bitter Lake Partnership
(a) NME Partial Hospital Services Corporation
(a) NME Psychiatric Hospitals, Inc.
(b) The Huron Corporation
(a) NME Rehabilitation Hospitals, Inc.
(a) Psychiatric Management Services Company
NME Psychiatric Properties, Inc.
(a) Alvarado Parkway Institute, Inc.
(a) Baywood Hospital, Inc.
(a) Brawner Hospital, Inc.
(a) Contemporary Psychiatric Hospitals, Inc.
(a) Elmcrest Manor Psychiatric Hospitals, Inc.
(a) Gwinnett Psychiatric Institute, Inc.
(a) Jefferson Hospital, Inc.
(a) Lake Hospital and Clinic, Inc. - OWNERSHIP - NME PSYCHIATRIC PROPERTIES, INC. (97.875%)
RALPH MOLLYCHECK, M.D. (2.125%)
(a) Lakewood Psychiatric Hospitals, Inc.
(a) Laurel Oaks Residential Treatment Center, Inc.
(a) Leesburg Institute, Inc.
(a) Manatee Palms Residential Treatment Center, Inc.
(a) Manatee Palms Therapeutic Group Home, Inc.
(a) Medfield Residential Treatment Center, Inc.
(a) Modesto Psychiatric Hospitals, Inc.
(a) Modesto Psychiatric Realty, Inc.
(a) Nashua Brookside Hospital, Inc.
(a) North Houston Healthcare Campus, Inc.
(a) Northeast Behavioral Health, Inc.
(a) Northeast Psychiatric Associates - 2, Inc.
(a) Outpatient Recovery Centers, Inc.
(a) P.D. at New Baltimore, Inc.
(a) P.I.A. Alexandria, Inc.
(a) P.I.A. Canoga Park, Inc.
(a) P.I.A. Cape Girardeau, Inc.
(a) P.I.A. Capital City, Inc.
(a) P.I.A. Central Jersey, Inc.
(a) P.I.A. Colorado, Inc.
(a) P.I.A. Connecticut Development Company, Inc.
(a) P.I.A. Cook County, Inc.
(a) P.I.A. Denton, Inc.
<PAGE>
(a) P.I.A. Detroit, Inc.
(b) Psychiatric Facility at Michigan Limited Partnership
(a) P.I.A. Educationsl Institute, Inc.
(a) P.I.A. of Fort Worth, Inc.
(a) P.I.A. Green Bay, Inc.
(a) P.I.A. Highland, Inc.
(b) Highland Psychiatric Associates - OWNERSHIP - P.I.A. HIGHLAND, INC. (50%)
PSYCHIATRIC FACILITY AT ASHEVILLE, INC. (50%)
(a) P.I.A. Highland Realty, Inc.
(b) Highland Realty Associates - OWNERSHIP - (LIMITED PARTNERSHIP) -
P.I.A. HIGHLAND REALTY, INC. (49%)
PSYCHIATRIC FACILITY AT ASHEVILLE, INC. (49%)
(GENERAL PARTNERSHIP) - P.I.A. HIGHLAND REALTY, INC. (1%)
PSYCHIATRIC FACILITY AT ASHEVILLE, INC. (1%)
(a) P.I.A. Indianapolis, Inc.
(a) P.I.A. Kansas City, Inc.
(a) P.I.A. Lincoln, Inc.
(a) P.I.A. Long Beach, Inc.
(a) P.I.A. Maryland, Inc.
(a) P.I.A. Michigan City, Inc.
(a) P.I.A. Milwaukee, Inc.
(a) P.I.A. Modesto, Inc.
(a) P.I.A. Naperville, Inc.
(a) P.I.A. New Jersey, Inc.
(a) P.I.A. North Jersey, Inc.
(a) P.I.A. Northern New Mexico, Inc.
(a) P.I.A. Panama City, Inc.
(a) P.I.A. Randolph, Inc.
(a) P.I.A. Rockford, Inc.
(a) P.I.A. of Rocky Mount, Inc.
(a) P.I.A. Salt Lake City, Inc.
(a) P.I.A. San Antonio, Inc.
(a) P.I.A. San Ramon, Inc.
(a) P.I.A. Sarasota Palms, Inc.
(a) P.I.A. Seattle, Inc.
(a) P.I.A. Slidell, Inc.
(a) P.I.A. Solano, Inc.
(a) P.I.A. Specialty Press, Inc.
(a) P.I.A. Stafford, Inc.
(a) P.I.A. Stockton, Inc.
(a) P.I.A. Tacoma, Inc.
(a) P.I.A. Tidewater Reatly, Inc.
(b) I.P.T. Associates
(a) P.I.A. Topeka, Inc.
(a) P.I.A. Visalia, Inc.
(a) P.I.A. Waxahachie, Inc.
(a) P.I.A. Westbank, Inc.
(a) P.I.A.C. Realty Company, Inc.
(a) PIAFCO, Inc.
(a) Pinewood Hospital, Inc.
(a) Potomac Ridge Treatment Center, Inc.
(a) Psychiatric Facility at Amarillo, Inc.
(a) Psychiatric Facility at Asheville, Inc.
(a) Psychiatric Facility at Azusa, Inc.
(a) Psychiatric Facility at Evansville, Inc.
(a) Psychiatric Facility at Lafayette, Inc.
(a) Psychiatric Facility at Lawton, Inc.
<PAGE>
(a) Psychiatric Facility at Medfield, Inc.
(a) Psychiatric Facility at Memphis, Inc.
(a) Psychiatric Facility at Palm Springs, Inc.
(a) Psychiatric Facility at Yorba Linda, Inc.
(a) Psychiatric Institute of Alabama, Inc.
(a) Psychiatric Institute of Atlanta, Inc.
(a) Psychiatric Institute of Bedford, Inc.
(a) Psychiatric Institute of Bucks County, Inc.
(a) Psychiatric Institute of Chester County, Inc.
(a) Psychiatric Institute of Columbus, Inc.
(a) Psychiatric Institute of Delray, Inc.
(a) Psychiatric Institute of Northern Kentucky, Inc.
(a) Psychiatric Institute of Northern New Jersey, Inc.
(a) Psychiatric Institute of Orlando, Inc.
(a) Psychiatric Institute of Richmond, Inc.
(a) Psychiatric Institute of San Jose, Inc.
(a) Psychiatric Institute of Sherman, Inc.
(a) Psychiatric Institute of Washington, D.C., Inc.
(a) Residential Treatment Center of Memphis, Inc.
(a) Residential Treatment Center of Mongtomery County, Inc.
(a) The Residential Treatment Center of the Palm Beaches, Inc.
(a) River Wood Center, Inc.
(a) Sandpiper Company, Inc.
(a) Southern Crescent Psychiatric Institute, Inc.
(a) Southwood Psychiatric Centers, Inc.
(a) Springwood Residential Treatment Centers, Inc.
(a) Tidewater Psychiatric Institute, Inc.
(a) The Treatment Center at Bedford, Inc.
(a) Tucson Psychiatric Institute, Inc.
(a) Tulsa County Health Services, Inc.
Northshore Hospital Management Corporation (LA)
Tenet HealthSystem HealthCorp
(a) OrNda Hospital Corporation
(b) AHM Acquisition Co., Inc.
(c) OrNda Investments, Inc.
(d) AHM CGH, Inc.
(d) AHM GEMCH, Inc.
(d) AHM Jackson Hospital, Inc.
(d) AHM JV, Inc.
(d) AHM Minden Hospital, Inc.
(d) AHM SMC, Inc.
(d) AHM WCH, Inc.
(d) American Healthcare Management Development Company
(d) CareNet Health Systems, Inc. - OWNNERSHIP - ORNDA INVESTMENTS (60%)
INDIVIDUAL SHAREHOLDERS (40%)
(d) CHHP, Inc.
(d) EGH, Inc.
(d) GCH, Inc.
(d) HCW, Inc.
(d) LBPG, Inc.
(d) LCMH, Inc.
(d) Lake Mead Holdings - OWNERSHIP - ORNDA INVESTMENTS, INC., GP (25%)
DOCTORS GROUP, LP (75%).
(d) Monterey Park Hospital
(d) MPC, Inc.
(d) NLVH, Inc.
(e) Pollamead Partnership - OWNERSHIP - NLVH, INC., GP (50%)
<PAGE>
DOCTORS GROUP, LP (50%)
(e) Pollamead Partnership II - OWNERSHIP - NLVH, INC., GP (50%)
DOCTORS GROUP, LP (50%)
(d) NLVPG of Nevada, Inc.
(d) OrNda Management Services, Inc.
(d) PSH, Inc.
(e) Foot and Ankle Specialty Institute of Tacoma - OWNERSHIP - PSH, INC., GP (50%)
INTEGRATED HEALTHCARE ALLIANCE, LP (50%)
(d) RHCP, Inc.
(d) STH Corporation
(d) USDHC, Inc.
(d) WCH Management Services, Inc.
(d) WPH Management Services, Inc.
(d) Woodland Park Hospital, Inc.
(b) CFMC LP, Inc.
(b) CGH Realty Holding, Inc.
(b) Coastal Communities Health Systems, Inc.
(c) Coastal Communities Hospital, L.P. - OWNERSHIP -
COASTAL COMMUNITIES HEALTH SYSTEMS, INC., GP (50%)
DOCTORS GROUP, LP(50%)
(b) Commonwealth Continental Health Care, Inc.
(b) Commonwealth Continental Health Care III, Inc.
(b) Coral Gables Hospital, Inc.
(c) CGH Hospital, Ltd. - OWNERSHIP - CORAL GABLES HOSPITAL, INC., GP (94.25%)
GREATER MIAMI MEDICAL GROUP, LTD., LP (5.75%)
(b) Coral Gables Hospital Partners, Inc.
(c) South Florida Physicians Services, Inc.
(b) CVHS Hospital Corporation
(b) Cypress Fairbanks Medical Center, Inc.
(c) New Medical Horizons II, Ltd. - OWNERSHIP - CYPRESS FAIRBANKS MEDICAL CENTER, INC., GP (99%)
ORNDA HOSPITAL CORPORATION, LP (1%)
(b) Davenport Medical Center, Inc.
(c) The Davenport Clinic, Inc.
(c) Davenport Medical Partners, L.P. - OWNERSHIP - DAVENPORT MEDICAL CENTER, INC., GP (51%)
(b) DHPG of Georgia, Inc.
(b) Doctors' Hospital Medical Center, Inc.
(b) FMC Center, Inc.
(c) FMC Hospital, Ltd. - OWNERSHIP - FMC CENTER, INC., GP (85%)
FLORIDA INSTITUTE OF HEALTH, LTD., LP (15%)
(b) FMC Medical, Inc.
(b) Fountain Valley Health Care, Inc.
(c) Fountain Valley Outpatient Surgery Center, Ltd. - OWNERSHIP -
FOUNTAIN VALLEY HEALTH CARE, INC., GP (1%)
ORNDA HOSPITAL CORPORATION, LP (99%)
(b) Fountain Valley Imaging Corporation
(c) Fountain Valley Imaging Center - OWNERSHIP - FOUNTAIN VALLEY IMAGING CORP., GP (1%)
ORNDA HOSPITAL CORPORATION, LP (99%)
(b) Fountain Valley Pharmacy, Inc.
(b) Fountain Valley Regional Hospital and Medical Center
(b) French Hospital Medical Center
(c) Recovery Partners, Ltd.- OWNERSHIP - FRENCH HOSPITAL MEDICAL CENTER, INC. GP (47.94%)
DOCTORS GROUP, LP (52.06%)
(b) GCPG, Inc.
(c) Garland Community Hospital, Ltd. - OWNERSHIP - GCPG, INC., GP (1%)
REPUBLIC HEALTH CORPORATION OF MESQUITE, LP (99%)
(b) General Hospital of Sequatchie, Inc.
(b) Harbor View Health Systems, Inc.
<PAGE>
(c) Harbor View Physician Services, Inc.
(c) Harbor View Health Partners, L.P. - OWNERSHIP - HARBOR VIEW HEALTH SYSTEMS, INC. GP (50%)
REPUBLIC HEATLH CORPORATION OF SAN BERNARDINO, LP (50%)
(b) Harbor View Medical Center, Inc.
(b) Health Choice Arizona, Inc.
(b) Health Holding Company, Inc.
(c) Tenet HealthSystem Biltmore, Inc.
(c) OrNda Healthcorp of Phoenix, Inc.
(d) Biltmore Surgery Center, Inc.
(d) CHR Service Corp.
(b) Health Resources Corporation of America - California
(b) Health Resources Corporation of America - Florida
(c) RHC Florida, Inc.
(d) RHC Parkway, Inc.
(e) Republic Health Corporation of North Miami, Inc.
(f) OrNda of South Florida Services Corporation
(g) San Juan Medical Center, Inc.
(b) Houston Northwest Medical Center, Inc.
(c) HNMC, Inc.
(d) C.T. Joint Venture - OWNERSHIP - HNMC, INC., GP (50%)
DOCTORS GROUP, LP (50%)
(d) Houston Northwest Radiotherapy, L.L.C. - OWNERSHIP -
HNMC, INC., MANAGING MEMBER(6.79%)
DOCTORS GROUP, MEMBER (93.21%)
(d) Houston Rehabilitation Associates - OWNERSHIP - HNMC, INC., GP (20%)
DOCTORS GROUP, LP (80%)
(d) HNPG, Inc.
(e) Houston Northwest Home Health Care, Inc.
(e) Champions Imaging Satellite, Ltd. - OWNERSHIP - HNPG, INC., GP (65%)
DOCTORS GROUP, LP (35%)
(e) HNMC Mobile Lithotripsy, Ltd. - OWNERSHIP - HNPG, INC., GP (50%)
DOCTORS GROUP, LP (50%)
(e) HNMC Outpatient Cardiac Cath Lab, Ltd. - OWNERSHIP - HNPG, INC., GP (50%)
DOCTORS GROUP, LP (50%)
(e) HNMC Women's Pavillion Limited Partnership - OWNERSHIP - HNPG, INC., GP (3.08%)
DOCTORS GROUP, LP (96.92%)
(e) MRI-North Houston Venture - OWNERSHIP - HNPG, INC., GP (12%)
DOCTORS GROUP, LP (88%)
(e) Texas Tower Imaging Satellite, Ltd. - OWNERSHIP - HNPG, INC., GP (50%)
DOCTORS GROUP, LP (50%)
(d) HNW GP, Inc.
(d) Houston Northwest Management Services, Inc.
(c) Northwest Houston Providers Alliance, Inc.
(b) Indianapolis Health Systems, Inc.
(c) MMC Cardiology Venture - OWNERSHIP - INDIANAPOLIS HEALTH SYSTEMS, INC., GP (50%)
REPUBLIC HEALTH CORPORATION OF INDIANAPOLIS, LP (50%)
(b) La Hacienda Treatment Center, Inc.
(b) Lewisburg Community Hospital, Inc.
(b) Managed Health Alliance
(b) MCF, Inc.
(c) Bone Marrow/Stem Cell Transplant Institute of Florida, Inc.
(d) Bone Marrow/Stem Cell Transplant Institute of Florida, Ltd. - OWNERSHIP -
BONE MARROW/STEM CELL TRANSPLANT INSTITUTE OF FLORIDA, INC., GP (51%)
STEM CELL, INC., LP (49%)
(c) Florida Medical Center, Ltd. - OWNERSHIP - MCF, INC., GP (50%)
ORNDA HOSPITAL CORPORATION, LP (50%)
(b) MCS Administrative Services, Inc.
<PAGE>
(b) Meridian Regional Hospital, Inc.
(b) Mesa General Hospital Medical Center, Inc.
(b) MGPG, Inc.
(b) Midway Hospital Medical Center, Inc.
(c) Midway Surgery Center, Ltd. - OWNERSHIP - MIDWAY HOSPITAL MEDICAL CENTER (100%)
(c) Westside Hospital, L.L.C. - OWNERSHIP - MIDWAY HOSPITAL MEDICAL CENTER, INC. - MANAGING MEMBER
ORNDA HOSPITAL CORPORATION - PARTICIPATING MEMBER
(b) NAI Community Hospital of Phoenix, Inc.
(b) OrNda Access, Inc.
(b) OrNda Ambulatory Network, Inc.
(c) Central Coast Surgery Center, Ltd.- OWNERSHIP - ORNDA AMBULATORY NETWORK, INC., GP (69.8%)
DOCTORS GROUP, LP (30.2%)
(c) Magnolia Ambulatory Surgi-Center, L.P. - OWNERSHIP -
ORNDA AMBULATORY NETWORK, INC., GP (71.8%)
DOCTORS GROUP, LP (28.2%)
(c) Metro Ambulatory Surgery Center, L.P. - OWNERSHIP -
ORNDA AMBULATORY NETWORK, INC., GP (75%)
DOCTORS GROUP, LP (25%)
(b) OrNda Health Initiatives, Inc.
(b) OrNda Health Choice, Inc.
(c) Health Choice HMO
(c) Health Choice Partners, Inc.
(b) OrNda Healthcorp of Florida, Inc.
(b) OrNda Healthcorp of Massachusetts, Inc.
(c) OrNda Hospital Investment Corp.
(d) S.V. Hospital, L.L.C. - OWNERSHIP - ORNDA HOSPITAL INVESTMENT CORP. - MANAGING MEMBER
(c) Clini-Tech Laboratories, Inc.
(c) OHM Health Initiatives, Inc.
(c) Provident Nursing Homes, Inc.
(b) OrNda HomeCare, Inc.
(b) OrNda of South Florida, Inc.
(c) OrNda FMC, Inc.
(c) TriLink Provider Services Organization, Inc.
(b) OrNda of South Florida Holdings, Inc.
(b) OrNda Physicians Services, Inc.
(b) OrNda Receivables Co.
(b) Portland Health Centers, Inc.
(b) PoWay Health Systems, Inc.
(b) Premier Health Resources, Inc.
(b) Qualicare of Mississippi, Inc.
(c) Gulf Coast Community Health Care Systems, Inc.
(c) Gulf Coast Community Hospital, Inc.
(b) Qualicare of Wyoming, Inc.
(c) Lander Valley Regional Medical Center
(b) Republic Health Corporation of Arizona
(b) Republic Health Corporation of California
(b) Republic Health Corporation of Central Georgia
(b) Republic Health Corporation of Hayward
(b) Republic Health Corporation of Indianapolis
(c) Indianapolis Physician Services, Inc.
(c) Winona Memorial Hospital, Ltd. - OWNERSHIP -
REPUBLIC HEALTH CORPORATION OF INDIANAPOLIS, INC., GP (99%)
ORNDA HEALTHCORP, LP (1%)
(b) Republic Health Corporation of Meridian
(b) Republic Health Corporation of Mesquite
(b) Republic Health Corporation of Rockwall County
(b) Republic Health Corporation of San Bernardino
<PAGE>
(b) Republic Health Corporation of Texas
(b) Republic Health of North Texas
(b) Republic Health Partners, Inc.
(c) Lake Pointe Medical Center, Ltd. - OWNERSHIP - REPUBLIC HEALTH PARTNERS, INC., GP (1%)
REPUBLIC HEALTH CORPORATION OF ROCKWALL COUNTY, INC., LP (99%)
(b) RHC Texas, Inc.
(b) RHCMS, Inc.
(b) S.C. Cal, Inc.
(c) Tenet HealthSystem TVLP, Inc.
(b) S.C. Management, Inc.
(c) Clinic Holdings, Inc.
(b) S.C. San Antonio, Inc.
(c) Southwest Physician Management Services, Inc.
(b) Sacramento Community Hospital
(b) Santa Ana Hospital Medical Center, Inc.
(b) SHL/O Corp.
(b) South Park Medical Center, Inc.
(b) St. Luke Medical Center
(b) Tucson General Hospital, Inc.
(b) UWMC Hospital Corporation
(b) UWMC Anaheim Hospital Corporation
(b) UWMC Bartlett Hospital Corporation
(b) Valley Community Hospital
(b) West Los Angeles Health Systems, Inc.
(c) Brotman Partners, L.P. - OWNERSHIP - WEST LOS ANGELES HEALTH SYSTEMS, INC. GP (55.75%)
ORNDA INVESTMENTS, INC., LP (44.25%)
(d) Foot and Ankle Specialty Institute of Culver City - OWNERSHIP -
BROTMAN PARTNERS, L.P., GP (50%)
INTEGRATED HEALTHCARE ALLIANCE, INC., LP (50%)
(d) Gynecological Specialty Institute of Culver City - OWNERSHIP -
BROTMAN PARTNERS, L.P., GP (50%)
INTEGRATED HEALTHCARE ALLIANCE, INC., LP (50%)
(b) Westcenter Rehabilitation Facility, Inc.
(b) Whittier Hospital Medical Center, Inc.
(c) Head & Neck Specialty Institute of Whittier - OWNERSHIP -
WHITTIER HOSPITAL MEDICAL CENTER, INC. GP (50%)
INTEGRATED HEALTHCARE ALLIANCE, LP (50%)
(a) Horizon Health Group, Inc.
(a) Tenet HealthSystem LMC, Inc.
(a) Tenet HealthSystem Occupational Medicine, Inc.
Tenet HealthSystem ALB, Inc.
(a) Proton Acquisition Corporation
Syndicated Office Systems
Wilshire Rental Corp.
Women's Medical Center of America, Inc.
Revised: August 13, 1997
Source: Michelle Quinn
</TABLE>
<PAGE>
Exhibit 23(a)
ACCOUNTANTS' CONSENT AND
REPORT ON CONSOLIDATED SCHEDULE
The Board of Directors
Tenet Healthcare Corporation:
Under date of July 25, 1997, we reported on the consolidated balance
sheets of Tenet Healthcare Corporation and subsidiaries as of May 31, 1997 and
1996 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,
1997, as contained in the 1997 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for fiscal year 1997. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
accompanying index. The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, based on our
audits, such schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We also consent to the incorporation by reference of our report dated July
25, 1997, in the Company's Registration Statements on Form S-3 (Nos. 33-39130,
33-57801, 33-57057, 33-55285, 33-62591, 33-63451, 333-17907, 333-24955,
333-21867 and 333-26621), Registration Statements on Form S-4 (Nos. 33-57485
and 333-18185) and Registration Statements on Form S-8 (Nos. 2-87611, 33-11478,
33-35688, 33-50182, 33-57375, 333-00709 and 333-01183).
/s/ KPMG Peat Marwick LLP
Los Angeles, California
August 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 35,000
<SECURITIES> 116,000
<RECEIVABLES> 1,570,000
<ALLOWANCES> 224,000
<INVENTORY> 193,000
<CURRENT-ASSETS> 2,391,000
<PP&E> 6,922,000
<DEPRECIATION> 1,432,000
<TOTAL-ASSETS> 11,705,000
<CURRENT-LIABILITIES> 1,869,000
<BONDS> 5,022,000
0
0
<COMMON> 23,000
<OTHER-SE> 3,201,000
<TOTAL-LIABILITY-AND-EQUITY> 11,705,000
<SALES> 0
<TOTAL-REVENUES> 8,691,000
<CGS> 0
<TOTAL-COSTS> 7,043,000
<OTHER-EXPENSES> 740,000
<LOSS-PROVISION> 494,000
<INTEREST-EXPENSE> 417,000
<INCOME-PRETAX> (21,000)
<INCOME-TAX> 52,000
<INCOME-CONTINUING> (73,000)
<DISCONTINUED> (134,000)
<EXTRAORDINARY> (47,000)
<CHANGES> 0
<NET-INCOME> (254,000)
<EPS-PRIMARY> (.84)
<EPS-DILUTED> (.84)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 107,000
<SECURITIES> 112,000
<RECEIVABLES> 1,245,000
<ALLOWANCES> 205,000
<INVENTORY> 170,000
<CURRENT-ASSETS> 2,040,000
<PP&E> 6,304,000
<DEPRECIATION> 1,320,000
<TOTAL-ASSETS> 10,768,000
<CURRENT-LIABILITIES> 1,541,000
<BONDS> 4,421,000
0
0
<COMMON> 22,000
<OTHER-SE> 3,255,000
<TOTAL-LIABILITY-AND-EQUITY> 10,768,000
<SALES> 0
<TOTAL-REVENUES> 7,706,000
<CGS> 0
<TOTAL-COSTS> 6,251,000
<OTHER-EXPENSES> 86,000
<LOSS-PROVISION> 431,000
<INTEREST-EXPENSE> 425,000
<INCOME-PRETAX> 881,000
<INCOME-TAX> 383,000
<INCOME-CONTINUING> 498,000
<DISCONTINUED> (25,000)
<EXTRAORDINARY> (23,000)
<CHANGES> 0
<NET-INCOME> 450,000
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.54
</TABLE>
