REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HEALTHSOUTH CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 8062 63-0860407
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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ONE HEALTHSOUTH PARKWAY
BIRMINGHAM, ALABAMA 35243
(205) 967-7116
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
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RICHARD M. SCRUSHY
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
HEALTHSOUTH CORPORATION
ONE HEALTHSOUTH PARKWAY
BIRMINGHAM, ALABAMA 35243
(205) 967-7116
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
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Copies to:
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MARK E. EZELL, ESQ. WILLIAM W. HORTON, ESQ. NATHANIEL M. CARTMELL III, ESQ.
F. HAMPTON MCFADDEN, JR., ESQ. HEALTHSOUTH CORPORATION KAREN A. DEMPSEY, ESQ.
HASKELL SLAUGHTER & YOUNG, L.L.C. ONE HEALTHSOUTH PARKWAY PILLSBURY MADISON & SUTRO, LLP
1200 AMSOUTH/HARBERT PLAZA BIRMINGHAM, ALABAMA 35243 235 MONTGOMERY STREET
1901 SIXTH AVENUE NORTH (205) 967-7116 16TH FLOOR
BIRMINGHAM, ALABAMA 35203 SAN FRANCISCO, CALIFORNIA 94104
(205) 251-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering [ ] -------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] -------------
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE (1) FEES (2)
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6.875% Senior Notes due 2005 ......... $250,000,000 100% $250,000,000 $ 73,750.00
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7.0% Senior Notes due 2008 ........... $250,000,000 100% $250,000,000 $ 73,750.00
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Total ................................ $500,000,000 100% $500,000,000 $ 147,500.00
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) of the Securities Act of 1933, as amended (the "Securities
Act").
(2) Calculated pursuant to Section 6(b) and Rule 457 of the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED AUGUST 14, 1998
PROSPECTUS
[HEALTHSOUTH LOGO]
OFFER TO EXCHANGE THE 6.875% SENIOR NOTES DUE 2005 AND 7.0% SENIOR NOTES
DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING 6.875% SENIOR NOTES DUE 2005 AND
7.0% SENIOR NOTES DUE 2008, RESPECTIVELY
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________, 1998, UNLESS EXTENDED.
HEALTHSOUTH Corporation, a Delaware corporation (the "Issuer" or
"HEALTHSOUTH"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal", and, together with this Prospectus, the "Exchange Offer"), to
exchange its 6.875% Senior Notes due 2005 (the "New Notes due 2005") and its
7.0% Senior Notes due 2008 (the "New Notes due 2008", and together with the New
Notes due 2005, the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for an equal
principal amount of the Issuer's outstanding 6.875% Senior Notes due 2005 (the
"Old Notes due 2005") and 7.0% Senior Notes due 2008 (the "Old Notes due 2008",
and together with the Old Notes due 2005, the "Old Notes"), that were issued in
a transaction exempt from registration under the Securities Act. The New Notes
and the Old Notes are collectively referred to herein as the "Notes".
Any and all Old Notes that are validly tendered and not withdrawn at or
prior to 5:00 p.m., New York City time, on the date on which the Exchange Offer
expires ("the Expiration Date"), which will be ___________, 1998 (30 calendar
days following the commencement of the Exchange Offer) unless the Exchange Offer
is extended, will be accepted for exchange. Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions, which may be waived by the Issuer, and to the
terms of the Registration Rights Agreement, dated as of June 22, 1998 (the
"Registration Rights Agreement"), by and among the Issuer and Salomon Brothers
Inc, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, NationsBanc
Montgomery Securities LLC, Bear, Stearns & Co. Inc., Credit Suisse First Boston
Corporation, Deutsche Bank Securities Inc., PaineWebber Incorporated and Scotia
Capital Markets (USA) Inc. (the "Initial Purchasers"). Old Notes may only be
tendered in integral multiples of $1,000. See "The Exchange Offer".
The New Notes will be obligations of the Issuer and will be entitled to the
benefits of the same Indenture (as defined herein) that governs the Old Notes.
The form and terms of the New Notes are the same in all material respects as the
form and terms of the Old Notes, except that (i) the New Notes have been
registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof and (ii) holders of New Notes will not be
entitled to certain rights of holders of the Old Notes under the Registration
Rights Agreement, which rights will be terminated upon consummation of the
Exchange Offer. See "The Exchange Offer" and "Description of the New Notes".
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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The Old Notes will be redeemable as a whole or in part, at the option of
the Issuer, at any time at a redemption price equal to the greater of (i) 100%
of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the applicable Treasury Yield (as defined herein) plus
15 basis points in the case of the New Notes due 2005 and 20 basis points in the
case of the New Notes due 2008, plus in each case accrued interest to the date
of redemption.
The New Notes will be represented by permanent global notes in fully
registered form which will be deposited with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of a nominee of DTC. Beneficial
interests in the permanent global notes are shown on, and transfers thereof will
be effected through, records maintained by DTC and its participants.
The New Notes are being offered hereunder to satisfy certain obligations of
the Issuer contained in the Registration Rights Agreement. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission"), as set forth in no-action letters issued to third parties,
including Exxon Capital Holdings Corporation (SEC No-Action Letter available
April 13, 1988), Morgan Stanley & Co. Incorporated (SEC No-Action Letter
available June 5, 1991) and Shearman & Sterling (SEC No-Action Letter available
July 2, 1993) (collectively, the "Exchange Offer No-Action Letters"), the Issuer
believes that the New Notes issued pursuant to the Exchange Offer may be offered
for resale, resold or otherwise transferred by each holder (other than a
broker-dealer who acquires such New Notes directly from the Issuer for resale
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act and other than any holder that is an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Issuer) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder is not engaged in, and does not intend to
engage in, a distribution of such New Notes and has no arrangement with any
person to participate in a distribution of such New Notes. By tendering Old
Notes in exchange for New Notes, each holder, other than a broker-dealer, will
represent to the Issuer that: (i) it is not an affiliate (as defined in Rule 405
under the Securities Act) of the Issuer; (ii) it is not a broker-dealer
tendering Old Notes acquired for its own account directly from the Issuer; (iii)
any New Notes to be received by it will be acquired in the ordinary course of
its business; and (iv) it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If a holder of Old Notes is engaged
in or intends to engage in a distribution of New Notes or has any arrangement or
understanding with respect to the distribution of New Notes to be acquired
pursuant to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING AT PAGE 14 FOR A DISCUSSION OF CERTAIN
FACTORS TO BE CONSIDERED BY EXISTING HOLDERS IN CONNECTION WITH THE EXCHANGE
OFFER.
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THE SECURITIES TO BE ISSUED HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is August , 1998.
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(Continued from previous page)
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer (a "Participating Broker-Dealer") must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. Pursuant to the
Registration Rights Agreement, the Issuer has agreed that it will make this
Prospectus available to any Participating Broker-Dealer for a period of time not
to exceed six months after the date on which the Exchange Offer is consummated
for use in connection with any such resale. See "Plan of Distribution".
The Issuer will not receive any proceeds from the Exchange Offer. The
Issuer has agreed to pay the expenses of the Exchange Offer. No underwriter is
being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to this Exchange Offer, there has been no public market for the New
Notes. If such a market were to develop, the New Notes could trade at prices
that may be higher or lower than their principal amount. The Issuer does not
intend to apply for listing of the New Notes on any securities exchange or for
quotation of the New Notes on the New York Stock Exchange or otherwise. The
Initial Purchasers have previously made a market in the Old Notes, and the
Issuer has been advised that the Initial Purchasers currently intend to make a
market in the New Notes, as permitted by applicable laws and regulations, after
consummation of the Exchange Offer. The Initial Purchasers are not obligated,
however, to make a market in the Old Notes or the New Notes and any such market
making activity may be discontinued at any time without notice at the sole
discretion of the Initial Purchasers. There can be no assurance as to the
liquidity of the public market for the New Notes or that any active public
market for the New Notes will develop or continue. If an active public market
does not develop or continue, the market price and liquidity of the New Notes
may be adversely affected. See "Risk Factors -- Absence of a Public Market".
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AVAILABLE INFORMATION
HEALTHSOUTH is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (Commission File No.
1-10315), and in accordance therewith files periodic reports, proxy statements
and other information with the SEC relating to its businesses, financial
statements and other matters. The Registration Statement, as well as such
reports, proxy statements and other information, may be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the public
reference facilities maintained by the SEC at its regional offices located at
Seven World Trade Center, Suite 1300, New York, New York, 10048; and Citicorp
Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511. Copies
of such material can be obtained at prescribed rates by writing to the SEC,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
SEC also maintains a web site that contains reports, proxy and information
statements and other information regarding HEALTHSOUTH and the Registration
Statement. The address of that web site is http:// www.sec.gov. The HEALTHSOUTH
Common Stock is listed on the New York Stock Exchange, and the Registration
Statement and other information with respect to HEALTHSOUTH are available for
inspection at the library of the New York Stock Exchange, Inc., 20 Broad Street,
7th Floor, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH REPORTS, PROXY STATEMENTS AND OTHER
INFORMATION FILED BY HEALTHSOUTH, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED HEREIN BY REFERENCE, ARE AVAILABLE
WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST, FROM THE SECRETARY OF HEALTHSOUTH
CORPORATION, ONE HEALTHSOUTH PARKWAY, BIRMINGHAM, ALABAMA 35243, TELEPHONE (205)
967-7116.
There are hereby incorporated by reference into this Prospectus and made a
part hereof the following documents filed by HEALTHSOUTH (Commission File No.
1-10315):
1. HEALTHSOUTH's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "1997 Form 10-K").
2. HEALTHSOUTH's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1998.
3. HEALTHSOUTH's Proxy Statement on Schedule 14A filed April 17, 1998, in
connection with HEALTHSOUTH's 1998 Annual Meeting of Stockholders.
4. HEALTHSOUTH's Current Report on Form 8-K filed May 28, 1998.
5. HEALTHSOUTH's Current Report on Form 8-K filed April 3, 1998.
6. HEALTHSOUTH's Current Report on Form 8-K filed January 15, 1998.
All documents filed by HEALTHSOUTH pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus shall be deemed to
be incorporated by reference into this Prospectus and to be made a part hereof
from the date of the filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for the purpose hereof to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof, except
as so modified or superseded.
FORWARD-LOOKING INFORMATION
Statements relating to HEALTHSOUTH contained in this Prospectus that are
not historical facts are forward-looking statements. In addition, HEALTHSOUTH,
through its senior management, from time to time makes forward-looking public
statements concerning its expected future operations and
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performance and other developments. Such forward-looking statements are
necessarily estimates reflecting HEALTHSOUTH's best judgment based upon current
information and involve a number of risks and uncertainties, and there can be no
assurance that other factors will not affect the accuracy of such
forward-looking statements. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those
estimated by HEALTHSOUTH include, but are not limited to, changes in the
regulation of the healthcare industry at either or both of the federal and state
levels, changes in reimbursement for HEALTHSOUTH's services by government or
private payors, competitive pressures in the healthcare industry and
HEALTHSOUTH's response thereto, HEALTHSOUTH's ability to obtain and retain
favorable arrangements with third-party payors, unanticipated delays in
HEALTHSOUTH's implementation of its Integrated Service Model, general conditions
in the economy and capital markets, and other factors which may be identified
from time to time in HEALTHSOUTH's SEC filings and other public announcements.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES TO WHICH THIS PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION
CONCERNING HEALTHSOUTH CONTAINED IN THIS PROSPECTUS SINCE THE DATE OF SUCH
INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES, OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS IN ANY JURISDICTION IN WHICH
SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION ................................................. 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ..................... 4
FORWARD-LOOKING INFORMATION ........................................... 4
SUMMARY OF PROSPECTUS ................................................. 8
The Issuer ........................................................... 8
Recent Developments .................................................. 8
Risk Factors ......................................................... 8
The Exchange Offer ................................................... 8
The New Notes ........................................................ 12
Use of Proceeds ...................................................... 13
RISK FACTORS .......................................................... 14
RATIO OF EARNINGS TO FIXED CHARGES .................................... 20
THE EXCHANGE OFFER .................................................... 20
Terms of the Exchange Offer .......................................... 20
Expiration Date; Extensions; Amendments; Termination ................. 22
Interest on the New Notes ............................................ 23
Procedures for Tendering ............................................. 23
Acceptance of Old Notes for Exchange; Delivery of New Notes .......... 24
Book-Entry Transfer .................................................. 25
Guaranteed Delivery Procedures ....................................... 25
Withdrawal of Tenders ................................................ 25
Conditions ........................................................... 26
Accounting Treatment ................................................. 26
Exchange Agent ....................................................... 26
Fees and Expenses .................................................... 27
USE OF PROCEEDS ....................................................... 27
CAPITALIZATION ........................................................ 28
SELECTED CONSOLIDATED FINANCIAL DATA .................................. 29
DESCRIPTION OF THE NEW NOTES .......................................... 31
General .............................................................. 31
Global Securities .................................................... 31
Optional Redemption .................................................. 33
Certain Covenants of the Issuer ...................................... 34
Merger, Consolidation and Sale of Assets ............................. 36
Events of Default .................................................... 36
Discharge, Defeasance and Covenant Defeasance ........................ 37
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Modification of the Indenture .............................................. 38
Concerning the Trustee ..................................................... 38
No Personal Liability of Directors, Officers, Stockholders or Incorporators 39
Governing Law .............................................................. 39
Information Concerning the Trustee ......................................... 39
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS ..................... 40
Exchange of Old Notes for New Notes ........................................ 40
Tax Considerations Applicable to United States Persons ..................... 40
Tax Considerations Applicable to Non-U.S. Holders .......................... 41
Information Reporting and Backup Withholding ............................... 42
BUSINESS OF HEALTHSOUTH ..................................................... 43
General .................................................................... 43
HEALTHSOUTH Strategy ....................................................... 43
Recent Developments ........................................................ 44
Patient Care Services ...................................................... 45
PLAN OF DISTRIBUTION ........................................................ 47
EXPERTS ..................................................................... 48
LEGAL MATTERS ............................................................... 48
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SUMMARY OF PROSPECTUS
The following is a summary of certain information contained elsewhere in
this Prospectus. Certain capitalized terms used in this Summary are defined
elsewhere in this Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained in this
Prospectus, and the documents incorporated by reference herein.
THE ISSUER
HEALTHSOUTH. HEALTHSOUTH is the nation's largest provider of outpatient
surgery and rehabilitative healthcare services, based upon number of staffed
rehabilitation beds, number of facilities and revenues derived from those
services. It provides these services through its national network of outpatient
and inpatient rehabilitation facilities, outpatient surgery centers, diagnostic
centers, occupational medicine centers, medical centers and other healthcare
facilities. HEALTHSOUTH believes that it provides patients, physicians and
payors with high-quality healthcare services at significantly lower costs than
traditional inpatient hospitals. Additionally, HEALTHSOUTH's national network,
reputation for quality and focus on outcomes has enabled it to secure contracts
with national and regional managed care payors. At June 30, 1998, HEALTHSOUTH
had over 1,900 patient care locations in 50 states, the United Kingdom and
Australia. See "BUSINESS OF HEALTHSOUTH".
At June 30, 1998, HEALTHSOUTH had consolidated assets of approximately
$6.113 billion and consolidated stockholders' equity of approximately $3.474
billion and employed approximately 58,500 persons.
HEALTHSOUTH was incorporated under the laws of Delaware in 1984. Its
principal executive offices are located at One HealthSouth Parkway, Birmingham,
Alabama 35243, and its telephone number is (205) 967-7116.
RECENT DEVELOPMENTS
On July 1, 1998, HEALTHSOUTH acquired 33 ambulatory surgery centers from
Columbia/ HCA Healthcare Corporation. The surgery centers are located in
Alabama, California, Iowa, Illinois, Kentucky, Louisiana, Minnesota,
Mississippi, North Carolina, Nevada, Oregon, Rhode Island and Texas. Effective
July 31, 1998, HEALTHSOUTH entered into certain other arrangements to acquire
substantially all of the economic benefits of Columbia/HCA's interest in one
additional surgery center. The transaction was valued at approximately
$550,000,000.
On July 22, 1998, HEALTHSOUTH acquired National Surgery Centers, Inc.
("NSC"), adding 40 outpatient surgery centers in 14 states to HEALTHSOUTH's
existing network of outpatient surgery and rehabilitative healthcare facilities.
The value of the NSC transaction was approximately $590,000,000. Under the terms
of the applicable agreement, NSC stockholders received 1.0972 shares of
HEALTHSOUTH Common Stock for each share of NSC Common Stock. The NSC transaction
is expected to be accounted for as a pooling of interests and is intended to be
a tax-free reorganization.
RISK FACTORS
Existing holders of the Old Notes should pay special attention to the "Risk
Factors" section beginning on page 14.
THE EXCHANGE OFFER
THE EXCHANGE OFFER.... New Notes are being offered in exchange for an equal
principal amount of Old Notes of the same maturity.
As of the date hereof, Old Notes due 2005 are
outstanding in the aggregate
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principal amount of $250,000,000 and Old Notes due
2008 are outstanding in the aggregate principal
amount of $250,000,000. Old Notes may be tendered
only in integral multiples of $1,000.
RESALE OF NEW NOTES.. Based on interpretations by the staff of the
Commission, as set forth in no-action letters issued
to third parties, including the Exchange Offer
No-Action Letters, the Issuer believes that the New
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred
by each holder thereof (other than a broker-dealer
who acquires such New Notes directly from the Issuer
for resale pursuant to Rule 144A under the
Securities Act or any other available exemption
under the Securities Act and other than any holder
that is an "affiliate" (as defined under Rule 405 of
the Securities Act) of the Issuer) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary
course of such holder's business and such holder is
not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no
arrangement with any person to participate in a
distribution of such New Notes. By tendering the Old
Notes in exchange for New Notes, each holder, other
than a broker-dealer, will represent to the Issuer
that: (i) it is not an affiliate (as defined in Rule
405 under the Securities Act) of the Issuer; (ii) it
is not a broker-dealer tendering Old Notes acquired
for its own account directly from the Issuer; (iii)
any New Notes to be received by it will be acquired
in the ordinary course of its business; and (iv) it
is not engaged in, and does not intend to engage in,
a distribution of such New Notes and has no
arrangement or understanding to participate in a
distribution of the New Notes. If a holder of Old
Notes is engaged in or intends to engage in a
distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder may not
rely on the applicable interpretations of the staff
of the Commission and must comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with any secondary
resale transaction. Each Participating Broker-Dealer
that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such
New Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection
with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of
market-making activities or other trading
activities. The Issuer has agreed that it will make
this Prospectus available to any Participating
Broker-Dealer for a period of time not to exceed one
year after the date on which the Exchange Offer is
con-
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summated for use in connection with any such resale.
See "Plan of Distribution". To comply with the
securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register the New
Notes prior to offering or selling such New Notes.
The Issuer has agreed, pursuant to the Registration
Rights Agreement and subject to certain specified
limitations therein, to register or qualify the New
Notes for offer or sale under the securities or
"blue sky" laws of such jurisdictions as may be
necessary to permit consummation of the Exchange
Offer.
REGISTRATION RIGHTS AGREE
MENTS .................. The Old Notes were issued on June 22, 1998, to the
Initial Purchasers. The Initial Purchasers placed
the Old Notes with institutional or overseas
investors. In connection therewith, the Issuer and
the Initial Purchasers entered into the Registration
Rights Agreement, providing, among other things, for
the Exchange Offer. See "The Exchange Offer".
CONSEQUENCES OF FAILURE TO
EXCHANGE OLD NOTES.... Upon consummation of the Exchange Offer, subject to
certain exceptions, holders of Old Notes who do not
exchange their Old Notes for New Notes in the
Exchange Offer will no longer be entitled to
registration rights and will not be able to offer or
sell their Old Notes, unless such Old Notes are
subsequently registered under the Securities Act
(which, subject to certain limited exceptions, the
Issuer will have no obligation to do), or pursuant
to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state
securities laws. See "Risk Factors -- Consequences
of Failure to Exchange" and "The Exchange Offer --
Terms of the Exchange Offer".
EXPIRATION DATE......... 5:00 p.m., New York City time, on __________, 1998
(30 calendar days following the commencement of the
Exchange Offer), unless the Exchange Offer is
extended, in which case the term "Expiration Date"
means the latest date and time to which the Exchange
Offer is extended.
INTEREST ON THE NEW NOTES. Interest on the New Notes will accrue from June 22,
1998 and be payable, at the rates of 6.875% per
annum on the New Notes due 2005 and 7.0% on the New
Notes due 2008, on June 15 and December 15 of each
year, commencing December 15, 1998.
CONDITIONS TO THE EXCHANGE
OFFER................. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject
to certain customary conditions, which may, under
certain circumstances, be waived by the Issuer. See
"The Exchange Offer -- Conditions". Except for the
requirements of applicable federal and state
securities laws, there are no federal or state
regulatory requirements to be complied with by the
Issuer in connection with the Exchange Offer.
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PROCEDURES FOR TENDERING
OLD NOTES.............. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, in accordance with the
instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal,
together with the Old Notes to be exchanged and any
other required documentation to the Exchange Agent
(as defined herein) at the address set forth herein
or effect a tender of Old Notes pursuant to the
procedures for book-entry transfer as provided for
herein. See "The Exchange Offer -- Procedures for
Tendering" and "-- Book Entry Transfer".
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and insruct such registered holder to
tender on his behalf. If such beneficial owner
wishes to tender on his own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time. See "Exchange
Offer -- Procedures for Tendering".
GUARANTEED DELIVERY
PROCEDURES............ Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes according
to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures".
WITHDRAWAL RIGHTS...... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. To withdraw a tender of Old Notes,
a written notice of withdrawal must be received by
the Exchange Agent at its address set forth herein
under "The Exchange Offer -- Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration
Date.
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF NEW NOTES.. Subject to certain conditions, any and all Old Notes
tha are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date will be accepted for exchange. The
New Notes issued pursuant to the Exchange Offer will
be delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer".
In all cases, issuance of New Notes for Old Notes
that are accepted for exchange pursuant to the
Exchange Offer will be made only after timely
receipt by the Exchange Agent of cer-
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tificates for the Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility,
a properly completed and duly executed Letter of
Transmittal and all other required documents. If any
tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a
greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes
will be returned without expense to the tendering
holder thereof (or, in the case of Old Notes
tendered by book-entry transfer procedures described
herein, such non-exchanged Old Notes will be
credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of
the Exchange Offer.
CERTAIN TAX
CONSIDERATIONS......... The exchange of New Notes for Old Notes will not b
considered a sale or exchange or otherwise a taxable
event for Federal income tax purposes. See "Certain
United States Federal Tax Considerations".
EXCHANGE AGENT......... PNC Bank, N.A. is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer.
FEES AND EXPENSES..... All expenses incident to consummation of the
Exchange Offer and compliance with the Registration
Rights Agreement will be borne by the Issuer. See
"The Exchange Offer -- Fees and Expenses".
USE OF PROCEEDS....... There will be no proceeds payable to the Issuer from
the issuance of the New Notes pursuant to the
Exchange Offer. See "Use of Proceeds".
THE NEW NOTES
The Exchange Offer relates to (a) the exchange of up to $250,000,000
aggregate principal amount of Old Notes due 2005 for up to an equal aggregate
principal amount of New Notes due 2005 and (b) the exchange of up to
$250,000,000 aggregate principal amount of Old Notes due 2008 for up to an equal
aggregate principal amount of New Notes due 2008. The New Notes will be entitled
to the benefits of the same Indenture that governs the Old Notes and that will
govern the New Notes. The form and terms of the New Notes are the same in all
material respects as the form and terms of the Old Notes, except that (i) the
New Notes have been registered under the Securities Act and therefore will not
bear legends restricting the transfer thereof and (ii) holders of New Notes will
not be entitled to certain rights of holders of the Old Notes under the
Registration Rights Agreement, which rights will be terminated upon consummation
of the Exchange Offer (e.g. liquidated damages). See "Description of the New
Notes".
MATURITY DATES......... The New Notes due 2005 will mature on June 15, 2005
and the New Notes due 2008 will mature on June 15,
2008
INTEREST PAYMENT DATES... June 15 and December 15 of each year, commencing
December 15, 1998.
OPTIONAL REDEMPTION.... The Old Notes will be redeemable as a whole or in
part, at the option of the Issuer, at any time at a
redemption price equal to the greater of (i) 100% of
their principal amount and (ii) the sum
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of the present values of the remaining scheduled
payments of principal and interest thereon
discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the
applicable Treasury Yield (as defined herein) plus
15 basis points in the case of the New Notes due
2005 and 20 basis points in the case of the New
Notes due 2008, plus in each case accrued interest
to the date of redemption. See "Description of the
New Notes -- Optional Redemption".
RANKING................. The New Notes will constitute unsecured and
unsubordinated obligations of the Issuer and will
rank pari passu in right of payment with all other
unsecured and unsubordinated obligations of the
Issuer. See "Description of the New Notes".
RESTRICTIVE COVENANTS... The Indenture governing the New Notes contains
certain covenants that, among other things, limit
the ability of the Issuer to incur liens and engage
in mergers and consolidations or sale and lease-back
transactions. See "Description of the New Notes".
USE OF PROCEEDS
There will be no proceeds payable to the Issuer from the issuance of the
New Notes pursuant to the Exchange Offer. The proceeds from the sale of the Old
Notes were used by HEALTHSOUTH to repay bank debt. See "Use of Proceeds".
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RISK FACTORS
In addition to the other information in this Prospectus, the following
should be considered carefully by holders of the Notes. Statements made herein
should be considered as "forward-looking information". See "Forward-Looking
Information".
REIMBURSEMENT BY THIRD-PARTY PAYORS
Substantially all of HEALTHSOUTH's revenues are derived from private and
governmental third-party payors (in 1997, approximately 36.9% from Medicare and
approximately 63.1% from commercial insurers, managed care plans, workers'
compensation payors and other private pay revenue sources). There are increasing
pressures from many payor sources to control healthcare costs and to limit
increases in reimbursement rates for medical services. There can be no
assurances that payments under governmental and third-party payor programs will
remain at levels comparable to present levels. In attempts to limit the federal
budget deficit, there have been, and HEALTHSOUTH expects that there will
continue to be, a number of proposals to limit Medicare reimbursements for
certain services. HEALTHSOUTH cannot now predict whether any of these pending
proposals will be adopted or, if adopted and implemented, what effect such
proposals would have on HEALTHSOUTH.
REGULATION
HEALTHSOUTH is subject to various other types of regulation at the federal
and state levels, including licensure and certification laws, Certificate of
Need laws and laws relating to financial relationships among providers of
healthcare services, Medicare fraud and abuse and physician self-referral.
The operation of HEALTHSOUTH's facilities and the provision of healthcare
services are subject to federal, state and local licensure and certification
laws. These facilities and services are subject to periodic inspection by
governmental and other authorities to assure compliance with the various
standards established for continued licensure under state law, certification
under the Medicare and Medicaid programs and participation in the Veteran's
Administration program. Additionally, in many states, Certificates of Need or
other similar approvals are required for expansion of HEALTHSOUTH's operations.
HEALTHSOUTH could be adversely affected by the failure or inability to obtain
such approvals, by changes in the standards applicable to approvals and by
possible delays and expenses associated with obtaining approvals. The failure by
HEALTHSOUTH to obtain, retain or renew any required regulatory approvals,
licenses or certificates could prevent HEALTHSOUTH from being reimbursed for, or
from offering, its services, or could adversely affect its results of
operations.
A wide array of Medicare/Medicaid fraud and abuse provisions apply to the
operations of HEALTHSOUTH. HEALTHSOUTH is subject to extensive federal and state
regulation with respect to financial relationships among healthcare providers,
physician self-referral arrangements and other fraud and abuse issues. Penalties
for violation of federal and state laws and regulations include exclusion from
participation in the Medicare/Medicaid programs, asset forfeiture, civil
penalties and criminal penalties. The Office of Inspector General of the
Department of Health and Human Services (the "OIG"), the Department of Justice
(the "DOJ") and other federal agencies interpret healthcare fraud and abuse
provisions liberally and enforce them aggressively. See "-- Certain Horizon/CMS
Litigation". See also "Business -- Regulation" in HEALTHSOUTH's 1997 Form 10-K.
HEALTHCARE REFORM
In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures that would
effect major changes in the healthcare system, either nationally or at the state
level. Among the proposals which are, or recently have been, under consideration
are cost controls on hospitals, insurance market reforms to increase the
availability of group health insurance to small businesses, requirements that
all businesses offer health insurance coverage to their employees and the
creation of a single government health insurance plan that would cover all
citizens. The costs of certain proposals would be funded in significant part by
reductions in payments by governmental programs, including Medicare and
Medicaid, to healthcare providers. There continue to be fed-
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<PAGE>
eral and state proposals that would, and actions that do, impose more
limitations on government and private payments to healthcare providers such as
HEALTHSOUTH and proposals to increase copayments and deductibles from program
and private patients. At the federal level, both Congress and the current
Administration have continued to propose healthcare budgets that substantially
reduce payments under the Medicare and Medicaid programs. In addition, many
states are considering the enactment of initiatives designed to reduce their
Medicaid expenditures, to provide universal coverage or additional levels of
care and/or to impose additional taxes on healthcare providers to help finance
or expand the states' Medicaid systems. There can be no assurance as to the
ultimate content, timing or effect of any healthcare reform legislation, nor is
it possible at this time to estimate the impact of potential legislation, which
may be material, on HEALTHSOUTH.
COMPUTER TECHNOLOGIES AND YEAR 2000 COMPLIANCE
HEALTHSOUTH is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. Many existing computer
programs use only two digits to identify a year in the date field. The issue is
whether such code exists in HEALTHSOUTH's mission-critical applications and if
that code will produce accurate information to date-sensitive calculations after
the turn of the century.
HEALTHSOUTH is involved in an extensive, ongoing program to identify and
correct problems arising from the year 2000 issues. The program is broken down
into the following categories: (1) mission-critical computer applications which
are internally maintained by HEALTHSOUTH's information technology department;
(2) mission-critical computer applications which are maintained by third-party
vendors; (3) non-mission-critical applications, whether internally or externally
maintained; (4) hardware; (5) embedded applications which control certain
medical and other equipment; (6) computer applications of its significant
suppliers; and (7) computer applications of its significant payors.
Mission-critical computer applications are those which are integral to
HEALTHSOUTH's business mission, which have no reasonable manual alternative for
producing the same information and results, and the failure of which to produce
accurate information and results would have a significant adverse impact on the
Company. Such applications include HEALTHSOUTH's general business systems and
its patient billing systems. Most of HEALTHSOUTH's clinical applications are not
considered mission-critical, because reasonable manual alternatives are
available to produce the same information and results for as long as necessary.
HEALTHSOUTH's review of its internally maintained mission-critical
applications revealed that such applications contained very few date-sensitive
calculations. The revisions to these applications are scheduled to be completed
by October 31, 1998, tested during November and December, 1998 and implemented
during the first quarter of 1999. The budget for this project is approximately
$150,000. The project is currently on schedule, with coding approximately 25%
complete at the end of July 1998.
HEALTHSOUTH's general business applications are all licensed from and
maintained by the same vendor. All such applications are already year 2000
compliant. HEALTHSOUTH has received written confirmation from the vendors of its
other externally maintained mission-critical applications that such applications
are currently year 2000 compliant or will be made year 2000 compliant by the end
of 1998. The cost to be incurred by HEALTHSOUTH related to externally maintained
applications is not currently expected to be material.
HEALTHSOUTH has reviewed all of its non-mission-critical applications and
determined that some of these applications are not year 2000 compliant and will
not be made to be compliant. In such cases, HEALTHSOUTH has developed manual
alternatives to produce the information that such systems currently produce. The
incremental cost of the manual systems is not currently estimated to be
material. HEALTHSOUTH plans to evaluate the effectiveness of the manual systems
before any decisions are made on the replacement of the non-compliant
applications.
HEALTHSOUTH has engaged a consultant to test all of its computer hardware
for year 2000 compliance at a cost of approximately $800,000. The results of
these tests are expected to be available by November 30, 1998. The Company has
regularly upgraded its significant servers and hardware platforms. Therefore, it
is expected that the consultant's tests will only reveal that HEALTHSOUTH's
older per-
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sonal computers are not year 2000 compliant. Once the results of the tests are
available, HEALTHSOUTH will determine which hardware components are necessary to
replace and will develop a plan to do so. The cost of such replacements cannot
be estimated until the plan is developed.
HEALTHSOUTH has not completed its review of embedded applications which
control certain medical and other equipment. HEALTHSOUTH expects to complete
this review during the third quarter of 1998. The nature of HEALTHSOUTH's
business is such that any failure of these type applications is not expected to
have a material adverse effect on its business.
HEALTHSOUTH has sent inquiries to its significant suppliers of equipment
and medical supplies concerning the year 2000 compliance of their significant
computer applications. Responses have been received from over 50% of those
suppliers, and no significant problems have been identified. Second requests
have been mailed to all non-respondents.
HEALTHSOUTH has also sent inquiries to its significant third-party payors.
Responses have been received from payors representing over 35% of HEALTHSOUTH's
revenues. Such responses indicate that these payors' systems will be year 2000
compliant. Second requests will be mailed to all non-respondents during October
1998. HEALTHSOUTH will continue to evaluate year 2000 risks with respect to such
payors as additional responses are received. In that connection, it should be
noted that substantially all of HEALTHSOUTH's revenues are derived from
reimbursement by governmental and private third-party payors, and that
HEALTHSOUTH is dependent upon such payors' evaluation of their year 2000
compliance status to access such risks. If such payors are incorrect in their
evaluation of their own year 2000 compliance status, this could result in delays
or errors in reimbursement to HEALTHSOUTH by such payors, the effects of which
could be material to HEALTHSOUTH.
Based on the information currently available, HEALTHSOUTH believes that its
risk associated with problems arising from year 2000 issues is not significant.
However, because of the many uncertainties associated with year 2000 compliance
issues, and because HEALTHSOUTH's assessment is necessarily based on information
from third-party vendors, payors and supplies, there can be no assurance that
HEALTHSOUTH's assessment is correct or as to the materiality or effect of any
failure of such assessment to be correct. HEALTHSOUTH will continue with the
assessment process as described above and, to the extent that changes in such
assessment require it, will attempt to develop alternatives or modifications to
its compliance plan above. There can, however, be no assurance that such
compliance plan, as it may be changed, augmented or modified from the time to
time, will be successful.
COMPETITION
HEALTHSOUTH operates in a highly competitive industry. HEALTHSOUTH
generally operates its facilities in communities that also are served by similar
facilities operated by others. Although HEALTHSOUTH is the largest provider of
outpatient surgery and rehabilitation healthcare services on a nationwide basis,
in any particular market it may encounter competition from local or national
entities with longer operating histories or other superior competitive
advantages. There can be no assurance that such competition, or other
competition which HEALTHSOUTH may encounter in the future, will not adversely
affect HEALTHSOUTH's results of operations.
CERTAIN HORIZON/CMS LITIGATION
On October 29, 1997, HEALTHSOUTH acquired Horizon/CMS Healthcare
Corporation ("Horizon/ CMS") through the merger of a wholly-owned subsidiary of
HEALTHSOUTH with and into Horizon/ CMS. Horizon/CMS is currently a party, or is
subject, to certain material litigation matters and disputes, which are
described below, as well as various other litigation matters and disputes
arising in the ordinary course of its business. HEALTHSOUTH is not itself a
party to the litigation described below.
SEC and NYSE Investigations
The Division of Enforcement of the SEC is conducting a private
investigation with respect to trading in the securities of Horizon/CMS and
Continental Medical Systems, Inc. ("CMS"), which was acquired by Horizon/CMS in
June 1995. In connection with that investigation, Horizon/CMS produced
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certain documents, and Neal M. Elliott, then Chairman of the Board, President
and Chief Executive Officer of Horizon/CMS, and certain other former officers of
Horizon/CMS have given testimony to the SEC. Horizon/CMS has also been informed
that certain of its division office employees and an individual, affiliates of
whom had limited business relationships with Horizon/CMS, have responded to
subpoenas from the SEC. Mr. Elliott also produced certain documents in response
to a subpoena from the SEC. In addition, Horizon/CMS and Mr. Elliott have
responded to separate subpoenas from the SEC pertaining to trading in
Horizon/CMS's common stock and various material press releases issued in 1996 by
Horizon/CMS; Horizon/CMS's February 18, 1997 announcement that HEALTHSOUTH would
acquire Horizon/CMS; and any discussions of proposed business combinations
between Horizon/CMS and Medical Innovations and Horizon/CMS and certain other
companies. The investigation is, to the knowledge of HEALTHSOUTH and
Horizon/CMS, ongoing, and neither Horizon/CMS nor HEALTHSOUTH possesses all the
facts with respect to the matters under investigation. Although neither
Horizon/CMS nor HEALTHSOUTH has been advised by the SEC that the SEC has
concluded that any of Horizon/ CMS, Mr. Elliott or any other current or former
officer or director of Horizon/CMS has been involved in any violation of the
federal securities laws, there can be no assurance as to the outcome of the
investigation or the time of its conclusion. Both Horizon/CMS and HEALTHSOUTH
have, to the extent requested to date, cooperated fully with the SEC in
connection with the investigation.
In March 1995, the New York Stock Exchange (the "NYSE") informed
Horizon/CMS that it had initiated a review of trading in The Hillhaven
Corporation common stock prior to the announcement of Horizon/CMS's proposed
acquisition of Hillhaven. In April 1995, the NYSE extended the review of trading
to include all dealings with CMS. On April 3, 1996, the NYSE notified
Horizon/CMS that it had initiated a review of trading in its common stock
preceding Horizon/CMS's March 1, 1996 press release announcing a revision in
Horizon/CMS's third quarter earnings estimate. On February 20, 1997, the NYSE
notified Horizon/CMS that it was reviewing trading in Horizon/CMS's securities
prior to the February 18, 1997 announcement that HEALTHSOUTH would acquire
Horizon/CMS. Horizon/CMS has cooperated with the NYSE in its reviews and, to
Horizon/CMS's knowledge, the reviews are ongoing.
In February 1997, HEALTHSOUTH received a subpoena from the SEC with respect
to its investigation concerning trading in Horizon/CMS common stock prior to the
February 18, 1997 announcement that HEALTHSOUTH would acquire Horizon/CMS and a
request for information from the NYSE in connection with its review of such
trading. HEALTHSOUTH responded to such subpoena and request for information and
advised both the SEC and the NYSE that it intended to cooperate fully in any
investigations or reviews relating to such trading. HEALTHSOUTH provided certain
additional information to the SEC in April 1997. Since that time, HEALTHSOUTH
has had no further inquiries from either the SEC or the NYSE with respect to
such matters, and is unaware of the current status of such investigations or
reviews.
Michigan Attorney General Investigation Into Long-Term Care Facility In
Michigan
Horizon/CMS learned in September 1996 that the Attorney General of the
State of Michigan was investigating one of its skilled nursing facilities. The
facility, in Howell, Michigan, was owned and operated by Horizon/CMS from
February 1994 until December 31, 1997. As widely reported in the press, the
Attorney General seized a number of patient, financial and accounting records
that were located at this facility. By order of a circuit judge in the county in
which the facility is located, the Attorney General was ordered to return
patient records to the facility for copying. Horizon/CMS advised the Michigan
Attorney General that it was willing to cooperate fully in the investigation.
The facility in question was sold by Horizon/CMS to Integrated Health Services,
Inc., on December 31, 1997.
On February 19, 1998, the State of Michigan filed a criminal complaint
against Horizon/CMS, four former employees of the facility and one former
Horizon/CMS regional manager, alleging various violations in 1995 and 1996 of
certain statutes relating to patient care, patient medical records and the
making of false statements with respect to the condition or operations of the
facility (State of Michigan v. Horizon/CMS Healthcare Corp., et al., Case No.
98-630-FY, State of Michigan District Court 54B). The maximum fines chargeable
against Horizon/CMS under the counts alleged in the complaint (exclusive of
charges against the individual defendants, some of which charges may result in
indemnification
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obligations for Horizon/CMS) aggregate $69,000. Horizon/CMS denies the
allegations made in the complaint and expects to vigorously defend against the
charges. It is not possible to predict at this time the outcome or effect of
this litigation or the length of time it will take to resolve this litigation.
Lawsuit by Former Shareholders of Communi-Care, Inc. and Pro Rehab, Inc.
On May 28, 1997, CMS was served with a lawsuit styled Kenneth Hubbard and
Lynn Hubbard v. Rocco Ortenzio, Robert A. Ortenzio and Continental Medical
Systems, Inc., No. 3:97 CV294MCK, filed in the United States District Court for
the Western District of North Carolina, Charlotte Division, by the former
shareholders of Communi-Care, Inc. and Pro Rehab, Inc. seeking damages arising
out of certain "earnout" provisions of the definitive purchase agreements under
which CMS purchased the outstanding stock of Communi-Care, Inc. and Pro Rehab,
Inc. from such shareholders. The plaintiffs allege that the manner in which CMS
and the other defendants operated the companies after their acquisition breached
its fiduciary duties to the plaintiffs, constituted fraud, gross negligence and
bad faith, and breached their employment agreements with the companies. As a
result of such alleged conduct, the plaintiffs assert that they are entitled to
damages in an amount in excess of $27,000,000 from CMS and the other defendants.
Horizon/CMS believes, based upon its evaluation of the legal and factual matters
relating to the plaintiffs' assertions, that it has valid defenses to the
plaintiffs' claims and, as a result, intends to vigorously contest such claims.
Because this litigation remains at an early stage, HEALTHSOUTH cannot now
predict the outcome or effect of such litigation or the length of time it will
take to resolve such litigation.
EEOC Litigation
In March 1997, the Equal Employment Opportunity Commission (the "EEOC")
filed a complaint against Horizon/CMS alleging that Horizon/CMS had engaged in
unlawful employment practices in respect of Horizon/CMS's employment policies
related to pregnancies. Specifically, the EEOC asserts that Horizon/CMS's
alleged refusal to provide pregnant employees with light-duty assignments to
accommodate their temporary disabilities caused by pregnancy violates Sections
701(k) and 703(a) of Title VII, 42 U.S.C. (section)(section) 2000e-(k) and
2000e-2(a). In this lawsuit, the EEOC seeks, among other things, to permanently
enjoin Horizon/CMS's employment practices in this regard. Horizon/CMS disputes
the factual and legal assertions of the EEOC in this litigation and intends to
vigorously contest the EEOC's claims. HEALTHSOUTH cannot predict the length of
time it will take to resolve this litigation or the outcome or effect of the
litigation.
Heritage Western Hills Litigation
Since July 1996, Horizon/CMS has been a defendant in a lawsuit styled Lexa
A. Auld, Administratrix of Martha Hary, Deceased v. Horizon/CMS Healthcare
Corporation and Charles T. Maxvill, D.O., No. 48-165121, 48th Judicial District
Court, Tarrant County, Texas. The case involved injuries allegedly suffered by a
resident of the Heritage Western Hills nursing facility in Fort Worth, Texas.
Horizon/CMS tendered the claim to its insurance carrier, which accepted coverage
with a reservation of rights and provided a defense through the carrier's
selected counsel in Dallas, Texas. The case went to trial on October 29, 1997,
and on November 7, 1997, the jury rendered a verdict in favor of the plaintiff
in the amount of $2,370,000 in compensatory damages and $90,000,000 in punitive
damages. Counsel has advised Horizon/CMS that, under applicable Texas law, the
punitive damages award is, at worst, limited to four times the amount of the
compensatory damages (the "Punitive Damages Cap"), and thus that the maximum
amount of an enforceable judgment in favor of the plaintiff is approximately
$12,000,000. Counsel has also advised Horizon/CMS that there are, potentially,
other and further caps on both the amount of compensatory damages available to
the plaintiff and the amount of punitive damages. Horizon/CMS filed the required
motions with the court to impose the Punitive Damages Cap. On February 20, 1998,
the court reduced the jury's verdict and entered a judgment in the amount of
approximately $11,237,000. Horizon/CMS also vigorously disputes the efficacy of
the jury's verdict and has appealed the judgment.
Horizon/CMS's insurance carrier continues to defend the matter subject to a
reservation of rights. Based upon an evaluation by its then-current internal
counsel, after reviewing the findings contained in the jury verdict, the
insurance policy at issue and the carrier's handling of the case, Horizon/CMS
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believes that the entirety of any judgment ultimately entered is covered by and
payable from such insurance policy, less Horizon/CMS's self-insured retention of
$250,000. On November 19, 1997, the insurance carrier sent Horizon/CMS a letter
indicating its belief that certain policy exclusions might apply and requesting
additional information which might affect its coverage determination. Horizon/
CMS has retained separate counsel to analyze the coverage issues and advise
Horizon/CMS on its position, and Horizon/CMS expects to continue to negotiate
any coverage issues with its carrier. Settlement negotiations by Horizon/CMS's
insurance carrier, in conjunction with HEALTHSOUTH's retained counsel, continue
with the plaintiff. It is not possible at this time to predict the outcome of
any post-trial motions or appeals, the resolution of any coverage issues, the
outcome of any settlement negotiations or the ultimate amount of any liability
which will be borne by Horizon/CMS.
PROCEDURES FOR TENDER OF OLD NOTES
The New Notes will be issued in exchange for Old Notes only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of Old Notes desiring to tender such Old Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. Failure by a holder to
follow such procedures may result in delay in receiving a New Note on a timely
basis. Neither the Exchange Agent nor HEALTHSOUTH is under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange. Any holder of Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of New Notes. See "The
Exchange Offer -- Procedures for Tendering" and "Plan of Distribution".
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, or pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. HEALTHSOUTH does not currently anticipate that
it will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
LACK OF PUBLIC MARKET FOR THE NOTES
There can be no assurance that a public market for the New Notes will
develop or, if such a market develops, as to the liquidity of such market. If
such a market were to develop, the New Notes could trade at prices that may be
higher or lower than their principal amount. HEALTHSOUTH does not intend to
apply for listing of the New Notes on any securities exchange or for quotation
of the New Notes on any automated quotation system. The Initial Purchasers have
previously made a market in the Old Notes, and HEALTHSOUTH has been advised that
the Initial Purchasers currently intend to make a market in the New Notes, as
permitted by applicable laws and regulations, after consummation of the Exchange
Offer. The Initial Purchasers are not obligated, however, to make a market in
the Old Notes or the New Notes and any such market making activity may be
discontinued at any time without notice at the sole discretion of the Initial
Purchasers. If an active public market does not develop or continue, the market
price and liquidity of the New Notes may be adversely affected.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Issuer's consolidated ratio of earnings
to fixed charges for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges ......... 5.71x 3.31x 3.27x 4.61x 5.34x 6.59x
</TABLE>
For purposes of calculating ratio of earnings to fixed charges, (i)
earnings consist of consolidated income (loss) before taxes and nonrecurring
charges, plus fixed charges, and (ii) fixed charges consist of interest expense
incurred and the portion of rental expense under operating leases deemed by the
Issuer to be representative of the interest factor.
THE EXCHANGE OFFER
The following discussion sets forth or summarizes the material terms of the
Exchange Offer, including those set forth in the Letter of Transmittal
distributed with this Prospectus. This summary is qualified in its entirety by
reference to the full text of the documents underlying the Exchange Offer
(including the Indenture and the Registration Rights Agreement), which are
exhibits to the registration statement of which this Prospectus is a part.
TERMS OF THE EXCHANGE OFFER
The Old Notes were sold by the Issuer to the Initial Purchasers on June 22,
1998, the "Closing Date", pursuant to a Purchase Agreement entered into by the
Initial Purchasers on June 22, 1998 (the "Purchase Agreement") and were
subsequently resold (i) to qualified institutional buyers pursuant to Rule 144A
under the Securities Act, and (ii) pursuant to offers and sales that occurred
outside the United States within the meaning of Regulation S under the
Securities Act. In connection with the issuance of the Old Notes pursuant to the
Purchase Agreement, the Initial Purchasers and their respective assignees became
entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Issuer is required to file
within 60 days after the Closing Date a registration statement (the "Exchange
Offer Registration Statement") for a registered exchange offer with respect to
an issue of new notes identical in all material respects to the Old Notes except
that the new notes shall contain no restrictive legend thereon. Under the
Registration Rights Agreement, the Issuer is required to (i) cause the Exchange
Offer Registration Statement to be filed with the Commission no later than 60
days after the Closing Date, (ii) use its best efforts to cause such Exchange
Offer Registration Statement to become effective no later than 150 days after
the Closing Date, (iii) use its best efforts to keep the Exchange Offer open for
at least 30 and not longer than 45 calendar days (or longer if required by
applicable law), (iv) use its best efforts to consummate the Exchange Offer as
soon as practicable following the date on which the Exchange Offer Registration
Statement is declared effective by the Commission, but in no event later than
180 days after the Closing Date and (v) cause the Exchange Offer to comply with
all applicable federal and state securities laws. The Exchange Offer being made
hereby, if commenced and consummated within the time periods described in this
paragraph, will satisfy those requirements under the Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, all Old Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New Notes of the same maturity will be issued in exchange
for an equal principal amount of outstanding Old Notes accepted in the Exchange
Offer. Old Notes may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders on or about ____________, 1998. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered in
exchange. However, the obligation to accept Old Notes for exchange pursuant to
the Exchange Offer is subject to certain conditions as set forth herein under
"-- Conditions".
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Old Notes shall be deemed to have been accepted as validly tendered when,
as and if the Trustee has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purposes of receiving the New Notes and delivering New Notes to
such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, the Issuer believes that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
each holder thereof (other than a broker-dealer who acquires such New Notes
directly from the Issuer for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act and other than any
holder that is an "affiliate" (as defined in Rule 405 under the Securities Act)
of the Issuer without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder is not engaged in,
and does not intend to engage in, a distribution of such New Notes and has no
arrangement with any person to participate in a distribution of such New Notes.
By tendering the Old Notes in exchange for New Notes, each holder, other than a
broker-dealer, will represent to the Issuer that: (i) it is not an affiliate (as
defined in Rule 405 under the Securities Act) of the Issuer; (ii) it is not a
broker-dealer tendering Old Notes acquired for its own account directly from the
Issuer; (iii) any New Notes to be received by it will be acquired in the
ordinary course of its business; and (iv) it is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of the New Notes. If a holder of
Old Notes is engaged in or intends to engage in a distribution of the New Notes
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such holder may not
rely on the applicable interpretations of the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Each
Participating Broker-Dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Issuer has agreed that
it will make this Prospectus available to any Participating Broker-Dealer for a
period of time not to exceed one year after the date on which the Exchange Offer
is consummated for use in connection with any such resale. See "Plan of
Distribution".
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Issuer to effect the Exchange
Offer, or (ii) if any holder of Old Notes shall notify the Issuer within 30
calendar days following the consummation of the Exchange Offer that (A) such
holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such holder may not resell the New Notes acquired by it in
the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder or (C) such holder is a
broker-dealer and holds Old Notes acquired directly from the Issuer or one of
its affiliates, then the Issuer shall (x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement") on or prior to 30 days after the date on which the Issuer determines
that it is not required to file the Exchange Offer Registration Statement
pursuant to clause (i) above or 30 days after the date on which the Issuer
receives the notice specified in clause (ii) above and shall (y) use its best
efforts to cause such Shelf Registration Statement to become effective within 30
days after the date on which the Issuer becomes obligated to file such Shelf
Registration Statement. If, after the Issuer has filed an Exchange Offer
Registration Statement, the Issuer is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer is not permitted
under applicable federal law, then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above. Such
an event shall have no effect on the requirements of clause (y) above. The
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<PAGE>
Issuer shall use its best efforts to keep the Shelf Registration Statement
continuously effective, supplemented and amended to the extent necessary to
ensure that it is available for sales of Transfer Restricted Securities (as
defined below) by the holders thereof for a period of at least two years
following the date on which such Shelf Registration Statement first becomes
effective under the Securities Act. The term "Transfer Restricted Securities"
means each Note, until the earliest to occur of (a) the date on which such Note
is exchanged in the Exchange Offer and entitled to be resold to the public by
the holder thereof without complying with the prospectus delivery requirements
of the Act, (b) the date on which such Note has been disposed of in accordance
with a Shelf Registration Statement, (c) the date on which such Note is disposed
of by a broker-dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the prospectus
contained therein) or (d) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
If (i) the Exchange Offer Registration Statement or the Shelf Registration
Statement is not filed with the Commission on or prior to the date specified in
the Registration Rights Agreement, (ii) any such Registration Statement has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in the Registration Rights Agreement, (iii) the Exchange
Offer has not been consummated within 180 days after the Closing Date or (iv)
any Registration Statement required by the Registration Rights Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the Issuer has
agreed to pay liquidated damages to each holder of Transfer Restricted
Securities. Liquidated Damages shall accrue on the applicable Old Notes or the
applicable New Notes, as the case may be, over and above the applicable interest
rate set forth in the title to the applicable Old Notes or the applicable New
Notes. Following the occurrence of each such Registration Default mentioned
herein from and including the next day following each such Registration Default
in each case at a rate equal to 0.25% per annum; provided, however, that in any
case, if one or more Registration Defaults occurs and continues for more than 60
days (whether or not consecutive) in any twelve month period (the 61st day being
referred to as the "Default Day") then and from the Default Day until the
earlier of (i) the date such Shelf Registration Statement is again deemed
effective or is useable, (ii) the date that is the second anniversary of the
Closing Date (or, if Rule 144(k) of the Securities Act is amended to provide a
shorter restrictive period, such shorter period) or (iii) the date on which the
Notes are sold pursuant to such Shelf Registration Statement, Liquidated Damages
shall accrue at a rate of 0.25% per annum, provided, however, that the aggregate
amount of Liquidated Damages payable will in no event exceed 0.25% per annum.
The Liquidated Damages attributable to each Registration Default shall cease to
accrue from the date such Registration Default is cured.
All accrued liquidated damages shall be paid to the holders of record on
the preceding June 1 and December 1, respectively, of the global note
representing the Old Notes by wire transfer of immediately available funds or by
federal funds check and to holders of certificated securities by mailing checks
to their registered addresses on each June 15 and December 15. All obligations
of the Issuer set forth in the preceding paragraph that are outstanding with
respect to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
Upon consummation of the Exchange Offer, subject to certain exceptions, holders
of Old Notes who do not exchange their Old Notes for New Notes in the Exchange
Offer will no longer be entitled to registration rights and will not be able to
offer or sell their Old Notes, unless such Old Notes are subsequently registered
under the Securities Act (which, subject to certain limited exceptions, the
Issuer will have no obligation to do), except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. See "Risk Factors -- Risk Factors Relating to the Notes --
Consequences of Failure to Exchange".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean ____________, 1998 (30 calendar days
following the commencement of the Exchange Offer), unless the Exchange Offer is
extended, if and as required by
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<PAGE>
applicable law, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Issuer will notify the Exchange
Agent of any extension by oral or written notice and will notify the holders of
the Old Notes by means of a press release or other public announcement prior to
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Issuer reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not permit
acceptance of Old Notes not previously accepted if any of the conditions set
forth herein under "-- Conditions" shall have occurred and shall not have been
waived by the Issuer, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
Exchange Agent. If the Exchange Offer is amended in a manner determined by the
Issuer to constitute a material change, the Issuer will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment.
INTEREST ON THE NEW NOTES
The New Notes will accrue interest from June 22, 1998, at the rates of
6.875% on the New Notes due 2005 and 7.0% on the New Notes due 2008. Commencing
December 15, 1998, cash interest on the New Notes will accrue and be payable, at
a per annum rate of 6.875% on the New Notes due 2005 and 7.0% on the New Notes
due 2008, semi-annually in arrears on each June 15 and December 15.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, have the signatures thereon guaranteed if required by the
Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal,
together with any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at DTC (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent prior to the Expiration Date or (iii) the
holder must comply with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS OF THE NOTES. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE ISSUER. Delivery of all documents must be made to the Exchange
Agent at its address set forth below. Holders of Notes may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Issuer or any other person who
has obtained a properly completed bond power from the registered holder.
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<PAGE>
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each, an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuer,
evidence satisfactory to the Issuer of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Notes will be determined by the
Issuer in its sole discretion, which determination will be final and binding.
The Issuer reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes which, if accepted, would, in the opinion of
counsel for the Issuer, be unlawful. The Issuer also reserves the absolute right
to waive any irregularities or conditions of tender as to particular Old Notes.
The Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Issuer reserves the right in its sole discretion, subject
to the provisions of the Indenture, to (i) purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
under "-- Conditions", (ii) to terminate the Exchange Offer in accordance with
the terms of the Registration Rights Agreement and (iii) to the extent permitted
by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly tendered will be accepted, promptly after the Expiration
Date, and the New Notes will be issued promptly after acceptance of the Old
Notes. See "-- Conditions" below. For purposes of the Exchange Offer, Old Notes
shall be deemed to have been accepted as validly tendered for exchange when, as
and if the Issuer has given oral or written notice thereof to the Exchange
Agent.
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In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or nonexchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal with any required
signature guarantees and any other required documents must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with. DELIVERY
OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes,
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal and Notice of Guaranteed Delivery, substantially
in the form provided by the Issuer (by mail or hand delivery), setting forth the
name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent". Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes) and (where certificates for
Old Notes have been transmitted)
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<PAGE>
specify the name in which such Old Notes are registered, if different from that
of the withdrawing holder. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuer,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering" and "-- Book-Entry
Transfer" above at any time on or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Notes will not be
required to be accepted for exchange, nor will New Notes be issued in exchange
for any Old Notes, and the Issuer may terminate or amend the Exchange Offer as
provided herein before the acceptance of such Old Notes, if because of any
change in law, or applicable interpretations thereof by the Commission, the
Issuer determines that it is not permitted to effect the Exchange Offer. The
Issuer has no obligation to, and will not knowingly, permit acceptance of
tenders of Old Notes from affiliates (within the meaning of Rule 405 under the
Securities Act) of the Issuer or from any other holder or holders who are not
eligible to participate in the Exchange Offer under applicable law or
interpretations thereof by the Commission, or if the New Notes to be received by
such holder or holders of Old Notes in the Exchange Offer, upon receipt, will
not be tradable by such holder without restriction under the Securities Act and
the Exchange Act and without material restrictions under the "blue sky" or
securities laws of substantially all of the states of the United States.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Issuer's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Issuer. The costs of the Exchange Offer and the unamortized expenses related to
the issuance of the Old Notes will be amortized over the term of the New Notes.
EXCHANGE AGENT
PNC Bank, N.A. has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED MAIL: FOR INFORMATION CALL: BY HAND/OVERNIGHT DELIVERY:
PNC Bank, N.A. David G. Metcalf PNC Bank, N.A.
500 West Jefferson Street (502) 581-3029 500 West Jefferson Street
Louisville, Kentucky 40202 Facsimile (502) 581-2702 Louisville, Kentucky 40202
Attn: Corporate Trust Department Attn: Corporate Trust Department
</TABLE>
26
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuer. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Issuer.
The Issuer will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Issuer may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Notes, and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Issuer, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of, any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
USE OF PROCEEDS
There will be no cash proceeds payable to HEALTHSOUTH from the issuance of
the New Notes pursuant to the Exchange Offer. The proceeds from the sale of the
Old Notes were used by HEALTHSOUTH to repay bank debt. In consideration for
issuing the New Notes as contemplated in this Prospectus, HEALTHSOUTH will
receive in exchange the Old Notes in like principal amount, the terms of which
are identical in all material respects to the New Notes. The Old Notes
surrendered in exchange for the New Notes will be retired and cancelled and
cannot be reissued. Accordingly, the issuance of the New Notes will not result
in any increase in the indebtedness of HEALTHSOUTH.
27
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1998, the capitalization of
the Company, which reflects the sale of the Old Notes and the application of the
net proceeds therefrom. See "Selected Consolidated Financial Data" and "Use of
Proceeds".
<TABLE>
<CAPTION>
JUNE 30,
1998
----
(IN THOUSANDS)
<S> <C>
Current portion of long-term debt .................................. $ 47,600
==========
Long-term debt (net of current maturities):
Notes payable ...................................................... 750,000
Other .............................................................. 122,956
9.5% Senior Subordinated Notes due 2001 ............................ 250,000
3.25% Convertible Subordinated Debentures due 2003 ................. 567,750
6.875% Senior Notes due 2005 ....................................... 250,000
7.0% Senior Notes due 2008 ......................................... 250,000
----------
Total long-term debt ............................................ 2,190,706
Stockholders' equity:
Preferred Stock, par value $.10 per share, 1,500,000 shares autho-
rized; no shares outstanding .................................... --
Common Stock, par value $.01 per share, 600,000,000 shares autho-
rized; 401,817,000 shares outstanding (1) ....................... 4,018
Additional paid-in capital ....................................... 2,406,903
Retained earnings ................................................ 1,078,580
Treasury stock ................................................... (323)
Receivable from Employee Stock Ownership Plan .................... (10,169)
Notes receivable from stockholders ............................... (5,180)
----------
Total stockholders' equity ....................................... 3,473,829
----------
Total capitalization ............................................ $5,664,535
==========
</TABLE>
- ----------
(1) Outstanding shares do not include a total of 28,406,753 shares of Common
Stock subject to options outstanding under the Company's stock option plans.
An additional 8,089,191 shares of Common Stock are reserved for future
option grants under such plans. Outstanding shares also do not include
980,542 shares of Common Stock reserved for issuance pursuant to outstanding
warrants, 15,501,707 shares of Common Stock initially reserved for issuance
upon conversion of the Company's 3.25% Convertible Subordinated Debentures
due 2003, and 20,482,885 shares of Common Stock issued in connection with
acquisitions subsequent to June 30.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is a summary of selected consolidated financial data for
HEALTHSOUTH for the years indicated. All amounts have been restated to reflect
the effects of the 1994 acquisition of ReLife, Inc. ("ReLife"), the 1995
acquisition of Surgical Health Corporation ("SHC") and Sutter Surgery Centers,
Inc. ("SSCI"), the 1996 acquisition of Surgical Care Affiliates, Inc. ("SCA")
and Advantage Health Corporation ("Advantage Health") and the 1997 acquisition
of Health Images, Inc. ("Health Images"), each of which was accounted for as a
pooling of interests. The data below should be read in conjunction with the
consolidated financial statements, related notes and other information included,
or incorporated by reference, herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ......................................................... $1,055,295 $1,726,321 $2,118,681
Operating unit expenses .......................................... 715,189 1,207,707 1,441,059
Corporate general and administrative expenses .................... 43,378 67,798 65,424
Provision for doubtful accounts .................................. 22,677 35,740 42,305
Depreciation and amortization .................................... 75,425 126,148 160,901
Merger and acquisition related expenses (1) ...................... 333 6,520 19,553
Loss on impairment of assets (2) ................................. -- 10,500 53,549
Loss on abandonment of computer project .......................... -- 4,500 --
Loss on disposal of surgery centers .............................. -- 13,197 --
NME Selected Hospitals Acquisition related expense ............... 49,742 -- --
Interest expense ................................................. 25,884 74,895 105,517
Interest income .................................................. (6,179) (6,658) (8,009)
Gain on sale of partnership interest ............................. (1,400) -- --
Gain on sale of MCA Stock ........................................ -- (7,727) --
---------- ---------- ----------
925,049 1,532,620 1,880,299
---------- ---------- ----------
Income from continuing operations before income taxes,
minority interests and extraordinary item ....................... 130,246 193,701 238,382
Provision for income taxes ....................................... 40,450 68,560 86,161
---------- ---------- ----------
89,796 125,141 152,221
Minority interests ............................................... 29,549 31,665 43,753
---------- ---------- ----------
Income from continuing operations before extraordi-
nary item ....................................................... 60,247 93,476 108,468
Income from discontinued operations .............................. 3,986 (6,528) (1,162)
Extraordinary item (2) ........................................... -- -- (9,056)
---------- ---------- ----------
Net income ...................................................... $ 64,233 $ 86,948 $ 98,250
========== ========== ==========
Weighted average common shares outstanding (3)(4) ................ 265,502 273,480 289,594
========== ========== ==========
Net income per common share: (3)(4)
Continuing operations ........................................... $ 0.23 $ 0.34 $ 0.37
Discontinued operations ......................................... 0.01 (0.02) 0.00
Extraordinary item .............................................. -- -- (0.03)
---------- ---------- ----------
$ 0.24 $ 0.32 $ 0.34
========== ========== ==========
Weighted average common shares outstanding -- as-
suming dilution(3)(4)(5) ....................................... 275,366 300,758 320,018
========== ========== ==========
Net income per common share -- assuming dilution:
(3)(4)(5)
Continuing operations ........................................... $ 0.22 $ 0.32 $ 0.35
Discontinued operations ......................................... 0.01 (0.02) 0.00
Extraordinary item .............................................. -- -- (0.03)
---------- ---------- ----------
$ 0.23 $ 0.30 $ 0.32
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- --------------------
1996 1997 1997 1998
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER (UNAUDITED)
SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ......................................................... $2,568,155 $3,017,269 $1,414,648 $1,850,145
Operating unit expenses .......................................... 1,667,248 1,888,435 889,939 1,140,128
Corporate general and administrative expenses .................... 79,354 82,757 36,358 52,681
Provision for doubtful accounts .................................. 58,637 71,468 32,788 43,723
Depreciation and amortization .................................... 207,132 250,010 117,516 153,713
Merger and acquisition related expenses (1) ...................... 41,515 15,875 15,875 --
Loss on impairment of assets (2) ................................. 37,390 -- -- --
Loss on abandonment of computer project .......................... -- -- -- --
Loss on disposal of surgery centers .............................. -- -- -- --
NME Selected Hospitals Acquisition related expense ............... -- -- -- --
Interest expense ................................................. 98,751 111,504 53,415 56,918
Interest income .................................................. (6,034) (4,414) (2,322) (4,522)
Gain on sale of partnership interest ............................. -- -- -- --
Gain on sale of MCA Stock ........................................ -- -- -- --
---------- ---------- ---------- ----------
2,183,993 2,415,635 1,143,569 1,442,641
---------- ---------- ---------- ----------
Income from continuing operations before income taxes,
minority interests and extraordinary item ....................... 384,162 601,634 271,079 407,504
Provision for income taxes ....................................... 143,929 206,153 92,465 145,484
---------- ---------- ---------- ----------
240,233 395,481 178,614 262,020
Minority interests ............................................... 50,369 64,873 32,715 35,424
---------- ---------- ---------- ----------
Income from continuing operations before extraordi-
nary item ....................................................... 189,864 330,608 145,899 226,596
Income from discontinued operations .............................. -- -- -- --
Extraordinary item (2) ........................................... -- -- -- --
---------- ---------- ---------- ----------
Net income ...................................................... $ 189,864 $ 330,608 $ 145,899 $ 226,596
========== ========== ========== ==========
Weighted average common shares outstanding (3)(4) ................ 321,367 346,872 334,233 399,540
========== ========== ========== ==========
Net income per common share: (3)(4)
Continuing operations ........................................... $ 0.59 $ 0.95 $ 0.44 $ 0.57
Discontinued operations ......................................... -- -- -- --
Extraordinary item .............................................. -- -- -- --
---------- ---------- ---------- ----------
$ 0.59 $ 0.95 $ 0.44 $ 0.57
========== ========== ========== ==========
Weighted average common shares outstanding -- as-
suming dilution(3)(4)(5) ....................................... 349,033 365,546 355,340 420,248
========== ========== ========== ==========
Net income per common share -- assuming dilution:
(3)(4)(5)
Continuing operations ........................................... $ 0.55 $ 0.91 $ 0.41 $ 0.55
Discontinued operations ......................................... -- -- -- --
Extraordinary item .............................................. -- -- -- --
---------- ---------- ---------- ----------
$ 0.55 $ 0.91 $ 0.41 $ 0.55
========== ========== ========== ==========
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities ......... $ 153,011 $ 134,040 $ 159,793 $ 153,831 $ 152,399 $ 204,546
Working capital ........................ 300,876 308,770 406,601 564,529 566,751 1,046,498
Total assets ........................... 2,000,566 2,355,920 3,107,808 3,529,706 5,401,053 6,112,778
Long-term debt (6) ..................... 1,028,610 1,164,135 1,453,018 1,560,143 1,601,824 2,238,306
Stockholders' equity ................... 727,737 837,160 1,269,686 1,569,101 3,157,428 3,473,829
</TABLE>
- ----------
(1) Expenses related to SHC's Ballas Merger in 1993, the ReLife and Heritage
Surgical Corporation acquisitions in 1994, the SHC, SSCI and NovaCare,
Inc.'s rehabilitation hospitals division acquisitions in 1995, the SCA,
Advantage Health, Professional Sports Care Management, Inc. and ReadiCare
acquisitions in 1996, and the Health Images acquisition in 1997.
(2) See Notes 2 and 13 of "Notes to Consolidated Financial Statements" included
in HealthSouth's 1997 Annual Report on Form 10-K incorporated by reference
herein.
(3) Adjusted to reflect a two-for-one stock split effected in the form of a
100% stock dividend paid on April 17, 1995 and a two-for-one stock split
effected in the form of a 100% stock dividend paid on March 17, 1997.
(4) Earnings per share amounts prior to 1997 have been restated as required to
comply with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share". For further discussion, see Note 1 of "Notes to Consolidated
Financial Statements" included in HealthSouth's 1997 Annual Report on Form
10-K incorporated by reference herein.
(5) Diluted earnings per share in 1994, 1995, 1996 and 1997 reflect shares
reserved for issuance upon conversion of HEALTHSOUTH's 5% Convertible
Subordinated Debentures due 2001. Substantially all of such Debentures were
converted into shares of HEALTHSOUTH's Common Stock in 1997. Diluted
earings per share in 1998 reflect shares reserved for issuance upon
conversion of HealthSouth's 3.25% Convertible Subordinated Debentures due
2001.
(6) Includes current portion of long-term debt.
30
<PAGE>
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued, and the New Notes (together with the Old Notes,
the "Notes") offered hereby will be issued pursuant to an Indenture, dated as of
June 22, 1998 (the "Indenture"), between the Issuer and PNC Bank, N.A., as
trustee (the "Trustee"). The following summary does not purport to be complete
and such summary is subject to the detailed provisions of the Indenture, to
which reference is hereby made for a full description of such provisions,
including the definition of certain terms used herein, and for other information
regarding the Notes. Wherever particular sections or defined terms of the
Indenture are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference.
GENERAL
The New Notes constitute two series for purposes of the Indenture. The
6.875% Senior Notes due 2005 (the "New Notes due 2005") will be unsecured,
unsubordinated obligations of the Issuer limited in aggregate principal amount
to $250,000,000 and will mature on June 15, 2005. The 7.0% Senior Notes due 2008
(the "New Notes due 2008") will be unsecured, unsubordinated obligations of the
Issuer limited in aggregate principal amount to $250,000,000 and will mature on
June 15, 2008.
Payment of the principal of and interest on the New Notes will rank pari
passu with all other unsecured, unsubordinated debt of the Issuer. The New Notes
will be redeemable in whole or in part at any time at the option of the Issuer
at a price equal to the greater of (i) 100% of the principal amount thereof and
(ii) the sum of the present values of the remaining schedule payments of
principal and interest thereon discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the applicable Treasury Yield plus 15 basis points in the case of the New
Notes due 2005 and 20 basis points in the case of the New Notes due 2008, plus,
in each case, accrued interest to the date of redemption. See "-- Optional
Redemption". The New Notes will not be entitled to the benefit of any mandatory
redemption or sinking fund. The Indenture does not limit the amount of
additional indebtedness the Issuer or any of its subsidiaries may incur. The
Indenture does not limit the amount of notes, debentures or other evidences of
indebtedness ("Debt Securities") that the Issuer may issue thereunder and
provides that Debt Securities may be issued from time to time in one or more
series. As of the date of this Prospectus, no Debt Securities (other than the
Old Notes) were outstanding under the Indenture.
The New Notes will bear interest from June 22, 1998 at the respective rates
per annum set forth on the cover page of this Prospectus, and such interest will
be payable semiannually in arrears on June 15 and December 15 of each year,
commencing on December 15, 1998 to the persons in whose names the New Notes are
registered at the close of business on the immediately preceding June 1 and
December 1, respectively. Interest on the New Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest on the New Notes will be computed
on the basis of a 360-day year consisting of twelve 30-day months. Principal of,
premium, if any, and interest on the New Notes will be payable, and the transfer
of New Notes will be registrable, at the office or agency of the Issuer to be
maintained for such purpose in the Borough of Manhattan, The City of New York,
except that, at the option of the Issuer, interest may be paid by mailing a
check to the address of the person entitled thereto as it appears on the New
Notes register. In the event that any date on which principal, premium, if any,
or interest is payable on the New Notes is not a Business Day (as defined in the
Indenture), then payment of the principal, premium, if any, or interest payable
on such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay).
GLOBAL SECURITIES
The New Notes will be issued in fully-registered form without coupons. The
Old Notes were initially issued in global form and definitive certificated
securities were not issued except in the limited circumstances described below.
31
<PAGE>
Each series of Notes will be evidenced by one or more global Securities
(the "Global Securities"), which will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC") and registered in the name
of Cede & Co. ("Cede"), as DTC's nominee.
Persons holding interests in the Global Securities may hold their interests
directly through DTC, or indirectly through organizations which are participants
in DTC ("Participants"). Transfers between Participants will be effected in the
ordinary way in accordance with DTC rules and will be settled in immediately
available funds.
Holders who are not Participants may beneficially own interests in a Global
Security held by DTC only through Participants or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly, and
have indirect access to the DTC system ("Indirect Participants"). So long as
Cede, as the nominee of DTC, is the registered owner of any Global Security,
Cede for all purposes will be considered the sole holder of such Global
Security. Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to have certificates registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form, and will not be considered the holder thereof.
Neither HEALTHSOUTH nor the Trustee (nor any registrar or paying agent)
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised HEALTHSOUTH that it will
take any action permitted to be taken by a holder of the Notes only at the
direction of one or more Participants whose accounts are credited with DTC
interests in a Global Security.
DTC has advised HEALTHSOUTH as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants in
deposited securities through electronic book-entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Certain of
such Participants (or their representatives), together with other entities, own
DTC. The rules applicable to DTC and its Participants are on file with the
Commission.
Exchanges of the Old Notes for New Notes under the DTC system must be made
by or through Participants, which will receive a credit for the New Notes on
DTC's records. The ownership interest of actual holders of each New Note (a
"Beneficial Owner") is in turn to be recorded on the Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their exchange, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the New
Notes, except in the event that use of the book-entry system for the New Notes
is discontinued.
The deposit of New Notes with DTC and their registration in the name of
Cede effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the New Notes; DTC's records reflect only the
identity of the Participants to whose accounts such New Notes are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Global
Securities.
32
<PAGE>
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time. Redemption notices shall be sent to Cede. If less than all of the
New Notes due 2005 or the New Notes due 2008, as the case may be, are being
redeemed, DTC's practice is to determine by lot the interest of each Participant
in such New Notes due 2005 or New Notes due 2008, as the case may be, to be
redeemed.
Principal and interest payments on the New Notes will be made to DTC by
wire transfer of immediately available funds. DTC's practice is to credit
Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such Participant
and not of DTC, or HEALTHSOUTH, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of HEALTHSOUTH, disbursement of such
payments to Participants shall be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of
Participants and Indirect Participants. Neither HEALTHSOUTH nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Global
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DTC may discontinue providing its services as securities depositary with
respect to any series of the New Notes at any time by giving reasonable notice
to HEALTHSOUTH. In the event that DTC notifies HEALTHSOUTH that it is unwilling
or unable to continue as depositary for any Global Security or if at any time
DTC ceases to be a clearing agency registered as such under the Exchange Act
when DTC is required to be so registered to act as such depositary and no
successor depositary shall have been appointed within 90 days of such
notification or of HEALTHSOUTH becoming aware of DTC's ceasing to be so
registered, as the case may be, certificates for the applicable New Notes will
be printed and delivered in exchange for interests in such Global Security. Any
Global Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for New Notes registered in such names as DTC shall direct. It is
expected that such instructions will be based upon directions received by DTC
from its Participants with respect to ownership of beneficial interests in such
Global Security.
HEALTHSOUTH may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
certificates representing each series of the New Notes will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that HEALTHSOUTH believes to be reliable, but
HEALTHSOUTH does not take responsibility for the accuracy thereof.
OPTIONAL REDEMPTION
The New Notes will be redeemable as a whole or in part, at the option of
the Issuer, at any time at a redemption price equal to the greater of (i) 100%
of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the applicable Treasury Yield plus 15 basis points in
the case of the New Notes due 2005 and 20 basis points in the case of the New
Notes due 2008, plus, in each case, accrued interest to the date of redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the applicable
Comparable Treasury Issue, assuming a price for the applicable Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
applicable Comparable Treasury Price for such redemption date.
33
<PAGE>
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the New Notes due 2005 or New Notes due 2008, as the case
may be, that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the New Notes due 2005 or the
New Notes due 2008, as the case may be. "Independent Investment Banker" means
Salomon Brothers Inc and its successor or, if such firm is unwilling or unable
to select the applicable Comparable Treasury Issue, an independent investment
banking institution of national standing appointed by the Trustee.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the applicable Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the applicable Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices of the applicable Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means a primary U.S. Government Securities
dealer in New York City selected by the Trustee after consultation with the
Issuer.
On and after the redemption date, interest will cease to accrue on the New
Notes or any portion thereof called for redemption. On or before the redemption
date, the Issuer shall deposit with a paying agent (or the Trustee) money
sufficient to pay the redemption price of and accrued interest on the New Notes
to be redeemed on such date. If less than all of the New Notes due 2005 or the
New Notes due 2008 are to be redeemed, the New Notes to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.
Holders of New Notes to be redeemed will receive notice thereof by
first-class mail at least 30 and not more than 60 days prior to the date fixed
for redemption.
CERTAIN COVENANTS OF THE ISSUER
Definitions. "Attributable Debt" shall mean, in connection with a sale and
lease-back transaction, the lesser of (i) the fair value of the assets subject
to such transaction or (ii) the present value of the obligations of the lessee
for net rental payments during the term of any lease discounted at the rate of
interest set forth or implicit in the terms of such lease or, if not practicable
to determine such rate, the weighted average interest rate per annum borne by
the Debt Securities of each series outstanding pursuant to the Indenture and
subject to the limitation on sale and lease-back transaction provisions of the
Indenture, compounded semiannually in either case as determined by the principal
accounting or financial officer of the Issuer.
"Capital Stock" of any specified person shall mean any and all shares,
rights to purchase, warrants or options (whether or not currently exercisable),
participation or other equivalents of or interests in (however designated) the
equity (including, without limitation, common stock, preferred stock and
partnership and joint venture interests) of such person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
"Common Equity" of any specified person shall mean all Capital Stock of
such person that is generally entitled to (i) vote in the election of directors
of such person or (ii) if such person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such person.
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"Consolidated Tangible Assets" with respect to any specified person as of
any date shall mean the total assets of such person and its Subsidiaries
(excluding any assets that would be classified as "intangible assets" under
GAAP) on a consolidated basis at such date, as determined in accordance with
GAAP, less all write-ups subsequent to the date of initial issuance of the Notes
in the book value of any asset owned by such person or any of its Subsidiaries.
"Exempted Debt" shall mean the sum of the following as of the date of
determination: (i) Indebtedness of the Issuer and its Subsidiaries incurred
after the date of issuance of the New Notes and secured by liens not otherwise
permitted by the limitation on liens provisions of the Indenture, and (ii)
Attributable Debt of the Issuer and its Subsidiaries in respect of every sale
and lease-back transaction entered into after the date of the issuance of the
Old Notes, other than leases permitted by the limitation on sale and lease-back
provisions of the Indenture.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as from time to time in effect.
"Indebtedness" shall mean all items classified as indebtedness on the most
recently available consolidated balance sheet of the Issuer and its
Subsidiaries, in accordance with GAAP.
"Subsidiary" with respect to any specified person shall mean (i) any
corporation of which the Common Equity having ordinary voting power to elect a
majority of directors of such corporation is owned by such person directly or
through one or more Subsidiaries of such person and (ii) any entity other than a
corporation in which such person, directly or indirectly, owns at least 50% of
the Common Equity of such entity and has the authority to manage such entity on
a day-to-day basis.
Limitation on Liens. The Issuer covenants that, so long as any of the New
Notes remain outstanding, it will not, nor will it permit any Subsidiary to,
create or assume any Indebtedness for money borrowed which is secured by a
mortgage, security interest, pledge, charge, lien or other similar encumbrance
of any kind (collectively, a "lien") upon any assets, whether now owned or
hereafter acquired, of the Issuer or any such Subsidiary without equally and
ratably securing the New Notes by a lien ranking ratably with and equally to
such secured Indebtedness, except that the foregoing restriction shall not apply
to (i) liens on assets of any corporation existing at the time such corporation
becomes a Subsidiary; (ii) liens on assets existing at the time of acquisition
thereof, or to secure the payment of the purchase price of such assets, or to
secure indebtedness incurred or guaranteed by the Issuer or a Subsidiary for the
purpose of financing the purchase price of such assets or improvements or
construction thereon, which indebtedness is incurred or guaranteed prior to, at
the time of or within 360 days after such acquisition (or in the case of real
property, completion of such improvement or construction or commencement of full
operation of such property, whichever is later); (iii) liens securing
indebtedness owed by any Subsidiary to the Issuer or another wholly-owned
Subsidiary; (iv) liens on any assets of a corporation existing at the time such
corporation is merged into or consolidated with the Issuer or a Subsidiary or at
the time of a purchase, lease or other acquisition of the assets of a
corporation or firm as an entirety or substantially as an entirety by the Issuer
or a Subsidiary; (v) liens on any assets of the Issuer or a Subsidiary in favor
of the United States of America or any state thereof, or in favor of any other
country, or in favor of any political subdivision of any of the foregoing, to
secure certain payments pursuant to any contract or statute or to secure any
indebtedness incurred or guaranteed for the purpose of financing all or any part
of the purchase price (or, in the case of real property, the cost of
construction) of the assets subject to such liens (including but not limited to,
liens incurred in connection with industrial revenue or similar financing
involving a political subdivision, agency or authority thereof); (vi) any
extension, renewal or replacement (or successive extensions, renewals or
replacements) in whole or in part, of any lien referred to in the foregoing
clauses (i) to (v), inclusive; (vii) certain statutory liens or other similar
liens arising in the ordinary course of business of the Issuer or a Subsidiary,
or certain liens arising out of government contracts; (viii) certain pledges,
deposits or liens made or arising under workers compensation or similar
legislation or in certain other circumstances; (ix) certain liens in connection
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with legal proceedings, including certain liens arising out of judgments or
awards; (x) liens for certain taxes or assessments, landlord's liens and liens
and charges incidental to the conduct of the business or the ownership of the
assets of the Issuer or of a Subsidiary, which were not incurred in connection
with the borrowing of money and which do not, in the opinion of the Issuer,
materially impair the use of such assets in the operation of the business of the
Issuer or such Subsidiary or the value of such assets for the purposes thereof
or (xi) liens relating to accounts receivable of the Issuer or any of its
Subsidiaries which have been sold, assigned or otherwise transferred to another
Person in a transaction classified as a sale of accounts receivable in
accordance with generally accepted accounting principles (to the extent the sale
by the Issuer or the applicable Subsidiary is deemed to give rise to a lien in
favor of the purchaser thereof in such accounts receivable or the proceeds
thereof). Notwithstanding the above, the Issuer or any Subsidiary may, without
securing the New Notes, create or assume any Indebtedness which is secured by a
lien which would otherwise be subject to the foregoing restrictions, provided
that after giving effect thereto the Exempted Debt then outstanding does not
exceed 10% of the total Consolidated Tangible Assets of the Issuer and its
Subsidiaries at such time.
Limitation on Sale and Lease-Back Transactions. Sale and lease-back
transactions (except such transactions involving leases for less than three
years) by the Issuer or any Subsidiary of any assets are prohibited unless (i)
the Issuer or such Subsidiary would be entitled pursuant to clauses (i) through
(xi) contained in the covenant described under "-- Limitations on Liens", to
create, incur or permit to exist a lien on the assets to be leased in an amount
at least equal to the Attributable Debt in respect of such transaction without
equally and ratably securing the New Notes, or (ii) the proceeds from the sale
of the assets to be leased are at least equal to their fair market value and the
proceeds are applied to the purchase or acquisition (or, in the case of real
property, the construction) of assets or to the retirement of indebtedness.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides that the Issuer shall not consolidate or merge with
or into, or transfer or lease its assets substantially as an entirety to any
entity unless the Issuer shall be the continuing entity, or the successor entity
or entity to which such assets are transferred or leased shall be an entity
organized under the laws of the United States, any state thereof or the District
of Columbia and shall expressly assume the Issuer's obligations on the Debt
Securities and under the Indenture, and immediately after giving effect to such
transaction no Event of Default (as defined in the Indenture) shall have
occurred and be continuing, and certain other conditions are met. Upon
assumption of the Issuer's obligations by an entity to whom such assets are
transferred or leased, subject to certain exceptions, the Issuer shall be
discharged from all obligations under the New Notes and the Indenture.
There are no covenants or other provisions in the Indenture providing for a
put at the option of the holders of the New Notes or an increase in the rate of
interest borne by the respective New Notes or that would otherwise afford
holders of any of New Notes protection in the event of a recapitalization
transaction, a change of control of the Issuer or a highly leveraged
transaction.
EVENTS OF DEFAULT
An Event of Default is defined under the Indenture with respect to Debt
Securities of each series as being: (i) default in payment of all or any part of
the principal of, or premium, if any, on any Debt Securities of such series when
due, either at maturity, upon any redemption, by declaration or otherwise; (ii)
default for 30 days in payment of any interest on any Debt Securities of such
series; (iii) default in payment of any sinking fund installment when due by the
terms of the Debt Securities of such series; (iv) default for 60 days after
written notice as provided in the Indenture in the observance or performance of
any other covenant or agreement in the Debt Securities of such series or in the
Indenture, other than a covenant included in the Indenture solely for the
benefit of a series of Debt Securities other than such series; (v) acceleration
of $25 million or more, individually or in the aggregate, in principal amount of
Indebtedness of the Issuer or any Subsidiary under the terms of the instrument
under which such Indebtedness is issued or secured if such Indebtedness shall
not have been discharged or such acceleration is not annulled within 10 days
after written notice; or (vi) certain events of bankruptcy, insolvency or
reorganization.
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The Indenture provides that (a) if an Event of Default due to the default
in payment of principal, premium, if any, or interest on any series of Debt
Securities, or due to the default in the performance or breach of any other
covenant or agreement of the Issuer applicable to the Debt Securities of such
series but not applicable to all outstanding Debt Securities, shall have
occurred and be continuing, either the Trustee or the holders of not less than
25% in principal amount of the Debt Securities of such series may declare the
principal of all Debt Securities of such series and interest accrued thereon to
be due and payable immediately and (b) if an Event of Default due to a default
in the performance of any other of the covenants or agreements in the Indenture
applicable to all Debt Securities then outstanding or due to certain events of
bankruptcy, insolvency and reorganization of the Issuer shall have occurred and
be continuing, either the Trustee or the holders of not less than 25% in
principal amount of the Debt Securities then outstanding (treated as one class)
may declare the principal of all such Debt Securities and interest accrued
thereon to be due and payable immediately, but upon certain conditions such
declarations may be annulled and past defaults may be waived (except a
continuing default in payment of principal, premium, if any, or interest on such
Debt Securities) by the holders of a majority in principal amount of the Debt
Securities of such series (or of all series, as the case may be) then
outstanding.
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee to act with the required standard of care, to be indemnified
by the holders of Debt Securities requesting the Trustee to exercise any right
or power under the Indenture before proceeding to exercise any such right or
power at the request of such holders.
The Indenture provides that no holder of Debt Securities of any series may
institute any action against the Issuer under the Indenture (except actions for
payment of overdue principal, premium, if any, or interest) unless such holder
previously shall have given to the Trustee written notice of default and
continuance thereof and unless the holders of not less than 25% in principal
amount of the Debt Securities of such series then outstanding shall have
requested the Trustee to institute such action and shall have offered the
Trustee reasonable indemnity, the Trustee shall not have instituted such action
within 60 days of such request and the Trustee shall not have received direction
inconsistent with such written request by the holders of a majority in principal
amount of the Debt Securities of such series then outstanding.
The Indenture contains a covenant that the Issuer will file annually with
the Trustee a certificate of no default or a certificate specifying any default
that exists.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Legal Defeasance. The Indenture provides that the Issuer, at the Issuer's
option, will be discharged from any and all obligations in respect of the Debt
Securities of any series (except for certain obligations to register the
transfer or exchange of Debt Securities of any series, to replace stolen, lost
or mutilated Debt Securities of such series, to maintain paying agencies and to
hold monies for payment in trust) upon the deposit with the Trustee, in trust,
of cash and/or U.S. Government Obligations (as defined in the Indenture) which,
through the payment of interest and principal in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay and
discharge each installment of principal (and premium, if any) and interest, if
any, on, and any mandatory sinking fund payments in respect of, the Debt
Securities of such series on the stated maturity of such payments in accordance
with the terms of the Indenture and such Debt Securities. Such discharge may
occur only if, among other things, the Issuer has delivered to the Trustee an
opinion of counsel to the effect that the Issuer has received from, or there has
been published by, the United States Internal Revenue Service a ruling, or there
has been a change in tax law, in either case to the effect that such discharge
will not be deemed, or result in, a taxable event with respect to holders of the
Debt Securities of such series.
Covenant Defeasance. The Indenture provides that upon compliance with
certain conditions, the Issuer may omit to comply with the obligations imposed
by certain provisions of the Indenture (which contain the covenants described
above limiting liens, consolidations, mergers, transfers and leases) and any
omission to comply with such sections will not constitute an Event of Default.
The Issuer, in order to exercise such option, will be required to deposit with
the Trustee cash and/or U.S. Government Obligations which, through the payment
of interest and principal in respect thereof in accordance with
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their terms, will provide money in an amount sufficient to pay and discharge
each installment of principal (and premium, if any) and interest, if any, on and
any mandatory sinking fund payments in respect of the Debt Securities of such
series on the stated maturity of such payments in accordance with the terms of
the Indenture and such Debt Securities. The Issuer will also be required to
deliver to the Trustee an opinion of counsel to the effect that the deposit and
related covenant defeasance will not cause the holders of the Debt Securities of
such series to recognize income, gain or loss for federal income tax purposes.
MODIFICATION OF THE INDENTURE
The Indenture provides that the Issuer and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (i) secure any Debt Securities, (ii) evidence the assumption by a successor
corporation of the obligations of the Issuer, (iii) add covenants for the
protection of the holders of Debt Securities, (iv) cure any ambiguity or correct
any inconsistency in the Indenture, provided that such cure or correction does
not adversely affect the holders of Debt Securities, (v) establish the forms or
terms of Debt Securities of any series and (vi) evidence the acceptance of
appointment by a successor trustee.
The Indenture also contains provisions permitting the Issuer and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of Debt Securities of all series then outstanding and
affected (voting as one class), to add any provisions to, or change in any
manner or eliminate any of the provisions of, the Indenture or modify in any
manner the rights of the holders of the Debt Securities of each series so
affected; provided that the Issuer and the Trustee may not, without the consent
of the holder of each outstanding Debt Security affected thereby, (a) extend the
final maturity of any Debt Security, or reduce the principal amount thereof or
premium thereon, if any, or reduce the rate or extend the time of payment of
interest thereon, or reduce any amount payable on redemption thereof or change
the currency in which the principal thereof, premium, if any, or interest
thereon is payable or reduce the amount of the principal of any Debt Security
issued with original issue discount that is payable upon acceleration or
provable in bankruptcy or alter certain provisions of the Indenture relating to
the Debt Securities not denominated in U.S. dollars or impair the right to
institute suit for the enforcement of any payment on any Debt Security when due
or (b) reduce the aforesaid percentage in principal amount of Debt Securities of
any series, the consent of the holders of which is required for any such
modification.
CONCERNING THE TRUSTEE
PNC Bank, N.A., is the Trustee under the Indenture. All payments of
principal of, premium, if any, and interest on and all registration, transfer,
exchange, authentication and delivery of, the New Notes will be effected by the
Trustee at an office designated by the Trustee in New York, New York. The
Trustee is one of a number of banks with which the Issuer and its subsidiaries
maintain ordinary banking and trust relationships.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict or resign.
In case of any conflicting interest relating to the Trustee's duties with
respect to the New Notes, the Trustee shall either eliminate such conflicting
interest or, except as otherwise provided in the Trust Indenture Act of 1939, as
amended, resign.
The holders of a majority in principal amount of any series of Debt
Securities then outstanding will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee with respect to such series of Debt Securities, provided that such
direction would not conflict with any rule of law or with the Indenture, would
not be unduly prejudicial to the rights of another holder of the Debt
Securities, and would not involve the Trustee in personal liability. The
Indenture provides that in case an Event of Default shall occur and be known to
the
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Trustee (and not be cured), the Trustee will be required to use the degree of
care of a prudent person in the conduct of his or her own affairs in the
exercise of its power. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of the Debt Securities, unless they shall have
offered to the Trustee security and indemnity satisfactory to it.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, STOCKHOLDERS OR INCORPORATORS
The Indenture provides that no past, present or future director, officer,
employee, stockholder or incorporator of the Issuer or any successor corporation
shall have any liability for any obligations of the Issuer under the New Notes
or the Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation, by reason of such person's or entity's status as
such director, officer, stockholder or incorporator.
GOVERNING LAW
The Indenture and New Notes will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to such State's
conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Issuer and its subsidiaries may maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of business.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations to holders of the New Notes. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings, and judicial decisions
now in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the New Notes and does not
deal with tax consequences arising under the laws of any foreign, state or local
jurisdiction. This discussion is for general information only, and does not
purport to address all tax consequences that may be important to particular
holders in light of their personal circumstances, or to certain types of holders
(such as certain financial institutions, insurance companies, tax-exempt
entities, dealers in securities or persons who hold the New Notes in connection
with a straddle) that may be subject to special rules. This discussion assumes
that each holder holds the New Notes as capital assets.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any
holder who is not a United States person. The term "United States person" means
a citizen or resident of the United States, a corporation or partnership
(including any entity taxed as a partnership for U.S. federal income tax
purposes) created or organized in the United States or any state thereof, an
estate, the income of which is includible in income for the United States
federal income tax purposes regardless of its source, or a trust if (i) a court
within the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States persons have the
authority to control all substantial decisions of the trust.
HOLDERS OF THE NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE,
OWNERSHIP AND DISPOSITION OF THE NEW NOTES AND THE EFFECT THAT THEIR PARTICULAR
CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The terms of the New Notes are identical to those of the Old Notes, except
that the New Notes are registered under applicable federal securities laws.
Under applicable Treasury Regulations, the exchange of Old Notes for New Notes
pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes. If, however, the exchange of Old Notes for New
Notes were treated as an "exchange" for federal income tax purposes, such
transactions should constitute a recapitalization for federal income tax
purposes and holders of the Old Notes should not recognize any gain or loss on
such exchanged. The term "New Notes" utilized in the following sections means,
in certain contexts, the Old Notes an New Notes considered as one and the same
evidences of indebtedness in applying the federal income tax rule in question.
TAX CONSIDERATIONS APPLICABLE TO UNITED STATES PERSONS
Interest on New Notes. Interest paid on the New Notes will be taxable to a
holder as ordinary interest income in accordance with the holder's method of tax
accounting at the time that such interest is accrued or (actually or
constructively) received.
Sale or Exchange of New Notes. In general, a holder of the New Notes will
recognize gain or loss upon the sale, redemption, retirement or other
disposition of the New Notes measured by the difference between the amount of
cash and the fair market value of any property received (except to the extent
attributable to the payment of accrued interest which will be taxable as such)
and the holder's adjusted tax basis in the New Notes. A holder's tax basis in
the New Notes generally will equal the cost of the Old Notes to the holder
increased by the amount of market discount, if any, previously taken into income
by the holder or decreased by any bond premium theretofore amortized by the
holder with respect to the New Notes. Subject to the market discount rules
discussed below, the gain or loss on the
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disposition of the New Notes will be capital gain or loss and will be long-term
gain or loss if the New Notes have been held for more than one year at the time
of such disposition. For non-corporate taxpayers, the lower capital gain tax
rates enacted as part of the Taxpayer Relief Act of 1997 (the "1997 Act"), do
not apply to gains from the sale or exchange of the New Notes held for 18 months
or less. The pre-1997 Act 28% maximum tax rate continues to apply to gains from
the sale or exchange of capital assets held more than one year but not more than
18 months.
Market Discount. The resale of the New Notes may be affected by the "market
discount" provisions of the Code. For this purpose, the market discount on a
Note will generally be equal to the amount, if any, by which the stated
redemption price at maturity of the New Notes immediately after its acquisition
exceeds the holder's tax basis in the New Notes. Subject to a de minimis
exception, these provisions generally require a holder of a New Note acquired at
a market discount to treat as ordinary income any gain recognized on the
disposition of such New Notes to the extent of the "accrued market discount" on
such New Notes at the time of disposition. In general, market discount on a New
Note will be treated as accruing on a straight-line basis over the term of such
New Notes, or, at the election of the holder, under a constant yield method.
Holders may elect to include accrued market discount in income currently with
respect to all market discount bonds acquired on or after the first day of the
first taxable year for which the election is effective and for any such bond on
either a straight-line or constant yield basis. In the absence of such election,
a holder of New Notes acquired at a market discount may be required to defer the
deduction of a portion of the interest on any indebtedness incurred or
maintained to acquire or carry the New Notes until the New Notes are disposed of
in a taxable transaction.
TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on New Notes. Generally, interest paid on the New Notes to a
Non-U.S. Holder will not be subject to United States federal income tax if: (i)
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder; (ii) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total voting
power of all classes of stock of the Issuer entitled to vote and is not a
controlled foreign corporation with respect to which the Issuer is a "related
person" within the meaning of the Code; and (iii) the beneficial owner, under
penalty of perjury, certifies that the owner is not a United States person and
provides the owner's name and address. If certain requirements are satisfied,
the certification described in clause (iii) above may be provided by a
securities clearing organization, a bank, or other financial institution that
holds customers' securities in the ordinary course of its trade or business. A
holder that is not exempt from tax under these rules will be subject to United
States federal income tax withholding at a rate of 30% unless the interest is
effectively connected with the conduct of a United States trade or business, in
which case the interest will be subject to the United States federal income tax
on net income that applies to United States persons generally. Non-U.S. Holders
should consult applicable income tax treaties, which may provide different
rules.
Sales or Exchange of New Notes. A Non-U.S. Holder generally will not be
subject to United States federal income tax on gain recognized upon the sale or
other disposition of the New Notes unless (i) the gain is effectively connected
with the conduct of a trade or business within the United States by the Non-U.S.
Holder, or (ii) in the case of a Non-U.S. Holder who is a nonresident alien
individual and holds the New Notes as a capital asset, such holder is present in
the United States for 183 or more days in the taxable year and certain other
circumstances are present. If the Issuer is a "United States real property
holding corporation", a Non-U.S. Holder may be subject to federal income tax
with respect to gain realized on the disposition of such New Notes as if it were
effectively connected with a United States trade or business and the amount
realized would then be subject to withholding at the rate of 10%. The amount
withheld pursuant to these rules will be creditable against such Non-U.S.
Holder's United States federal income tax liability and may entitle such
Non-U.S. Holder to a refund upon furnishing the required information to the
Internal Revenue Service. Non-U.S. Holders should consult applicable income tax
treaties, which may provide different rules.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply to
payments of interest on or the proceeds of the sale or other disposition of the
New Notes with respect to certain non-corporate U.S. holders. Such U.S. holders
generally will be subject to backup withholding at a rate of 31% unless the
recipient of such payment supplies a taxpayer identification number, certified
under penalties of perjury, as well as certain other information, or otherwise
establishes, in the manner prescribed by law, an exemption from backup
withholding. Any amount withheld under backup withholding is allowable as a
credit against the U.S. holder's federal income tax liability, upon furnishing
the required information.
Non-U.S. Holders. Generally, information reporting and backup withholding
of United States federal income tax at a rate of 31% may apply to payments of
principal, interest and premium (if any) to Non-U.S. Holders if the payee fails
to certify that the holder is not a United States person or if the Issuer or its
paying agent has actual knowledge that the payee is a United States person. The
31% backup withholding tax generally will not apply to interest paid to foreign
holders outside the United States that are subject to 30% withholding as
discussed above (see "Tax Considerations Applicable to Non-U.S. Holders --
Interest on New Notes") or that are subject to a tax treaty that reduces such
withholding.
The payment of the proceeds on the disposition of New Notes to or through
the United States office of a United States or foreign broker will be subject to
information reporting and backup withholding unless the owner provides the
certification described above or otherwise establishes an exemption. The payment
of the proceeds of the disposition by a Non-U.S. Holder of New Notes to or
through a foreign office of a broker will not be subject to backup withholding.
However, if such broker is a U.S. person, a controlled foreign corporation for
United States tax purposes, or a foreign person 50% or more of whose gross
income from all sources for certain periods is from activities that are
effectively connected with a United States trade or business, information
reporting will apply unless such broker has documentary evidence in its files of
the owner's foreign status and has no actual knowledge to the contrary or unless
the owner otherwise establishes an exemption. Both backup withholding and
information reporting will apply to the proceeds from such dispositions if the
broker has actual knowledge that the payee is a U.S. Holder.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general, the
final regulations do not significantly after the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. As originally promulgated,
the final regulations were to be generally effective for payments made after
December 31, 1998, subject to certain transition rules; however, the Treasury
Department and the IRS subsequently announced that the December 31, 1998 date
would be extended to December 31, 1999. Non-U.S. Holders should consult their
own tax advisors with respect to the impact, if any, of the new final
regulations.
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BUSINESS OF HEALTHSOUTH
GENERAL
HEALTHSOUTH is the nation's largest provider of outpatient surgery and
rehabilitative healthcare services. It provides these services through its
national network of outpatient and inpatient rehabilitation facilities,
outpatient surgery centers, diagnostic centers, occupational medicine centers,
medical centers and other healthcare facilities. HEALTHSOUTH believes that it
provides patients, physicians and payors with high-quality healthcare services
at significantly lower costs than traditional inpatient hospitals. Additionally,
HEALTHSOUTH's national network, reputation for quality and focus on outcomes has
enabled it to secure contracts with national and regional managed care payors.
At June 30, 1998, HEALTHSOUTH had over 1,900 patient care locations in 50
states, the United Kingdom and Australia.
In its outpatient and inpatient rehabilitation facilities, HEALTHSOUTH
provides interdisciplinary programs for the rehabilitation of patients
experiencing disability due to a wide variety of physical conditions, such as
stroke, head injury, orthopaedic problems, neuromuscular disease and
sports-related injuries. HEALTHSOUTH's rehabilitation services include physical
therapy, sports medicine, work hardening, neurorehabilitation, occupational
therapy, respiratory therapy, speech-language pathology and rehabilitation
nursing. Independent studies have shown that rehabilitation services like those
provided by HEALTHSOUTH can save money for payors and employers.
In addition to its rehabilitation facilities, HEALTHSOUTH operates the
largest network of freestanding outpatient surgery centers in the United States.
HEALTHSOUTH's outpatient surgery centers provide the facilities and medical
support staff necessary for physicians to perform non-emergency surgical
procedures. While outpatient surgery is widely recognized as generally less
expensive than surgery performed in a hospital, HEALTHSOUTH believes that
outpatient surgery performed at a freestanding outpatient surgery center is
generally less expensive than hospital-based outpatient surgery. Over 80% of
HEALTHSOUTH's surgery center facilities are located in markets served by its
rehabilitative service facilities, enabling the Issuer to pursue opportunities
for cross-referrals.
HEALTHSOUTH is also among the largest operators of outpatient diagnostic
centers and occupational medicine centers in the United States. Most of
HEALTHSOUTH's diagnostic centers and occupational medicine centers operate in
markets where HEALTHSOUTH also provides rehabilitative healthcare and outpatient
surgery services. HEALTHSOUTH believes that its ability to offer a comprehensive
range of its services in a particular geographic market makes HEALTHSOUTH more
attractive to both patients and payors in such market.
Over the last three years, HEALTHSOUTH has completed several significant
acquisitions in the rehabilitation business and has expanded into the surgery
center, diagnostic and occupational medicine businesses. HEALTHSOUTH believes
that these acquisitions complement its historical operations and enhance its
market position. HEALTHSOUTH further believes that its expansion into the
outpatient surgery, diagnostic and occupational medicine businesses provides it
with platforms for future growth. HEALTHSOUTH is continually evaluating
potential acquisitions in the outpatient and rehabilitative healthcare services
industry.
HEALTHSOUTH was organized as a Delaware corporation in February 1984.
HEALTHSOUTH's principal executive offices are located at One HealthSouth
Parkway, Birmingham, Alabama 35243, and its telephone number is (205) 967-7116.
HEALTHSOUTH STRATEGY
HEALTHSOUTH's principal objective is to be the provider of choice for
patients, physicians and payors alike for outpatient surgery and rehabilitative
healthcare services throughout the United States. HEALTHSOUTH's growth strategy
is based upon four primary elements: (i) the implementation of HEALTHSOUTH's
integrated service model in appropriate markets, (ii) successful marketing to
managed care organizations and other payors, (iii) the provision of
high-quality, cost-effective healthcare services, and (iv) the expansion of its
national network.
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o Integrated Service Model. HEALTHSOUTH seeks, where appropriate, to provide
an integrated system of healthcare services, including outpatient
rehabilitation services, inpatient rehabilitation services, ambulatory
surgery services and outpatient diagnostic services. HEALTHSOUTH believes
that its integrated system offers payors the convenience of dealing with a
single provider for multiple services. Additionally, it believes that its
facilities can provide extensive cross-referral opportunities. For
example, HEALTHSOUTH estimates that approximately one-third of its
outpatient rehabilitation patients have had outpatient surgery, virtually
all inpatient rehabilitation patients will require some form of outpatient
rehabilitation, and virtually all inpatient rehabilitation patients have
had some type of diagnostic procedure. HEALTHSOUTH has implemented its
Integrated Service Model in certain of its markets, and intends to expand
the model into other appropriate markets.
o Marketing to Managed Care Organizations and Other Payors. Since the late
1980s, HEALTHSOUTH has focused on the development of contractual
relationships with managed care organizations, major insurance companies,
large regional and national employer groups and provider alliances and
networks. HEALTHSOUTH's documented outcomes and experience with several
hundred thousand patients in delivering quality healthcare services at
reasonable prices has enhanced its attractiveness to such entities and has
given HEALTHSOUTH a competitive advantage over smaller and regional
competitors. These relationships have increased patient flow to
HEALTHSOUTH's facilities and contributed to HEALTHSOUTH's same-store
growth.
o Cost-Effective Services. HEALTHSOUTH's goal is to provide high-quality
healthcare services in cost-effective settings. To that end, HEALTHSOUTH
has developed standardized clinical protocols for the treatment of its
patients. This results in "best practices" techniques being utilized at
all of HEALTHSOUTH's facilities, allowing the consistent achievement of
demonstrable, cost-effective clinical outcomes. HEALTHSOUTH's reputation
for its clinical programs is enhanced through its relationships with major
universities throughout the nation, and its support of clinical research
in its facilities. Further, independent studies estimate that, for every
dollar spent on rehabilitation, $11 to $35 is saved. Finally, surgical
procedures typically are less expensive in outpatient surgery centers than
in hospital settings. HEALTHSOUTH believes that outpatient and
rehabilitative healthcare services will assume increasing importance in
the healthcare environment as payors continue to seek to reduce overall
costs by shifting patients to more cost-effective treatment
settings.
o Expansion of National Network. As the largest provider of outpatient
surgery and rehabilitative healthcare services in the United States,
HEALTHSOUTH is able to realize economies of scale and compete successfully
for national contracts with large payors and employers while retaining the
flexibility to respond to particular needs of local markets. The national
network affords HEALTHSOUTH the opportunity to offer large national and
regional employers and payors the convenience of dealing with a single
provider, to utilize greater buying power through centralized purchasing,
to achieve more efficient costs of capital and labor and to more
effectively recruit and retain clinicians. HEALTHSOUTH believes that its
recent acquisitions in the outpatient surgery, diagnostic imaging and
occupational medicine fields will further enhance its national presence by
broadening the scope of its existing services and providing new
opportunities for growth. These national benefits are realized without
sacrificing local market responsiveness. HEALTHSOUTH's objective is to
provide those outpatient and rehabilitative healthcare services needed
within each local market by tailoring its services and facilities to that
market's needs, thus bringing the benefits of nationally recognized
expertise and quality into the local setting.
RECENT DEVELOPMENTS
On July 1, 1998, HEALTHSOUTH acquired 33 ambulatory surgery centers from
Columbia/HCA Healthcare Corporation. The surgery centers are located in Alabama,
California, Iowa, Illinois, Kentucky, Louisiana, Minnesota, Mississippi, North
Carolina, Nevada, Oregon, Rhode Island and Texas.
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Effective July 31, 1998, HEALTHSOUTH entered into certain other arrangements to
acquire substantially all of the economic benefit of Columbia/HCA's interest in
one additional surgery center. The transaction was valued at approximately
$550,000,000.
On July 22, 1998, HEALTHSOUTH acquired National Surgery Centers, Inc.,
adding 40 outpatient surgery centers in 14 states to HEALTHSOUTH's existing
network of outpatient surgery and rehabilitative healthcare facilities. The
value of the NSC transaction is approximately $590,000,000. Under the terms of
the NSC agreement, NSC stockholders will receive 1.0972 shares of HEALTHSOUTH
Common Stock. The NSC transaction is expected to be accounted for as a pooling
of interests and is intended to be a tax-free reorganization.
PATIENT CARE SERVICES
HEALTHSOUTH began its operations in 1984 with a focus on providing
comprehensive orthopaedic and musculoskeletal rehabilitation services on an
outpatient basis. Over the succeeding 14 years, HEALTHSOUTH has consistently
sought and implemented opportunities to expand its services through acquisitions
and de novo development activities that complement its historic focus on
orthopaedic, sports medicine and occupational medicine services and that provide
independent platforms for growth. HEALTHSOUTH's acquisitions and internal growth
have enabled it to become the largest provider of rehabilitative healthcare
services, both inpatient and outpatient, in the United States, as well as the
largest operator of freestanding outpatient surgery centers. In addition,
HEALTHSOUTH has added diagnostic imaging services, occupational medicine
services and other outpatient services which provide natural enhancements to its
rehabilitative healthcare locations and facilitate the implementation of its
Integrated Service Model. HEALTHSOUTH believes that these additional businesses
also provide opportunities for growth in other areas not directly related to the
rehabilitative business, and HEALTHSOUTH intends to pursue further expansion in
those businesses.
Outpatient Rehabilitation Services
HEALTHSOUTH operates the largest group of affiliated proprietary outpatient
rehabilitation facilities in the United States. HEALTHSOUTH's outpatient
rehabilitation centers offer a comprehensive range of rehabilitative healthcare
services, including physical therapy and occupational therapy, that are tailored
to the individual patient's needs, focusing predominantly on orthopaedic
injuries, sports injuries, work injuries, hand and upper extremity injuries,
back injuries, and various neurological/neuromuscular conditions. As of June 30,
1998, HEALTHSOUTH provided outpatient rehabilitative healthcare services through
approximately 1,240 outpatient locations, including freestanding outpatient
centers and their satellites, outpatient satellites of inpatient facilities and
outpatient facilities managed under contract.
Inpatient Services
INPATIENT REHABILITATION FACILITIES. At June 30, 1998, HEALTHSOUTH operated
131 inpatient rehabilitation facilities with 7,717 beds in the United States,
representing the largest group of affiliated proprietary inpatient
rehabilitation facilities in the nation, as well as a 71-bed rehabilitation
hospital in Australia. HEALTHSOUTH's inpatient rehabilitation facilities provide
high-quality comprehensive services to patients who require intensive
institutional rehabilitation care. In certain markets HEALTHSOUTH's
rehabilitation hospitals may provide outpatient rehabilitation services as a
complement to their inpatient services.
MEDICAL CENTERS. At June 30, 1998, HEALTHSOUTH operated four medical
centers with 800 licensed beds in four distinct markets. These facilities
provide general and specialty medical and surgical healthcare services,
emphasizing orthopaedics, sports medicine and rehabilitation.
Surgery Centers
HEALTHSOUTH is currently the largest operator of outpatient surgery centers
in the United States. At June 30, 1998, it operated 176 freestanding surgery
centers, including five mobile lithotripsy units, in 36 states. Over 80% of
these facilities are located in markets served by HEALTHSOUTH's
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outpatient and rehabilitative service facilities, enabling HEALTHSOUTH to pursue
opportunities for cross-referrals between surgery and rehabilitative facilities
as well as to centralize administrative functions. HEALTHSOUTH's surgery centers
provide the facilities and medical support staff necessary for physicians to
perform non-emergency surgical procedures. Its typical surgery center is a
freestanding facility with three to six fully equipped operating and procedure
rooms and ancillary areas for reception, preparation, recovery and
administration. Each of HEALTHSOUTH's surgery centers is available for use only
by licensed physicians, oral surgeons and podiatrists, and the centers do not
perform surgery on an emergency basis.
Outpatient surgery centers, unlike hospitals, have not historically
provided overnight accommodations, food services or other ancillary services.
Over the past several years, states have increasingly permitted the use of
extended-stay recovery facilities by outpatient surgery centers. As a result,
many outpatient surgery centers are adding extended recovery care capabilities
where permitted. Most of HEALTHSOUTH's surgery centers currently provide for
extended recovery stays. The Issuer's ability to develop such recovery care
facilities is dependent upon state regulatory environments in the particular
states where its centers are located.
Diagnostic Centers
At June 30, 1998, HEALTHSOUTH operated 119 diagnostic centers in 25 states
and the United Kingdom. These centers provide outpatient diagnostic imaging
services, including magnetic resonance imaging ("MRI"), computerized tomography
("CT") services, X-ray services, ultrasound services, mammography services,
nuclear medicine services and fluoroscopy. Not all services are provided at all
sites; however, most of HEALTHSOUTH's diagnostic centers are multi-modality
centers.
Because many patients at HEALTHSOUTH's rehabilitative healthcare and
outpatient surgery facilities require diagnostic procedures of the type
performed at its diagnostic centers, HEALTHSOUTH believes that its diagnostic
operations are a natural complement to its other services and enhance its
ability to market those services to patients and payors.
Occupational Health Services
At March 31, 1998, HEALTHSOUTH operated 122 occupational health centers in
33 states. These centers provide cost-effective, outpatient primary medical care
and rehabilitation services to individuals for the treatment of work-related
medical problems.
HEALTHSOUTH's occupational health centers market their services to large
and small employers, workers' compensation and health insurers and managed care
organizations. The services provided at HEALTHSOUTH's occupational health
centers include outpatient primary medical care for work-related injuries and
illnesses, work-related physical examinations, physical therapy services and
workers' compensation medical services, as well as other services primarily
aimed at work-related injuries or illnesses. Medical services at the centers are
provided by licensed physicians who are employed by or under contract with
HEALTHSOUTH or affiliated medical practices. These centers also employ nurses,
therapists and other licensed professional staff as necessary for the services
provided. HEALTHSOUTH believes that occupational health primary care services
are a strategic component of its business, and that the physicians in its
occupational medicine centers can, in many cases, serve as "gatekeepers"
providing access to the other services offered by HEALTHSOUTH.
Other Patient Care Services
In certain of its markets, HEALTHSOUTH provides other patient care
services, including home healthcare, physician services and contract management
of hospital-based rehabilitative healthcare services. HEALTHSOUTH evaluates
market opportunities on a case-by-case basis in determining whether to provide
additional services of these types, which may be complementary to facility-based
services provided by HEALTHSOUTH or stand-alone businesses.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. HEALTHSOUTH has agreed that it will make this Prospectus, as
amended or supplemented, available to any Participating Broker-Dealer for a
period of time not to exceed 180 days after the Registration Statement is
declared effective (subject to extension under certain circumstances) for use in
connection with any such resale. In addition, until such date, all
broker-dealers effecting transactions in the New Notes may be required to
deliver a prospectus.
HEALTHSOUTH will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Starting on the Expiration Date, and for a period of 180 days thereafter,
HEALTHSOUTH will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. HEALTHSOUTH has agreed to pay
expenses incident to the Exchange Offer other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the New Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, HEALTHSOUTH believes that the New Notes issued pursuant to
the Exchange Offer may be offered for resale, resold or otherwise transferred by
each holder thereof (other than a broker-dealer who acquires such New Notes
directly from HEALTHSOUTH for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act and other than any
holder that is an "affiliate" (as defined in Rule 405 under the Securities Act)
of HEALTHSOUTH) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder is not engaged in,
and does not intend to engage in, a distribution of such New Notes and has no
arrangement with any person to participate in a distribution of such New Notes.
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EXPERTS
The consolidated financial statements and schedule of HEALTHSOUTH at
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, appearing in HEALTHSOUTH's Annual Report on Form 10-K for the
year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated herein
by reference. Such consolidated financial statements and schedule have been
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the New Notes to be issued pursuant to the Exchange Offer
will be passed upon by Haskell Slaughter & Young, L.L.C., Birmingham, Alabama.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") grants
corporations the right to limit or eliminate the personal liability of their
directors in certain circumstances in accordance with provisions therein set
forth. Article NINTH of the HEALTHSOUTH Certificate contains a provision
eliminating or limiting director liability to HEALTHSOUTH and its stockholders
for monetary damages arising from acts or omissions in the director's capacity
as a director. The provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
HEALTHSOUTH or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the Delaware statutory provision making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the Board
of Directors of HEALTHSOUTH protection against awards of monetary damages
resulting from breaches of their duty of care (except as indicated above). As a
result of this provision, the ability of HEALTHSOUTH or a stockholder thereof to
successfully prosecute an action against a director for a breach of his duty of
care is limited. However, the provision does not affect the availability of
equitable remedies such as an injunction or rescission based upon a director's
breach of his duty of care. The SEC has taken the position that the provision
will have no effect on claims arising under the Federal securities laws.
Section 145 of the DGCL grants corporations the right to indemnify their
directors, officers, employees and agents in accordance with the provisions
therein set forth. Article NINTH of the HEALTHSOUTH Certificate and Article IX
of the HEALTHSOUTH Bylaws provide for mandatory indemnification rights, subject
to limited exceptions, to any director, officer, employee, or agent of
HEALTHSOUTH who, by reason of the fact that he or she is a director, officer,
employee, or agent of HEALTHSOUTH, is involved in a legal proceeding of any
nature. Such indemnification rights include reimbursement for expenses incurred
by such director, officer, employee, or agent in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
the DGCL.
HEALTHSOUTH has entered into agreements with all of its directors and its
executive officers pursuant to which HEALTHSOUTH has agreed to indemnify such
directors and executive officers against liability incurred by them by reason of
their services as a director or executive officer to the fullest extent
allowable under applicable law.
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ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C>
(1) Purchase Agreement, dated June 17, 1998, among HEALTHSOUTH
Corporation and Salomon Brothers Inc, Goldman, Sachs & Co., J.P.
Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, NationsBanc
Montgomery Securities LLC, Bear, Stearns & Co. Inc., Credit Suisse
First Boston Corpora- tion, Deutsche Bank Securities Inc.,
PaineWebber Incorporated and Scotia Capital Markets (U.S.A.) Inc.
relating to the Issuer's 6.875% Senior Notes due 2005 and 7.0%
Senior Notes due 2008.
(3)-1 Restated Certificate of Incorporation of HEALTHSOUTH Corporation,
filed as Exhibit (3)-1 to the Issuer's Current Report on Form 8-K,
dated May 28, 1998, is hereby incorporated by reference.
(4)-1 Indenture, dated June 22, 1998, between HEALTHSOUTH Corporation and
PNC Bank, National Association, as Trustee, filed as Exhibit 4.1 to
the Issuer's Quarterly Report on Form 10-Q for the three months
ended June 30, 1998, is hereby incorporated herein by reference.
(4)-2 Officer's Certificate pursuant to Sections 2.3 and 11.5 of the
Indenture, dated June 22, 1998, between HEALTHSOUTH Corporation and
PNC Bank, National Association, as Trustee, relating to the
Issuer's 6.875% Senior Notes due 2005 and 7.0% Senior Notes due
2008, filed as Exhibit 4.2 to the Issuer's Quarterly Report on Form
10-Q for the three months ended June 30, 1998, is hereby
incorporated herein by reference.
(4)-3 Registration Rights Agreement, dated June 22, 1998, among
HEALTHSOUTH Corporation and Salomon Brothers Inc, Goldman, Sachs &
Co., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated, NationsBanc
Montgomery Securities LLC, Bear, Stearns & Co. Inc., Credit Suisse
First Boston Corpora- tion, Deutsche Bank Securities Inc.,
PaineWebber Incorporated and Scotia Capital Markets (U.S.A.) Inc.
relating to the Issuer's 6.875% Senior Notes due 2005 and 7.0%
Senior Notes due 2008, filed as Exhibit 4.3 to the Issuer's
Quarterly Report on Form 10-Q for the three months ended June 30,
1998, is hereby incorporated herein by reference. (4)-4 Form of
6.875% Senior Notes due 2005. (4)-5 Form of 7.0% Senior Notes due
2008. (4)-6 Form of Officer's Certificate pursuant to Sections 2.3
and 11.5 of the Indenture, dated June 22, 1998, between HEALTHSOUTH
Corporation and PNC Bank, National Association, as Trustee,
relating to the new 6.875% Senior Notes due 2005 and the new 7.0%
Senior Notes due 2008.
(5) Opinion of Haskell Slaughter & Young, L.L.C., regarding legality of
the New Notes.
(12) Computation of Ratio of Earnings to Fixed Charges.
(23)-1 Consent of Ernst & Young LLP.
(23)-2 Consent of Haskell Slaughter & Young, L.L.C. (included in the
opinion filed as Exhibit (5)).
(24) Powers of Attorney. See signature pages.
(25)-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of a Corporation Designated to Act as Trustee
on Form T-1, relating to PNC Bank, National Association.
(99)-1 Form of Letter of Transmittal.
(99)-2 Form of Notice of Guaranteed Delivery.
(99)-3 Form of Letter to Clients.
(99)-4 Form of Letter to Depository Trust Company Participants.
(99)-5 Instruction to Book-Entry Transfer Participant.
</TABLE>
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<TABLE>
<S> <C>
(99)-6 Form of Exchange Agent Agreement.
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering prices set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling
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person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama, on August 14, 1998.
HEALTHSOUTH CORPORATION
By RICHARD M. SCRUSHY
------------------------------------
Richard M. Scrushy
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard M. Scrushy and Michael D. Martin, and
each of them, his attorney-in-fact with powers of substitution for him in any
and all capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this Registration Statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
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<S> <C> <C>
RICHARD M. SCRUSHY Chairman of the Board and Chief August 14, 1998
- ------------------------- Executive Officer and Director
Richard M. Scrushy
MICHAEL D. MARTIN Executive Vice President, August 14, 1998
- ------------------------- Chief Financial Officer, Treasurer
Michael D. Martin and Director
WILLIAM T. OWENS Group Senior Vice President- August 14, 1998
- ------------------------- Finance and Controller (Principal
William T. Owens Accounting Officer)
JAMES P. BENNETT Director August 14, 1998
- -------------------------
James P. Bennett
ANTHONY J. TANNER Director August 14, 1998
- -------------------------
Anthony J. Tanner
P. DARYL BROWN Director August 14, 1998
- -------------------------
P. Daryl Brown
PHILLIP C. WATKINS, M.D. Director August 14, 1998
- -------------------------
Phillip C. Watkins, M.D.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------- ---------- ----------------
<S> <C> <C>
GEORGE H. STRONG Director August 14, 1998
- -------------------------
George H. Strong
C. SAGE GIVENS Director August 14, 1998
- -------------------------
C. Sage Givens
CHARLES W. NEWHALL III Director August 14, 1998
- -------------------------
Charles W. Newhall III
JOHN S. CHAMBERLIN Director August 14, 1998
- -------------------------
John S. Chamberlin
JOEL C. GORDON Director August 14, 1998
- -------------------------
Joel C. Gordon
EDWIN M. CRAWFORD Director August 14, 1998
-------------------------
Edwin M. Crawford
</TABLE>
II-6
EXHIBIT (1)
HEALTHSOUTH CORPORATION
$250,000,000 6.875% SENIOR NOTES DUE 2005
$250,000,000 7.0% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
New York, New York
June 17, 1998
Salomon Brothers Inc
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
HEALTHSOUTH Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to you, as the initial purchasers (the "Initial Purchasers"),
$250,000,000 principal amount of its 6.875% Senior Notes due 2005 (the "2005
Notes") and $250,000,000 principal amount of its 7.0% Senior Notes due 2008 (the
"2008 Notes" and, together with the 2005 Notes, the "Securities"). The
Securities are to be issued under that certain Indenture, as supplemented by
that certain Officers' Certificate dated June 22, 1998 (the Indenture as
supplemented by the Officers' Certificate being herein collectively referred to
as the "Indenture"), dated as of June 22, 1998 between the Company and PNC Bank,
National Association, as trustee (the "Trustee").
The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"Securities
1
<PAGE>
Act"), in reliance upon exemptions from the registration requirements of the
Securities Act. You have advised the Company that the Initial Purchasers will
offer and sell the Securities purchased by them hereunder in accordance with
Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum as of June 4, 1998 (including any and all
exhibits thereto, the "Preliminary Memorandum") and a final offering memorandum,
dated June 17, 1998 (including any and all exhibits thereto, the "Final
Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets
forth certain information concerning the Company and the Securities. Any
references herein to the Preliminary Memorandum or the Final Memorandum shall be
deemed to include all amendments and supplements thereto and any documents filed
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder which are incorporated by reference therein. As used
herein, the term "Incorporated Documents" means the documents which at the time
are incorporated by reference in the Preliminary Memorandum or the Final
Memorandum or any amendment or supplement thereto. The Company hereby confirms
that it has authorized the use of the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, in connection with the
offer and sale of the Securities by the Initial Purchasers. Unless stated to the
contrary, all references herein to the Final Memorandum are to the Final
Memorandum at the Execution Time (as defined below) and are not meant to include
any amendment or supplement subsequent to the Execution Time.
The Company understands that the Initial Purchasers propose to make offers
and sales (the "Exempt Resales") of the Securities purchased by the Initial
Purchasers hereunder only on the terms and in the manner set forth in the
Preliminary Memorandum, the Final Memorandum and Section 4 hereof.
The Initial Purchasers of the Securities and their direct and indirect
transferees will be entitled to the benefits of a Registration Rights Agreement,
to be dated as of the Closing Date (as defined below) and to be substantially in
the form attached hereto as Annex 1 (the "Registration Rights Agreement"),
pursuant to which the Company will file one or more registration statements with
the Commission registering with the Commission the New Securities (as such term
is defined in such Registration Rights Agreement) or the Securities.
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture, the Preliminary Memorandum or the
Final Memorandum.
1. Representations and Warranties. The Company represents and warrants to
each Initial Purchaser as set forth below in this Section 1.
(a) Each of the Preliminary Memorandum and the Final Memorandum has been
prepared by the Company for use by the Initial Purchasers in connection with the
Exempt Resales. No order or decree preventing the use of the Preliminary
Memorandum or the Final Memorandum or any amendment or supplement thereto, or
any order asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Securities Act has been issued
and no proceeding for that purpose has commenced or is pending
2
<PAGE>
or, to the knowledge of the Company, is contemplated.
(b) The Preliminary Memorandum, at the date thereof, did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading. The Final Memorandum, at the date
hereof and at the Closing Date (as defined below), does not and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to statements in or
omissions from the Preliminary Memorandum or the Final Memorandum made in
reliance upon and in conformity with information relating to the Initial
Purchasers furnished to the Company in writing by or on behalf of the Initial
Purchasers expressly for use therein.
(c) The Incorporated Documents heretofore filed were filed in a timely
manner and, when they were filed (or, if any amendment with respect to any such
document was filed, when such amendment was filed), conformed in all material
respects to the requirements of the Exchange Act, and the rules and regulations
thereunder and any further Incorporated Documents so filed will, when they are
filed, conform in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder; no such document when it was filed
(or, if an amendment with respect to any such document was filed, when such
amendment was filed), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and no such further document, when
it is filed, will contain an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(d) The Indenture has been duly and validly authorized by the Company and,
upon its execution, delivery and performance by the Company and assuming due
authorization, execution, delivery and performance by the Trustee, will be a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally, and subject to the
applicability of general principles of equity, and conforms in all material
respects to the description thereof in the Preliminary Memorandum and the Final
Memorandum; no qualification of the Indenture under the Trust Indenture Act of
1939 (the "1939 Act") is required in connection with the offer and sale of the
Securities contemplated hereby or in connection with the Exempt Resales.
(e) The Securities have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in accordance with the
Indenture and delivered to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally, and subject to
the applicability of general principles of equity, and the Securities will
conform in all material respects to the description thereof in the Preliminary
Memorandum and the Final Memorandum.
3
<PAGE>
(f) The Securities have been duly authorized and, when issued and delivered
to the Initial Purchasers against payment therefor in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and free of any
preemptive or similar rights.
(g) Each of the Company and its corporate subsidiaries (collectively, the
"Subsidiaries") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Preliminary Memorandum and the Final Memorandum; each of the Company's
affiliated partnerships (collectively, the "Controlled Entities") is duly formed
and validly existing under the laws of the jurisdiction pursuant to which it was
organized with full power and authority (partnership and other) to own, lease
and operate its properties and conduct its business as described in the
Preliminary Memorandum and the Final Memorandum; and each of the Company, the
Subsidiaries and the Controlled Entities is duly qualified to do business as a
foreign corporation or partnership in good standing in all other jurisdictions,
if any, where the ownership or leasing of properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business, operations
or financial condition of the Company, the Subsidiaries and the Controlled
Entities taken as a whole (a "Material Adverse Effect"); all of the issued
shares of capital stock of each of the Subsidiaries, and the partnership
interests representing ownership in each Controlled Entity held of record or
beneficially by the Company, have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company free and clear of all
liens, security interests, charges or other encumbrances, except for those
liens, security interests, charges or other encumbrances that would not have a
Material Adverse Effect; and all of the outstanding interests representing
ownership in the Controlled Entities have been offered, sold and issued in
compliance with applicable state and federal laws related to the issuance of
securities.
(h) There is no legal or governmental proceeding pending or to the
Company's knowledge threatened to which the Company, any Subsidiary or any
Controlled Entity is a party or of which the business or property of the
Company, any Subsidiary or any Controlled Entity is the subject which is not
disclosed in the Preliminary Memorandum and the Final Memorandum and which might
result in a judgment or decree having a Material Adverse Effect or which is
otherwise of a character that would be required to be described in the
Preliminary Memorandum and the Final Memorandum if the Preliminary Memorandum
and the Final Memorandum were prospectuses included in a registration statement
on Form S-1 under the Securities Act, and there is no contract, license or other
document of a character required to be described in the Preliminary Memorandum
and the Final Memorandum or to be filed as an exhibit to any Incorporated
Document which is not described or filed as required by the Securities Act or
the Exchange Act.
(i) The Company and its Subsidiaries are not in violation of their
respective charters or bylaws, the Controlled Entities are not in violation of
their respective agreements of limited partnership, and neither the Company nor
any Subsidiary or Controlled Entity is in default in any respect in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any agreement,
indenture or other instrument to which it is a party or by which it is bound,
which violation or default would have a Material Adverse Effect; and neither the
issuance, offer, sale or delivery of the
4
<PAGE>
Securities, the execution, delivery or performance of this Agreement, the
Indenture or the Registration Rights Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby or thereby
require any consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body (except such
as may be required in connection with the registration under the Securities Act
of the Securities in accordance with the Registration Rights Agreement and the
qualification of the Indenture under the 1939 Act and except for compliance with
the securities or Blue Sky laws of various jurisdictions), and will not conflict
with or constitute a breach of or default under, or violate, the charter or
bylaws of the Company or any Subsidiary, or the agreement of limited partnership
of any Controlled Entity, or any agreement, indenture or other instrument to
which the Company or any Subsidiary or any Controlled Entity is a party or by
which it is bound, or any law, regulations, order or decree applicable to the
Company, any Subsidiary or any Controlled Entity.
(j) The accountants, Ernst & Young LLP, who have certified or shall certify
the financial statements included as part of the Preliminary Memorandum and the
Final Memorandum (or any amendment or supplement thereto) or the Incorporated
Documents, are independent public accountants as required by the Securities Act.
(k) The financial statements, together with related schedules and notes,
included or incorporated by reference in the Preliminary Memorandum and the
Final Memorandum (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company, the Subsidiaries and the Controlled Entities on the
basis stated in the Preliminary Memorandum and the Final Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data included or incorporated by reference in the
Preliminary Memorandum and the Final Memorandum (and any amendment or supplement
thereto) are accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company, the Subsidiaries
and the Controlled Entities.
(l) The Company has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement and the Registration Rights
Agreement; the execution and delivery of, and the performance by the Company of
its obligations under this Agreement and the Registration Rights Agreement have
been duly and validly authorized by the Company, and this Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Company and constitute the valid and legally binding agreements of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement hereof and thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and except as
rights to indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy.
(m) Except as disclosed in the Preliminary Memorandum and the Final
Memorandum (or any amendment or supplement thereto), subsequent to the dates as
of which such information is given in the Preliminary Memorandum and the Final
Memorandum (or any
5
<PAGE>
amendment or supplement thereto), neither the Company nor any of the
Subsidiaries or Controlled Entities has incurred any liability or obligation,
direct or contingent, or entered into any transaction, not in the ordinary
course of business, that is material to the Company, the Subsidiaries and the
Controlled Entities taken as a whole, and there has not been any change in the
capital stock, or material increase in the short-term debt or long-term debt, of
the Company or any of the Subsidiaries or Controlled Entities, or any material
adverse change, or any development involving or which may reasonably be expected
to involve a prospective material adverse change in the condition (financial or
other), business, net worth or results of operations of the Company, the
Subsidiaries and the Controlled Entities taken as a whole.
(n) The Company and each Subsidiary and Controlled Entity have good and
marketable title to all real and personal property described in the Preliminary
Memorandum and the Final Memorandum as being owned respectively by them, in each
case free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Preliminary Memorandum and the
Final Memorandum or such as are not materially significant or important in
relation to the business of the Company, the Subsidiaries and the Controlled
Entities taken as a whole; and the real and personal property held under lease
by the Company, any Subsidiary or any Controlled Entity is held by such entity
under valid, subsisting and enforceable leases with only such exceptions as in
the aggregate are not material and do not interfere with the conduct of the
business of the Company, the Subsidiaries and the Controlled Entities taken as a
whole; provided, however, that no representation is made hereby as to the title
of the lessors of such property.
(o) Except as permitted by the Securities Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and completion
of the distribution of the Securities, will not distribute any offering material
in connection with the offering and sale of the Securities other than the
Preliminary Memorandum and the Final Memorandum.
(p) Each of the Company, the Subsidiaries and the Controlled Entities holds
and is operating in compliance (in all material respects) with all material
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates and orders of any governmental or self-regulatory body required for
the conduct of its business, and all of such are valid and in full force and
effect, and each of the Company, the Subsidiaries and the Controlled Entities is
in compliance in all material respects with all laws, regulations, orders and
decrees applicable to it which have a material effect on its business,
properties or assets.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that 1) transactions are executed in
accordance with management's general or specific authorization; 2) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; 3) access to assets is permitted only in accordance
with management's general or specific authorization; and 4) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(r) To the best of the Company's knowledge after reasonable investigation,
neither the Company, any Subsidiary or any Controlled Entity, nor any employee
or agent thereof, has made any payment of funds of the Company, any Subsidiary
or any Controlled
6
<PAGE>
Entity or received or retained any funds in violation of any law, rule or
regulation, which violation would have a Material Adverse Effect.
(s) The Company, each Subsidiary and each Controlled Entity have filed or
timely obtained extensions to file all tax returns required to be filed by it,
which returns are complete and correct, and are not in default in the payment of
any taxes which were payable pursuant to said returns or any assessments with
respect thereto, except where the failure to file such returns and make such
payments would not have a Material Adverse Effect.
(t) No holder of any security of the Company (other than holders of the
Securities) has any right to request or demand registration of any security of
the Company because of the consummation of the transactions contemplated by this
Agreement or the Registration Rights Agreement.
(u) Each of the Company, the Subsidiaries and the Controlled Entities own
all patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Preliminary Memorandum and the Final Memorandum as being
owned by them or any of them or necessary for the conduct of their respective
businesses, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company, the Subsidiaries and
the Controlled Entities with respect to the foregoing that would have a Material
Adverse Effect.
(v) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(w) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D ("Regulation D") under the Securities Act) of the Company has
directly, or through any agent (provided that no representation is made as to
the Initial Purchasers or any person acting on their behalf), 1) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated with
the offering and sale of the Securities in a manner that would require the
registration of the Securities under the Securities Act or 2) engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offering of the Securities.
(x) Except as otherwise provided in the Indenture, the Company is not
required to deliver the information specified in Rule 144A(d)(4) in connection
with the offering and resale of the Securities by the Initial Purchasers.
(y) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf has engaged in any directed selling efforts with respect
to the Securities, and each of them has complied with the offering restrictions
requirement of Regulation S ("Regulation S") under the Securities Act. Terms
used in this paragraph have the meanings given to them by Regulation S.
7
<PAGE>
(z) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities in the United States.
2. Purchase and Sale. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Company agrees to
sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and
not jointly, to purchase from the Company, at a purchase price of 99.104% of the
principal amount of the 2005 Notes and 98.4% of the principal amount of the 2008
Notes, plus accrued interest in each case, if any, from June 22, 1998 to the
Closing Date, the principal amount of Securities set forth opposite such Initial
Purchaser's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the Securities shall
be made at 9:00 AM, New York City time, on June 22, 1998, or such later date
(not later than June 29,1998) as the Initial Purchasers shall designate, which
date and time may be postponed by agreement between the Initial Purchasers and
the Company or as provided in Section 9 hereof (such date and time of delivery
and payment for the Securities being herein called the "Closing Date"). Delivery
of the Securities shall be made to the Initial Purchasers for their respective
accounts against payment by the Initial Purchasers of the purchase price thereof
to or upon the order of the Company by federal or other immediately available
funds or such other manner of payment as may be agreed by the Company and the
Initial Purchasers. Delivery of the Securities shall be made at such location as
the Initial Purchasers shall reasonably designate at least one business day in
advance of the Closing Date and payment for the Securities shall be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York.
Certificates for the Securities shall be registered in such names and in such
denominations as the Initial Purchasers may request not less than three full
business days in advance of the Closing Date. The 144A Global Securities will be
represented by one or more global securities registered in the name of Cede &
Co. as nominee of The Depository Trust Company ("DTC"). The Regulation S Global
Securities will be represented by one or more global securities registered in
the name of Cede & Co. as nominee of DTC, for the accounts of Euroclear and
Cedel Bank.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities. Each Initial Purchaser, severally and not
jointly, represents and warrants to and agrees with the Company that:
(a) It has not offered or sold, and will not offer or sell, any Securities
except (i) to those it reasonably believes to be qualified institutional buyers
(as defined in Rule 144A under the Securities Act) and that, in connection with
each such sale, it has taken or will take reasonable steps to ensure that the
purchaser of such Securities is aware that such sale is being made in reliance
on Rule 144A, or (ii) to other institutional "accredited investors" (as defined
in Rule 501(a)(1),(2), (3) or (7) of Regulation D) who provide to it and to the
Company a letter in the form of Exhibit A hereto, or (iii) to persons other than
U.S. persons in accordance with the
8
<PAGE>
restrictions set forth in Exhibit B hereto (such persons specified in clauses
(i), (ii) and (iii) being referred to herein as "Eligible Purchasers"). As used
herein, the term "U.S. persons" has the meaning given it in Regulation S.
(b) Neither it nor any person acting on its behalf has made or will make
offers or sales of the Securities in the United States by means of any form of
general solicitation or general advertising (within the meaning of Regulation D)
in the United States.
5. Agreements. The Company agrees with each Initial Purchaser that:
(a) The Company will advise the Initial Purchasers promptly and, if
requested by them, will confirm such advice in writing, within the period of
time referred to in paragraph (e) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event which makes any
statement made in the Preliminary Memorandum or the Final Memorandum (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Preliminary Memorandum or the Final Memorandum (as then
amended or supplemented) in order to make the statements therein not misleading,
or of the necessity to amend or supplement the Final Memorandum (as then amended
or supplemented) to comply with any law.
(b) The Company will furnish to the Initial Purchasers, without charge, as
of the date of the Preliminary Memorandum and the Final Memorandum, such number
of copies of the Preliminary Memorandum and the Final Memorandum, as it may then
be amended or supplemented, as they may reasonably request.
(c) The Company will not make any amendment or supplement to the Final
Memorandum of which the Initial Purchasers shall not previously have been
advised or to which they shall reasonably object after being so advised or file
any document which upon filing becomes an Incorporated Document, without
delivering a copy of such document to the Initial Purchasers, prior to or
concurrently with such filing.
(d) The Company consents to the use of the Preliminary Memorandum and the
Final Memorandum (and of any amendment or supplement thereto) in accordance with
the securities or Blue Sky laws of the jurisdictions in which the Securities are
offered by the Initial Purchasers and by all dealers to whom Securities may be
sold, in connection with the offering and sale of the Securities.
(e) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchasers to Eligible Purchasers, any event shall
occur that in the judgment of the Company or in the opinion of counsel for the
Initial Purchasers should be set forth in the Final Memorandum (as then amended
or supplemented) in order to make the statements therein not misleading, or if
it is necessary to supplement or amend the Final Memorandum, or to file under
the Exchange Act any document which upon filing becomes an Incorporated
Document, to comply with any law, the Company will forthwith prepare an
appropriate supplement or amendment thereto or such document, and will
expeditiously furnish to the Initial Purchasers and dealers a reasonable number
of copies thereof. In the event that the Company and the Initial Purchasers
agree that the Final Memorandum should be amended or supplemented, or that a
document should be filed under the Exchange Act which upon filing becomes an
9
<PAGE>
Incorporated Document, the Company, if requested by the Initial Purchasers, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement or such document.
(f) The Company will cooperate with the Initial Purchasers and with their
counsel in connection with the qualification of the Securities for offering and
sale by the Initial Purchasers and by dealers under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchasers may designate and will file
such consents to service of process or other documents necessary or appropriate
in order to effect such qualification; provided that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to service of
process in suits, other than those arising out of the offering or sale of the
Securities, in any jurisdiction where it is not now so subject.
(g) So long as any of the Securities are outstanding, the Company will
furnish to the Initial Purchasers 1) as soon as available, a copy of each report
of the Company mailed to stockholders or filed with the Commission, and 2) from
time to time such other information concerning the Company as the Initial
Purchasers may reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchasers terminating this Agreement pursuant to
Section 10 hereof) or if this Agreement shall be terminated by the Initial
Purchasers because of any failure or refusal on the part of the Company to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Initial Purchasers for all out-of-pocket
expenses (including fees and expenses of its counsel) reasonably incurred by
them in connection herewith, but without any further obligation on the part of
the Company for loss of profits or otherwise.
(i) The Company will apply the net proceeds from the sale of the Securities
to be sold by it hereunder substantially in accordance with the description set
forth in the Preliminary Memorandum and the Final Memorandum.
(j) Except as stated in this Agreement and in the Preliminary Memorandum
and the Final Memorandum, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Securities
to facilitate the sale or resale of the Securities. Except as permitted by the
Securities Act, the Company will not distribute any offering material in
connection with the Exempt Resales.
(k) From and after the Closing Date, so long as any of the Securities are
outstanding and are "Restricted Securities" within the meaning of the Rule
144(a)(3) under the Securities Act or, if earlier, until two years after the
Closing Date, and during any period in which the Company is not subject to
Section 13 or 15(d) of the Exchange Act, the Company will furnish to holders of
the Securities and prospective purchasers of the Securities designated by such
holders, upon request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act to permit compliance with Rule 144A in connection with resale of
the Securities.
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(l) The Company agrees not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Securities in a manner that
would require the registration under the Securities Act of the sale to the
Initial Purchasers or the Eligible Purchasers of the Securities.
(m) The Company agrees to comply with all of the terms and conditions of
the Registration Rights Agreement, and all agreements set forth in the
representation letters of the Company to DTC relating to the approval of the
Securities by DTC for "book entry" transfer.
(n) The Company agrees that prior to any registration of the Securities
pursuant to the Registration Rights Agreement, or at such earlier time as may be
so required, the Indenture shall be qualified under the 1939 Act and will cause
to be entered into any necessary supplemental indentures in connection
therewith.
(o) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf will engage in any directed selling efforts with respect
to the Securities, and each of them will comply with the offering restrictions
requirement of Regulation S. Terms used in this paragraph have the meanings
given to them by Regulation S.
(p) The Company will not, until 60 days following the Closing Date, without
the prior written consent of the Initial Purchasers, offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce the offering
of, any debt securities issued or guaranteed by the Company (other than the
Securities).
(q) The Company will not, and will not permit any of its Affiliates to,
resell any Securities that have been acquired by any of them unless and until a
registration statement with respect to such Securities filed pursuant to the
Securities Act has been declared effective.
6. Conditions to the Obligations of the Initial Purchasers. The obligations
of the Initial Purchasers to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Company
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Company made in any certificates pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) At the time of execution of this Agreement and on the Closing Date, no
order or decree preventing the use of the Final Memorandum or any amendment or
supplement thereto, or any order asserting that the transactions contemplated by
this Agreement are subject to the registration requirements of the Securities
Act shall have been issued and no proceedings for that purpose shall have been
commenced or shall be pending or, to the knowledge of the Company, be
contemplated. No stop order suspending the sale of the Securities in any
jurisdiction designated by the Initial Purchasers shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall not
have
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occurred 1) any change, or any development involving a prospective change, in or
affecting the condition (financial or other), business, properties, net worth,
or results of operations of the Company, the Subsidiaries or the Controlled
Entities not contemplated by the Preliminary Memorandum and the Final
Memorandum, which in the opinion of the Initial Purchasers, would materially
adversely affect the market for the Securities, or 2) any event or development
relating to or involving the Company or any officer or director of the Company
which makes any statement made in the Preliminary Memorandum or the Final
Memorandum untrue or which, in the opinion of the Company and its counsel or the
Initial Purchasers and their counsel, requires the making of any addition to or
change in the Final Memorandum in order to state a material fact required by any
law to be stated therein or necessary in order to make the statements therein
not misleading, if amending or supplementing the Final Memorandum to reflect
such event or development would, in the opinion of the Initial Purchasers,
materially adversely affect the market for the Securities.
(c) The Company shall have furnished to the Initial Purchasers the
opinion of Haskell Slaughter & Young L.L.C., counsel for the Company, dated
the Closing Date, to the effect that:
(i) Each of the Company and those subsidiaries that constitute
"significant subsidiaries" under Rule 1-02(w) of Regulation S-X (the
"Significant Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Each of the Preliminary Memorandum and the Final Memorandum has
been prepared by the Company solely for use by the Initial Purchasers in
connection with the Exempt Resales. To the best of such Counsel's
knowledge, no order or decree preventing the use of the Preliminary
Memorandum or the Final Memorandum or any amendment or supplement thereto,
or any order asserting that the transactions contemplated by this Agreement
are subject to the registration requirements of the Securities Act has been
issued and no proceeding for that purpose has commenced or is pending or,
to the knowledge of such Counsel, is contemplated.
(iii) The Incorporated Documents heretofore filed were filed in a
timely manner and, when they were filed (or, if any amendment with respect
to any such document was filed, when such amendment was filed), conformed
in all material respects to the requirements of the Exchange Act.
(iv) The Indenture has been duly and validly authorized by the Company
and, upon its execution and delivery by the Company and assuming due
authorization, execution, delivery and performance by the Trustee, will be
a valid and binding agreement of the Company, enforceable in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally, and
subject to the applicability of general principles of equity, and conforms
in all material respects to the description thereof in the Preliminary
Memorandum and the Final Memorandum.
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(v) The Securities have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in accordance with
the Indenture and delivered to the Initial Purchasers against payment
therefor in accordance with the terms hereof, will have been validly issued
and delivered, and will constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally, and subject to the applicability of general
principles of equity, and the Securities will conform in all material
respects to the description thereof in the Preliminary Memorandum and the
Final Memorandum.
(vi) All of the issued and outstanding shares of capital stock of each
of the Significant Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and are owned by the Company, free
and clear of any adverse claim; all of the issued and outstanding
partnership interests representing ownership in the Controlled Entities
have been duly authorized and, to the extent material to the business,
operations or financial condition of the Company, the Significant
Subsidiaries and the Controlled Entities taken as a whole, validly issued;
and all such partnership interests held of record by the Company are owned
free and clear of any adverse claim, except such claims that would not have
a Material Adverse Effect on the business, operations or financial
condition of the Company, the Significant Subsidiaries and Controlled
Entities taken as a whole.
(vii) Each of the Company and the Significant Subsidiaries has full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Preliminary Memorandum and the
Final Memorandum; and each of the Company and the Significant Subsidiaries
is duly qualified to do business as a foreign corporation, and is in good
standing, in all jurisdictions in the United States, if any, in which it is
required to be so qualified and in which the failure so to qualify would
have a Materially Adverse Effect on the Company, the Subsidiaries and
Controlled Entities, taken as a whole.
(viii) To the best of such Counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company, any
Significant Subsidiary or any Controlled Entity, or to which the Company,
any Significant Subsidiary or any Controlled Entity, or any of their
property, is subject, which would be required to be disclosed in the
Preliminary Memorandum or the Final Memorandum or both (or any amendment or
supplement thereto) if the Preliminary Memorandum and the Final Memorandum
were prospectuses included in a registration statement on Form S-1 under
the Securities Act, other than those disclosed therein; and to the best
knowledge of such Counsel after reasonable inquiry, neither the Company,
any Significant Subsidiary or any Controlled Entity is in violation of any
law, ordinance, administrative or governmental rule or regulation
applicable to the Company, any Significant Subsidiary or any Controlled
Entity, except for violations, if any, which in the aggregate do not have a
Material Adverse Effect.
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(ix) Neither the Company, any Significant Subsidiary or any Controlled
Entity is in violation of its respective certificate or articles of
incorporation or bylaws, or other organizational documents, or to the best
knowledge of such Counsel after reasonable inquiry, is in default in the
performance of any material obligation, agreement or condition contained in
any bond, debenture, note or other evidence of indebtedness, which default
could have a Material Adverse Effect, except as may be disclosed in the
Preliminary Memorandum or Final Memorandum (or any amendment or supplement
thereto).
(x) This Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, are valid, legal and binding
agreements of the Company, enforceable against the Company in accordance
with their respective terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and subject to the applicability of general principles of equity,
and except as enforcement of rights to indemnity and contribution hereunder
or under the Registration Rights Agreement may be limited by applicable
law.
(xi) Each of the Company, the Significant Subsidiaries and the
Controlled Entities holds all material permits, licenses, certificates of
need and other approvals or authorizations of and from governmental
regulatory officials and bodies necessary to entitle it to own its
properties and conduct its business as described in the Preliminary
Memorandum and the Final Memorandum, or to receive reimbursement under
Medicare (if represented in the Preliminary Memorandum or Final Memorandum
as being Medicare-certified, except where the lack of such approval or
authorization would not have a Material Adverse Effect).
(xii) No holder of any security of the Company (other than holders of
the Securities) has any right to request or demand registration of any
security of the Company because of the consummation of the transactions
contemplated by this Agreement or the Registration Rights Agreement.
(xiii) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Securities Act) as any security of the
Company that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States
automated inter-dealer quotation system.
(xiv) To the best of such Counsel's knowledge after reasonable
inquiry, neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Securities Act) of the Company
has directly, or through any agent (provided that no representation is made
as to the Initial Purchasers or any person acting on their behalf), a)
sold, offered for sale,
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solicited offers to buy or otherwise negotiated in respect of, any security
(as defined in the Securities Act) which is or will be integrated with the
offering and sale of the Securities in a manner that would require the
registration of the Securities under the Securities Act or b) engaged in
any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offering of the Securities.
(xv) Except as otherwise provided in the Indenture, the Company is not
required to deliver the information specified in Rule 144A(d)(4) in
connection with the offering and resale of the Securities by the Initial
Purchasers.
(xvi) No registration of the Securities under the Securities Act is
required for the sale of the Securities to the Initial Purchasers as
contemplated in this Agreement or for the Exempt Resales and no
qualification of the Indenture under the 1939 Act is required in connection
with the offer and sale of the Securities contemplated by this Agreement or
in connection with the Exempt Resales (assuming (A) that any Eligible
Purchaser who buys the Securities in the Exempt Resales is a Qualified
Institutional Buyer, Accredited Investor or a person other than a U.S.
person outside the United States in reliance on Regulation S, (B) the
accuracy of the Initial Purchasers' representations and those of the
Company in this Agreement regarding the absence of general solicitation in
connection with the Exempt Resales and (C) the accuracy of the
representations made by each Accredited Investor who purchases Securities
pursuant to an Exempt Resale as set forth in the letter of representation
executed by such Accredited Investor in the form of Exhibit A hereto and
Annex A to the Preliminary Memorandum and the Final Memorandum).
(xvii) The descriptions in the Preliminary Memorandum and Final
Memorandum of statutes, governmental regulations, agreements, contracts,
leases and other documents are accurate and fairly present the information
that would be required to be presented therein if the Preliminary
Memorandum and the Final Memorandum were prospectuses included in a
registration statement on Form S-1 under the Securities Act; and, to the
best of such Counsel's knowledge, there are no statutes, governmental
regulations, agreements, contracts, leases or documents of a character that
would be required to be described or referred to in the Preliminary
Memorandum and the Final Memorandum (or any amendment or supplement
thereto) or to be filed as an exhibit to the Preliminary Memorandum and the
Final Memorandum if the Preliminary Memorandum and the Final Memorandum
were prospectuses included in a registration statement on Form S-1 under
the Securities Act that are not described or referred to therein and filed
as would be required;
(xviii) Neither the offer, sale or delivery of the Securities, the
execution, delivery or performance of this Agreement and the Indenture,
compliance by the Company with the provisions hereof and thereof, nor
consummation by the Company of the transactions contemplated hereby and
thereby, conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company,
any
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Significant Subsidiary or any Controlled Entity or any agreement,
indenture, lease or other instrument to which the Company, any Significant
Subsidiary or any Controlled Entity is a party or by which any of them or
any of their respective properties is bound, which is known to such Counsel
after reasonable inquiry, or will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company,
any Significant Subsidiary or any Controlled Entity.
(xix) A New York court would apply the substantive law of the State of
New York in construing the Securities and the Indenture and in ascertaining
the validity of the payment of interest and the permissible rate of
interest on the Securities, and would hold that New York law governs the
rights and obligations of the parties to the Securities and the Indenture.
(xx) A New York court applying the substantive law of the State of New
York would hold that the payment of interest on the Securities and the rate
of interest provided pursuant to the Indenture with respect to the
Securities are not subject to the usury laws of the State of New York.
(xxi) An Alabama court should apply the substantive law of the State
of New York in construing the Indenture and the Securities and in
ascertaining the validity of the payment of interest and the rate of
interest provided pursuant to the Indenture with respect to the Securities,
and should hold that New York law governs the rights and obligations of the
parties to the Securities and the Indenture.
(xxii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as may be required under the
Blue Sky or securities laws of any jurisdiction in connection with the
purchase and sale of the Securities by the Initial Purchasers and such
other approvals as have been obtained.
Such Counsel may state that they have participated in conferences with
officers and representatives of the Company and with its independent public
accountants regarding the contents of the Preliminary Memorandum and the
Final Memorandum, but have not independently verified the statements made
in the Preliminary Memorandum and the Final Memorandum; and such Counsel
will state that nothing has come to their attention which has caused them
to believe that the Preliminary Memorandum, as of its date, or the Final
Memorandum (including the Incorporated Documents) as of its date and as of
the Closing Date, including, without limitation, all descriptions of
statutes, governmental regulations, agreements, contracts, leases and other
documents contained in the Preliminary Memorandum and the Final Memorandum
(including the Incorporated Documents but not including the financial
statements and supporting schedules, upon which such counsel need express
no opinion), contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or that any amendment or supplement to the Final
Memorandum, as
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of its respective date, and as of the Closing Date, contained any untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In rendering the enforceability opinions in paragraph (iv), the opinion
concerning the valid and binding obligations of the Company in paragraph (v) and
the opinions set forth in paragraphs (xix) and (xx) above, such Counsel shall
rely upon an opinion or opinions, each dated the Closing Date, of Cleary,
Gottlieb, Steen & Hamilton as to laws of any jurisdiction other than the United
States or the State of Alabama, provided that (1) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to each of the Initial Purchasers, in form and substance satisfactory
to them and their counsel, and (2) Counsel shall state in their opinion that
they believe that they and the Initial Purchasers are justified in relying
thereon. In addition, with the approval of counsel to the Initial Purchasers,
certain of the foregoing matters may be addressed in an opinion of William W.
Horton, Senior Vice President of the Company, dated the Closing Date and
addressed to the Initial Purchasers.
(d) The Initial Purchasers shall have received from Pillsbury Madison
& Sutro LLP, counsel for the Initial Purchasers ("Counsel for the Initial
Purchasers"), such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Securities, the Final Memorandum
(as amended or supplemented at the Closing Date) and other related matters
as the Initial Purchasers may reasonably require, and the Company shall
have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(e) The Company shall have furnished to the Initial Purchasers a
certificate of the Company, signed by the Chief Executive Officer of the
Company and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Final Memorandum, any amendment or supplement
to the Final Memorandum and this Agreement and that:
(i) There has not been any material change in the capital stock
of the Company or material increase in the short-term or long-term
debt of the Company, the Subsidiaries or the Controlled Entities, from
that set forth or contemplated in the Final Memorandum;
(ii) There has not been any material adverse change, financial or
otherwise, in the condition, business, prospects, properties, net
worth or results of operations of the Company, the Subsidiaries or the
Controlled Entities, taken as a whole, from that set forth in the
Final Memorandum;
(iii) The Company, the Subsidiaries and the Controlled Entities
do not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material
to the Company, the Subsidiaries and the Controlled Entities, taken as
a whole, other than those reflected in the Final Memorandum;
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(iv) All of the representations and warranties of the Company
contained in this Purchase Agreement are true and correct on and as of
the date hereof, as if made on and as of the date hereof; and
(v) The Company has not failed at or prior to the date hereof to
perform or comply with any of the agreements contained in this
Purchase Agreement and required to be performed or complied with by
the Company at or prior to the date hereof.
(f) At the Execution Time and at the Closing Date, Ernst & Young, LLP,
independent certified public accountants, shall have furnished to the
Initial Purchasers a letter or letters, dated respectively as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to the Initial Purchasers.
(g) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act) or any notice given of
any intended or potential decrease in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change.
(h) Prior to the Closing Date, the Company shall have furnished to the
Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchasers and Counsel for the Initial Purchasers,
this Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial
Purchasers. Notice of such cancellation shall be given to the Company in writing
or by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be delivered
at the offices of Salomon Brothers Inc, at 388 Greenwich Street in New York, New
York on the Closing Date.
7. Expenses; Reimbursements. (a) The Company agrees to pay the following
costs and expenses and all other costs and expenses incident to the performance
by it of its obligations hereunder: (i) the preparation, printing or
reproduction of the Preliminary Memorandum and the Final Memorandum, this
Agreement and the Indenture; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Preliminary Memorandum and the Final Memorandum, the
Incorporated Documents, and all amendments or supplements to any of them as may
be reasonably requested for use in connection with the offering and sale of the
Securities; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Securities, including any stamp taxes in
connection with the original issuance and sale of the Securities;
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(iv) the printing (or reproduction) and delivery of this Agreement, the
preliminary and supplemental Blue Sky Memoranda, if any, and all other
agreements or documents printed (or reproduced) and delivered in connection with
the offering of the Securities; (v) the qualification of the Securities for
offer and sale under the securities or Blue Sky laws of the several states of
the United States (including the reasonable fees, expenses and disbursements of
counsel for the Initial Purchasers relating to the preparation, printing or
reproduction, and delivery of the preliminary and supplemental Blue Sky
Memoranda, if any, and such qualification); (vi) the performance by the Company
of its obligations under the Registration Rights Agreement; and (vii) the fees
and expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company. The Company hereby agrees
that it will pay in full on the Closing Date the fees and expenses referred to
in clause (v) of this Section 7(a) by delivering to counsel for the Initial
Purchasers on such date a check payable to such counsel in the requisite amount.
(b) If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Initial Purchasers in payment
for the Securities on the Closing Date, the Company will reimburse the Initial
Purchasers severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each Initial Purchaser, the directors, officers, employees and
agents of each Initial Purchaser, any affiliate of each Initial Purchaser and
each person who controls any Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Memorandum, the Final Memorandum or any
information provided by the Company to any holder or prospective purchaser of
Securities pursuant to Section 5(g), or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in the Preliminary Memorandum or
the Final Memorandum, or in any amendment thereof or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Initial Purchasers specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
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(b) Each Initial Purchaser severally agrees to indemnify and hold harmless
the Company, its directors, its officers, and each person who controls the
Company within the meaning of either the Securities Act or the Exchange Act, to
the same extent as the foregoing indemnity from the Company to each Initial
Purchaser, but only with reference to written information relating to such
Initial Purchaser furnished to the Company by or on behalf of such Initial
Purchaser specifically for inclusion in the Preliminary Memorandum or the Final
Memorandum (or in any amendment or supplement thereto). This indemnity agreement
will be in addition to any liability which any Initial Purchaser may otherwise
have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Initial Purchasers agree to contribute
to the aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection
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with investigating or defending same) (collectively "Losses") to which the
Company and one or more of the Initial Purchasers may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company and by the Initial Purchasers from the offering of the Securities;
provided, however, that in no case shall any Initial Purchaser (except as may be
provided in any agreement among the Initial Purchasers relating to the offering
of the Securities) be responsible for any amount in excess of the purchase
discount or commission applicable to the Securities purchased by such Initial
Purchaser hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company and the Initial Purchasers
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and of the Initial
Purchasers in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses), and benefits received by the Initial
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions received by the Initial Purchasers from the Company in connection
with the purchase of the Securities hereunder. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Initial Purchasers. The
Company and the Initial Purchasers agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person who controls an Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee and
agent of an Initial Purchaser shall have the same rights to contribution as such
Initial Purchaser, and each person who controls the Company within the meaning
of either the Securities Act or the Exchange Act and each officer and director
of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d).
9. Default by an Initial Purchaser. If any one or more Initial Purchasers
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions, for each maturity of the
Securities, which the principal amount of Securities of such maturity set forth
opposite their names in Schedule I hereto bears to the aggregate principal
amount of Securities of such maturity set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth in Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such non-defaulting Initial Purchasers do not purchase
all the Securities, this Agreement will terminate without liability to any
non-defaulting Initial Purchaser or the Company. In the event of a default by
any Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as
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the Initial Purchasers shall determine in order that the required changes in the
Final Memorandum or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Initial
Purchaser of its liability, if any, to the Company or any non-defaulting Initial
Purchaser for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Initial Purchasers, by notice given to the Company
prior to delivery of and payment for the Securities, if prior to such time (i)
trading in securities generally on the New York Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on such
Exchange, (ii) trading in securities of the Company listed on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established for such securities on such Exchange, (iii) a banking moratorium
shall have been declared either by Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war or other calamity or crisis
the effect of which on financial markets is such as to make it, in the judgment
of the Initial Purchasers, impracticable or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Final Memorandum.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Initial Purchasers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Initial Purchasers or the Company or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Initial Purchasers, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York, 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at HEALTHSOUTH
Corporation, One HealthSouth Parkway, Birmingham, Alabama 35243, attention:
Michael D. Martin.
13. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
15. Business Day. For purposes of this Agreement, "business day" means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
16. Counterparts. This Agreement may be executed in one or more
22
<PAGE>
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
23
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement between the
Company and the Initial Purchasers.
Very truly yours,
HEALTHSOUTH CORPORATION
By /s/ WILLIAM W. HORTON
------------------------
Name: William W. Horton
Title: Senior Vice President
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
Salomon Brothers Inc
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.
By: Salomon Brothers Inc
By /s/ WILLIAM C. MCGAHAN
-------------------------
Name:
Title:
For itself and the other
Initial Purchasers named in
Schedule I to the foregoing Agreement
24
<PAGE>
SCHEDULE I
HEALTHSOUTH CORPORATION
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
2005 Notes 2008 Notes
to be to be
Initial Purchasers Purchased Purchased
------------------ --------- ---------
<S> <C> <C>
Salomon Brothers Inc $ 75,000,000 $ 75,000,000
Goldman, Sachs & Co. $ 23,750,000 $ 23,750,000
J.P. Morgan Securities Inc. $ 23,750,000 $ 23,750,000
Merrill Lynch, Pierce, Fenner & Smith $ 23,750,000 $ 23,750,000
Incorporated
Morgan Stanley & Co. Incorporated $ 23,750,000 $ 23,750,000
NationsBanc Montgomery Securities LLC $ 23,750,000 $ 23,750,000
Bear, Stearns & Co. Inc. $ 11,250,000 $ 11,250,000
Credit Suisse First Boston Corporation $ 11,250,000 $ 11,250,000
Deutsche Bank Securities Inc. $ 11,250,000 $ 11,250,000
PaineWebber Incorporated $ 11,250,000 $ 11,250,000
Scotia Capital Markets (USA ) Inc. $ 11,250,000 $ 11,250,000
----------------- -----------------
TOTAL $ 250,000,000 $ 250,000,000
</TABLE>
25
<PAGE>
EXHIBIT A
Form of Purchaser Letter for Institutional Accredited Investors
__________, 1998
HEALTHSOUTH CORPORATION
One HealthSouth Parkway
Birmingham, Alabama 35243
Salomon Brothers Inc
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
We are delivering this letter in connection with an offering by HEALTHSOUTH
Corporation, a Delaware corporation (the "Company"), of its 6.875% Senior Notes
due 2005 and 7.0% Senior Notes due 2008 (collectively, the "Securities").
We understand that the Securities are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and that the
Securities have not been registered under the Securities Act, and we agree, on
our own behalf and on behalf of each account for which we acquire any
Securities, that if in the future we decide to resell or otherwise transfer any
Securities, such Securities may be resold or otherwise transferred only (i) to
the Company or any subsidiary thereof, (ii) pursuant to an effective
registration statement under the Securities Act, (iii) to a person who is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, (iv) to an
Institutional Accredited Investor (as defined below) that, prior to such
transfer, furnishes to PNC Bank, National Association, as trustee (the
"Trustee"), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of such Securities (the
1
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form of which letter can be obtained from the Trustee), (v) outside the United
States in a transaction meeting the requirements of Rule 904 under the
Securities Act, (vi) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if applicable) and (vii) in each case, in
accordance with any applicable securities laws of the United States or any other
applicable jurisdiction and in accordance with the legends set forth on the
Securities. We further agree to provide any person purchasing any of the
Securities from us a notice advising such purchaser that resales of such
Securities are restricted as stated herein. We understand that the registrar for
the Securities will not be required to accept for registration of transfer any
Securities, except upon presentation of evidence satisfactory to the Company
that the foregoing restrictions on transfer have been complied with. We further
understand that any Securities will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph.
We confirm that:
(i) we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act (an "Institutional Accredited
Investor");
(ii) any purchase of Securities by us will be for our own account or for
the account of one or more Institutional Accredited Investors or as fiduciary
for the account of one or more trusts, each of which is an "accredited investor"
within the meaning of Rule 501(a)(7) under the Securities Act and for each of
which we exercise sole investment discretion;
(iii) in the event that we purchase any Securities, we will acquire
Securities having a minimum purchase price of not less than $250,000 for our own
account or for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Securities;
(v) we are not acquiring Securities with a view to distribution thereof or
with any present intention of offering or selling Securities, except as
permitted above; provided that the disposition of our property and property of
any accounts for which we are acting as fiduciary shall remain at all times
within our control; and
(vi) we have received a copy of the Offering Memorandum relating to the
Securities and acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers thereto, as we deem necessary
in connection with our decision to purchase Securities.
We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
(Name of Purchaser)
2
<PAGE>
By
----------------------------------
Name:
Title:
3
<PAGE>
EXHIBIT B
Selling Restrictions for Offers and
Sales outside the United States
(1)(a) The Securities have not been registered under the Securities Act and
may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act. Each Initial Purchaser represents and agrees that, except as
otherwise permitted by Section 4(a)(i) or (ii) of the Agreement to which this is
an exhibit, it has offered and sold the Securities, and will offer and sell the
Securities, (i) as part of their distribution at any time and (ii) otherwise
until forty (40) days after the later of the commencement of the offering and
the Closing Date, only in accordance with Rule 903 of Regulation S under the
Securities Act. Accordingly, each Initial Purchaser represents and agrees that
neither it, nor any of its affiliates nor any person acting on its or their
behalf has engaged or will engage in any directed selling efforts with respect
to the Securities, and that it and they have complied and will comply with the
offering restrictions requirement of Regulation S. Each Initial Purchaser agrees
that, at or prior to the confirmation of sale of Securities (other than a sale
of Securities pursuant to Section 4(a)(i) or (ii) of the Agreement to which this
is an exhibit), it shall have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise
until forty (40) days after the later of the commencement of the offering
and the Closing Date, except in either case in accordance with Regulation S
or Rule 144A under the Securities Act. Terms used above have the meanings
given to them by Regulation S."
(b) Each Initial Purchaser also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any distributor
with respect to the distribution of the Securities, except with its affiliates
or with the prior written consent of the Company.
(c) Terms used in this section have the meanings given to them by
Regulation S.
(2) Each Initial Purchaser represents and agrees that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Securities other than to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or as agent (except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985 of Great Britain), (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and (iii) it has only issued
or passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the
1
<PAGE>
issue of the Securities to a person who is of a kind described in Article 9(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1988 or is a person to whom the document may otherwise lawfully be issued
or passed on.
2
EXHIBIT (4)-4
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDEN TURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT
IN SUCH LIMITED CIRCUMSTANCES.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS REQUESTED BY AN AUTHORIZED REP RESENTATIVE OF THE DEPOSITORY TRUST
COMPANY AND ANY PAYMENT THEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
HEALTHSOUTH CORPORATION
6.875% SENIOR NOTE DUE 2005
No. ____ CUSIP NO. _____________
$_____________
HEALTHSOUTH CORPORATION, a Delaware corporation (the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to Cede & Co., the principal sum of
Fifty Million Dollars on June 15, 2005, and to pay interest on said principal
sum from June 22, 1998, or from the most recent interest payment date to which
interest has been paid or duly provided for, semiannually in arrears on June 15
and December 15 (each such date, an "Interest Payment Date") of each year
commencing on December 15, 1998, at the rate of 6.875% per annum until the
principal hereof shall have become due and payable.
1
<PAGE>
The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360 day year comprised of twelve 30 day months. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture (as defined below)
be paid to the person in whose name this Note (or one or more predecessor Notes)
is registered at the close of business on the record date for such interest
install ment, which shall be the close of business on the immediately preceding
June 1 and December 1 prior to such Interest Payment Date, as applicable. The
principal of, premium, if any, and the interest on this Note will be payable at
the office or agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the person entitled thereto at such
address as shall appear in the registry books of the Company; provided, further
that for so long as this Note is represented by a Registered Global Security,
payment of principal, premium, if any, or interest on this Note may be made by
wire transfer to the account of the Depositary or its nominee. In the event that
any date on which the principal, premium, if any, or interest on this Note is
payable is not a Business Day, then payment of principal, premium, if any, or
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of such
delay).
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee (as defined below) under the Indenture (as defined below),
by the manual signature of one of its authorized officers, this Note shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
Capitalized terms used in this Note which are defined in the Indenture
shall have the respective meanings assigned to them in the Indenture.
2
<PAGE>
Reference is hereby made to the further provisions of this Note hereinafter
set forth, which further provisions shall for all purposes have the same effect
as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, manually or in facsimile, and an imprint or facsimile of its corporate
seal to be imprinted hereon.
HEALTHSOUTH Corporation
By
------------------------------------------
Michael D. Martin
Executive Vice President,
Chief Financial Officer
and Treasurer
ATTEST:
- ---------------------------------------------
William W. Horton
Senior Vice President,
Corporate Counsel and Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred
to in the within-mentioned Indenture.
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
By
------------------------------------------
Authorized Officer
Dated:
---------------------------------------
3
<PAGE>
REVERSE SIDE OF NOTE
This Note is one of a duly authorized series of securities (the
"Securities") of the Company designated as its 6.875% Senior Notes due 2005
limited in aggregate principal amount to $250,000,000 (the "Notes"). The
Securities are all issued or to be issued under and pursuant to an Indenture,
dated as of June 22, 1998, as supplemented by that certain Officers' Certificate
dated August ____, 1998 (the Indenture as supplemented by the Officers'
Certificate being herein collectively referred to as the "Indenture"), duly
executed and delivered between the Company and PNC Bank, National Association
(the "Trustee," which term includes any successor Trustee with respect to the
Notes under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights
thereunder of the Company, the Trustee and the holders of the Securities and the
terms upon which the Notes are to be authenticated and delivered. The terms of
individual series of Securities may vary with respect to interest rate or
interest rate formulas, issue dates, maturity, redemption, repayment, currency
of payment and otherwise.
Reference is hereby made to the Indenture for a description of the terms of
the Notes, to all of the provisions of which Indenture the holder of this Note,
by acceptance hereof, assents and agrees.
Except as set forth below, this Note is not redeemable and is not entitled
to the benefit of a sinking fund or any analogous provision.
This Note is redeemable as a whole or in part, at the option of the
Company, at any time at a redemption price equal to the greater of (i) 100% of
its principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon dis counted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield plus 15 basis points, plus, in each case,
accrued interest to the date of redemption. On and after the redemption date,
interest will cease to accrue on the Notes or any portion thereof called for
redemption. On or before the redemption date, the Company shall deposit with a
paying agent (or the Trustee) money sufficient to pay the redemption price of
and accrued interest on the Notes to be redeemed on such date. If less than all
of the Notes are to be redeemed, the Notes to be redeemed shall be selected by
the Trustee by such method as the Trustee shall deem fair and appropriate. The
Holder of this Note will receive notice thereof by first-class mail at least 30
and not more than 60 days prior to the date fixed for redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. "Comparable Treasury Issue" means the United States
Treasury security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the Note that would be utilized, at
the time of selection and in
4
<PAGE>
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of the Note.
"Independent Investment Banker" means Salomon Brothers Inc and its successor or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee. "Comparable Treasury Price" means, with respect to any redemption date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices of the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemp
tion date. "Reference Treasury Dealer" means a primary U.S. Government
Securities dealer in New York City selected by the Trustee after consultation
with the Company.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of all the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the con sent of the holders of not less than a majority in aggregate
principal amount of the Securities of all series issued under such Indenture
then outstanding and affected (voting as one class) to add any provisions to, or
change in any manner or eliminate any of the provisions of, such Indenture or
modify in any manner the rights of the holders of the Securities of each series
or Coupons so affected; provided that the Company and the Trustee may not,
without the consent of the holder of each Outstanding Note affected thereby, (i)
extend the final maturity of the principal of any Note, or reduce the principal
amount thereof, or premium thereon, if any, or reduce the rate or extend the
time of payment of interest thereon, or reduce any amount payable on redemption
thereof or make the principal thereof (including any amount in respect of
original issue discount), or interest thereon payable in any coin or currency
other than that provided in the Securities or Coupons or in accordance with the
terms thereof, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof or the amount thereof provable in bankruptcy or alter certain provisions
of the Indenture relating to Securities not denominated in Dollars or the
Judgment Currency of such Securities or impair or affect the right of any
Securityholder to institute suit for the enforcement of any payment thereof when
due or, if the Securities provide therefor, any right of repayment at the option
of the Securityholder or (ii) reduce the aforesaid percentage in principal
amount of Securities of any series issued under such Indenture,
5
<PAGE>
the consent of the holders of which is required for any such modification. It is
also provided in the Indenture that, with respect to certain defaults or Events
of Default regarding the Securities of any series, the holders of a majority in
aggregate principal amount Outstanding of the Securities of each such series,
each such series voting as a separate class (or, of all Securities, as the case
may be, voting as a single class) may under certain circum stances waive all
defaults with respect to each such series (or with respect to all the
Securities, as the case may be) and rescind and annul a declaration of default
and its consequences, but no such waiver or rescission and annulment shall
extend to or affect any subsequent default or shall impair any right
consequent/hereto. The preceding sentence shall not, however, apply to a default
in the payment of the principal of or interest on any of the Securities.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the time, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note may be registered on the registry books of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained by the Company for such purpose in the
Borough of Manhattan, The City of New York, duly endorsed by, or accom panied by
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the holder hereof or by its attorney duly authorized
in writing, and thereupon one or more new Notes of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable only in registered form in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes as requested by the
holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compli ance with certain conditions set
forth therein.
6
<PAGE>
The Indenture contains covenants which impose certain limitations on the
Company's and its Subsidiaries' ability to create or incur certain liens on any
of their respective properties or assets and to enter into certain sale and
lease-back transactions and on the Company's ability to engage in mergers or
consolidations or the conveyance, transfer or lease of all or substantially all
of its properties and assets. These limitations are subject to a number of
important qualifications and exceptions and reference is made to the Indenture
for a description thereof.
No recourse shall be had for the payment of the principal of or the
interest on this Note or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Inden ture or any indenture
supplemental thereto against any incorporator, stockholder, officer or direc
tor, as such, past or present or future of the Company or of any successor
thereof, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the con sideration for the issue
hereof, expressly waived and released.
THE INDENTURE AND THIS NOTE SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS
OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SMALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ CUSTODIAN ______
TEN ENT - as tenants by the entireties (Cust) (Cust)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors Act _______________
survivorship and not as tenants in (State)
common
</TABLE>
Additional abbreviations may also be used though not in the above list.
7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including
postal zip code of assignee)
- --------------------------------------------------------------------------------
this Note and all rights thereunder hereby irrevocably constituting and
appointing
_____________________________________________, Attorney, to transfer this
security on the books of the Trustee, with full power of substitution in the
premises.
8
<PAGE>
SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITIES
TO REFLECT CHANGES IN PRINCIPAL AMOUNT
Schedule A
Changes to Principal Amount of Global Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Amount
of Notes
by which this Global
Security is to be Remaining
Reduced or Increased, Principal
and Reason for Amount of this
Date Reduction or Increase Global Security Notation Made By
---- --------------------- --------------- ----------------
</TABLE>
9
EXHIBIT (4)-5
THIS NOTE 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 OF A DEPOSITARY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
THEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
HEALTHSOUTH CORPORATION
7.0% SENIOR NOTE DUE 2008
No. ____ CUSIP NO. ____________
$____________
HEALTHSOUTH CORPORATION, a Delaware corporation (the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to Cede & Co., the principal sum of
Two Hundred Million Dollars on June 15, 2008, and to pay interest on said
principal sum from June 22, 1998, or from the most recent interest payment date
to which interest has been paid or duly provided for, semiannually in arrears on
June 15 and December 15 (each such date, an "Interest Payment Date") of each
year commencing on December 15, 1998,at the rate of 7.0% per annum until the
principal hereof shall have become due and payable.
1
<PAGE>
The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360 day year comprised of twelve 30 day months. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture (as defined below)
be paid to the person in whose name this Note (or one or more predecessor Notes)
is registered at the close of business on the record date for such interest
installment, which shall be the close of business on the immediately preceding
June 1 and December 1 prior to such Interest Payment Date, as applicable. The
principal of, premium, if any, and the interest on this Note will be payable at
the office or agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the person entitled thereto at such
address as shall appear in the registry books of the Company; provided, further
that for so long as this Note is represented by a Registered Global Security,
payment of principal, premium, if any, or interest on this Note may be made by
wire transfer to the account of the Depositary or its nominee. In the event that
any date on which the principal, premium, if any, or interest on this Note is
payable is not a Business Day, then payment of principal, premium, if any, or
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of such
delay).
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee (as defined below) under the Indenture (as defined below),
by the manual signature of one of its authorized officers, this Note shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
Capitalized terms used in this Note which are defined in the Indenture
shall have the respective meanings assigned to them in the Indenture.
2
<PAGE>
Reference is hereby made to the further provisions of this Note hereinafter
set forth, which further provisions shall for all purposes have the same effect
as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, manually or in facsimile, and an imprint or facsimile of its corporate
seal to be imprinted hereon.
HEALTHSOUTH Corporation
By
-----------------------------------
Michael D. Martin
Executive Vice President,
Chief Financial Officer
and Treasurer
ATTEST:
- ----------------------------------------------
William W. Horton
Senior Vice President,
Corporate Counsel and Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in
the within-mentioned Indenture.
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
By
----------------------------------------------
Authorized Officer
Dated:
------------------------------------------
<PAGE>
REVERSE SIDE OF NOTE
This Note is one of a duly authorized series of securities (the
"Securities") of the Company designated as its 7.0% Senior Notes due 2008
limited in aggregate principal amount to $250,000,000 (the "Notes"). The
Securities are all issued or to be issued under and pursuant to an Indenture,
dated as of June 22, 1998, as supplemented by that certain Officers' Certificate
dated August ____, 1998 (the Indenture as supplemented by the Officers'
Certificate being herein collectively referred to as the "Indenture"), duly
executed and delivered between the Company and PNC Bank, National Association
(the "Trustee," which term includes any successor Trustee with respect to the
Notes under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights
thereunder of the Company, the Trustee and the holders of the Securities and the
terms upon which the Notes are to be authenticated and delivered. The terms of
individual series of Securities may vary with respect to interest rate or
interest rate formulas, issue dates, maturity, redemption, repayment, currency
of payment and otherwise.
Reference is hereby made to the Indenture for a description of the terms of
the Notes, to all of the provisions of which Indenture the holder of this Note,
by acceptance hereof, assents and agrees.
Except as set forth below, this Note is not redeemable and is not entitled
to the benefit of a sinking fund or any analogous provision.
This Note is redeemable as a whole or in part, at the option of the
Company, at any time at a redemption price equal to the greater of (i) 100% of
its principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield plus 20 basis points, plus, in each case,
accrued interest to the date of redemption. On and after the redemption date,
interest will cease to accrue on the Notes or any portion thereof called for
redemption. On or before the redemption date, the Company shall deposit with a
paying agent (or the Trustee) money sufficient to pay the redemption price of
and accrued interest on the Notes to be redeemed on such date. If less than all
of the Notes are to be redeemed, the Notes to be redeemed shall be selected by
the Trustee by such method as the Trustee shall deem fair and appropriate. The
Holder of this Note will receive notice thereof by first-class mail at least 30
and not more than 60 days prior to the date fixed for redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. "Comparable Treasury Issue" means the United States
Treasury security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the Note that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Note. "Independent Investment Banker" means
4
<PAGE>
Salomon Brothers Inc and its successor or, if such firm is unwilling or unable
to select the Comparable Treasury Issue, an independent investment banking
institution of national standing appointed by the Trustee. "Comparable Treasury
Price" means, with respect to any redemption date, (i) the average of the bid
and asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day preceding such
redemption date, as set forth in the daily statistical release (or any successor
release) published by the Federal Reserve Bank of New York and designated
"Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not contain such
prices on such business day, (A) the average of the Reference Treasury Dealer
Quotations for such redemption date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than
four such Reference Treasury Dealer Quotations, the average of all such
quotations. "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices of the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date. "Reference Treasury Dealer"
means a primary U.S. Government Securities dealer in New York City selected by
the Trustee after consultation with the Company.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of all the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Securities of all series issued under such Indenture
then outstanding and affected (voting as one class) to add any provisions to, or
change in any manner or eliminate any of the provisions of, such Indenture or
modify in any manner the rights of the holders of the Securities of each series
or Coupons so affected; provided that the Company and the Trustee may not,
without the consent of the holder of each Outstanding Note affected thereby, (i)
extend the final maturity of the principal of any Note, or reduce the principal
amount thereof, or premium thereon, if any, or reduce the rate or extend the
time of payment of interest thereon, or reduce any amount payable on redemption
thereof or make the principal thereof (including any amount in respect of
original issue discount), or interest thereon payable in any coin or currency
other than that provided in the Securities or Coupons or in accordance with the
terms thereof, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof or the amount thereof provable in bankruptcy or alter certain provisions
of the Indenture relating to Securities not denominated in Dollars or the
Judgment Currency of such Securities or impair or affect the right of any
Securityholder to institute suit for the enforcement of any payment thereof when
due or, if the Securities provide therefor, any right of repayment at the option
of the Securityholder or (ii) reduce the aforesaid percentage in principal
amount of Securities of any series issued under such Indenture, the consent of
the holders of which is required for any such modification. It is also provided
in the Indenture that, with respect to certain defaults or Events of Default
regarding the Securities of any
5
<PAGE>
series, the holders of a majority in aggregate principal amount Outstanding of
the Securities of each such series, each such series voting as a separate class
(or, of all Securities, as the case may be, voting as a single class) may under
certain circumstances waive all defaults with respect to each such series (or
with respect to all the Securities, as the case may be) and rescind and annul a
declaration of default and its consequences, but no such waiver or rescission
and annulment shall extend to or affect any subsequent default or shall impair
any right consequent/hereto. The preceding sentence shall not, however, apply to
a default in the payment of the principal of or interest on any of the
Securities.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the time, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note may be registered on the registry books of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained by the Company for such purpose in the
Borough of Manhattan, The City of New York, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the holder hereof or by its attorney duly authorized
in writing, and thereupon one or more new Notes of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable only in registered form in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes as requested by the
holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein.
The Indenture contains covenants which impose certain limitations on the
Company's and its Subsidiaries' ability to create or incur certain liens on any
of their respective properties or assets
6
<PAGE>
and to enter into certain sale and lease-back transactions and on the Company's
ability to engage in mergers or consolidations or the conveyance, transfer or
lease of all or substantially all of its properties and assets. These
limitations are subject to a number of important qualifications and exceptions
and reference is made to the Indenture for a description thereof.
No recourse shall be had for the payment of the principal of or the
interest on this Note or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto against any incorporator, stockholder, officer or director, as such,
past or present or future of the Company or of any successor thereof, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
THE INDENTURE AND THIS NOTE SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS
OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SMALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ CUSTODIAN ______
TEN ENT - as tenants by the entireties (Cust) (Cust)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors Act ____________
survivorship and not tenants in (State)
common
</TABLE>
Additional abbreviations may also be used though not in the above list.
7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including
postal zip code of assignee)
- --------------------------------------------------------------------------------
this Note and all rights thereunder hereby irrevocably constituting and
appointing
_____________________________________________, Attorney, to transfer this
security on the books of the Trustee, with full power of substitution in the
premises.
8
<PAGE>
SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITIES
TO REFLECT CHANGES IN PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
Schedule A
Changes to Principal Amount of Global Securities
<S> <C> <C> <C>
Principal Amount
of Notes
by which this Global
Security is to be Remaining
Reduced or Increased, Principal
and Reason for Amount of this
Date Reduction or Increase Global Security Notation Made By
---- --------------------- --------------- ----------------
</TABLE>
9
EXHIBIT (4)-6
HEALTHSOUTH CORPORATION
OFFICERS' CERTIFICATE PURSUANT TO
SECTIONS 2.3 AND 11.5 OF THE INDENTURE
Michael D. Martin and William W. Horton do hereby certify that they are the
Executive Vice President, Chief Financial Officer and Treasurer and Senior Vice
President, Corporate Counsel and Assistant Secretary, respectively, of
HEALTHSOUTH Corporation, a Delaware corporation (the "Company") and do further
certify, pursuant to resolutions of the Board of Directors of the Company
adopted on May 21, 1998 and resolutions of the Pricing Committee of said Board
of Directors adopted on June 17, 1998 (collectively, the "Resolutions"), and in
accordance with Sections 2.3 and 11.5 of the Indenture (the Indenture as amended
and supplemented by the Resolutions is herein referred to as the "Indenture")
dated as of June 22, 1998 between the Company and PNC Bank, National
Association, as trustee (the "Trustee"), as follows:
1. Two series of securities to be issued under the Indenture and designated
as the Company's 6.875% Senior Notes due 2005 (the "2005 Notes"), and 7.0%
Senior Notes due 2008 (the "2008 Notes") have been authorized. Each of the 2005
Notes and the 2008 Notes are a separate series of securities under the Indenture
and are referred to herein collectively as the "Securities." Attached hereto as
Annex A is a true and correct copy of a specimen 2005 Note (the "Form of 2005
Note") and attached hereto as Annex B is a true and correct copy of a specimen
2008 Note (the "Form of 2008 Note"). The Form of 2005 Note and the Form of 2008
Note are herein collectively referred to as the "Forms of Securities."
2. The 2005 Notes shall be limited to $250,000,000 in aggregate principal
amount and shall mature on June 15, 2005. The 2005 Notes shall bear interest at
the rate of 6.875% per annum from June 22, 1998, payable semiannually on each
June 15 and December 15 commencing December 15, 1998. The 2005 Notes were issued
at the initial offering price of 99.729% of principal amount. The 2005 Notes
shall be redeemable as provided in the Form of 2005 Note attached hereto as
Annex A.
3. The 2008 Notes shall be limited to $250,000,000 in aggregate principal
amount and shall mature on June 15, 2008. The 2008 Notes shall bear interest at
the rate of 7.0% per annum from June 22, 1998, payable semiannually on each June
15 and December 15 commencing December 15, 1998. The 2008 Notes were issued at
the initial offering price of 99.050% of principal amount. The 2008 Notes shall
be redeemable as provided in the Form of 2008 Note attached hereto as Annex B.
4. The following terms shall apply to each of the Securities:
-1-
<PAGE>
(a) The Securities shall be issued initially in minimum denominations
of $1,000 and integral multiples of $1,000;
(b) The Securities shall be issued initially in part as global
securities in registered form in the name of the Depositary (hereinafter
defined) or its nominee in such denominations as shall be specified in a
Company Order delivered in accordance with the Indenture and otherwise as
provided in the Forms of Securities with such changes thereto as may be
required in the process of printing or otherwise producing the Securities
and which will not affect the substance thereof;
(c) The Depositary for the global Securities shall be The Depository
Trust Company;
(d) The global Securities shall be exchangeable for definitive
Securities in registered form substantially the same as the global
Securities in denominations of $1,000 or any integral multiple thereof upon
the terms and in accordance with the provisions of the Indenture;
(e) The Securities shall be payable (as to both principal and
interest) when and as the same shall become due at the office of the
Trustee, PNC Bank, National Association, provided that, as long as any part
of the Securities are in the form of one or more global Securities,
payments of interest with respect thereto may be made by wire transfer, and
provided further that, with respect to Securities issued in definitive
form, the Company may elect to exercise its option to have interest paid by
check mailed to the registered owners' address as they appear on the
Register, as kept by the Trustee on each Record Date; and
(f) The defeasance and covenant defeasance provisions of Article 10 of
the Indenture shall be applicable to the Securities.
5. The Forms of Securities set forth certain of the terms required to be
set forth in this certificate pursuant to Section 2.3 of the Indenture, and said
terms are incorporated herein by reference.
6. In addition to the covenants set forth in Article 3 of the Indenture,
the Securities shall include the following additional covenants:
-2-
<PAGE>
"Section 3.10 Limitation on Liens.
The Company shall not, nor will it permit any Subsidiary to, create or
assume any Indebtedness for money borrowed which is secured by a mortgage,
security interest, pledge, charge, lien or other similar encumbrance of any kind
(collectively, a "lien") upon any assets, whether now owned or hereafter
acquired, of the Company or any such Subsidiary without equally and ratably
securing the Securities by a lien ranking ratably with and equally to such
secured Indebtedness, except that the foregoing restriction shall not apply to
(i) liens on assets of any corporation existing at the time such corporation
becomes a Subsidiary; (ii) liens on assets existing at the time of acquisition
thereof, or to secure the payment of the purchase price of such assets, or to
secure indebtedness incurred or guaranteed by the Company or a Subsidiary for
the purpose of financing the purchase price of such assets or improvements or
construction thereon, which indebtedness is incurred or guaranteed prior to, at
the time of or within 360 days after such acquisition (or in the case of real
property, completion of such improvement or construction or commencement of full
operation of such property, whichever is later); (iii) liens securing
indebtedness owed by any Subsidiary to the Company or another wholly-owned
Subsidiary; (iv) liens on any assets of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Subsidiary or
at the time of a purchase, lease or other acquisition of the assets of a
corporation or firm as an entirety or substantially as an entirety by the
Company or a Subsidiary; (v) liens on any assets of the Company or a Subsidiary
in favor of the United States of America or any state thereof, or in favor of
any other country, or in favor of any political subdivision of any of the
foregoing, to secure certain payments pursuant to any contract or statute or to
secure any indebtedness incurred or guaranteed for the purpose of financing all
or any part of the purchase price (or, in the case of real property, the cost of
construction) of the assets subject to such liens (including but not limited to,
liens incurred in connection with industrial revenue or similar financing
involving a political subdivision, agency or authority thereof); (vi) any
extension, renewal or replacement (or successive extensions, renewals or
replacements) in whole or in part, of any lien referred to in the foregoing
clauses (i) to (v), inclusive; (vii) certain statutory liens or other similar
liens arising in the ordinary course of business of the Company or a Subsidiary,
or certain liens arising out of government contracts; (viii) certain pledges,
deposits or liens made or arising under workers compensation or similar
legislation or in certain other circumstances; (ix) certain liens in connection
with legal proceedings, including certain liens arising out of judgments or
awards; (x) liens for certain taxes or assessments, landlord's liens and liens
and charges incidental to the conduct of the business or the ownership of the
assets of the Company or of a Subsidiary, which were not incurred in connection
with the borrowing of money and which do not, in the opinion of the
-3-
<PAGE>
Company, materially impair the use of such assets in the operation of the
business of the Company or such Subsidiary or the value of such assets for the
purposes thereof or (xi) liens relating to accounts receivable of the Company or
any of its Subsidiaries which have been sold, assigned or otherwise transferred
to another Person in a transaction classified as a sale of accounts receivable
in accordance with generally accepted accounting principles (to the extent the
sale by the Company or the applicable Subsidiary is deemed to give rise to a
lien in favor of the purchaser thereof in such accounts receivable or the
proceeds thereof). Notwithstanding the above, the Company or any Subsidiary may,
without securing the Securities, create or assume any Indebtedness which is
secured by a lien which would otherwise be subject to the foregoing
restrictions, provided that after giving effect thereto the Exempted Debt then
outstanding does not exceed 10% of the total Consolidated Tangible Assets of the
Company and its Subsidiaries at such time.
Section 3.11 Limitations on Sale and Lease-Back Transactions.
The Company shall not, nor shall it permit any of its Subsidiaries to,
enter into any sale and lease-back transaction (except such transactions
involving leases for less than three years) for the sale and leasing back of any
property or asset unless (i) the Company or such Subsidiary would be entitled
pursuant to clauses (i) through (xi) of Section 3.10 to create, incur or permit
to exist a lien on the assets to be leased in an amount at least equal to the
Attributable Debt in respect of such transaction without equally and ratably
securing the Securities, or (ii) the proceeds of the sale of the assets to be
leased are at least equal to their fair market value and the proceeds are
applied to the purchase or acquisition (or, in the case of real property, the
construction) of assets or to the retirement of indebtedness."
7. In addition to the definitions set forth in Article 1 of the Indenture,
the following additional definitions shall apply with respect to the 2005 Notes
and the 2008 Notes and, in the event of a conflict with the definition of terms
in the Indenture, such additional definitions shall control:
"Attributable Debt" means, in connection with a sale and lease-back
transaction, the lesser of (i) the fair value of the assets subject to such
transaction or (ii) the present value of the obligations of the lessee for net
rental payments during the term of any lease discounted at the rate of interest
set forth or implicit in the terms of such lease or, if not practicable to
determine such rate, the weighted average interest rate per annum borne by the
Securities of each series outstanding pursuant to this Indenture and subject to
the limitation on sale and lease-back transactions provisions contained in
Section 3.11, compounded semiannually in either case as determined by the
principal accounting or financial officer of the Company.
-4-
<PAGE>
"Consolidated Tangible Assets" of any Person as of any date means the total
assets of such Person and its Subsidiaries (excluding any assets that would be
classified as "intangible assets" under GAAP) on a consolidated basis at such
date, as determined in accordance with GAAP, less all write-ups subsequent to
the date of initial issuance of the Securities in the book value of any asset
owned by such Person or any of its Subsidiaries.
"Exempted Debt" means the sum of the following as of the date of
determination: (i) Indebtedness of the Company and its Subsidiaries incurred
after the date of issuance of the Securities and secured by liens not otherwise
permitted by the limitation on liens provisions of the Indenture, and (ii)
Attributable Debt of the Company and its Subsidiaries in respect of every sale
and lease-back transaction entered into after the date of the issuance of the
Securities, other than leases permitted by Section 3.11.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as from time to time in effect.
"Indebtedness" shall mean all items classified as indebtedness on the most
recently available consolidated balance sheet of the Company and its
Subsidiaries, in accordance with GAAP.
8. Each of the undersigned is authorized to approve the form, terms and
conditions of the Securities pursuant to the Resolutions.
9. Attached hereto as Annex D is a true and correct copy of the
Resolutions.
10. Attached hereto as Annex E are true and correct copies of the letter
addressed to the Trustee entitling the Trustee to rely on the Opinion of Counsel
attached thereto, which Opinion relates to the Securities and complies with
Section 11.5 of the Indenture.
11. Each of the undersigned has reviewed the provisions of the Indenture,
including the covenants and conditions precedent pertaining to the issuance of
the Securities.
12. In connection with this certificate each of the undersigned has
examined documents, corporate records and certificates and has spoken with other
officers of the Company.
-5-
<PAGE>
13. Each of the undersigned has made such examination and investigation as
is necessary to enable him to express an informed opinion as to whether or not
the covenants and conditions precedent of the Indenture pertaining to the
issuance of the Securities have been satisfied.
14. In our opinion all of the covenants and conditions precedent provided
for in the Indenture for the issuance of the Securities have been satisfied.
15. If and to the extent that any provision of this certificate qualifies
or conflicts with any provision of the Indenture, the provisions of this
certificate shall control.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Indenture or the Securities, as the case may
be.
IN WITNESS WHEREOF, each of the undersigned officers has executed this
certificate this ____ day of August, 1998.
----------------------------------------
Michael D. Martin
Executive Vice President,
Chief Financial Officer and
Treasurer
----------------------------------------
William W. Horton
Senior Vice President,
Corporate Counsel and
Assistant Secretary
-6-
EXHIBIT 5
[HASKELL SLAUGHTER & YOUNG, L.L.C. LETTERHEAD]
August 14, 1998
HEALTHSOUTH Corporation
One HealthSouth Parkway
Birmingham, Alabama 35243
Attention: Legal Department
RE: REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We have served as counsel to HEALTHSOUTH Corporation, a Delaware
corporation (the "Company"), in connection with the proposed exchange offer (the
"Exchange Offer") which is more fully described in the Registration Statement on
Form S-4 (Commission File No. 333- ) filed under the Securities Act of 1933, as
amended with the Securities and Exchange Commission on August 14, 1998 (the
"Registration Statement"), to exchange its 6.875% Senior Notes due 2005 (the
"New Notes due 2005") and its 7.0% Senior Notes due 2008 (the "New Notes due
2008", and together with the New Notes due 2005, the "New Notes"), for an equal
principal amount of the Company's outstanding 6.875% Senior Notes due 2005 (the
"Old Notes due 2005") and 7.0% Senior Notes due 2008 (the "Old Notes due 2008",
and together with the Old Notes due 2005, the "Old Notes"). This opinion is
furnished to you pursuant to the requirements of Form S-4.
In connection with this opinion, we have examined and are familiar with
originals or copies (certified or otherwise identified to our satisfaction) of
such documents, corporate records and other instruments relating to the
formation of the Company and the authorization and issuance of the New Notes as
we have deemed necessary and appropriate.
<PAGE>
HEALTHSOUTH Corporation
August 14, 1998
Page 2
Based upon the foregoing, and having regard for such legal considerations
as we have deemed relevant, it is our opinion that:
1. The New Notes have been duly authorized; and
2. Upon issuance, exchange and delivery of the New Notes as contemplated in
the Registration Statement, the New Notes will be legally issued, fully paid and
nonassessable and will constitute the valid and binding obligations of the
Issuer.
We do hereby consent to the reference to our Firm in the Prospectus which
forms a part of the Registration Statement, and to the filing of this opinion as
an Exhibit thereto.
Very truly yours,
Haskell Slaughter & Young, L.L.C.
By /s/ F. Hampton McFadden, Jr.
-----------------------------
F. Hampton McFadden, Jr.
EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
--------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income from continuing operations before income taxes,
Minority interest and extraordinary items $ 130,246 $ 193,701 $ 238,382 $ 384,162 $ 601,634 $ 407,504
Less: Minority interest 29,549 31,655 43,753 50,369 64,873 35,424
------------------------------------------------------- --------------
Income from continuing operations before income taxes and
extraordinary items 100,697 162,036 194,629 333,793 536,761 372,080
Adjustments:
Non-recurring charges 50,075 34,717 73,102 78,905 15,875 -
Fixed charges 31,413 83,942 116,647 113,254 126,827 66,466
Capitalized interest expense (2,664) (2,869) (2,865) (3,943) (2,491) (523)
------------------------------------------------------- --------------
Numerator - earnings available for fixed charges $ 179,521 $ 277,826 $ 381,513 $ 522,009 $ 676,972 $ 438,023
======================================================= ==============
FIXED CHARGES:
Interest expense $ 25,884 $ 74,895 $ 105,517 $ 98,751 $ 111,504 $ 56,918
Capitalized interest expense 2,664 2,869 2,865 3,943 2,491 523
Interest component of rental expense 2,865 6,178 8,265 10,560 12,832 9,025
------------------------------------------------------- --------------
Denominator - fixed charges $ 31,413 $ 83,942 $ 116,647 $ 113,254 $ 126,827 $ 66,466
======================================================= ==============
Ratio of earnings to fixed charges 5.71x 3.31x 3.27x 4.61x 5.34x 6.59x
======================================================= ==============
</TABLE>
EXHIBIT (23)-1
Consent of Ernst & Young LLP
Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, No. 333- ) and to the incorporation by
reference therein of our report dated February 25, 1998, except Note 14, as to
which the date is March 20, 1998, with respect to the consolidated financial
statements and schedule of HEALTHSOUTH Corporation included in its Annual Report
(Form 10-K) for the year ended December 31, 1997, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Birmingham, Alabama
August 14, 1998
SECURITIES ACT OF 1933 FILE NO. 333-___
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
---------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2) [ ]
---------------
PNC BANK, NATIONAL ASSOCIATION
---------------------------------------------------
(Exact name of trustee as specified in its charter)
NATIONAL BANKING ASSOCIATION 22-1146430
-------------------------------- -------------------
(State of Incorporation If Not a (I.R.S. Employer
National Bank) Identification No.)
500 W. Jefferson Street
Louisville, Kentucky 40202
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
---------------
Martha A. Ziskind
Vice President
PNC Bank, N.A.
500 W. Jefferson Street
Louisville, Kentucky 40202
(502) 581-3231
(Name, address, and telephone number of agent for service)
---------------
HEALTHSOUTH CORPORATION
---------------------------------------------------
(Exact Name of Obligor as Specified in its Charter)
DELAWARE 63-08604407
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
ONE HEALTHSOUTH PARKWAY, BIRMINGHAM, AL 35243
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
6.875% SENIOR NOTES DUE 2005 AND 7.00% SENIOR NOTES DUE 2008
------------------------------------------------------------
(Title of the Indenture Securities)
<PAGE>
1. General information. Furnish the following information as Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency Washington, D.C.
Federal Deposit Insurance Corp. Washington, D.C.
Federal Reserve Bank of Cleveland Cleveland, OH
(b) Whether it is authorized to exercise corporate trust powers.
Yes, the Trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any
underwriters for the obligor is an affiliate of the Trustee, describe each
such affiliation.
Neither the obligor nor any underwriter for the obligor is an affiliate of
the trustee.
3. Voting Securities of the trustee. Furnish the following information as to
each class of voting securities of the trustee.
Col. A Col. B
------ ------
(Title of Class) Amount Outstanding
---------------- ------------------
PNC Bank Corp.
Common Stock, par value $5 per share 300,807,500 shares
4. Trusteeships under other indentures. If the trustee is a trustee under
another indenture under which any other securities, or certificates of
interest or participation in any other securities, of the obligor are
outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
Not applicable.
(b) A brief statement of the facts relied upon as a basis for the claim that no
conflict of interest within the meaning of Section 310(b)(1) of the Act arises
as a result of the trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as compared with the
securities issued under other such other indenture.
Not applicable.
<PAGE>
5. Interlocking directorates and similar relationships with the obligor
or underwriters. If the trustee or any of the directors or executive officers of
the trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor, identify
each such person having any such connection and state the nature of each such
connection.
Not applicable.
6. Voting securities of the trustee owned by the obligor or its
officials. Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner and
executive officer of the obligor:
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COLUMN C
- --------------- ---------------- -------------- ------------------
<S> <C> <C> <C>
</TABLE>
Not applicable.
7. Voting securities of the trustee owned by underwriter or their
officials. Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, executive officer of each such underwriter:
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COLUMN C
- --------------- ---------------- -------------- ------------------
<S> <C> <C> <C>
</TABLE>
Not applicable.
8. Securities of the obligor owned or held by the trustee. Furnish the
following information as to securities of the obligor owned beneficially or held
as collateral security for obligations in default by the trustee.
COLUMN A COLUMN B COLUMN C COLUMN D
AMOUNT OWNED
BENEFICIALLY
WHETHER THE OR HELD AS
SECURITIES ARE COLLATERAL PERCENT OF
VOTING OR SECURITY FOR CLASS REPRESENTED
NONVOTING OBLIGATIONS IN BY AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT IN COLUMN C
- ---------------- ---------------- ---------------- ------------------
Not applicable.
9. Securities of the underwriters owned or held by the trustee. If the
trustee owns beneficially of holds as collateral security for obligations in
default any securities of an underwriter for the obligor, furnish the following
information as to each class of securities of such underwriter any of which are
so owned or held by the trustee:
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
AMOUNT OWNED
BENEFICIALLY
OR HELD AS
COLLATERAL PERCENT OF
SECURITY FOR CLASS REPRESENTED
TITLE OF ISSUER AMOUNT OBLIGATIONS BY AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING IN DEFAULT IN COLUMN C
- ----------------- ------------- -------------- ------------------
<S> <C> <C> <C>
</TABLE>
Not applicable.
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor. If the trustee owns beneficially
or holds collateral security for obligations in default voting securities of a
person who, to the knowledge of the trustee (1)
<PAGE>
owns 10% or more of the voting securities of the obligor or (2) is an affiliate,
other than a subsidiary, of the obligor, furnish the following information as to
the voting securities of such person:
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
AMOUNT OWNED
BENEFICIALLY
OR HELD AS
COLLATERAL PERCENT OF
SECURITY FOR CLASS REPRESENTED
TITLE OF ISSUER AMOUNT OBLIGATIONS BY AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING IN DEFAULT IN COLUMN C
- ----------------- ------------- -------------- ------------------
<S> <C> <C> <C>
</TABLE>
Not applicable.
11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor. If the
trustee owns beneficially or holds as collateral security for obligations in
default any securities of a person who, to the knowledge of the trustee, owns 50
percent or more of the voting securities of the obligor, furnish the following
information as to each class of securities of such person any of which are so
owned or held by the trustee:
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
AMOUNT OWNED
BENEFICIALLY
OR HELD AS
COLLATERAL PERCENT OF
SECURITY FOR CLASS REPRESENTED
TITLE OF ISSUER AMOUNT OBLIGATIONS BY AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING IN DEFAULT IN COLUMN C
- ----------------- ------------- -------------- ------------------
<S> <C> <C> <C>
</TABLE>
Not applicable.
12. Indebtedness of the obligor to the trustee. Except as noted in the
instructions, if the obligor is indebted to the trustee, furnish the following
information:
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C
-------------- ------------- ---------
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DUE DATE
-------------- ------------- ---------
<S> <C> <C> <C>
1) Revolving Credit ......... $77,909,000 6/2003
2) Term Loan ................ $ 8,800,000 10/2000
</TABLE>
13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is the trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable.
14. Affiliation with the Underwriters. If any underwriter is an affiliate
of the trustee, describe each such affiliation.
Not applicable.
<PAGE>
15. Foreign Trustee. Identify the order or rule pursuant to which the
foreign trustee is authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
Not applicable.
16. List of Exhibits. List below all exhibits filed as part of this
statement of eligibility.
1. Articles of Association of the Trustee, with all amendments thereto,
as presently in effect, filed as Exhibit 1 to Trustee's Statement of Eligibility
and Qualification, Registration Statement No. 33-58107 and incorporated herein
by reference.
2. Copy of Certificate of the Authority of the Trustee to commence
business, filed as Exhibit 2 to Trustee's Statement of Eligibility and
Qualification, Registration No. 2-58789 and incorporated herein by reference.
3. Copy of Certificate as to Authority of the Trustee to exercise trust
powers, filed as Exhibit 3 to Trustee's Statement of Eligibility and
Qualification, Registration No. 2-58789 and incorporated herein by reference.
The By-Laws of the trustee, filed as Exhibit 4 to Trustee's Statement of
Eligibility and Qualification, Registration No. 333-28711 and incorporated
herein by reference.
5. Copy of each indenture referred to in Item 4, if the obligor is in
default. Not applicable.
6. The consent of United States institutional trustees required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority is
hereby incorporated by reference to its Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 which were previously filed with the Commission.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, PNC Bank, National Association, a national banking association, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Louisville and
Commonwealth of Kentucky on the 14th day of August, 1998.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ DAVID G. METCALF
----------------------------------------
David G. Metcalf
Vice President
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(B) OF THE ACT
PNC Bank, National Association, the Trustee executing the statement of
eligibility and qualification to which this Exhibit is attached does hereby
consent that reports of examinations of the undersigned by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefore in accordance with the
provisions of Section 321(b) of the Trust Indenture Act of 1939.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ DAVID G. METCALF
----------------------------------------
David G. Metcalf
Vice President
DATE: August 14, 1998
EXHIBIT (99)-1
LETTER OF TRANSMITTAL
HEALTHSOUTH CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING
6.875% SENIOR NOTES DUE 2005
AND 7.0% SENIOR NOTES DUE 2008
FOR
6.875% SENIOR NOTES DUE 2005
AND 7.0% SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED AUGUST , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998 OR
SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED (THE
"EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.
PNC BANK, N.A.
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
500 West Jefferson Street (502) 581-2705 500 West Jefferson Street
Louisville, Kentucky 40202 Louisville, Kentucky 40202
Attn: Corporate Trust Department Attn: Corporate Trust Department
</TABLE>
For Information Call:
David G. Metcalf
(502) 581-3029
Delivery of this letter of transmittal to an address other than as set
forth above, or transmission of instructions via facsimile other than as set
forth above, does not constitute a valid delivery.
The undersigned acknowledges that the undersigned has received the
Prospectus dated August , 1998 (as amended or supplemented from time to time,
the "Prospectus") of HEALTHSOUTH Corporation, a Delaware corporation (the
"Issuer"), and this Letter of Transmittal (as amended or supplemented from time
to time, the "Letter of Transmittal"), which together constitute the Issuer's
offer (the "Exchange Offer") to exchange up to $250,000,000 aggregate principal
amount of 6.875% Senior Notes due 2005 and up to $250,000,000 aggregate
principal amount of 7.0% Senior Notes due 2008 (the "New Notes") of the Issuer,
for an equal principal amount of the Issuer's issued and outstanding 6.875%
Senior Notes due 2005 and 7.0% Senior Notes due 2008, respectively
(collectively, the "Old Notes"). The terms of the New Notes are identical in all
material respects (including principal amount, interest rate and maturity) to
those of the Old Notes, except that the New Notes will be registered under the
Securities Act of 1933, as amended (the "Securities Act").
Holders of New Notes will not be entitled to certain rights of Holders of
the Old Notes under the Registration Rights Agreement, which rights will be
terminated upon consummation of the Exchange Offer.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein have the meanings given to
such terms in the Prospectus.
<PAGE>
This Letter of Transmittal is to be completed by holders of Old Notes (a)
if Old Notes are to be forwarded herewith or (b) if tenders of Old Notes are to
be made by book-entry transfer to an account maintained by PNC Bank, N.A. (the
"Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer--Procedures for
Tendering". Delivery of this Letter of Transmittal and any other required
documents should be made to the Exchange Agent.
If a Holder desires to tender Old Notes pursuant to the Exchange Offer but
time will not permit this Letter of Transmittal, the certificates representing
Old Notes or other required documents to reach the Exchange Agent on or before
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such Holder may effect a tender of such Notes in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under "Exchange Offer--Guaranteed Delivery Procedures".
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
List below the Old Notes to which the Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal amount
of Old Notes should be listed on a separate schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES (1) (2) (3) (4)
- ------------------------------------------------- ------------- ---------- ----------- ---------------------
<S> <C> <C> <C> <C>
Name(s) and Address(es) of Registered Holder(s) Principal Amount
(Please fill in, if blank) Aggregate of Old
Principal Notes
Certificate Maturity Amount of Tendered
Number(s)* Date Old Notes (if less than all)**
------------- ---------- ----------- ---------------------
------------- ---------- ----------- ---------------------
------------- ---------- ----------- ---------------------
------------- ---------- ----------- ---------------------
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry holders.
** Old Notes may be tendered in whole or in part in integral multiples of
$1,000. Unless this column is completed, a holder will be deemed to have
tendered the full aggregate principal amount of the Old Notes represented by
the Old Notes indicated in column 3.
- --------------------------------------------------------------------------------
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTRUCTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------
Account Number
----------------------------------------------
Transaction Code Number
----------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
---------------------------------------------
Window Ticket Number (if any)
---------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
----------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
----------------------------------------------
Account Number
----------------------------------------------
Transaction Code Number
----------------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER THAT ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of Old
Notes indicated above in exchange for a like aggregate principal amount of New
Notes of the same maturity. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby exchanges,
assigns and transfers to, or upon the order of, the Issuer all right, title and
interest in and to such Old Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Issuer) with respect to the tendered Old
Notes with the full power of substitution (such power of attorney being deemed
to be an irrevocable power coupled with an interest), to (i) deliver
certificates for such Old
<PAGE>
Notes to the Issuer and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Issuer, (ii) present such Old Notes
for transfer on the books of the Issuer, and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that, when the same are accepted for exchange, the Issuer
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims or
proxies. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, and the undersigned will comply with its obligations under the
Registration Rights Agreement. The undersigned has read and agreed to all of the
terms of the Exchange Offer.
The undersigned agrees that acceptance of any tendered Old Notes by the
Issuer and the issuance of New Notes in exchange therefor will constitute
performance in full by the Issuer of its obligations under the Registration
Rights Agreement and that the Issuer will have no further obligations or
liabilities thereunder.
The name(s) and address(es) of the registered holders of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Old Notes. The Certificate number(s) and the
principal amount(s) of the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on certain interpretive letters by the staff of the Securities and
Exchange Commission (the "SEC") to third parties in unrelated transactions. On
the basis thereof, the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders are not participating in, and
have no arrangement or understanding with any person to participate in, the
distribution of such New Notes. THE UNDERSIGNED ACKNOWLEDGES THAT ANY HOLDER OF
OLD NOTES USING THE EXCHANGE OFFER TO PARTICIPATE IN A DISTRIBUTION OF THE NEW
NOTES (I) CANNOT RELY ON THE POSITION OF THE STAFF OF THE SEC ENUNCIATED IN ITS
INTERPRETIVE LETTERS AND (II) MUST COMPLY WITH THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH A SECONDARY
RESALE TRANSACTION. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of marketing-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any resale
of such New Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The undersigned represents that (i) it is not an affiliate (as defined in
Rule 405 under the Securities Act) of the Issuer; (ii) it is not a broker-dealer
tendering Old Notes acquired for its own account directly from the Issuer; (iii)
any New Notes to be received by it will be acquired in the ordinary course of
its business; and (iv) it is not engaged in, and does not intend to engage in, a
distribution of such new Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If a holder of Old Notes is engaged
in or intends to engage in a distribution of New Notes or has any arrangement or
understanding with respect to the distribution of New Notes to be acquired
pursuant to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
The Issuer agrees that, subject to the provisions of the Registration
Rights Agreement, the Prospectus may be used by a Participating Broker-Dealer
(as defined below) in connection with resales of New Notes received in exchange
for Old Notes, where such Old Notes were acquired by such Participating
Broker-Dealer for its own account as a result of market-making activities or
other trading activities, for
<PAGE>
a period ending one year after the Expiration Date (subject to extension under
certain limited circumstances described in the Prospectus) or, if earlier, when
all such New Notes have been disposed of by such Participating Broker-Dealer. In
that regard, each broker-dealer who acquired Old Notes for its own account as a
result of market-making or other trading activities (a "Participating
Broker-Dealer"), by tendering such Old Notes and executing this Letter of
Transmittal, agrees that, upon receipt of notice from the Issuer of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in the Prospectus untrue in any material
respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
therein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend the
sale of New Notes pursuant to the Prospectus until the Issuer has amended or
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the Participating
Broker-Dealer or the Issuer has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Issuer gives such notice to suspend the
sale of the New Notes, the one-year period referred to above during which
Participating Broker-Dealers are entitled to use the Prospectus in connection
with the resale of New Notes shall be extended by the number of days during the
period from and including the date of the giving of such notice to and including
the date when Participating Broker-Dealers shall have received copies of the
supplemented or amended Prospectus necessary to permit resales of the New Notes
or to and including the date on which the Issuer has given notice that the sale
of New Notes may be resumed, as the case may be.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described under "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Issuer in accordance with the
terms and subject to the conditions set forth herein and in the Prospectus.
The undersigned recognizes that under certain circumstances set forth in
the Prospectus under "The Exchange Offer--Conditions" the Issuer will not be
required to accept for exchange any of the Old Notes tendered. Old Notes not
accepted for exchange or withdrawn will be returned to the undersigned at the
address set forth below unless otherwise indicated under "Special Delivery
Instructions" below (or, in the case of Old Notes tendered by book-entry
transfer, credited to an account maintained by the tendering holder at DTC).
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes (and, if
applicable, any substitute certificates representing Old Notes not exchanged or
not accepted for exchange) be issued in the name(s) of the undersigned and be
delivered to the undersigned at the address, or, in the case of book-entry
transfer of Old Notes, be credited to the account at DTC shown above in the box
entitled "Description of Old Notes".
Holders of the Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after the
original issue date of the New Notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuer to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
herein conferred or agreed to be conferred in this Letter of Transmittal shall
survive the death or incapacity of the undersigned and any obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the Prospectus and
in the instructions contained in this Letter of Transmittal.
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL AND DELIVERING SUCH NOTES AND THIS
LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE TENDERED THE
OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. ANY FINANCIAL INSTITUTION THAT IS A
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY'S SYSTEMS MAY MAKE BOOK-ENTRY
DELIVERY OF OLD NOTES BY CAUSING THE BOOK-ENTRY TRANSFER FACILITY TO TRANSFER
SUCH OLD NOTES INTO THE EXCHANGE AGENT'S ACCOUNT AT THE BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES.
ALTHOUGH DELIVERY OF OLD NOTES MAY BE EFFECTED THROUGH BOOK-ENTRY TRANSFER AT
THE BOOK-ENTRY TRANSFER FACILITY, THIS LETTER OF TRANSMITTAL WITH ALL REQUIRED
SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND
RECEIVED BY THE EXCHANGE AGENT.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete accompanying Substitute Form W-9)
X Date: , 1998
------------------------------------- ----------
X Date: , 1998
------------------------------------- ----------
Signature(s) of Owner
The above lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Old Notes, or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Old Notes to which this Letter of Transmittal relate are held of record by
two or more joint holders, then all such holders must sign this. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or other person acting in a fiduciary or representative
capacity, then please set forth full title. See Instruction 4.
Name(s):
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------------
Address:
----------------------------------------------------------------------
-------------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone Number:
------------------------------------------------
Tax Identification or
Social Security Number(s):
------------------------------------------------------
SIGNATURE GUARANTEED
(If required by Instruction 4)
Signatures Guaranteed
by an Eligible Institution:
----------------------------------------------------
(Authorized Signature)
-------------------------------------------------------------------------------
(Title)
-------------------------------------------------------------------------------
(Name of Firm)
-------------------------------------------------------------------------------
(Address and Telephone Number)
Dated: , 1998
-------------------
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5) (SEE INSTRUCTIONS 4 AND 5)
<S> <C>
To be completed ONLY if certificates for Old Notes To be completed ONLY if certificates for Old Notes not
not exchanged and/or New Notes are to be issued in the exchanged and/or New Notes are to be sent to someone other
name of and sent to someone other than the person or per than the person or persons whose signature(s) appear(s) on
sons whose signature(s) appear(s) on the Letter of Trans this Letter of Transmittal above or to such person or persons
mittal above. at an address other than that shown in the box above entitled
"Description of Old Notes".
Issue New Notes and/or Old Notes to:
Deliver New Notes and/or Old Notes to:
Name(s): Name(s):
-------------------------------------------- ------------------------------------------------------
(Please Type or Print) (Please Type or Print)
- ------------------------------------------------------ --------------------------------------------------------------
(Please Type or Print) (Please Type or Print)
Address:
---------------------------------------------- --------------------------------------------------------------
- ------------------------------------------------------ Address:
(Zip Code) ------------------------------------------------------
(Zip Code)
Telephone Number:
-------------------------------------
Telephone Number:
---------------------------------------------
Tax Identification or
Social Security Number(s):
---------------------------- Tax Identification or
Social Security Number(s):
(Complete Substitute Form W-9) -------------------------------------
- ------------------------------------------------------ --------------------------------------------------------------
</TABLE>
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS
LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S)
FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES.
This Letter of Transmittal must accompany, (i) all certificates
representing Old Notes tendered pursuant to the Exchange Offer and (ii) all
tenders of Old Notes made pursuant to the procedures for book-entry transfer set
forth in the Prospectus under "The Exchange Offer--Procedures for Tendering".
Certificates representing the Old Notes in proper form for transfer, or a timely
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as a properly completed and duly executed copy
of this Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, a Substitute Form W-9 (or facsimile thereof) and any other
documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein on or before the Expiration Date.
The method of delivery of this Letter of Transmittal, the Old Notes and all
other required documents is at the election and risk of the tendering holders,
but delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If such delivery is by mail, it is recommended that registered
mail properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to permit timely delivery.
The Issuer will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEED DELIVERY PROCEDURES.
If a holder desires to tender Old Notes, but time will not permit a Letter
of Transmittal, certificates representing the Old Notes to be tendered or other
required documents to reach the Exchange Agent on or before the Expiration Date,
or it the procedure for book-entry transfer cannot be completed on or prior to
the Expiration Date, such holder's tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as
defined below);
(b) on or before the Expiration Date, the Exchange Agent has received
a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Issuer (or a facsimile
thereof with receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) from such Eligible Institution setting
forth the name and address of the holder of such Old Notes, the name(s)
in which the Old Notes are registered and the principal amount of Old
Notes tendered and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, certificates representing Old Notes to be
tendered, in proper form for transfer, or a Book-Entry confirmation, as
the case may be, together with a duly executed Letter of Transmittal and
any other documents required by this Letter of Transmittal and the
instructions hereto, will be deposited by such Eligible Institution with
the Exchange Agent; and
(c) a Letter of Transmittal (or a facsimile thereof) and certificates
representing the Old Notes to be tendered, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other required
documents are received by the Exchange Agent within three New York Stock
Exchange trading days after the Expiration Date.
3. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
Tenders of Old Notes will be accepted only in integral multiples of $1,000.
If less than all the Old Notes evidenced by any Certificate submitted are to be
tendered, fill in the principal amount of Old Notes which are to be tendered in
the box entitled "Principal Amount of Old Notes Tendered (if less than all)". In
such case, new certificate(s) for the remainder of the Old Notes that were
evidenced by your old certificate(s) will only be sent to the holder of the Old
Notes (or, in the case of Old Notes
<PAGE>
tendered pursuant to book-entry transfer, will only be credited to the account
at DTC maintained by the holder of the Old Notes) promptly after the Expiration
Date. All Old Notes represented by certificates or subject to a Book-Entry
Confirmation delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Any holder who has tendered Old Notes may withdraw the tender by delivering
written notice of withdrawal (which may be sent by facsimile) to the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must specify the name of the person having tendered the Old
Notes to be withdrawn, identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes) and (where certificates for Old Notes have
been transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the withdrawal of such certificates, the withdrawing holder must also submit
the serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such holder is an Eligible Institution. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Issuer, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered following one of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering".
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder of the Old
Notes tendered herewith, the signature must correspond exactly with the name as
written on the face of the certificates without any alteration, enlargement or
change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter of Transmittal. If any tendered Old Notes
are registered in different names on several certificates, it will be necessary
to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are names in which tendered Old Notes are registered.
If this Letter of Transmittal is signed by the registered holder, and New
Notes are to be issued and any untendered or unaccepted principal amount of Old
Notes are to be reissued or returned to the registered holder, then the
registered holder need not and should not endorse any tendered Old Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (in either case, executed
exactly as the name of the registered holder appears on such Old Notes), with
the signature on the endorseement or bond power guaranteed by an Eligible
Institution, unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and submit with this Letter of
Transmittal evidence satisfactory to the Issuer of their authority to so act.
The signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder (which term,
for purposes of this document, shall include any participant in DTC
<PAGE>
whose name appears on the register of holders maintained by the Issuer as owner
of the Old Notes) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that the
signatures in this Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a commercial
bank or trust company located or having an office or correspondent in the United
States, or by a member firm of a national securities exchange or the National
Association of Securities Dealers, Inc., or by a member of a signature medallion
program such as "STAMP" (any of the foregoing being referred to herein as an
"Eligible Institution"). If Old Notes are registered in the name of a person
other than the signer of this Letter of Transmittal, the Old Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Issuer in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address or account at DTC to which New Notes issued pursuant to the
Exchange Offer and/or substitute Old Notes for principal amounts not tendered or
not accepted for exchange are to be issued, sent or deposited if different from
the name and address or account of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the employer
identification or Social Security number of the person named must also be
indicated. If no such instructions are given, any New Notes will be issued in
the name of, and delivered to, the name and address (or account at DTC, in the
case of any tender by book-entry transfer) of the person signing this Letter of
Transmittal, and any Old Notes not accepted for exchange will be returned to the
name and address (or account at DTC, in the case of any tender by book-entry
transfer) of the person signing this Letter of Transmittal.
6. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9.
Under the federal income tax laws, payments that may be made by the Issuer
on account of New Notes issued pursuant to the Exchange Offer may be subject to
backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter of Transmittal and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (i) the holder has not been notified
by the Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the holder that the holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such holder should write "Applied for" in the space
provided for the TIN in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Issuer (or the
Paying Agent under the Indenture governing the New Notes) will retain 31% of
payments made to the tendering holder during the 60-day period following the
date of the Substitute Form W-9. If the holder furnishes the Exchange Agent or
the Issuer with its TIN within 60-days after the date of the Substitute Form
W-9, the Issuer (or Paying Agent) will remit such amounts retained during the
60-day period to the holder and no further amounts shall be retained or withheld
from payments made to the holder thereafter. If, however, the holder has not
provided the Exchange Agent or the Issuer with its TIN within such 60-day
period, the Issuer (or the Paying Agent) will remit such previously retained
amounts to the IRS as backup withholding. In general, if a holder is an
individual, the taxpayer identification number is the Social Security Number of
such individual. If the Exchange Agent or the Issuer is not provided with the
correct taxpayer identification number, the holder may be subject to a U.S. $50
penalty imposed by the IRS. Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
<PAGE>
identification number if you do not have one and how to complete the Substitute
Form W-9 if Old Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause Old
Notes to be deemed invalidly tendered, but may require the Issuer (or the Paying
Agent) to withhold 31% of the amount of any payments made on account of the New
Notes. Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
7. TRANSFER TAXES.
The Issuer will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered herewith, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
transfer of Old Notes to the Issuer or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter of
Transmittal.
8. WAIVER OF CONDITIONS.
The Issuer reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
9. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders of Old Notes
or transmittals of this Letter of Transmittal will be accepted. All tendering
holders of Old Notes, by execution of this Letter of Transmittal, shall waive
any right to receive notice of the acceptance of their Old Notes for exchange.
Neither the Issuer, the Exchange Agent nor any other person is obligated to
give notice of defects or irregularities in any tender, nor shall any of them
incur any liability for failure to give any such notice.
10. INADEQUATE SPACE.
If the space provided herein is inadequate, the aggregate principal amount
of Old Notes being tendered and the certificate number or numbers (if
applicable) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
11. MUTILATED, LOST, STOKEN OR DESTROYED OLD NOTES.
If any certificate has been lost, mutilated, destroyed or stolen, the
holder should promptly notify David G. Metcalf at PNC Bank, N.A., telephone
(502) 581-3029. The holder will then be instructed as to the steps that must be
taken to replace the certificate. This Letter of Transmittal and related
documents cannot be processed until the Old Notes have been replaced.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number indicated
above.
<PAGE>
13. VALIDITY OF TENDERS.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be determined by the Issuer,
in its sole discretion, which determination will be final and binding. The
Issuer reserves the right to reject any and all Old Notes not validly tendered
or any Old Notes, the Issuer's acceptance of which may, in the opinion of the
Issuer or counsel to the Issuer, be unlawful. The Issuer also reserves the right
to waive any conditions of the Exchange Offer or defects or irregularities in
tenders of Old Notes as to any ineligibility of any holder who seeks to tender
Old Notes in the Exchange Offer, whether or not similar conditions or
irregularities are waived in the case of other holders. Any such waiver shall
not constitute a general waiver of the conditions of the Exchange Offer by the
Issuer. The interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) by the Issuer
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Issuer shall determine. The Issuer will use reasonable efforts to
give notification of defects or irregularities with respect to tenders of Old
Notes, but neither the Issuer nor the Exchange Agent shall incur any liability
for failure to give such notification.
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF NEW NOTES; RETURN OF OLD
NOTES.
Subject to the terms and conditions of the Exchange Offer, the Issuer will
accept for exchange all validly tendered Old Notes as soon as practicable after
the Expiration Date and will issue New Notes therefor as soon as practicable
thereafter. For purposes of the Exchange Offer, the Issuer shall be deemed to
have accepted tendered Old Notes when, as and if the Issuer has given written
and oral notice thereof to the Exchange Agent. If any tendered Old Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged Old
Notes will be returned, without expense, to the name and address shown above or,
if Old Notes have been tendered by book-entry transfer, to the account at DTC
shown above, or at a different address or account at DTC as may be indicated
under "Special Delivery Instructions".
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 6)
PAYOR's NAME:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SUBSTITUTE FORM W-9 PART I--TAXPAYER IDENTIFICATION
NUMBER
Department of the Treasury ------------------
Internal Revenue Service Enter your taxpayer identification Social Security Number
number in the appropriate box. For
most individuals, this is your social
security number. If you do not have a OR
number, see how to obtain a "TIN" in
the enclosed Guidelines. ------------------
Employer Identification
Number
NOTE: If the account is in more than
one name, see the chart on page 2 of the
enclosed Guidelines to determine what
number to give.
----------------------------------------------------------------
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE ENCLOSED
GUIDELINES)
----------------------------------------------------------------
Payor's Request for Taxpayer CERTIFICATION--UNDER THE PENALTIES OF PERJURY,
Identification Number (TIN) and I CERTIFY THAT:
Certification (1) the number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup withholding either because I have
not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends or the IRS has
notified me that I am no longer subject to backup withholding.
SIGNATURE DATE
----------------------- -----------
</TABLE>
- --------------------------------------------------------------------------------
Certificate Guidelines--You must cross out Item (2) of the above certification
if you have been notified by the IRS that you are subject to backup withholding
because of underreporting of interest on dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding,
you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out Item 2.
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payor, 31% of all payments made
to me on account of the New Notes shall be retained until I provide a Taxpayer
Identification Number to the payor and that, if I do not provide my Taxpayer
Identification Number within 60 days, such retained amounts shall be remitted to
the Internal Revenue Service as a backup withholding and 31% of all reportable
payments made to me thereafter will be withheld and remitted to the Internal
Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE DATE
------------------------------- ----------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
EXHIBIT (99)-2
HEALTHSOUTH CORPORATION
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
6.875% SENIOR NOTES DUE 2005
AND
7.0% SENIOR NOTES DUE 2008
IN EXCHANGE FOR NEW
6.875% SENIOR NOTES DUE 2005
AND
7.0% SENIOR NOTES DUE 2008,
RESPECTIVELY
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used by registered holders of outstanding 6.875% Senior Notes due
2005 and/or 7.0% Senior Notes due 2008 (collectively the "Old Notes") of
HEALTHSOUTH Corporation, a Delaware corporation (the "Issuer"), who wish to
tender their Old Notes for an equal principal amount of new 6.875% Senior Notes
due 2005 and 7.0% Senior Notes due 2008 (the "New Notes") of the same maturity
that have been registered under the Securities Act of 1933, as amended (the
"Securities Act") if (i) the Old Notes, a duly completed and executed Letter of
Transmittal (as defined in the Prospectus) and all other required documents
cannot be delivered to PNC Bank, N.A. (the "Exchange Agent") prior to 5:00 P.M.,
New York City time, on the Expiration Date (as defined in the Prospectus
referred to below) or (ii) the procedures for delivery of the Old Notes being
tendered by book-entry transfer, together with a duly completed and executed
Letter of Transmittal, cannot be completed on or prior to 5:00 P.M., New York
City time, on the Expiration Date. This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery), to the Exchange Agent. See "The Exchange Offer
- -- Procedures for Tendering" in the Prospectus. The Issuer has the right to
reject a tender of Old Notes made pursuant to the guaranteed delivery procedures
unless the registered holder using the guaranteed delivery procedure submits
either (a) the Old Notes tendered thereby, in proper form for transfer, or (b)
confirmation of book-entry transfer in the manner set forth in the Prospectus,
in either case together with one or more properly completed and duly executed
Letter(s) of Transmittal (or facsimile thereof) and any other required documents
by 5:00 P.M., New York City time, on the third New York Stock Exchange trading
day following the Expiration Date. Capitalized terms not defined herein have the
meanings assigned to them in the Prospectus.
<PAGE>
The Exchange Agent for The Exchange Offer is:
PNC BANK, N.A.
<TABLE>
<S> <C> <C>
By Registered or Certified Mail Facsimile Transmissions: By Hand Or Overnight Delivery:
(Eligible Institutions Only)
500 Wet Jefferson Street (502) 581-2705 500 West Jefferson Street
Louisville, Kentucky 40202 Louisville, Kentucky 40202
Attn: Corporate Trust Department Attn: Corporate Trust Department
Confirm By Telephone:
(502) 581-3029
For Information Call:
(502) 581-3029
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT BE USED TO GUARANTEE SIGNATURES.
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER
OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and subject to
the conditions set forth in Prospectus dated August , 1998 (as the same may be
amended or supplemented from time to time, the "Prospectus"), and the related
Letter of Transmittal (which together constitute the "Exchange Offer"), receipt
of which is hereby acknowledged, the aggregate principal amount of the Old Notes
set forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in instruction 2 to the Letter of Transmittal.
<PAGE>
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF CERTIFICATE
REGISTERED HOLDER AS IT NUMBER(S) MATURITY OF AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF
APPEARS ON THE OLD OF OLD NOTES OLD NOTES AMOUNT REPRESENTED OLD NOTES
NOTES (PLEASE PRINT) TENDERED TENDERED BY OLD NOTES* TENDERED
<S> <C> <C> <C> <C>
- -------------------------- -------------- ------------- --------------------- --------------------
- ------------------------- -------------- ------------- --------------------- --------------------
- ------------------------- -------------- ------------- --------------------- --------------------
- ------------------------- -------------- ------------- --------------------- --------------------
- ------------------------- -------------- ------------- --------------------- --------------------
- ------------------------- -------------- ------------- --------------------- --------------------
</TABLE>
* Must be tendered only in integral multiples of $1,000.
If the Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:
------------------
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X Date: , 1998
-------------------------- --------------
X Date: , 1998
-------------------------- --------------
Signature(s) of Owner(s)
or Authorized Signatory
Area Code and Telephone Number:
--------------------
Must be signed by the holder(s) of the Old Notes as their name(s) appear(s) on
certificates of the Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery.
<PAGE>
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must be set forth his or her full title
below.
Please print name(s) and address(es)
Name(s):
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
Capacity:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Address(es):
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution", including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either (a) the Old
Notes tendered hereby, in proper form for transfer, or (b) confirmation of the
book-entry transfer of such Old Notes to the Exchange Agent's account at the
Depository Trust Company ("DTC") maintained for such purpose, pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents by 5:00
P.M., New York City time, on the third New York Stock Exchange trading day
following the Expiration Date.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
<TABLE>
<S> <C>
Name of Firm:
--------------------- ---------------------------------------
(Authorized Signature)
Address: Title:
------------------------- -------------------------------
Name:
------------------------- -------------------------------
(zip code) (Please type or print)
Area Code and
Telephone Number: Date:
-------------- ---------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
EXHIBIT (99)-3
HEALTHSOUTH CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING
6.875% SENIOR NOTES DUE 2005
AND 7.0% SENIOR NOTES DUE 2008
FOR
6.875% SENIOR NOTES DUE 2005
AND 7.0% SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED AUGUST , 1998
To Our Clients:
We are enclosing herewith a Prospectus dated August , 1998 (the
"Prospectus") of HEALTHSOUTH Corporation (the "Issuer") and a Letter of
Transmittal (which together constitute the "Exchange Offer") relating to the
offer by the Issuer to exchange up to $250,000,000 aggregate principal amount of
the Issuer's 6.875% Senior Notes due 2005 and up to $250,000,000 aggregate
principal amount of the Issuer's 7.0% Senior Notes due 2008 (the "New Notes"),
pursuant to an offering registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a corresponding principal amount of the Issuer's
issued and outstanding 6.875% Senior Notes due 2005 and 7.0% Senior Notes due
2008, respectively (the "Old Notes"), upon the terms and subject to the
conditions set forth in the Exchange Offer. Capitalized terms used but not
defined herein have the meaning given to such terms in the Prospectus.
PLEASE NOTE THAT THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the participants in the book-entry transfer facility for Old Notes
held by us for your account. A tender of such Old Notes can be made only by us
as the participant in the book-entry transfer facility and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account (you may tender less than all of such Old
Notes and/or tender less than the full principal amount of any given Old Note,
provided that the amount tendered is in integral multiples of $1,000) pursuant
to the terms and conditions of the Exchange Offer. We also request that you
confirm that we may on your behalf make the representations contained in the
Letter of Transmittal that are to be made with respect to you as beneficial
owner.
Pursuant to the Letter of Transmittal, each holder (a "Holder") of Old
Notes will represent to the Issuer that (i) it is not an affiliate (as defined
in Rule 405 under the Securities Act) of the Issuer; (ii) it is not a
broker-dealer tendering Old Notes acquired for its own account directly from the
Issuer; (iii) any New Notes to be received by it will be acquired in the
ordinary course of its business; and (iv) it is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. If a Holder of Old
Notes is engaged in or intends to engage in a distribution of New Notes or has
any arrangement or understanding with respect to the distribution of New Notes
to be acquired pursuant to the Exchange Offer, such Holder may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Very truly yours,
EXHIBIT (99)-4
HEALTHSOUTH CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING
6.875% SENIOR NOTES DUE 2005
AND 7.0% SENIOR NOTES DUE 2008
FOR
6.875% SENIOR NOTES DUE 2005
AND 7.0% SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED AUGUST , 1998
To Depository Trust Company Participants:
We are enclosing herewith the materials listed below relating to the offer
by HEALTHSOUTH Corporation (the "Issuer") to exchange up to $250,000,000
aggregate principal amount of the Issuer's 6.875% Senior Notes due 2005 and up
to $250,000,000 aggregate principal amount of the Issuer's 7.0% Senior Notes due
2008 (the "New Notes"), pursuant to an offering registered under the Securities
Act of 1933, as amended (the "Securities Act"), for a corresponding principal
amount of the Issuer's issued and outstanding 6.875% Senior Notes due 2005 and
7.0% Senior Notes due 2008, respectively (the "Old Notes"), upon the terms and
subject to the conditions set forth in the Prospectus dated August , 1998 (the
"Prospectus") of the Issuer and the related Letter of Transmittal (the "Letter
of Transmittal"), in each case as amended or supplemented from time to time
(which together constitute the "Exchange Offer"). Capitalized terms used but not
defined herein have the meaning given to such terms in the Prospectus.
Enclosed herewith are copes of the following documents;
1. Prospectus dated August , 1998;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Book-Entry Transfer Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold Old
Notes in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's
instruction with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
To participate in the Exchange Offer, a beneficial holder (a "Holder") of
Old Notes must cause a DTC Participant to tender such Holder's Old Notes to the
account of PNC Bank, N.A. (the "Exchange Agent") maintained at the Depository
Trust Company ("DTC") for the benefit of the Exchange Agent through DTC's
Automated Tender Offer Program ("ATOP"), including transmission of a
computer-generated message that acknowledges and agrees, on behalf of the DTC
Participant and the beneficial owners of tendered Old Notes, to be bound by the
terms of the Letter of Transmittal. By complying with DTC's ATOP procedures with
respect to the Exchange Offer, the DTC Participant confirms, on behalf of itself
and the beneficial owners of tendered Old Notes, all provisions of the Letter of
Transmittal applicable to it and such beneficial owners as fully as if it had
completed, executed and returned the Letter of Transmittal to the Exchange
Agent.
Pursuant to the Letter of Transmittal, each Holder of Old Notes will
represent to the Issuer that (i) it is not an affiliate (as defined in Rule 405
under the Securities Act) of the Issuer; (ii) it is not a broker-dealer
tendering Old Notes acquired for its own account directly from the Issuer; (iii)
any New
<PAGE>
Notes to be received by it will be acquired in the ordinary course of its
business; and (iv) it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If a holder of Old Notes is engaged
in or intends to engage in a distribution of New Notes or has any arrangement or
understanding with respect to the distribution of New Notes to be acquired
pursuant to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
The enclosed Instruction to the Book-Entry Transfer Participant from Owner
contains an authorization by the beneficial owners of the Old Notes for you to
make the foregoing representations.
The Issuer will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Issuer
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 7 of the enclosed
Letter of Transmittal.
Additional copies of the enclosed material may be obtained form PNC Bank,
N.A., Attention: David G. Metcalf.
HEALTHSOUTH CORPORATION
By:
------------------------------------
Michael D. Martin
Executive Vice President,
Chief Financial Officer and Treasurer
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF HEALTHSOUTH CORPORATION OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE
ANY STATEMENT ON ITS BEHALF IN CONNECTION THE EXCHANGE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
EXHIBIT (99)-5
INSTRUCTION TO
BOOK-ENTRY TRANSFER PARTICIPANT FROM OWNER
OF
HEALTHSOUTH CORPORATION
6.875% SENIOR NOTES DUE 2005
AND
7.0% SENIOR NOTES DUE 2008
To Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated August
, 1998 (the "Prospectus") of HEALTHSOUTH Corporation (the "Issuer") and a
related Letter of Transmittal (which together constitute the "Exchange Offer").
Capitalized terms used but not defined herein have the meaning given to such
terms in the Prospectus.
This will instruct you, the book-entry transfer facility participant, as to
the action to be taken by you relating to the Exchange Offer with respect to the
Old Notes held by you for the account of the undersigned.
The aggregate fact amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$ of the 6.875% Senior Notes due 2005
----------
$ of the 7.0% Senior Notes due 2008
----------
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate statement):
A. ___________ To TENDER the following Old Notes held by you for the
account of the undersigned (insert principal amount of Old Notes to be
tendered);
$
---------- of the 6.875% Senior Notes due 2005, and not to tender
other Old Notes of such maturity, if any, held by you for
the account of the undersigned;
$
---------- of the 7.0% Senior Notes due 2008, and not to tender other
Old Notes of such maturity, if any, held by you for the
account of the undersigned;
OR
B. __________ NOT to tender any Old Notes held by you for the account of
the undersigned.
- ----------
1 Must be in integral multiples of $1,000.
<PAGE>
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby authorizes you to make), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned as
a beneficial owner, including but not limited to the representations that (i) it
is not an affiliate of the Issuer or any of its subsidiaries, or, if the
undersigned is an affiliate of the Issuer or any of its subsidiaries, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (ii) the New Notes are being acquired
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, (iii) the undersigned has not entered
into an arrangement or understanding with any other person to participate in the
distribution (within the meaning of the Securities Act) of the New Notes, (iv)
the undersigned is not a broker-dealer who purchased the Old Notes for resale
pursuant to an exemption under the Securities Act, and (v) the undersigned will
be able to trade New Notes acquired in the Exchange Offer without restriction
under the Securities Act. If the undersigned is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account
pursuant to the Exchange Offer, it represents that such Old Notes to be
exchanged were acquired by it as a result of market-making activities or other
trading activities, and it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
(zip code)
Telephone Number:
---------------------------------------------------------------
(area code)
Taxpayer Identification or Social Security Number:
- ------------------------------------
Date:
-------------------------------
EXHIBIT (99)-6
EXCHANGE AGENT AGREEMENT
August ___, 1998
PNC Bank, N.A.
Corporate Trust Department
500 West Jefferson Street
Louisville, Kentucky 40202
Attention: David Metcalf
Ladies and Gentlemen:
HEALTHSOUTH Corporation (the "Company"), is offering to exchange (the
"Exchange Offer") its 6.875% Senior Notes due 2005 (the "New Notes due 2005")
and 7.0% Senior Notes due 2008 (the "New Notes due 2008" and, together with the
New Notes due 2005, the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement on Form S-4 (File No. 333-____) for an equal principal
amount of the Company's outstanding 6.875% Senior Notes due 2005 (the "Old Notes
due 2005") and 7.0% Senior Notes due 2008 (the "Old Notes due 2008" and,
together with the Old Notes due 2005, the "Old Notes"), which were issued in a
transaction exempt from registration under the Securities Act. The New Notes and
the Old Notes are collectively referred to herein as the "Notes". The Term
"Expiration Date" shall mean 5:00 p.m., New York City time, on __________, 1998,
unless the Exchange Offer is extended as provided in the Prospectus included in
such Registration Statement (the "Prospectus"), in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Upon execution of this Agreement, PNC Bank, N.A. will act as
the Exchange Agent for the Exchange Offer (the "Exchange Agent"). A copy of the
Prospectus is attached hereto as EXHIBIT A. Capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Prospectus.
A copy of each of the form of the letter of transmittal (the "Letter of
Transmittal"), the form of the notice of guaranteed delivery (the "Notice of
Guaranteed Delivery"), the form of letter to brokers and the form of letter of
clients (collectively, the "Tender Documents") to be used by holders of Old
Notes ("Holders") in order to receive New Notes pursuant to the Exchange Offer
is attached hereto as EXHIBIT B.
<PAGE>
The Company hereby appoints you to act as Exchange Agent in connection with
the Exchange Offer. In carrying out your duties as Exchange Agent, you are to
act in accordance with the following provisions of this Agreement:
1. You are to mail the Prospectus and the Tender Documents to all of the
Holders and participants on the day that you are notified by the Company that
the Registration Statement has become effective under the Securities Act of
1933, as amended, or as soon as practicable thereafter, and to make subsequent
mailings thereof to any persons who become Holders prior to the Expiration Date
and to any persons as may from time to time be requested by the Company. All
mailings pursuant to this Section 1 shall be by first-class mail, postage
prepaid, unless otherwise specified by the Company. You shall also accept and
comply with telephone requests for information relating to the Exchange Offer,
provided that such information shall relate only to the procedures for tendering
Old Notes in (or withdrawing tenders of Old Notes from) the Exchange Offer. All
other requests for information relating to the Exchange Offer shall be directed
to the Company, Attention: Leif Murphy, One HealthSouth Parkway, Birmingham,
Alabama 35243; Telephone (205) 969-6056; Facsimile (205) 969-6837.
2. You are to examine the Letters of Transmittal and the Old Notes and
other documents delivered or mailed to you, by or for the Holders, prior to the
Expiration Date, to ascertain whether (i) each Letter of Transmittal is properly
executed and completed in accordance with the instructions set forth therein,
(ii) the Old Notes are in proper form for transfer and (iii) any other document
required by the instructions accompanying the Letters of Transmittal is
completed and duly executed in accordance with such instructions. In each case
where a Letter of Transmittal or other document has been improperly executed or
completed or, for any other reason, is not in proper form, or some other
irregularity exists, you are authorized to endeavor to take such action as you
consider appropriate to notify the tendering Holder of such irregularity and as
to the appropriate means of resolving the same. Determination of questions as to
the proper completion or execution of the Letters of Transmittal, or as to the
proper form for transfer of the Old Notes or as to any other irregularity in
connection with the submission of Letters of Transmittal and/or Old Notes and
other documents in connection with the Exchange Offer, shall be made by the
officers of, or counsel for, the Company at their written instructions or oral
direction confirmed by facsimile. Any determination made by the Company on such
questions shall be final and binding.
3. At the written request of the Company or its counsel, Haskell Slaughter
& Young, L.L.C., you shall notify tendering Holders in the event of any
extension, termination or amendment of the Exchange Offer. In the event of any
such termination, you will return all tendered Old Notes to the persons entitled
thereto, at the request and expense of the Company.
4. Tender of the Old Notes may be made only as set forth in the Letter of
Transmittal. Notwithstanding the foregoing, tenders which the Company shall
approve in writing as having been properly tendered shall be considered to be
properly tendered. Letters of Transmittal and Notices of Guaranteed Delivery
shall be recorded by you as to the date and time of receipt and
2
<PAGE>
shall be preserved and retained by you at the Company's expense for six years.
New Notes are to be issued in exchange for Old Notes pursuant to the Exchange
Offer only in accordance with the provisions of Section 8 hereof and only (i)
against deposit with you prior to the Expiration Date or, in the case of a
tender in accordance with the guaranteed delivery procedures outlined in the
Letter of Transmittal, within three New York Stock Exchange trading days after
the Expiration Date of the Exchange Offer, together with executed Letters of
Transmittal and other documents required by the Exchange Offer or (ii) in the
event that the Holder is a participant in The Depository Trust Company ("DTC")
system, by the utilization of DTC's Automated Tender Offer Program ("ATOP") and
any evidence required by the Exchange Offer.
You are hereby directed to establish an account with respect to the Old
Notes at DTC (the "Book Entry Transfer Facility") within two business days after
the date of the Prospectus. Any financial institution that is a participant in
the Book Entry Transfer Facility system may, until the Expiration Date, make
book-entry delivery of the Shares by causing the Book Entry Transfer Facility to
transfer such Notes into your account in accordance with the procedure for such
transfer established by the Book Entry Transfer Facility. In every case,
however, a Letter of Transmittal (or a manually executed facsimile thereof), or
an Agent's Message, properly completed and duly executed with any required
signature guarantees and any other required documents must be transmitted to and
received by you prior to the Expiration Date or the guaranteed delivery
procedures described in the Prospectus must be complied with.
The term "Agent's Message" means a message transmitted by a participant of
the Book Entry Transfer Facility to and received by DTC and forming a part of a
Book Entry Confirmation, which states that such Book Entry Transfer Facility has
received an express acknowledgment from the participant in such Book Entry
Transfer Facility tendering the Old Notes that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Company may enforce such agreement against such participant.
5. Upon the oral or written request of the Company (with written
confirmation of any such oral request thereafter), you will transmit by
telephone, and promptly thereafter confirm in writing to Leif Murphy, One
HealthSouth Parkway, Birmingham, Alabama 35243; Telephone (205) 969-6056;
Facsimile (205) 969-6837, or such other persons as the Company may reasonably
request the aggregate number and principal amount of Old Notes tendered to you
and the number and principal amount of Old Notes properly tendered that day. In
addition, you will also inform the aforementioned persons, upon oral request
made from time to time (with written confirmation of such request thereafter)
prior to the Expiration Date, of such information as they or any of them may
reasonably request.
6. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of New Notes will be made by you promptly after acceptance of the
tendered Old Notes in accordance with Section 8 hereof. You will hold all items
which are deposited for tender with you after 5:00 p.m., New York City time, on
the Expiration Date pending further instructions from an officer of the Company
or its counsel.
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7. If any Holder shall report to you that his or her failure to surrender
Old Notes registered in his or her name is due to the loss or destruction of a
certificate or certificates, you shall request such Holder (i) to furnish to you
an affidavit of loss and, if required by the Company, a bond of indemnity in an
amount and evidenced by such certificate or certificates of a surety, as may be
satisfactory to you and the Company, and (ii) to execute and deliver an
agreement to indemnify the Company and you in such form as is acceptable to you
and the Company. The obligees to be named in each such indemnity bond shall
include the Company and you. You shall report to the Company the names of all
Holders who claim that their Old Notes have been lost or destroyed and the
principal amount of such Old Notes.
8. Upon the expiration of the Exchange Offer, Michael D. Martin, William W.
Horton or Leif Murphy, or another designated officer or agent of the Company,
will confirm to you orally (oral notice to be promptly confirmed in writing) or
in writing the aggregate principal amount of Old Notes being exchanged for New
Notes pursuant to the Exchange Offer. The Old Notes accepted for exchange are to
be delivered to the Trustee with instructions to cancel such Old Notes and
unless otherwise instructed by the Company to destroy such canceled Old Notes
and furnish the Company with a certificate evidencing such destruction.
As soon as practicable after the Company notifies you of its election to
exchange Old Notes pursuant to the preceding paragraph, you shall either (i)
cause an aggregate principal amount of New Notes equal to the aggregate
principal amount of Old Notes surrendered with and tendered by each Letter of
Transmittal or Agent's Message and accepted for exchange to be reflected, as
directed in such Letter of Transmittal or Agent's Message, on records maintained
by DTC, or, as applicable, (ii) at the request of the tendering Holder contained
in a Letter of Transmittal which is tendering Old Notes in definitive form,
cause to be delivered as directed in such Letter of Transmittal New Notes
registered in the name or names specified in such Letter of Transmittal
evidencing an aggregate principal amount equal to the aggregate principal amount
of Old Notes surrendered with and tendered by such Letter of Transmittal.
Tenders pursuant to the Exchange Offer are irrevocable, except that Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date as described in the Prospectus.
If, pursuant to the terms of the Exchange Offer, the Company does not
accept and exchange all or any part of the Old Notes, or Old Notes are tendered
but withdrawn prior to the Expiration Date, or partial tenders are made, you
shall promptly return to, or, upon the order of, the tendering Holder,
certificates for Old Notes not exchanged.
Any certificates for unexchanged Notes forwarded by first-class mail shall
be so forwarded under an existing insurance policy protecting you and the
Company from loss or liability arising out of the non-receipt or non-delivery of
such certificates or by registered mail insured separately for the replacement
value of such certificates.
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9. For your services as the Exchange Agent hereunder, the Company shall pay
you in accordance with the schedule of fees attached hereto as EXHIBIT C. The
Company also will reimburse you, for your reasonable out-of-pocket expenses
(including, but not limited to, reason able attorneys' fees and expenses not
previously paid to you) in connection with your services promptly after
submission to the Company of itemized statements.
10. You are not authorized to pay any concessions, commissions or
solicitation fees to any broker, dealer, bank or other person or to engage or
utilize any person to solicit tenders.
11. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those specifically
set forth herein or in the Exhibits attached hereto or as may be
subsequently requested in writing of you by the Company and agreed to by
you in writing with respect to the Exchange Offer;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, accuracy, sufficiency, value or
genuineness of any Old Notes deposited with you hereunder of any New Notes,
any tender Documents or other documents prepared by the Company in
connection with the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder which
might in your judgment involve any expense or liability unless you shall
have been furnished with an indemnity reasonably satisfactory to you;
(d) may rely on, and shall be fully protected and indemnified as pro
vided in Section 12 hereof in acting upon, the written or oral instructions
with respect to any matter relating to your acting as Exchange Agent
specifically cov ered by this Agreement or supplementing or qualifying any
such action of any officer or agent of such other person or persons as may
be designated or whom you reasonably believe have been designated by the
Company;
(e) may consult with counsel satisfactory to you, including counsel
for the Company, and the advice of such counsel shall be full and complete
authoriza tion and protection in respect in good faith and in accordance
with such advice of such counsel;
(f) shall not at any time advise any person as to the wisdom of the
Exchange Offer or as to the market value or decline or appreciation in
market value of any Old Notes or New Notes;
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(g) shall not be liable for any action which you may do or refrain
from doing in connection with this Agreement except for your gross
negligence, willful misconduct or bad faith;
(h) shall not be required to expend or risk your own funds or
otherwise to incur any liability, financial or otherwise, in the
performance of any of your duties hereunder or in the exercise of any of
your rights or powers if you shall have reasonable grounds for believing
that repayment of such funds or indemnity satisfactory to you against such
risk or liability is not assured to you;
(i) may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval or
other paper or docu ment believed by you to be genuine and to have been
signed or presented by the proper party or parties;
(j) shall be entitled, if in the administration of the provisions of
this Agreement you shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action to be taken
hereunder, to receive, and such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of gross
negligence, willful misconduct or bad faith on your part be deemed to be
conclusively proved and established, by a certificate signed by one of the
Company's authorized officers and delivered to you, and such certificate,
in the absence of gross negligence, willful misconduct or bad faith on your
part, shall be full warrant to you for any action taken, suffered or
omitted by it under the provisions of this Agreement upon the faith
thereof;
(k) may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents, attorneys,
custodians or nominees appointed with due care; and
(l) may at any time resign by giving 30 days' written notice of
resigna tion to the Company. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor and, upon the acceptance by the
successor of such appointment, release you from your obligations hereunder
by written instrument, a copy of which instrument shall be delivered to
each of you and your successor. If no successor shall have been so
appointed and have accepted appointment within 45 days after the giving of
such notice of resignation, you may petition any court of competent
jurisdiction for the appointment of a successor.
12. The Company covenants and agrees to indemnify and hold harmless you and
your officers, directors, employees, agents and affiliates (collectively, the
"Indemnified Parties" and each an "Indemnified Party") against any loss,
liability or reasonable expense of any nature
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(including reasonable attorneys' and other fees and expenses) incurred without
gross negligence, willful misconduct or bad faith on an Indemnified Party's
part, in connection with the admin istration of the duties of the Indemnified
Parties hereunder in accordance with this Agreement; provided, however, such
Indemnified Party shall use its best effort to notify the Company by letter, or
by cable, telex or facsimile confirmed by letter, of the written assertion of a
claim against such Indemnified Party, or of any action commenced against such
Indemnified Party, promptly after but in any event within 10 days of the date
such Indemnified Party shall have received any such written assertion of a claim
or shall have been served with a summons, or other legal process, giving
information as to the nature and basis of the claim; provided, however, that
failure to so notify the Company shall not relieve the Company of any liability
which it may otherwise have hereunder except such liability that is a direct
result of such Indemnified Party's failure to so notify the Company. The Company
shall be entitled to participate at its own expense in the defense of any such
claim or legal action, and if the Company so elects or if the Indemnified Party
in such notice to the Company so directs, the Company shall assume the defense
of any suit brought to enforce any such claim. In the event the Company assumes
such defense, the Company shall not be liable for any fees and expenses
thereafter incurred by such Indemnified Party which is incurred as a result of
the need to have separate representation because of a conflict of interest
between such Indemnified Party and the Company. No Indemnified Party shall enter
into a settlement or other compromise with respect to any indemnified loss,
liability or expense without the prior written consent or the Company, which
shall not be unreasonably withheld or delayed if not adverse to the Company's
interests. Obligations under this Section 12 shall survive the termination of
this Agreement or the earlier resignation or termination of the Exchange Agent.
13. This Agreement and your appointment as the Exchange Agent shall be
construed and enforced in accordance with the laws of the State of New York
(without regard to its conflicts of law principles) and shall inure to the
benefit of, and the obligations created hereby shall be binding upon the
successors and assigns of, the parties hereto. No other person shall acquire or
have any rights under or by virtue of this Agreement.
14. This Agreement may not be modified, amended or supplemented without an
express written agreement executed by the parties hereto. Any inconsistency
between this Agreement and the Tender Documents, as they may from time to time
be supplemented or amended, shall be resolved in favor of the latter, except
with respect to the duties, liabilities and indemnification of you as Exchange
0Agent.
15. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
16. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or unpaired thereby.
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17. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the foregoing,
Sections 9 and 12 shall sur vive the termination of this Agreement. Upon any
termination of this Agreement, you shall promptly deliver to the Trustee any
certificates for Old Notes or New Notes, funds or property then held by you as
Exchange Agent under this Agreement.
18. All notices and communications hereunder shall be in writing and shall
be deemed to be duly given on the date received if delivered by reputable
overnight courier or registered mail, postage prepaid, or sent by facsimile as
follows:
If to Company: HEALTHSOUTH Corporation
One HealthSouth Parkway
Birmingham, Alabama 35243
Attention: William W. Horton
Telephone: (205) 969-4977
Facsimile: (205) 969-4730
and a copy to: Haskell Slaughter & Young, L.L.C.
1200 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203
Attention: F. Hampton McFadden, Jr.
Telephone: (205) 251-1000
Facsimile: (205) 324-1133
If to you: PNC Bank, N.A.
500 West Jefferson Street
Louisville, Kentucky 40202
Attention: David G. Metcalf
Telephone: (502) 581-3029
Facsimile: (502) 581-2705
or such other address or telecopy number as any of the above may have finished
to the other parties in writing for such purposes
19. This Agreement and all of the obligations hereunder shall be assumed by
any and all successors and assigns of the Company.
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If the foregoing is in accordance with your understanding, please indicate
your agreement by signing and returning the enclosed copy of this Agreement to
the Company.
Very truly yours,
HEALTHSOUTH Corporation
By
---------------------------------------
William W. Horton
Senior Vice President and Corporate Counsel
Agreed to this ______ day of August, 1998.
PNC Bank, N.A., as Exchange Agent
By
------------------------------------------
David G. Metcalf
Vice President
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EXHIBIT C
SCHEDULE OF FEES FOR SERVICES AS
EXCHANGE AGENT FOR
HEALTHSOUTH CORPORATION SENIOR NOTES DUE 2005 & 2008
EXCHANGE AGENT FEE
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To cover the acceptance of the appointment, the review and consideration of the
documentation, communication with the working parties, normal functions of the
Exchange Agent including the establishment and maintenance of required records
and accounts, distribution of tender documentation, and receipt of tendered
Notes and supporting documentation.
Initial Fee of $850
Transaction Fee of $5.00 per tendered note
OUT-OF-POCKET EXPENSES, DTC SERVICE CHARGES AND EXPENSES, LEGAL FEES AND
EXPENSES, IF AND WHEN INCURRED, FEES AND DISBURSEMENTS AND SERVICES OF AN
UNANTICIPATED OR EXTRAORDINARY NATURE WILL BE CHARGED WHEN OR IF INCURRED.
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