<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TOTAL RENAL CARE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8092 51-0354549
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
21250 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90503-5517
(310) 792-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN E. KING
CHIEF FINANCIAL OFFICER
TOTAL RENAL CARE HOLDINGS, INC.
21250 HAWTHORNE BOULEVARD, SUITE 800
TORRANCE, CALIFORNIA 90503-5517
(310) 792-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
CYNTHIA M. DUNNETT JONATHAN H. GRUNZWEIG
RIORDAN & MCKINZIE SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE, 29TH FLOOR 300 SOUTH GRAND AVENUE, SUITE 3400
LOS ANGELES, CALIFORNIA 90071 LOS ANGELES, CALIFORNIA 90071
(213) 629-4824 (213) 687-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As promptly
as practicable following the effective date of this Registration Statement.
If the only securities being registered on this Form S-3 are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being offered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share...... 2,750,000 shares $45.75 $125,812,000 $38,125
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, based on the
average of the high and low sales prices, $47.125 and $44.375,
respectively, on August 8, 1997, as reported on the New York Stock
Exchange.
---------------
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 ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 12, 1997
PROSPECTUS
AUGUST , 1997
2,595,524 SHARES
[LOGO OF TRC APPEARS HERE]
TOTAL RENAL CARE HOLDINGS, INC.
COMMON STOCK
The 2,595,524 shares of Common Stock being offered hereby (the "Offering")
are being sold by the Selling Stockholders. See "Selling Stockholders." Total
Renal Care Holdings, Inc. (the "Company") will not receive any proceeds from
the sale of Common Stock by the Selling Stockholders.
The Common Stock is listed on the New York Stock Exchange under the symbol
"TRL." On August 8, 1997 the closing price for the Common Stock as reported on
the New York Stock Exchange was $45.3125 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO THE DISCOUNTS AND THE SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
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<S> <C> <C> <C>
Per Share............................ $ $ $
Total................................ $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $200,000, all of which are payable
by the Selling Stockholders.
The shares of Common Stock are being offered by the Underwriter, subject to
prior sale when, as and if delivered to and accepted by the Underwriter and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of share certificates will be
made in New York, New York on or about August , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITER MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK
IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission"). A
copy of the reports and other information filed by the Company with the
Commission may be inspected without charge at the offices of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the following Regional Offices of the Commission: the Midwest Regional
Office at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and the Northeast Regional Office at 13th Floor, 7 World
Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Such reports and other information concerning the Company are also available
for inspection at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005. In addition the Commission maintains an Internet
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) The Company's Quarterly Report on Form 1O-Q for the three-month period
ended March 31, 1997;
(3) The description of the Common Stock contained in the Company's Form 8-A
dated October 23, 1995; and
(4) All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), (c), 14 or 15(d) of the Exchange Act and prior to
the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Copies of this
Prospectus, as amended or supplemented from time to time, and any other
documents (or parts of documents) that constitute part of the Prospectus under
Section 10(a) of the Securities Act will also be provided without charge to
each such person, upon written or oral request. Requests should be directed to
Total Renal Care Holdings, Inc., Attention: John E. King, 21250 Hawthorne
Boulevard, Suite 800, Torrance, California 90503-5517, telephone number (310)
792-2600.
2
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THE COMPANY
Total Renal Care Holdings, Inc. is the third largest provider of high-
quality dialysis and related services in the United States for patients
suffering from chronic kidney failure, also known as end stage renal disease
("ESRD"). As of the date of this Prospectus, the Company provides dialysis and
ancillary services to more than 12,900 patients through a network of 167
outpatient dialysis facilities in 17 states, as well as Washington, D.C., Guam
and the United Kingdom. In addition, the Company provides inpatient dialysis
services at 117 hospitals. The Company has implemented an aggressive growth
strategy since its recapitalization and change in ownership in August 1994,
adding 130 outpatient dialysis facilities to its network as well as 61
hospital inpatient contracts. 33 of the outpatient dialysis facilities and 30
of these hospital inpatient contracts have been added in the first six months
of 1997. The Company has also expanded its in-house ancillary services to
include ESRD laboratory and pharmacy facilities, as well as vascular access
management, transplant services programs and ESRD clinical research programs.
The increase in the number of facilities and hospital contracts, combined with
the enhancement of the Company's ancillary businesses, has resulted in an
increase in net operating revenues of 68.8% to $193.8 million in the six
months ended June 30, 1997 as compared to the same period in the previous
year. Since the Company's most recent equity offering in November 1996 the
Company has acquired 79 facilities servicing 3,300 patients, including 3
facilities servicing approximately 230 patients since July 1, 1997.
The Company's growth strategy is focused on establishing strong regional
networks of clustered facilities that provide comprehensive care for ESRD
patients. The Company believes that this approach enhances its operating
efficiency and positions the Company to be a leader in a health care
environment increasingly influenced by managed care. The Company strives to
continue its growth and margin improvement by (i) expanding its existing
networks and by creating new regional facility networks through acquisitions,
the development of new facilities ("de novo" developments) and the formation
of hospital alliances, (ii) forming strategic alliances with physicians and
managed care organizations, (iii) expanding the range of ancillary services it
provides to patients, (iv) continuously improving the quality of care provided
through the Company's Quality Management Program and (v) maximizing operating
efficiencies and utilization. As part of the Company's growth strategy, it has
begun development of operations in various overseas markets.
RECENT EVENTS
Six-Month Financial Results. Revenues increased 69% to $193.8 million in the
first six months of 1997 from $114.8 million in the corresponding period of
1996. Earnings increased 67% to $16.7 million, up from $10.0 million for the
corresponding period of 1996, and earnings per share increased 53% to $0.61 on
27.2 million weighted average shares outstanding for the six-month period
ended June 30, 1997, compared with earnings per share of $0.40 on 24.8 million
weighted average shares outstanding for the six-month period ended June 30,
1996.
Acquisitions/New Programs. Since July 1, 1997, the Company has acquired 3
facilities servicing approximately 230 patients in separate transactions. The
Company has also signed definitive agreements to acquire facilities servicing
approximately 660 additional patients. In addition, the Company has entered
into 7 agreements in principle to acquire facilities servicing approximately
1,100 patients. Although there can be no assurance that the transactions will
be consummated, the Company currently expects that each transaction for which
a definitive agreement has been signed will close in the third quarter and the
balance over the remainder of the year.
The Company recently acquired the Drug Evaluation Unit from the Minneapolis
Medical Research Foundation and thereby created Total Renal Pharmaceutical
Research, Inc. ("TRR"). TRR is a leading ESRD clinical research company
specializing in renal and renal-related studies. Headquartered in Minneapolis,
Minnesota, TRR has its core clinical site in the Hennepin County Medical
Center and plans to expand to multiple sites, initially throughout the U.S.
TRR conducts tolerance and pharmokinetics studies as well as Phase I through
IV clinical trials.
3
<PAGE>
The Company has recently committed to utilizing, system-wide and worldwide,
Health Outcomes Management Evaluation and Research ("HOMER") software from SSI
Health Systems, Inc. With its process-centered approach, HOMER relates
treatment parameters to patient problems, creating a versatile and powerful
outcomes database for clinical patient encounters. Management expects that
managed care reporting, outcomes analysis and risk assessment will be natural
extensions of HOMER.
Credit Facilities. In August 1997, the Company entered into a commitment to
replace its $400 million bank credit facility with an aggregate of $1 billion
in two senior bank facilities (the "Senior Credit Facilities"). The Senior
Credit Facilities consist of a seven-year $800 million revolving credit
facility and a ten-year $200 million term facility. The Company has also
committed to enter into an additional forward interest swap agreement with a
notional amount of $200 million for a ten-year period beginning September 30,
1997. There can be no assurance that the Company will consummate the
transactions related to the Senior Credit Facilities or the swap agreement. See
"Underwriting."
1997 Federal Budget. The Balanced Budget Act signed August 5, 1997 by
President Clinton included provisions: (1) providing for a permanent extension
to thirty months of the Medicare secondary payor requirement for items and
services furnished to ESRD patients by their existing Employer Group Health
Plan; and (2) specifying that where payment for drugs (other than EPO (defined
below)) is not made on a cost or prospective payment basis, the payment would
equal 95% of the Average Wholesale Price (as defined in federal laws and
regulations).
The Company is a Delaware corporation. The Company's offices are located at
21250 Hawthorne Boulevard, Torrance, California 90503-5517 and its telephone
number is (310) 792-2600.
4
<PAGE>
RISK FACTORS
In evaluating the Company and its business, prospective investors should
carefully consider the following risk factors in addition to the other
information contained herein. This Prospectus and the materials incorporated
herein by reference contain statements that constitute "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements relate to future events or the future
financial performance of the Company and involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among other things, those discussed
below, and such factors could cause actual results to differ materially from
those indicated by such forward-looking statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. In light
of these risks and uncertainties, there can be no assurance that the forward-
looking information contained in this Prospectus or the materials incorporated
herein by reference will in fact transpire.
DEPENDENCE ON MEDICARE, MEDICAID AND OTHER SOURCES OF REIMBURSEMENT
The Company is reimbursed for dialysis services primarily at fixed rates
established in advance under the Medicare End Stage Renal Disease program.
Under this program, once a patient becomes eligible for Medicare
reimbursement, Medicare is responsible for payment of 80% of the composite
rates determined by the Health Care Financing Administration ("HCFA") for
dialysis treatments. Since 1972, qualified patients suffering from ESRD have
been entitled to Medicare benefits regardless of age or financial
circumstances. The Company estimates that approximately 61% of its net patient
revenues during its fiscal year ended December 31, 1996, and approximately 59%
during the six months ended June 30, 1997 were funded by Medicare. Since 1983,
numerous Congressional actions have resulted in changes in the Medicare
composite reimbursement rate from a national average of $138 per treatment in
1983 to a low of $125 per treatment on average in 1986 and to approximately
$126 per treatment on average at present. The Company is not able to predict
whether future rate changes will be made. Reductions in composite rates could
have a material adverse effect on the Company's revenues and net earnings.
Furthermore, increases in operating costs that are subject to inflation, such
as labor and supply costs, without a compensating increase in prescribed
rates, may adversely affect the Company's earnings in the future. The Company
is also unable to predict whether certain services, as to which the Company is
currently separately reimbursed, may in the future be included in the Medicare
composite rate.
Since June 1, 1989, the Medicare ESRD program has provided reimbursement for
the administration to dialysis patients of erythropoietin ("EPO"). EPO is
beneficial in the treatment of anemia, a medical complication frequently
experienced by dialysis patients. Many of the Company's dialysis patients
receive EPO. Revenues from EPO (the substantial majority of which are
reimbursed through Medicare and Medicaid programs) were approximately $55.1
million, or 20% of net patient revenues, in its fiscal year ended December 31,
1996, and were $38.9 million, or 20% of net patient revenues, during the six
months ended June 30, 1997. EPO reimbursement significantly affects the
Company's net income. Medicare reimbursement for EPO was reduced from $11 to
$10 per 1,000 units for services rendered after December 31, 1993. EPO is
produced by a single manufacturer, and any interruption of supply or product
cost increases could adversely affect the Company's operations. Prices paid
for EPO by the Company, its public competitors, and other dialysis providers
are presently the subject of a pricing survey being conducted on behalf of
HCFA.
All of the states in which the Company currently operates dialysis
facilities provide Medicaid (or comparable) benefits to qualified recipients
to supplement their Medicare entitlement. The Company estimates that
approximately 6% of its net patient revenues during the fiscal year ended
December 31, 1996 and 8% of its net patient revenues during the six month
period ended June 30, 1997 were funded by Medicaid or comparable state
programs. The Medicaid programs are subject to statutory and regulatory
changes, administrative rulings, interpretations of policy and governmental
funding restrictions, all of which may have the effect of decreasing program
payments, increasing costs or modifying the way the Company operates its
dialysis business.
5
<PAGE>
Approximately 33% of the Company's net patient revenues during the fiscal
year ended December 31, 1996, and 33% of the Company's net patient revenues
during the six months ended June 30, 1997 were from sources other than
Medicare and Medicaid. These sources include payments from third-party, non-
government payors, at rates that generally exceed the Medicare and Medicaid
rates, and payments from hospitals with which the Company has contracts for
the provision of acute dialysis treatments. Any restriction or reduction of
the Company's ability to charge for such services at rates in excess of those
paid by Medicare would adversely affect the Company's net operating revenues
and net income. The Company is unable to quantify or predict the degree, if
any, of the risk of reductions in payments under these various payment plans.
The Company is a party to non-exclusive agreements with certain third-party
payors and termination of such third-party agreements could have an adverse
effect on the Company.
OPERATIONS SUBJECT TO GOVERNMENT REGULATION
The Company is subject to extensive regulation by both the federal
government and the states in which the Company conducts its business. The
Company is subject to the illegal remuneration provisions of the Social
Security Act and similar state laws, which impose civil and criminal sanctions
on persons who solicit, offer, receive or pay any remuneration, directly or
indirectly, for referring a patient for treatment that is paid for in whole or
in part by Medicare, Medicaid or similar state programs. In July 1991 and
November 1992, the federal government published regulations that provide
exceptions or "safe harbors" for certain business transactions. Transactions
that are structured within the safe harbors are deemed not to violate the
illegal remuneration provisions. Transactions that do not satisfy all elements
of a relevant safe harbor do not necessarily violate the illegal remuneration
statute, but may be subject to greater scrutiny by enforcement agencies.
Neither the arrangements between the Company and the physician directors of
its facilities ("Medical Directors") nor the minority ownership interests of
referring physicians in certain of the Company's dialysis facilities meet all
of the necessary requirements to obtain full protection afforded by these safe
harbors. Although the Company has never been challenged under these statutes
and believes it complies in all material respects with these and all other
applicable laws and regulations, there can be no assurance that the Company
will not be required to change its practices or relationships with its Medical
Directors or with referring physicians holding minority ownership interests or
that the Company will not experience material adverse effects as a result of
any such challenge.
The Omnibus Budget Reconciliation Act of 1989 includes certain provisions
("Stark I") that restrict physician referrals for clinical laboratory services
to entities with which a physician or an immediate family member has a
"financial relationship." In August 1995, HCFA published regulations
interpreting Stark I. The regulations specifically provide that services
furnished in an ESRD facility that are included in the composite billing rate
are excluded from the coverage of Stark I. The Company believes that the
language and legislative history of Stark I indicate that Congress did not
intend to include laboratory services provided incidental to dialysis services
within the Stark I prohibition; however, laboratory services not included in
the Medicare composite rate could be included within the coverage of Stark I.
Violations of Stark I are punishable by civil penalties which may include
exclusion or suspension of a provider from future participation in Medicare
and Medicaid programs and substantial fines. Due to the breadth of the
statutory provisions, it is possible that the Company's practices might be
challenged under this law. A broad interpretation of Stark I would apply to
the Company's competitors as well.
The Omnibus Budget Reconciliation Act of 1993 includes certain provisions
("Stark II") that restrict physician referrals for certain "designated health
services" to entities with which a physician or an immediate family member has
a "financial relationship." The Company believes that the language and
legislative history of Stark II indicate that Congress did not intend to
include dialysis services and the services and items provided incident to
dialysis services within the Stark II prohibitions; however, certain services,
including the provision of, or arrangement and assumption of financial
responsibility for, outpatient prescription drugs, including EPO, and clinical
laboratory services, could be construed as designated health services within
the meaning of Stark II. Violations of Stark II are punishable by civil
penalties, which may include exclusion or suspension of the provider from
future participation in Medicare and Medicaid programs and substantial fines.
Due to the breadth of the statutory provisions and the absence of regulations
or court decisions addressing the specific arrangements
6
<PAGE>
by which the Company conducts its business, it is possible that the Company's
practices might be challenged under these laws. A broad interpretation of
Stark II to include dialysis services and items provided incident to dialysis
services would apply to the Company's competitors as well.
A California statute that became effective January 1, 1995 makes it unlawful
for a physician who has, or a member of whose immediate family has, a
financial interest with or in an entity to refer a person to that entity for,
among other services, laboratory services. The Company currently operates
centers in California, which account for a significant percentage of net
operating revenues. Although the Company does not believe that the statute is
intended to apply to laboratory services that are provided incident to
dialysis services, it is possible that the statute could be interpreted to
apply to such laboratory services. If the California statute were so
interpreted, the Company would be required to restructure some or all of its
relationships with referring physicians who serve as Medical Directors of the
Company's facilities and with the physicians who hold minority interests in
certain of the Company's facilities. The Company also operates dialysis
facilities and provides laboratory services in Virginia, Georgia, Florida,
Illinois, Minnesota, Maryland, Michigan, New York and Puerto Rico all of which
have so-called "fraud and abuse" statutes which regulate the Company's
relationships with physicians.
At present, ESRD patients eligible for California's Medicaid program,
MediCal, are reimbursed for their transportation costs relating to ESRD
treatments. If this practice is deemed to violate applicable federal or state
law, the Company may be forced to halt this practice and the Company cannot
predict the effect the foregoing would have on the desire of such patients to
use the Company's services.
The Company's two licensed clinical laboratories are also subject to
extensive federal and state regulation of performance standards, including the
provisions of The Clinical Laboratory Improvement Act of 1967 and The Clinical
Laboratory Improvement Amendments of 1988 Act, as well as the federal and
state regulations described above. The Company's laboratory subsidiary is
presently the subject of a third-party carrier review and a State of Florida
Medicaid review. The reviewing entities have requested medical and billing
records for certain patients, and the Company has provided the requested
records. Neither the third-party carrier nor Florida Medicaid has informed the
Company of the reason for or the nature or scope of its review.
A number of proposals for health care reform have been made in recent years,
some of which have included radical changes in the health care system. Health
care reform could result in material changes in the financing and regulation
of the health care business, and the Company is unable to predict the effect
of such changes on its future operations. It is uncertain what legislation on
health care reform, if any, will ultimately be implemented or whether other
changes in the administration or interpretation of governmental health care
programs will occur. There can be no assurance that future health care
legislation or other changes in the administration or interpretation of
governmental health care programs will not have a material adverse effect on
the results of operations of the Company.
RISKS INHERENT IN GROWTH STRATEGY
Beginning after the recapitalization in August 1994, which effected a change
in ownership, the Company has had an aggressive growth strategy. This growth
strategy is dependent on the continued availability of suitable acquisition
candidates and subjects the Company to the risks inherent in assessing the
value, strengths and weaknesses of acquisition candidates, the operations of
acquired companies and identifying suitable locations for additional
facilities. The Company's growth is expected to place significant demands on
the Company's financial and management resources. In recent years, acquisition
prices and competition for facilities has increased. To the extent the Company
is unable to acquire or develop facilities in a cost-effective manner, its
ability to expand its business and enhance results of operations would be
adversely affected. In addition, although the Company believes it has a
demonstrable track record of integrating the operations of acquired companies
with its historic operations, the process for integrating acquired operations,
particularly for newly acquired regional clusters, presents a significant
challenge to the Company's management and may lead to unanticipated costs or a
diversion of management's attention from day-to-day operations. There can be
no assurance that the Company will be able to continue its growth strategy or
that this strategy will ultimately prove successful. A failure to successfully
continue its growth strategy could have an adverse effect on the Company's
results of operations.
7
<PAGE>
COMPETITION
The dialysis industry is fragmented and highly competitive, particularly in
terms of acquisitions of existing dialysis facilities and developing
relationships with referring physicians. Certain of the Company's competitors
have substantially greater financial resources than the Company and may
compete with the Company for acquisitions of facilities in markets targeted by
the Company. Competition for acquisitions has increased the cost of acquiring
existing dialysis facilities. The Company has from time to time experienced
competition from referring physicians who have opened their own dialysis
facilities. A portion of the Company's business consists of monitoring and
providing supplies for ESRD treatments in patients' homes. Certain physicians
also provide similar services and, if the number of such physicians were to
increase, the Company could be adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the services and management experience of the
Company's executive officers, and accordingly has entered into employment
agreements with, and provided a variety of equity incentives to, each of these
executives. The Company's continued growth depends upon its ability to attract
and retain skilled employees, in particular highly skilled nurses, for whom
competition is intense. The Company believes that its future success will also
be significantly dependent on its ability to attract and retain qualified
physicians to serve as Medical Directors of its dialysis facilities. The
Company does not carry key-man life insurance on any of its officers.
DEPENDENCE ON PHYSICIAN REFERRALS
The Company's facilities are dependent upon referrals of ESRD patients for
treatment by physicians specializing in nephrology and practicing in the
communities served by the Company's dialysis facilities. As is generally true
in the dialysis industry, at each facility one or a few physicians account for
all or a significant portion of the patient referral base. The loss of one or
more key referring physicians at a particular facility could have a material
adverse effect on the operations of that facility and could adversely affect
the Company's overall operations. Referring physicians own minority interests
in certain of the Company's dialysis facilities. If such interests are deemed
to violate applicable federal or state law, such physicians may be forced to
dispose of their ownership interests. The Company cannot predict the effect
such dispositions would have on its business. See "--Operations Subject to
Government Regulation."
POSSIBLE VOLATILITY OF STOCK PRICE
The trading price and volume of the Common Stock historically has been and
could in the future be subject to significant fluctuations in response to many
factors, including quarter-to-quarter variations in operating results, changes
in earnings estimates by analysts, changes in federal or state regulation of
services provided by the Company or reimbursement rates for such services,
competition, general market conditions and other events or factors.
ANTITAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws include several
provisions which may have the effect of deterring hostile takeovers, delaying
or preventing changes in control or changes in management of the Company, or
limiting the ability of stockholders to approve transactions that they may
deem to be in their best interests, including (i) a provision requiring that
any action required or permitted to be taken by stockholders of the Company
must be effected at a duly called annual or special meeting of stockholders
and may not be effected by written consent, and (ii) a provision requiring at
least 60 days' advance notice by a stockholder of a proposal or director
nomination which such stockholder desires to present at any annual or special
meeting of stockholders. In addition, pursuant to the Company's Certificate of
Incorporation the Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the rights and
preferences of such Preferred Stock without the need for further stockholder
approval. The Company has no present plans to issue any shares of Preferred
Stock.
8
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Substantially all of the shares of Common Stock that are outstanding are
available for immediate sale in the public market (subject to certain resale
limitations under Rule 144 of the Securities Act). Sales of substantial
amounts of Common Stock into the public market or the perception that such
sales could occur, could adversely affect the prevailing market price for the
Common Stock and the ability of the Company to raise equity capital. The
Company can make no prediction as to the effect, if any, that sales of shares
of its Common Stock, or the availability of shares for future sale, will have
on the market price of the Common Stock prevailing from time to time. Such
sales may also make it more difficult for the Company to sell equity
securities or equity-related securities at a time and price that it deems
appropriate. Certain stockholders of the Company are also entitled to
registration rights. See "Selling Stockholders."
USE OF PROCEEDS
All of the Shares offered hereby being offered by the Selling Stockholders
and, accordingly, the Company will receive none of the proceeds therefrom.
9
<PAGE>
THE SELLING STOCKHOLDERS
The following table sets forth, with respect to the Selling Stockholders,
the number of shares of Common Stock owned by each Selling Stockholder prior
to this offering, the number of shares of Common Stock offered for each
Selling Stockholder's account and the number of shares held by each Selling
Stockholder after the anticipated completion of this offering.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF COMMON COMMON
STOCK OWNED PRIOR STOCK SHARES AFTER COMPLETION
TO THIS OFFERING OFFERED OF THIS OFFERING
------------------ --------- ---------------------------
NAME OF SELLING
STOCKHOLDER NUMBER PERCENTAGE NUMBER NUMBER PERCENTAGE
--------------- ------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Victor M.G. Chaltiel
(1).................... 910,514 3.4% 350,000 560,514 2.1%
Leonard W. Frie (2)..... 87,441 * 40,000 47,441 *
Mary Ellen Chambers
(3).................... 76,316 * 50,000 26,316 *
Barry C. Cosgrove (4)... 80,670 * 60,000 20,670 *
Sidney J. Kernion (5)... 32,693 * 15,000 17,693 *
John E. King (6)........ 24,112 * 15,000 9,112 *
Stan M. Lindenfeld, M.D.
(7).................... 30,402 * 21,290 9,112 *
Lois A. Mills, R.N.
(8).................... 36,047 * 20,000 16,047 *
DLJ Merchant Banking
Partners, L.P. and
related stockholders (9)
DLJ Merchant Banking
Partners, L.P. ...... 951,588 3.6% 951,588 0 --
DLJ International
Partners, C.V........ 427,134 1.6% 427,134 0 --
DLJ Offshore Partners,
C.V. ................ 24,765 * 24,765 0 --
DLJ First ESC, LLC.... 237,711 * 237,711 0 --
DLJ Merchant Banking
Funding, Inc. ....... 383,036 1.4% 383,036 0 --
</TABLE>
- --------
* Amount represents less than 1% of the Company's Common Stock.
(1) Mr. Chaltiel has been the Chairman, CEO and President and a director of
the Company since August 1994.
(2) Mr. Frie has been Executive Vice President and Chief Operating Officer of
the Company since August 1994.
(3) Ms. Chambers has been Vice President, Managed Care for the Company since
August 1994.
(4) Mr. Cosgrove has been Vice President, General Counsel and Secretary of the
Company since August 1994.
(5) Mr. Kernion has served as Vice President, Operations--Eastern Division of
the Company since August 1994.
(6) Mr. King has been Vice President, Finance and Chief Financial Officer of
the Company since April 1994.
(7) Dr. Lindenfeld has served as Vice President, Quality Management and
Integrated Programs of the Company since January 1995 and has served as a
Medical Director for the Company or its subsidiary since 1981.
(8) Ms. Mills has been a Vice President, Operations--Western Division of the
Company since August 1994.
(9) Each of these stockholders is a related investor (collectively, the
"Related Investors") and is affiliated with Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"). The Company, DLJ Merchant Banking
Partners, L.P. ("DLJMBP"), certain members of management and NME
Properties Corp. ("NME"), a wholly-owned subsidiary of Tenet Healthcare
Corporation ("Tenet"), entered into a shareholders' agreement (as amended,
the "Shareholders' Agreement") in August 1994 pursuant to which, among
other provisions, DLJMBP had the right to nominate four of the five
members of the Company's board of directors. Although this right has
terminated, an affiliate of DLJMBP continues to serve on the Company's
board of directors. The Shareholders' Agreement further provides for
certain registration rights (including in favor of the Related Investors)
and for restrictions on transfers of Common Stock, certain rights of first
refusal in favor of DLJMBP in the event NME proposes to transfer shares of
Common Stock and certain rights and obligations of NME to participate in
transfers of shares by DLJMBP (which have been waived in connection with
this offering). DLJ and certain of its affiliates from time to time
perform various investment banking and other services for the Company, for
which the Company pays customary consideration. See "Underwriting."
10
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following table presents selected consolidated financial and operating
data of the Company for the periods indicated. The consolidated financial data
as of May 31, 1992, 1993, 1994 and 1995 and as of December 31, 1995 and 1996
and for each of the years in the four year period ended May 31, 1995, the
seven month period ended December 31, 1995, and the year ended December 31,
1996 have been derived from the Company's audited consolidated financial
statements. The consolidated financial data as of June 30, 1997 and for the
seven months ended December 31, 1994, the year ended December 31, 1995 and the
six month periods ended June 30, 1996 and 1997 are unaudited and include all
adjustments consisting solely of normal recurring adjustments necessary to
present fairly the Company's results of operations for the period indicated.
The results of operations for the six month periods ended June 30, 1996 and
1997 are not necessarily indicative of the results which may occur for the
full fiscal year. The following financial and operating data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and the notes thereto and the other information incorporated herein by
reference. See "Documents Incorporated by Reference."
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED SIX MONTHS ENDED
YEARS ENDED MAY 31, DECEMBER 31,(1) DECEMBER 31, JUNE 30,
------------------------------- ------------------ -------------------- -----------------
1992 1993 1994 1995 1994 1995 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(2)
Net operating
revenues.......... $63,888 $71,576 $80,470 $98,968 $53,593 $89,711 $134,843 $272,947 $114,820 $193,782
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Facility operating
expenses.......... 45,599 49,440 56,828 65,583 36,012 57,406 86,977 183,987 76,647 130,007
General and
administrative
expenses(3)....... 4,819 5,292 7,457 9,115 4,916 7,645 11,844 19,267 8,701 13,383
Provision for
doubtful
accounts.......... 2,118 2,050 1,550 2,371 1,363 1,811 2,819 5,496 2,333 3,881
Depreciation and
amortization...... 3,167 3,434 3,752 4,740 2,586 4,383 6,537 15,368 6,032 11,761
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Total operating
expenses.......... 55,703 60,216 69,587 81,809 44,877 71,245 108,177 224,118 93,713 159,032
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Operating income... 8,185 11,360 10,883 17,159 8,716 18,466 26,666 48,829 21,107 34,750
Interest expense,
net............... 110 9 13 7,203 3,300 5,584 9,244 5.175 2,537 4,212
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Income before
income taxes,
minority interests
and extraordinary
item.............. 8,075 11,351 10,870 9,956 5,416 12,882 17,422 43,654 18,570 30,538
Income taxes....... 2,875 4,129 4,106 3,511 1,933 4,631 6,209 16,351 7,151 11,504
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Income before
minority interests
and extraordinary
item.............. 5,200 7,222 6,764 6,445 3,483 8,251 11,213 27,303 11,419 19,034
Minority interests
in income of
consolidated
subsidiaries...... 535 775 1,046 1,593 833 1,784 2,544 3,578 1,417 2,343
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Income before
extraordinary
item.............. $ 4,665 $ 6,447 $ 5,718 $ 4,852 $ 2,650 $ 6,467(4) $ 8,669(4) $ 23,725(4) $ 10,002 $ 16,691
======= ======= ======= ======= ======= ======= ======== ======== ======== ========
Income per share
before
extraordinary
item.............. $ 0.22(5) $ 0.08(5) $ 0.36(4) $ 0.52(4) $ 0.92(4) $ 0.40 $ 0.61
======= ======= ======= ======== ======== ======== ========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SEVEN MONTHS
YEARS ENDED MAY 31, ENDED YEAR ENDED SIX MONTHS
------------------------------- DECEMBER 31, DECEMBER 31, ENDED
1992 1993 1994 1995 1995(1) 1996 JUNE 30, 1997
------- ------- ------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Outpatient facilities
(at period end)........ 35 36 37 57 68 134 166
Treatments(6)........... 349,736 379,397 423,353 481,537 390,806 1,169,023 826,714
Hospitals receiving
inpatient services
(at period end)........ 33 32 28 48 55 87 117
</TABLE>
<TABLE>
<CAPTION>
MAY 31, DECEMBER 31,
------------------------------ --------------- JUNE 30,
1992 1993 1994 1995 1995 1996 1997
------ ------- ------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(2)
Working capital......... $8,508 $14,609 $20,064 $14,971 $54,691 $99,299 $118,951
Total assets............ 32,509 36,003 43,621 77,558 163,998 374,080 486,196
Long-term debt
(including current
portion)............... 437 267 198 88,142 55,894 104,616 193,180
Mandatorily redeemable
Common Stock(7)........ 3,990
Stockholders' equity
(deficit).............. 22,568 29,015 34,733 (30,879)(8) 82,804 230,966 250,305
</TABLE>
- --------
(1) In 1995, the Company changed its fiscal year end to December 31 from May
31.
(2) The organization of the holding company and sale of approximately 75% of
the Company in August 1994 by Tenet to DLJMBP and certain of its
affiliates, management of the Company and certain holders of debt
securities of the Company (the "August 1994 Transaction") and subsequent
acquisitions had a significant impact on the Company's capitalization and
equity securities and on the Company's results of operations.
Consequently, the Balance Sheet Data as of May 31, 1995, as of December
31, 1995 and 1996 and as of June 30, 1997 and the Income Statement Data
for the fiscal year ended May 31, 1995, for the seven months ended
December 31, 1995, the year ended December 31, 1996 and the six month
periods ended June 30, 1996 and 1997 are not directly comparable to
corresponding information as of prior dates and for prior periods,
respectively.
(3) General and administrative expenses for the fiscal years ended May 31,
1992, 1993 and 1994 include overhead allocations by the Company's former
parent of $662,000, $235,000 and $1,458,000, respectively. The overhead
allocations for the fiscal years ended May 31, 1992 and 1993 were made
using a different methodology than that used in the fiscal year ended May
31, 1994 and the substantial increase in that year reflects this change in
methodology rather than a change in the level of services provided. No
overhead allocation was made for the period from March 1, 1994 through the
closing of the August 1994 Transaction, at which time the Company began to
record general and administrative expenses as incurred on a stand-alone
basis. General and administrative expenses for the fiscal year ended May
31, 1994 reflect $458,000 in expenses relating to a terminated equity
offering.
(4) In December 1995, the Company recorded an extraordinary loss of
$2,555,000, or $0.14 per share, net of tax, on the early extinguishment of
debt. In July and September 1996, the Company recorded a combined
extraordinary loss of $7,700,000 or $0.30 per share, net of tax, on the
early retirement of the remaining outstanding Senior Subordinated Discount
Notes.
(5) Income per share before extraordinary item for the year ended May 31, 1995
and for the seven months ended December 31, 1994 is presented on a pro
forma basis to give effect to the August 1994 Transaction as if it had
occurred on June 1, 1994.
(6) Represents dialysis treatments provided in outpatient facilities, at home
and in acute care hospitals. Home dialysis treatments are stated in
hemodialysis equivalents. Only treatments rendered by the Company after
the acquisition of a facility are included.
(7) Mandatorily redeemable Common Stock represents shares of Common Stock
issued in certain acquisitions subject to put options that terminated upon
the completion of its initial public offering of Common Stock in October
1995.
(8) In connection with the August 1994 Transaction, the Company paid a
dividend to Tenet of $75.5 million.
12
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary is a description of certain provisions of the
Company's Certificate of Incorporation, as amended and restated (the
"Certificate of Incorporation"). Such summary does not purport to be complete
and is subject to, and is qualified in its entirety by, all of the provisions
of the Certificate of Incorporation.
The Company's authorized capital stock consists of 55,000,000 shares of
Common Stock, $0.001 par value, and 5,000,000 shares of Preferred Stock,
$0.001 par value ("Preferred Stock").
COMMON STOCK
As of August 1, 1997, there were 26,662,657 shares of Common Stock issued
and outstanding. The Company does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. The Company is subject to certain
restrictions on its ability to pay dividends on the Common Stock under the
Senior Credit Facility.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights applicable to the Common Stock.
Subject to the preferences applicable to shares of Preferred Stock
outstanding at any time, holders of shares of Common Stock are entitled to
dividends, if, when and as declared by the Board of Directors from funds
legally available therefor and are entitled, in the event of liquidation, to
share ratably in all assets remaining after payment of liabilities and
preferred stock preferences, if any.
The authorized but unissued shares of Common Stock are available for
issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange on
which the Common Stock may be listed. Shares of Common Stock are not
redeemable and there are no sinking fund provisions.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Company's Board of Directors
to establish series of Preferred Stock and to determine, with respect to any
series of Preferred Stock, the voting powers, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof,
as are stated in the resolutions of the Board of Directors providing for such
series.
The authorized but unissued shares of Preferred Stock are available for
issuance without further action by the Company's stockholders. This will allow
the Company to issue shares of Preferred Stock without the expense and delay
of a special stockholders' meeting, unless such action is required by
applicable law or the rules of any stock exchange on which the Company's
securities may be listed. The Company believes that the Preferred Stock will
provide flexibility in structuring possible future financing and acquisitions,
and in meeting other corporate needs. Although the Company's Board of
Directors has no intention at the present time of doing so, it could issue a
series of Preferred Stock, the terms of which, subject to certain limitations
imposed by the securities laws, impede the completion of a merger, tender
offer or other takeover attempt. The Company's Board of Directors will make
any determination to issue such shares based on its judgment as to the best
interests of the Company and its stockholders at the time of issuance. The
Company's Board of Directors, in so acting, could issue Preferred Stock having
terms that could discourage an acquisition attempt or other transaction that
some, or a majority, of the stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock
over the then market price of such stock.
TRANSFER AGENT
The Company's registrar and transfer agent for the Common Stock is The Bank
of New York.
13
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), DLJ (the "Underwriter") has agreed to purchase
from the Selling Stockholders an aggregate of 2,595,524 shares of Common
Stock.
The Underwriting Agreement provides that the obligations of the Underwriter
to accept delivery of the shares of Common Stock offered hereby are subject to
approval of certain legal matters by counsel and to certain other conditions.
If any shares of Common Stock are purchased by the Underwriter pursuant to the
Underwriting Agreement, all such shares must be purchased.
The Underwriter has advised the Selling Stockholders that it proposes to
offer the shares of Common Stock in part directly to the public initially at
the Price to the Public set forth on the cover page of this Prospectus and in
part to certain dealers at such price less a concession not in excess of $
per share; that the Underwriter may allow, and such dealers may reallow, a
concession not in excess of $ per share on sales to other dealers; and that
after this offering, the Price to the Public, concession and discount to
dealers may be changed by the Underwriter.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriter may be
required to make in respect thereof.
Subject to certain exceptions (including certain issuances by the Company of
Common Stock in connection with acquisitions), the Company, all of its
executive officers and directors and certain stockholders of the Company each
have agreed not to, directly or indirectly, offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for such Common
Stock or cause to be filed with the Securities and Exchange Commission a
registration statement under the Securities Act to register any shares of the
Common Stock or, in any manner, transfer all or a portion of the economic
consequences associated with the ownership of the Common Stock without the
prior written consent of DLJ for a period of 90 days after the date of this
Prospectus.
The provisions of Rule 2720 of the Conduct Rules of the National Association
of Securities Dealers, Inc. (the "NASD") apply to this offering. Under such
rules, when a NASD member such as DLJ distributes an affiliated company's
equity securities, one of the following two criteria must be met: (1) the
price of such equity security can be no higher than that recommended by a
"qualified independent underwriter" or (2) the offering is of a class of
equity securities for which a "bona fide independent market" exists. See
"Selling Stockholders." Because the shares of Common Stock are traded on the
New York Stock Exchange, the aggregate trading volume for the twelve months
immediately preceding the filing of the registration statement of which this
Prospectus forms a part was at least 100,000 shares and the Company had
outstanding for the twelve month period immediately preceding the filing of
such registration statement a minimum of 250,000 publicly held shares, a "bona
fide independent market" exists. Accordingly, the price of the Common Stock
will not be passed upon by a "qualified independent underwriter."
Pursuant to the provisions of Rule 2720 of the Conduct Rules, NASD members
may not execute transactions in the shares of Common Stock offered hereby in
discretionary accounts without the prior written approval of the customer.
DLJ and certain of its affiliates from time to time perform various
investment banking and other services for the Company, for which the Company
pays customary consideration. See "Selling Stockholders." An affiliate of DLJ
is presently a participant in and/or co-lead agent for certain of the
Company's bank financing arrangements, for which it received customary
consideration, and expects to do so in connection with certain proposed
refinancings thereof. See "The Company."
In connection with this offering, the Underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriter may bid for and purchase shares
14
<PAGE>
of Common Stock in the open market to stabilize the price of the Common Stock.
These activities may stabilize or maintain the price of the Common Stock.
These activities may stabilize or maintain the price of the Common
Stock above independent market levels. The Underwriter is not required to
engage in these activities, and may end these activities at any time.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Shares offered
hereby will be passed upon for the Company by Barry C. Cosgrove, General
Counsel of the Company. Certain legal matters will be passed upon for the
Underwriter by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles,
California.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of Total Renal Care Holdings, Inc. for the year
ended December 31, 1996 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The consolidated statements of income, stockholders' equity and cash flows
of Total Renal Care Holdings, Inc. and subsidiaries for the year ended May 31,
1994 and the related financial statement schedule have been incorporated by
reference herein and in the Registration Statement in reliance on the reports
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
15
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCK-
HOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECU-
RITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SO-
LICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JU-
RISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 2
The Company................................................................ 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 9
The Selling Stockholders................................................... 10
Selected Financial and Operating Data...................................... 11
Description of Capital Stock............................................... 13
Underwriting............................................................... 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
===============================================================================
===============================================================================
2,595,524 SHARES
[LOGO OF TOTAL RENAL CARE HOLDINGS, INC. APPEARS HERE]
TOTAL RENAL CARE HOLDINGS, INC.
COMMON STOCK
-------------
PROSPECTUS
-------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
AUGUST , 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 38,125
NASD filing fee.................................................. 13,082
Blue Sky fees and expenses....................................... 5,000*
Accounting fees and expenses..................................... 20,000*
Legal fees and expenses.......................................... 75,000*
Miscellaneous.................................................... 48,793*
--------
Total............................................................ $200,000
========
</TABLE>
All such expenses will be borne by the Selling Stockholders.
- --------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware Corporation Law provides that a Delaware
corporation may indemnify any person against expenses, judgments, fines and
settlements actually and reasonably incurred by any such person in connection
with a threatened, pending or completed action, suit or proceeding in which he
is involved by reason of the fact that he is or was director, officer,
employee or agent of such corporation, provided that (i) he acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation and (ii) with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. If
the action or suit is by or in the name of the corporation, the corporation
may indemnify any such person against expense actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification may be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation for
negligence or misconduct in the performance of his duty to the corporation,
unless and only to the extent that the Delaware Court of Chancery or the court
in which the action or suit is brought determines upon application that,
despite the adjudication of liability but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expense as the court deems proper.
Article XI, Section 1 of the Company's By-Laws provides for indemnification
of its directors and officers to the fullest extent permitted by the Delaware
Corporation Law. In accordance with the Delaware Corporation Law, the
Company's Certificate of Incorporation, as amended, limits the personal
liability of its directors for violations of their fiduciary duty. The
Certificate of Incorporation eliminates each director's liability to the
Company or its stockholders for monetary damages except (i) for any breach of
the director's duty of loyalty to the Company 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 section of the Delaware law
providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions, or (iv) for any transaction from
which a director derived any improper personal benefit. The effect of this
provision is to eliminate the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
This provision will not, however, limit in any way the liability of
directors for violations of the Federal officers to indemnify them to the
maximum extent permitted by Delaware law.
The form of Underwriting Agreement, filed as Exhibit 1 hereto, provides for
the indemnification of the Company, its control persons, its directors and
certain of its officers by the Underwriters against certain liabilities,
including liabilities under the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Form of Underwriting Agreement.+
5 Opinion of Barry C. Cosgrove.+
23.1 Consent of Price Waterhouse LLP.+
23.2 Consent of KPMG Peat Marwick LLP.+
23.3 Consent of Barry C. Cosgrove (included in Exhibit 5).
24 Power of Attorney with respect to the Company (see page II-4).
27 Financial Data Schedule.
</TABLE>
- --------
+ Included in this filing.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Exchange Act.
(6) That for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF TORRANCE, STATE OF CALIFORNIA ON THE 11TH DAY OF
AUGUST, 1997.
TOTAL RENAL CARE HOLDINGS, INC.
By /s/ John E. King
-----------------------------------
JOHN E. KING Vice President,
Finance and Chief Financial
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Victor M.G. Chaltiel, Barry C. Cosgrove and
John E. King, and each of them his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, including any post-effective
amendments as well as any related registration statement (or amendment
thereto) filed in reliance upon Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Victor M.G. Chaltiel Chairman of the August 11, 1997
- ------------------------------------- Board, Chief
VICTOR M.G. CHALTIEL Executive Officer,
President and
Director (Principal
Executive Officer)
/s/ John E. King Vice President, August 11, 1997
- ------------------------------------- Finance and Chief
JOHN E. KING Financial Officer
(Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Maris Andersons Director August 11, 1997
- -------------------------------------
MARIS ANDERSONS
/s/ Peter T. Grauer Director August 11, 1997
- -------------------------------------
PETER T. GRAUER
/s/ Regina E. Herzlinger Director August 11, 1997
- -------------------------------------
REGINA E. HERZLINGER
/s/ Shaul G. Massry Director August 11, 1997
- -------------------------------------
SHAUL G. MASSRY, M.D
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Form of Underwriting Agreement.
5 Opinion of Barry C. Cosgrove.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Barry C. Cosgrove (included in Exhibit 5).
24 Power of Attorney with respect to the Company (see page II-4).
27 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 1
________ Shares
TOTAL RENAL CARE HOLDINGS, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
August , 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
The stockholders of Total Renal Care Holdings, Inc., a Delaware
corporation (the "Company"), named in Schedule I hereto (collectively, the
"Selling Stockholders"), severally propose to sell an aggregate of ________
shares (the "Shares") of Common Stock, par value $0.001 per share, of the
Company (the "Common Stock") to Donaldson, Lufkin & Jenrette Securities
Corporation (the "Underwriter").
<PAGE>
1. Registration Statement and Prospectus. The Company has prepared
-------------------------------------
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-3 (File no. 333-_____) including a
prospectus relating to the Shares, which may be amended. The registration
statement as amended at the time when it becomes effective, including a
registration statement (if any) filed pursuant to Rule 462(b) under the Act
increasing the size of the offering registered under the Act and information (if
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A or Rule 434 under the Act, is hereinafter
referred to as the "Registration Statement"; and the prospectus (including any
prospectus subject to completion meeting the requirements of Rule 434(b), under
the Act provided by the Company with any term sheet meeting the requirements of
Rule 434(b) as the prospectus provided to meet the requirements of Section 10(a)
of the Act) in the form first used to confirm sales of Shares is hereinafter
referred to as the "Prospectus." As used herein, the terms Registration
Statement and Prospectus shall be deemed to include documents incorporated by
reference therein.
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this Agreement, and subject to its
terms and conditions, (i) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Shares set forth opposite such Selling
Stockholder's name in Schedule I hereto and (ii) the Underwriter agrees to
purchase from each Selling Stockholder at a price per share of $_____ (the
"Purchase Price")
2
<PAGE>
such number of Shares.
The Company and the Selling Stockholders hereby agree, severally and
not jointly, and the Company shall, concurrently with the execution of this
Agreement, deliver an agreement executed by (i) each of the directors and
officers of the Company and (ii) each other person listed on Annex I hereto,
pursuant to which each such person agrees, not to offer, sell, contract to sell,
3
<PAGE>
grant any option to purchase, or otherwise dispose of any common stock of the
Company or any securities convertible into or exercisable or exchangeable for
such common stock or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any such common stock,
except to the Underwriter pursuant to this Agreement, for a period of 90 days
(which, to the extent applicable, shall also be the "lock-up" period for
purposes of Section 5.3 of the Shareholders Agreement (the "Shareholders
Agreement") dated as of August 11, 1994, as amended on June 30, 1994) after the
date of the Prospectus without the prior written consent of the Underwriter.
Notwithstanding the foregoing, during such period the Company may (i) grant
stock options or securities pursuant to equity incentive plans approved by the
Company's Board of Directors, (ii) issue options or stock as consideration in
connection with acquisitions and (iii) issue shares of its common stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof or issued in accordance with clause (i) or (ii) above.
3. Terms of Public Offering. The Company and the Selling
------------------------
Stockholders are advised by the Underwriter that it proposes (i) to make a
public offering of the Shares as soon after the effective date of the
Registration Statement as in your judgment is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriter of and payment
--------------------
for the Shares shall be made at 10:00 A.M., New York City time, on the third or
fourth business day (the "Closing Date") unless otherwise permitted by the
Commission pursuant to Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") following the date of the initial public offering,
at the offices of Riordan & McKinzie, 300 South Grand Avenue, Los Angeles,
California. The Closing Date and the location of delivery of and the form of
payment for the Shares may be varied by agreement between you, the Company and
the Selling Stockholders.
4
<PAGE>
Certificates for the Shares shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date. Such certificates shall be made
available to you for inspection not later than 9:30 A.M., New York City time, on
the business day next preceding the Closing Date. Certificates in definitive
form evidencing the Shares shall be delivered to you on the Closing Date with
any transfer taxes thereon duly paid by the Selling Stockholder, for your
account against payment of the Purchase Price therefor by wire transfer of
federal or other immediately available funds to the account of the Custodian (as
hereafter defined) as shall be specified in writing by the Custodian, no later
than the Business Day immediately preceding the Closing Date.
5. Agreements of the Company. The Company agrees with you:
-------------------------
(a) To use its best efforts to cause the Registration Statement
to become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm
such advice in writing, (i) when the Registration Statement has become effective
and when any post-effective amendment to it becomes effective, (ii) of any
request by the Commission for amendments to the Registration Statement or
amendments or
5
<PAGE>
supplements to the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purposes, and (iv) of the happening of any event during the period referred
to in paragraph (e) below which makes any statement of a material fact made in
the Registration Statement or the Prospectus untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
in order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal or lifting of such order at the earliest possible time.
(c) To furnish to you, without charge, four signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits and documents incorporated by reference, and to
furnish to you and each Underwriter designated by you such number of conformed
copies of the Registration Statement as so filed and of each amendment to it,
without exhibits, as you may reasonably request. The terms "supplement" and
"amendment" or "amend" as used in this Agreement shall include all documents
subsequently filed by the Company with the Commission pursuant to the Exchange
Act that are deemed to be incorporated by reference in the Prospectus.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or to
make any amendment or supplement to the Prospectus (including the issuance or
filing of any term sheet within the meaning of Rule 434) of which you shall not
previously have been advised or to which you shall reasonably object; and to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or supplement to the Prospectus
(including the issuance or filing of any term sheet within the meaning of Rule
434) which may be necessary or advisable in connection with the distribution of
the Shares by you, and to use its best efforts to cause the same to become
promptly effective.
6
<PAGE>
(e) Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period as in the opinion of counsel
for the Underwriter a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the Underwriter
it becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to comply with any law, forthwith to prepare and file
with the Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented, will not
in the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law, and to furnish to each Underwriter and
to such dealers as you shall specify, such number of copies thereof as such
Underwriter or dealers may reasonably request.
(g) Prior to any public offering of the Shares, to cooperate
with you and counsel for the Underwriter in connection with the registration or
qualification of the Shares for offer and sale by the Underwriter and by dealers
under the state securities or Blue Sky laws of such jurisdictions as you may
request, to continue such qualification in effect so long as required for
distribution of the Shares and to file such consents to service of process or
other documents as may be necessary in order to effect such registration or
qualification; provided, however, that the Company shall not be obligated
-------- -------
to file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not already subject generally to
service of process or so qualified.
(h) To mail and make generally available to its stockholders as
soon as reasonably practicable an
7
<PAGE>
earnings statement covering a period of at least twelve months after the
effective date of the Registration Statement (but in no event commencing later
than 90 days after such date) which shall satisfy the provisions of Section
11(a) of the Act, and to advise you in writing when such statement has been so
made available.
(i) During the period of five years after the date of this
Agreement, (i) to mail as soon as reasonably practicable after the end of each
fiscal year to the record holders of its Common Stock a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar financial
report of all unconsolidated subsidiaries, if any), all such financial reports
to include a consolidated balance sheet, a consolidated statement of operations,
a consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
independent certified public accountants, and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(j) During the period referred to in paragraph (i), to furnish
to you as soon as available a copy of each report or other publicly available
information of the Company mailed to the holders of Common Stock or filed with
the Commission and such other publicly available information concerning the
Company and its subsidiaries as you may reasonably request.
8
<PAGE>
(k) To use its best efforts to maintain the listing of the Common
Stock on the New York Stock Exchange (or on another national securities exchange
or included in the Nasdaq National Market) for a period of five years after
the effective date of the Registration Statement.
(l) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Shares.
6. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Underwriter that:
9
<PAGE>
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) each part of
the Registration Statement, when such part became effective, did not contain and
each such part, as amended or supplemented, if applicable, will not contain any
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,
(iii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act
and (iv) the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (b) do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to the Underwriter furnished to the Company in writing
by the Underwriter expressly for use therein.
(c) Any term sheet and prospectus subject to completion provided
by the Company to the Underwriter for use in connection with the offering and
sale of the Shares pursuant to Rule 434 under the Act together are not
materially different from the prospectus included in the Registration Statement
(exclusive of any information deemed a part thereof pursuant to Rule 434(d)).
(d) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, and each registration statement filed
pursuant to Rule 462(b) under the Act, if any,
10
<PAGE>
complied when so filed in all material respects with the Act; and did 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, in
the light of the circumstances under which they were made, not misleading.
(e) Each of the Company and its subsidiaries as defined in Rule 405
of Regulation C under the Act (each a "Subsidiary") has been duly incorporated
or formed, is validly existing as a corporation in good standing under the laws
of its jurisdiction of incorporation or as a partnership duly formed and has the
corporate or partnership power and authority, as the case may be, to carry on
its business as it is currently being conducted and to own, lease and operate
its properties as described in the Registration Statement and Prospectus, and
each corporate Subsidiary is duly qualified and is in good standing as a foreign
corporation and each Subsidiary is authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification or authorization, except here the failure
to be so qualified and be in good standing could not, in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, properties, or financial or other condition of the Company and its
Subsidiaries, considered as a whole.
(f) Except as disclosed in the Prospectus, (i) all of the outstanding
shares of capital stock of each the Company's corporate Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable and, in
the case of Total Renal Care, Inc., a California corporation ("TRC"), are wholly
owned by the Company or are otherwise owned directly indirectly by the Company,
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature ("Liens") and (ii) all of the outstanding partnership
interests in each of the Company's partnership Subsidiaries have been duly
authorized by its respective partnership agreement and validly issued and the
partnership interests in such partnerships that are not owned by unaffiliated
third parties are owned directly or indirectly by the Company, free and clear of
any Liens, and any partnership capital contribution obligations of
11
<PAGE>
the Company in each partnership Subsidiary have been satisfied.
(g) All the outstanding shares of capital stock of the Company
(including the Shares) have been duly authorized and validly issued and are
fully paid, non-assessable and not subject to any preemptive or similar rights.
(h) The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained in the
Prospectus.
(i) Neither the Company nor any of its Subsidiaries is in violation of
its respective charter, by-laws or partnership agreement, as the case may be, or
in default in any material respect, and no condition exists that with notice or
lapse of time or both would constitute a material default in the performance of
any material obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other material
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of is Subsidiaries or their
respective property is bound except to the extent such violation or default, if
any, could not reasonably be expected to have a material adverse effect on the
business, operations, properties or financial or other condition of the Company
and its Subsidiaries, considered as a whole.
(j) The execution, delivery and performance of this Agreement,
compliance by the Company with all the provisions hereof and the consummation of
the transactions contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not conflict with or
constitute a breach of any
12
<PAGE>
of the terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any agreement, indenture or other
instrument to which it or any of its subsidiaries is party or by which it or any
of its subsidiaries or their respective property is bound, or violate or
conflict with any laws, administrative regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or their respective property.
(k) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any of their respective property is
the subject, and, to the best of the Company's knowledge, no such proceedings
are threatened or contemplated. No contract or document of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement is not so described or filed as
required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), nor any federal or
state law relating to discrimination in the hiring, promotion or pay of
employees nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole.
(m) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate its respective
properties and to conduct its business; the Company and each of its subsidiaries
has fulfilled and performed all of its material obligations with respect to such
permits and no event has occurred which allows, or after notice or lapse of time
13
<PAGE>
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit; and, except as
described in the Prospectus, such permits contain no restrictions that are
materially burdensome to the Company or any of its subsidiaries.
(n) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business, operations
and properties of the Company and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(o) Except as otherwise set forth in the prospectus or such as are not
material to the business, prospectus, financial condition or results of
operation of the Company and its Subsidiaries, taken as a whole, the Company
and each of its Subsidiaries has good and marketable title, free and clear of
all Liens, claims, encumbrances and restrictions except Liens for taxes not yet
due and payable, to all property and assets described in the Registration
Statement as being owned by it. All leases to which the Company or any of its
subsidiaries is a party are valid and binding and no default has occurred or is
continuing thereunder, which might result in any material adverse change in the
business, prospects, financial condition or results of operation of the Company
and its Subsidiaries taken as a whole, and the Company and its Subsidiaries
enjoy a peaceful and undisturbed possession under all such leases to which any
of them is a party as lessee with such exceptions as do not materially interfere
with the use made by the Company or such Subsidiary.
(p) The Company and each of its Subsidiaries maintains reasonably
adequate insurance.
14
<PAGE>
(q) Price Waterhouse LLP is, and during the fiscal years ended May 31,
1994 and 1993, KPMG Peat Marwick, LLP was, an independent public accountant with
respect to the Company as required by the Act.
(r) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the
Company and its subsidiaries on the basis stated in the Registration Statement
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 set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) is, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(s) The Company and each of its Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own, lease and operate its
respective properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus; the Company and each of its Subsidiaries has fulfilled and performed
all of its material obligations with respect to such permits and no event has
occurred which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of the rights
of the holder of any such permit, subject in each case to such qualification as
may be set forth in the Prospectus; and, except as described in the Prospectus,
such permits contain no restrictions that are materially burdensome to the
Company or any of its Subsidiaries.
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(t) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(u) Except as disclosed in the Prospectus or the Shareholders
Agreement, no holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company and
with respect to the offer of the Shares all such rights have been satisfied or
waived.
7. Representations and Warranties of the Selling Stockholders. Each
-----------------------------------------------------------
Selling Stockholder severally represents and warrants to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, Liens, encumbrances, security interests and claims
whatsoever.
(b) Upon delivery of and payment for such Shares pursuant to this
Agreement, good and clear title to such Shares will pass to the Underwriter,
free of all restrictions on transfer, Liens, encumbrances, security interests
and claims whatsoever.
(c) Such Selling Stockholder has, and on the Closing Date will have,
full legal right, power and authority to enter into this Agreement and the
Custody Agreement, if any, between such Selling Stockholder and The Bank of New
York, as Custodian (the "Custody Agree-
16
<PAGE>
ment") and to sell, assign, transfer and deliver which Shares in the manner
provided herein and therein, and this Agreement and the Custody Agreement, if
any, have been duly authorized, executed and delivered by such Selling
Stockholder and each of this Agreement and the Custody Agreement is a valid and
binding agreement such Selling Stockholder enforceable in accordance with its
terms, except as rights to indemnity and contribution hereunder may be limited
by applicable law.
(d) The power of attorney signed by such Selling Stockholder
appointing Leonard W. Frie, Barry C. Cosgrove and John E. King, or any one of
them, as his attorney-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement and the
Custody Agreement, if any, has been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder and is a valid and binding instrument
of such Selling Stockholder enforceable in accordance with its terms, and,
pursuant to such power of attorney, such Selling Stockholder has authorized
Leonard W. Frie, Barry C. Cosgrove and John. E. King, or any one of them, to
execute and deliver on his behalf this Agreement and any other document
necessary or desirable in connection with transactions contemplated hereby and
to deliver the Shares to be sold by such Selling Stockholder pursuant to this
Agreement.
(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares
pursuant to the distribution contemplated by this Agreement, and other than as
permitted by the Act, such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(f) The execution, delivery and performance of this Agreement by such
Selling Stockholder, compliance by such Selling Stockholder with all the
provisions thereof and the consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other govern-
17
<PAGE>
mental body (except as such may be required under the Act, state securities laws
or Blue Sky laws) and will not conflict with or constitute a breach of any of
the terms or provisions of, or a default under, organizational documents of such
Selling Stockholder, if not an individual, or any agreement, indenture or other
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder or property of such Selling Stockholder is bound, or violate or
conflict with any laws, administrative regulation or ruling or court decree
applicable to such Selling Stockholder or property of such Selling Stockholder.
(g) Such parts of the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relate to such Selling
Stockholder do not, and will not on the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of
circumstances under which they were made, not misleading.
(h) At any time during the period described in paragraph 5(e) hereof,
if there is any change in the information referred to in paragraph 7(g) above,
the Selling Stockholders will promptly notify you of such change.
8. Indemnification. (a) The Company hereby agrees to indemnify and hold
---------------
harmless the Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Under-
18
<PAGE>
writer furnished in writing to the Company by the Underwriter expressly for use
therein.
(b) The Selling Stockholders hereby severally and not jointly agree
to indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that such agreement of each Selling Stockholder to indemnify
- -------- -------
and hold harmless shall be limited to losses, claims, damages, liabilities or
judgments caused by any untrue statement or omission or alleged untrue statement
or omission based upon information furnished in writing to the Company by or on
behalf of such Selling Stockholder expressly for use in the Registration
Statement; provided, further, that the aggregate liability of any Selling
-------- -------
Stockholder pursuant to the provisions of this paragraph shall be limited to an
amount equal to the aggregate purchase price received by such Selling
Stockholder from the sale of such Selling Stockholder's Shares hereunder.
(c) In case any action shall be brought against the Underwriter or any
person controlling the Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Company or the
Selling Stockholders, the Underwriter shall promptly notify the Company and the
Selling Stockholders in writing and the Company and/or the Selling Stockholders
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses.
The Underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and partici-
19
<PAGE>
pate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of the Underwriter or such controlling person unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the Company, (ii) the Company and/or the Selling Stockholders shall have failed
to assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both the Underwriter or such
controlling person and the Company or any Selling Stockholder, as the case may
be, and the Underwriter or such controlling person shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company or the
Selling Stockholders, as the case may be (in which case the Company and the
Selling Stockholders shall not have the right to assume the defense of such
action on behalf of the Underwriter or such controlling person, it being
understood, however, that the Company and the Selling Stockholders shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for the
Underwriter and its controlling persons, which firm shall be designated in
writing by the Underwriter and that all such fees and expenses shall be
reimbursed as they are incurred). Neither the Company nor a Selling Stockholder
shall be liable for any settlement of any such action effected without its
written consent, but if settled with its written consent, the Company and/or
such Selling Stockholder agrees to indemnify and hold harmless the Underwriter
and any such controlling person from and against any loss or liability by reason
of such settlement, subject in the case of the Selling Stockholders to the
limits set forth in subsection (b) above. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of counsel are at
the expense of the indemnifying party and an indemnified party shall have
requested the indemnifying party to reimburse the indemnified party for such
fees and expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settle-
20
<PAGE>
ment of any action effected without a written consent if (i) such settlement is
entered into more than ten business days after the receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall have
failed to reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) The Underwriter agrees to indemnify and hold harmless the Company,
its directors, its officers who sign the Registration Statement, any person
controlling the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, each Selling Stockholder and each person, if any,
controlling such Selling Stockholder within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
to the Underwriter but only with reference to information relating to the
Underwriter furnished in writing by Underwriter expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. In case
any action shall be brought against the Company, any of its directors, any such
officer or and person controlling the Company or any Selling Stockholder or any
person controlling such Selling Stockholder based on the Registration Statement,
the Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against the Underwriter, the Underwriter shall have the rights and
duties given to the Company and/or the Selling Stockholders (except that if the
Company or any Selling Stockholder shall have assumed the defense thereof, the
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of the Underwriter), and the Company, its
directors, any such officers and any person controlling the Company and the
Selling Stockhold-
21
<PAGE>
ers and any person controlling such Selling Stockholders shall have the rights
and duties given to the Underwriter, by Section 8(c) hereof.
(e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriter on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, the Selling Stockholders and the Underwriter in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders and the Underwriter shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Selling Stockholders, and the total underwriting
discounts and commissions received by the Underwriter, bear to the total price
to the public of the Shares, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company and the Selling
Stockholders and the Underwriter shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or the Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Selling Stockholders and the Underwriter agree that
it would not be just and equitable if contribution pursuant
22
<PAGE>
to this Section 8(e) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, (a) the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares were offered to the public exceeds the amount of any damages which
the Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (b) no Selling
Stockholder shall be required to contribute any amount in excess of the amount
of the aggregate purchase price received by such Selling Stockholder for the
sale of such Selling Stockholder's Shares hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Selling Stockholders' obligations to
contribute pursuant to this Section 8(e) are several in proportion to the
respective number of such Selling Stockholder's Shares sold hereunder.
(f) Each Selling Stockholder hereby designates the Company as its
authorized agent, upon which process may be served in any action, suit or
proceeding which may be instituted in any state or federal court in the State of
New York by the Underwriter or person controlling the Underwriter asserting a
claim for indemnification or contribution under or pursuant to this Section 8,
and each Selling Stockholder will accept the jurisdiction of such court in such
action, and waives, to the fullest extent permitted by applicable law, any
defense based upon lack of personal
23
<PAGE>
jurisdiction or venue. A copy of any such process shall be sent or given to such
Selling Stockholder, at the address for notices specified in Section 13 hereof.
9. Conditions of Underwriter's Obligations. The obligations of the
---------------------------------------
Underwriter to purchase the Shares under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not
later than 5:00 P.M. (and in the case of any registration statement filed
pursuant to Rule 462(b) of the Act, not later than 10 P.M.), New York City time,
on August, 1997 or at such later date and time as you may approve in writing,
and at the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission.
(c)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
affairs or business prospects, whether or not arising in the ordinary course of
business, of the Company, (ii) since the date of the latest balance sheet
included in the Registration Statement and the Prospectus there shall not have
been any change, or any development involving a prospective material adverse
change, in the capital stock or in the long-term debt of the Company from that
set forth in the Registration Statement and Prospectus, (iii) the Company and
its subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole, other
than those reflected in the Registration Statement and the Prospectus and (iv)
on the Closing Date you shall have received a certificate dated the Closing
Date,
24
<PAGE>
signed by Victor Chaltiel and John E. King, in their capacities as the Chief
Executive Officer and Chief Financial Officer of the Company, confirming the
matters set forth in paragraphs (a), (b), and (c) of this Section 8.
(d) All the representations and warranties of the Selling Stockholders
contained in this Agreement shall be true and correct on the Closing Date (and
any Option Closing Date) with the same force and effect as if made on and as of
the Closing Date (or any Option Closing Date).
(e) You shall have received on the Closing Data an opinion
(satisfactory to you and counsel for the Underwriter), dated the Closing Date,
of Riordan & McKinzie, outside counsel for the Company, to the effect that:
i) this Agreement has been duly authorized, executed and
delivered by the Company;
ii) the authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the description thereof contained
in the Prospectus;
iii) such counsel has been advised by the Commission by telephone
that the Registration Statement has become effective under the Act, and to such
counsel's knowledge after due inquiry no stop order suspending its effectiveness
has been issued and no proceedings for that purpose are pending before or
contemplated by the Commission;
iv) the statements under the caption "Description of Capital
Stock" in the Prospectus and Item 15 of Part II of the Registration Statement
25
<PAGE>
insofar as such statements constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings;
v) the execution, delivery and performance of this Agreement by
the Company, compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not require any
consent, approval, authorization or other order of any California or Federal
court, regulatory body, administrative agency or other governmental body (except
as such may be required under the Act or other securities or Blue Sky laws) and
will not conflict with or constitute a breach of any of the terms or provisions
of, or a default under, the charter or by-laws, as the case may be, of the
Company or TRC;
vi) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended; and
vii)(1) The Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1996 (the "1996 Form 10-K") and its Quarterly Reports on Form
10-Q for the periods ended March 31, 1997 and June 30, 1997, which were filed
pursuant to the Exchange Act and are incorporated by reference in the Prospectus
(except for financial statements, schedules and other financial data as to which
no opinion need be expressed), complied when so filed as to form in all material
respects with the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (2) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for financial data, as aforesaid) comply
as to form in all material respects with the Act, and (3) such counsel believes
that (except for financial data, as aforesaid) the Registration Statement
(including the documents incorporated by reference therein) and the prospectus
included therein at the time the Registration Statement became effective did not
contain any 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, and that the Prospectus (including the documents incorpo-
26
<PAGE>
rated by reference therein), as amended or supplemented, if applicable (except
for financial statements, as aforesaid) does not contain any untrue statement of
a material fact or omit 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 giving the opinion specified in (v) above, such counsel may rely
upon an opinion or opinions of McDermott, Will & Emery, regulatory counsel for
the Company rendered pursuant to paragraph (h) below. In giving such opinion
with respect to the matters covered by clause (vii) such counsel may state that
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and Prospectus and any amendments or supplements
thereto and documents incorporated therein by reference and review and
discussion of the contents thereof, but are without independent check or
verification except as specified.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriter), dated the Closing Date,
of counsels to each of the Selling Stockholders named in Schedule I hereto, to
the effect that:
i) this Agreement has been duly authorized, executed and
delivered by such Selling Stockholder;
ii) the execution, delivery and performance of this Agreement
by such Selling Stockholder, compliance by such Selling Stockholder with all the
provisions hereof and the consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other order of any
California or Federal court, regulatory body, administrative agency or other
governmental body (except as such may be required under the Act or other
securities or Blue Sky laws) and will not conflict with or constitute a breach
of any of the terms or provisions of, or a default under, the charter, by-laws
or partnership agreement, as the case may be, of such Selling Stockholder;
iii) except as disclosed in the Prospectus or the Shareholders
Agreement, no such Selling Stockholder has any right to require registration of
27
<PAGE>
shares of Common Stock or any other security of the Company and with respect to
the offer of the Shares all such rights have been satisfied or waived;
iv) the Custody Agreement has been duly authorized, executed
and delivered by such Selling Stockholder and is a valid and binding agreement
of such Selling Stockholder;
v) such Selling Stockholder has full legal right, power and
authority, and any approval required by law (other than any approval imposed by
the applicable state securities and Blue Sky laws) to sell, assign, transfer and
deliver the Shares to be sold by him in the manner provided in this Agreement
and the Custody Agreement;
vi) such Selling Stockholder will be, immediately prior to
the closing on the Closing Date, the sole registered owner of the Shares to be
sold by such Selling Stockholder at such time pursuant to this Agreement; upon
delivery and payment for such Shares, and assuming the Underwriter acquired such
Shares in good faith and without notice of any adverse claim, the Underwriter
will acquire all rights and interests in such Shares free of any adverse claim;
and
vii) the power of attorney signed by such Selling Stockholder
appointing Leonard W. Frie, Barry C. Cosgrove and John E. King, or any one of
them, as his attorney-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement has been duly
authorized, executed and delivered by or on behalf of such Selling Stockholder
and is a valid and binding instrument of such Selling Stockholder, and pursuant
to such power of attorney, such Selling Stockholder has authorized Leonard W.
Frie, Barry C. Cosgrove and John E. King, or any one of them, to execute and
deliver on his behalf this Agreement and any other document necessary or
desirable in connection with the transactions contemplated hereby and to deliver
the Shares to be sold by such Selling Stockholder pursuant to this Agreement.
In giving the opinion specified in (ii) above, such counsel may rely
upon an opinion or opinions of
28
<PAGE>
McDermott, Will & Emery, regulatory counsel for the Company rendered pursuant to
paragraph (h) below.
(g) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriter), dated the Closing Date,
of Barry C. Cosgrove, General Counsel of the Company, to the effect that:
i) the Company is duly incorporated, validly existing and in
good standing as a corporation under the laws of the State of Delaware and has
the corporate power and authority required to carry on its business as it is
currently being conducted and to own, lease and operate its properties;
ii) each Subsidiary of the Company has been duly incorporated or
formed, is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation or as a partnership duly formed and has the
corporate or partnership power and authority, as the case may be, to carry on
its business as it is currently being conducted and to own, lease and operate
its properties, and, to such counsel's knowledge after due inquiry, each
corporate Subsidiary is duly qualified and is in good standing as a foreign
corporation and each Subsidiary is authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification or authorization, except where the failure
to be so qualified or authorized and be in good standing could not, in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, properties, or financial or other condition of the Company
and its Subsidiaries, considered as a whole;
iii) except as disclosed in the Prospectus,(i) all of the
outstanding shares of capital stock of each of the Company's corporate
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable and to such counsel's knowledge after due inquiry, in the case of
TRC, are wholly owned by the Company or are otherwise, owned directly or
indirectly by the Company, free and clear of any Liens and (ii) all of the
outstanding partnership interests in each of the Company's partnership
Subsidiaries have been duly authorized by its respective partner-
29
<PAGE>
ship agreement and validly issued and to such counsel's knowledge after due
inquiry the partnership interests in such partnerships that are not owned by
unaffiliated third parties are owned directly or indirectly by the Company, free
and clear of any Liens and, to such counsel's knowledge, any partnership capital
contribution obligations of the Company in each partnership Subsidiary have been
satisfied;
iv) all the outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights;
v) neither the Company nor any of its Subsidiaries is in
violation of its respective charter, by-laws or partnership agreement, as the
case may be, and, to the best of such counsel's knowledge after due inquiry,
neither the Company nor any of its Subsidiaries is in default in any material
respect, and no condition exists that with notice or lapse of time or both would
constitute a material default, in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries or their respective property is bound except to the extent such
violation or default, if any, could not reasonably be expected to have a
material adverse effect on the business, operations, properties or financial or
other condition of the Company and its Subsidiaries, considered as a whole;
vi) the execution, delivery and performance of this Agreement,
compliance by the Company with all the provisions hereof and the consummation of
the transactions contemplated hereby will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under any agreement,
indenture or other instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or their respective
properties are bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to the Company or any of its
subsidiaries or their respective properties, except to the extent such
violation,
30
<PAGE>
conflict, breach or default, if any, could not reasonably be expected to have a
material adverse effect on the business, operations, properties or financial or
other condition of the Company and its Subsidiaries, considered as a whole;
vii) after due inquiry, such counsel does not know of any legal or
governmental proceeding pending or threatened to which the Company or any of its
Subsidiaries is a party or to which any of their respective property is subject
which is required to be described in the Registration Statement or the
Prospectus and is not so described, or of any contract or other document which
is required to be described in the Registration Statement or the Prospectus or
is required to be filed as an exhibit to the Registration Statement which is not
described or filed as required;
viii) other than as set forth in the Shareholders Agreement or
otherwise described in the Prospectus, to the best of such counsel's knowledge,
after due inquiry, no holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company;
ix) to the best of such counsel's knowledge, after due inquiry,
all leases to which the Company or any of its subsidiaries is a party are valid
and binding and no default has occurred or is continuing thereunder, which might
result in any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries taken as a
whole, and the Company and its subsidiaries enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as lessee with
such exceptions as do not materially interfere with the use made by the Company
or such subsidiary;
x) each of the Facilities has such licenses, certifications and
authorizations of governmental or regulatory authorities which are required in
connection with the provision by the Facilities of dialysis services under
applicable licensure, Medicare or Medicaid laws in the manner described in the
Prospectus and which are required to be held by the Facilities as providers of
dialysis services under the Medicare or Medicaid programs; and
31
<PAGE>
xi)(1) each document filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and the Prospectus
(except for financial statements, schedules and other financial data as to which
no opinion need be expressed) complied when so filed as to form in all material
respects with the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (2) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for financial statements, schedules and
other financial data as to which no opinion need be expressed) comply as to form
in all material respects with the Act, and (3) such counsel believes that
(except for financial data, as aforesaid) the Registration Statement (including
the documents incorporated by reference therein) and the prospectus included
therein at the time the Registration Statement became effective did not contain
any 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, and that the Prospectus (including the documents incorporated by
reference therein), as amended or supplemented, if applicable (except for
financial statements, as aforesaid) does not contain any untrue statement of a
material fact or omit 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 giving the opinions specified in (vi), (vii) and (x) above, such
counsel may rely upon an opinion or opinions of McDermott, Will & Emery,
regulatory counsel for the Company rendered pursuant to paragraph (h) below. In
giving such opinion with respect to the matters covered by clause (xi) such
counsel may state that such counsel's opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and documents incorporated therein by
reference and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
(h) You shall have received on the Closing Date an opinion
(satisfactory to you and to our counsel), dated the Closing Date, of McDermott,
Will & Emery, regulatory counsel for the Company, to the effect that:
32
<PAGE>
i) the statements under the captions "Risk Factors--Dependence
on Medicare, Medicaid and Other Sources of Reimbursement" and "--Operations
Subject to Government Regulation" in the Prospectus and "Business--
Operations--Medicare Reimbursement" and "Business--Governmental Regulation"
in the 1996 Form 10-K, insofar as such statements constitute a summary of
legal matters, documents or proceedings referred to therein, are fair
summaries in all material respects of the information called for with
respect to such legal matters, documents and proceedings; and
ii) the execution, delivery and performance of this Agreement
by the Company will not require any consent, approval, authorization or
order of any court, regulatory body, administrative agency or other
governmental body in connection with the provision by the dialysis
facilities owned by the Company or its Subsidiaries (the "Facilities") of
dialysis services under applicable licensure, Medicare and Medicaid laws in
the manner described in the Prospectus and the 1996 Form 10-K or which
could affect the status of the Facilities as providers of dialysis services
under the Medicare or Medicaid programs other than presently effective
actions, consents disclosures or filings that have already been made on or
prior to the date hereof.
The opinions of Riordan & McKinzie, counsels for the Selling
Stockholders, Barry C. Cosgrove and McDermott, Will & Emery, described in
paragraphs (e), (f), (g) and (h) above shall be rendered to you at the
request of the Company and shall so state therein.
(i) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP counsel for
the Underwriter, as to the matters referred to in clauses (i), (iii), (iv)
(but only with respect to the statements under the captions "Description of
Capital Stock") and (vii)(3) of the foregoing paragraph (e). In giving
such opinion with respect to the matters covered by clause (vii)(3) such
counsel may state that their opinion and belief are
33
<PAGE>
based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto (other
than the documents incorporated by reference) and review and discussion of
the contents thereof (including documents incorporated by reference), but
are without independent check or verification except as specified.
(j) You shall have received letters on and as of the Closing Date, in
form and substance satisfactory to you, from Price Waterhouse, LLP and KPMG Peat
Marwick, LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus and substantially in the form and substance of the
letter delivered to you by such accountants on the date of this Agreement.
(k) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company at or priority the Closing Date.
10. Effective Date of Agreement and Termination. This Agreement shall
-------------------------------------------
become effective upon the later of (i) execution of this Agreement and (ii) when
notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Company and its Subsidiaries, taken
34
<PAGE>
as a whole, or the earnings, affairs, or business prospects of the Company and
its Subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, which would, in your judgment, make it impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus,
(ii) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions the effect of
which on the financial markets of the United States or elsewhere, in your
judgment, is material and adverse and would, in your judgment, make it
impracticable to market the Shares on the terms.and in the manner contemplated
in the Prospectus, (iii) the suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq Stock Market or limitation on prices for securities on any such exchange
or the National Market System, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority that in your opinion materially and
adversely affects, or will materially and adversely affect, the business or
operations of the Company and its Subsidiaries, taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
35
<PAGE>
11. Agreements of the Selling Stockholders. Each Selling Stockholder
--------------------------------------
severally agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes with respect to the
Shares to be sold by such Selling Stockholder; and
(b) To take all reasonable actions in cooperation with the Company and the
Underwriter to cause the Registration Statement to become effective at the
earliest possible time, to do and perform all things to be done and performed
under this Agreement prior to
36
<PAGE>
the Closing Date and to satisfy all conditions precedent to the delivery of the
Shares pursuant to this Agreement.
12. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if; to the Company, to TOTAL
RENAL CARE HOLDINGS, INC., 21250 Hawthorne Blvd. Suite 800, Torrance,
California 90503-5517, and (b) if to the Underwriter, to Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Selling Stockholders, the Company, its
officers and directors and of the Underwriter set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriter or by or on behalf of the Selling Stockholders, the officers or
directors of the Company or any controlling person of the Company or the Selling
Stockholders, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriter because of
any failure or refusal on the part of the Company or the Selling Stockholders to
comply with the terms or to fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Underwriter for all out-of-pocket expenses
(including the fees and disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriter, any controlling persons referred to herein and
their respective successors and assigns, all as and to the extent provided
37
<PAGE>
in this Agreement, and no other person shall acquire or have any rights under or
by virtue of this Agreement. The term "successors and assigns" shall not include
a purchaser of any of the Shares from the Underwriter merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
38
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the Underwriter.
Very truly yours,
TOTAL RENAL CARE
HOLDINGS, INC.
By:
---------------------------
Title:
THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE I HERETO
By:
---------------------------
[Attorney-in-fact]
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
---------------------------
Title:
<PAGE>
SCHEDULE I
----------
Selling Stockholders
--------------------
<PAGE>
ANNEX I
-------
Required Lock-ups
-----------------
Victor M.G. Chaltiel
Leonard W. Frie
Mary Ellen Chambers
Barry C. Cosgrove
Sidney J. Kernion
John E. King
Stan M. Lindenfeld
Lois A. Mills
Maris Andersons
Peter T. Grauer
Tenet Healthcare Corporation
<PAGE>
EXHIBIT 5
Total Renal Care Holdings, Inc.
21250 Hawthorne Boulevard, Suite 800
Torrance, California 90503-5517
August 11, 1997
21-163-001
Ladies and Gentlemen:
I am the General Counsel of Total Renal Care Holdings, Inc., a
Delaware corporation (the "Company"). I am delivering this opinion in
connection with the registration under the Securities Act of 1933, as amended
(the "1933 Act"), of the sale in an underwritten public offering of up to
2,750,000 shares of the Common Stock, $0.001 par value per share up (the
"Shares"). This opinion is delivered in connection with that certain
Registration Statement on Form S-3 (the "Registration Statement") to be filed
with the Securities and Exchange Commission (the "Commission") under the 1933
Act.
In rendering the opinion set forth herein, I have made such
investigations of fact and law, and examined such documents and instruments, or
copies thereof established to my satisfaction to be true and correct copies
thereof, as I have deemed necessary under the circumstances.
Based upon the foregoing and such other examination of law and fact as
I have deemed necessary, and in reliance thereon, I am of the opinion that the
Shares have been duly authorized and are validly issued, fully paid and
nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus which is a part of the Registration Statement. In
giving such consent, I do not thereby admit that I am in the category of persons
whose consent is required under Section 7 of the 1933 Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ Barry C. Cosgrove
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated February 13, 1997 appearing on page F-1 of Total Renal Care Holdings,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
Price Waterhouse LLP
Seattle, Washington
August 11, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Total Renal Care Holdings, Inc.:
We consent to the use of our reports on the consolidated financial
statements and related financial statement schedule of Total Renal Care
Holdings, Inc. and subsidiaries incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Seattle, Washington
August 11, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,039,000
<SECURITIES> 0
<RECEIVABLES> 122,363,000
<ALLOWANCES> 0
<INVENTORY> 1,876,000
<CURRENT-ASSETS> 152,229,000
<PP&E> 78,851,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 486,196,000
<CURRENT-LIABILITIES> 33,278,000
<BONDS> 0
0
0
<COMMON> 27,000
<OTHER-SE> 250,278,000
<TOTAL-LIABILITY-AND-EQUITY> 486,196,000
<SALES> 0
<TOTAL-REVENUES> 193,782,000
<CGS> 0
<TOTAL-COSTS> 159,032,000
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<LOSS-PROVISION> 3,881,000
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<INCOME-PRETAX> 28,195,000
<INCOME-TAX> 11,504,000
<INCOME-CONTINUING> 16,691,000
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<NET-INCOME> 16,691,000
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