e424b3
Filed pursuant to Rule 424(b)(3)
Registration No. 333-174014
PROSPECTUS
$400,000,000
Offer to Exchange Registered 6.625% Senior Notes due 2020
For All of Outstanding
Unregistered 6.625% Senior Notes due 2020
We are offering to exchange up to $400,000,000 of our new 6.625% Senior Notes due 2020, which
are jointly and severally guaranteed on an unsecured senior basis by certain of our current and
future domestic subsidiaries (the exchange notes), which will be registered under the Securities
Act of 1933, as amended (the Securities Act), for any and all of our outstanding 6.625% Senior
Notes due 2020, which are jointly and severally guaranteed on an unsecured senior basis by certain
of our current and future domestic subsidiaries (the outstanding notes). We are offering to
exchange the exchange notes for the outstanding notes to satisfy our obligations contained in the
registration rights agreement that we entered into when the outstanding notes were sold pursuant to
Rule 144A and Regulation S under the Securities Act. We sometimes refer to the exchange notes and
the outstanding notes collectively as the notes.
The Exchange Offer
|
|
We will exchange all outstanding notes that are validly tendered and not validly withdrawn
for an equal principal amount of exchange notes that are freely tradable, except in limited
circumstances described below. |
|
|
You may withdraw tenders of outstanding notes at any time prior to the expiration date of
the exchange offer. |
|
|
The exchange offer expires at 11:59 p.m., New York City time, on June 28, 2011, unless
extended. We do not currently intend to extend the expiration date. |
|
|
The exchange of the outstanding notes for exchange notes in the exchange offer will not be
a taxable event for U.S. federal income tax purposes. |
|
|
We will not receive any cash proceeds from the exchange offer. |
The Exchange Notes
|
|
We are offering exchange notes to satisfy certain obligations under the registration rights
agreement entered into in connection with the private offering of the outstanding notes. |
|
|
The terms of the exchange notes to be issued in the exchange offer are identical in all
material respects to the outstanding notes, except that the exchange notes will be freely
tradable, except in limited circumstances described below. |
|
|
We do not plan to list the exchange notes on a national securities exchange or automated
quotation system. |
All untendered outstanding notes will continue to be subject to the restrictions on transfer
set forth in the outstanding notes and in the related indenture. In general, the outstanding notes
may not be offered or sold, unless
registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange
offer, we currently do not anticipate that we will register the outstanding notes under the
Securities Act.
See Risk Factors beginning on page 13 for a discussion of certain risks that you should consider
before participating in the exchange offer.
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange
offer must acknowledge that it will deliver a prospectus in connection with any resale of such
exchange notes as required by applicable securities laws and regulations. The letter of transmittal
states that by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes received in exchange for outstanding
notes where such outstanding notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. In addition, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus. We have agreed that, for a period of 90
days after the date of this prospectus, we will make this prospectus available to any broker-dealer
for use in connection with such resale. See Plan of Distribution.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these notes or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
The date of this prospectus is June 1, 2011.
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
ii |
|
|
|
|
ii |
|
|
|
|
ii |
|
|
|
|
1 |
|
|
|
|
30 |
|
|
|
|
31 |
|
|
|
|
32 |
|
|
|
|
35 |
|
|
|
|
38 |
|
|
|
|
48 |
|
|
|
|
93 |
|
|
|
|
98 |
|
|
|
|
99 |
|
|
|
|
99 |
|
|
|
|
99 |
|
You should rely only on the information contained or incorporated by reference in this
prospectus or in any additional written communication prepared by or authorized by us. We have not
authorized anyone to provide you with any information or represent anything about us, our financial
results or the exchange offer that is not contained in or incorporated by reference into this
prospectus or in any additional written communication prepared by or on behalf of us. If given or
made, any such other information or representation should not be relied upon as having been
authorized by us. We are not making an offer to exchange the outstanding notes in any jurisdiction
where the offer or sale is not permitted. You should assume that the information in this prospectus
or in any additional written communication prepared by or on behalf of us is accurate only as of
the date on its cover page and that any information incorporated by reference herein is accurate
only as of the date of the document incorporated by reference.
MARKET AND INDUSTRY DATA
This prospectus and the documents incorporated by reference herein include market share and
industry data and forecasts that we obtained from industry publications, third-party surveys and
internal company surveys. Although we believe that the third-party sources are reliable, we have
not independently verified market industry data provided by third parties or by industry or general
publications, and we do not take any further responsibility for this data. Similarly, while we
believe our internal estimates with respect to our industry are reliable, our estimates have not
been verified by any independent sources, and we cannot assure you that they are accurate. Our
estimates involve risks and uncertainties and are subject to change based on various factors,
including those discussed under the sections entitled Forward-Looking Statements and Risk
Factors below.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
We own or have rights to use the trademarks, trade names and service marks that we use in
conjunction with the operation of our business. We own the trademark Making Communities
Healthier®, LifePoint Hospitals® and LifePoint®. We do not own any
trademark, trade names or service mark of any other company appearing in this prospectus.
FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this prospectus and in reports and proxy statements we
file with the SEC. In addition, our senior management makes forward-looking statements orally to
analysts, investors, the media and others. Broadly speaking, forward-looking statements include:
|
|
|
projections of our revenues, net income, earnings per share, capital expenditures, cash
flows, debt repayments, interest rates, operating statistics and data or other financial
items; |
|
|
|
|
descriptions of plans or objectives of our management for future operations, services or
growth plans including acquisitions, divestitures, business strategies and initiatives; |
|
|
|
|
interpretations of Medicare and Medicaid laws and regulations and their effect on our
business; and |
|
|
|
|
descriptions of assumptions underlying or relating to any of the foregoing. |
In this prospectus and the documents incorporated by reference herein, for example, we make
forward-looking statements, including statements discussing our expectations about:
|
|
|
this offering, including the use of proceeds, stabilizing transactions and the issuance
and delivery of the notes; |
|
|
|
|
future financial performance and condition; |
|
|
|
|
future liquidity and capital resources; |
|
|
|
|
future cash flows; |
|
|
|
|
existing and future debt and equity structure; |
|
|
|
|
our strategic goals; |
|
|
|
|
future acquisitions; |
|
|
|
|
our business strategy and operating philosophy, including an evaluation of growth
strategies for existing markets and for potential acquisitions; |
|
|
|
|
costs of providing care to our patients; |
|
|
|
changes in interest rates; |
|
|
|
|
our compliance with new and existing laws and regulations; |
|
|
|
|
the impact of national healthcare reform; |
|
|
|
|
the performance of counterparties to our agreements; |
|
|
|
|
effect of credit ratings; |
|
|
|
|
professional fees; |
|
|
|
|
increased costs of salaries and benefits; |
|
|
|
|
industry and general economic trends; |
|
|
|
|
reimbursement changes; |
|
|
|
|
patient volumes and related revenues; |
|
|
|
|
future capital expenditures, including capital expenditures related to information
systems; |
|
|
|
|
the impact of changes in our critical accounting estimates; |
|
|
|
|
claims and legal actions relating to professional liabilities, governmental
investigations and other matters; and |
|
|
|
|
physician recruiting and retention, including trends in physician employment. |
Forward-looking statements discuss matters that are not historical facts. Because they discuss
future events or conditions, forward-looking statements often include words such as can, could,
may, should, believe, will, would, expect, project, estimate, seek, anticipate,
intend, target, continue or similar expressions. You should not unduly rely on
forward-looking statements, which give our expectations about the future and are not guarantees.
Forward-looking statements speak only as of the date they are made. We operate in a continually
changing business environment, and new risk factors emerge from time to time. We cannot predict
such new risk factors nor can we assess the impact, if any, of such new risk factors on our
business or to the extent to which any factor or combination of factors may cause actual results to
differ materially from those expressed or implied by any forward-looking statement. We do not
undertake any obligation to update our forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the occurrence of unanticipated events.
There are several factors, including some beyond our control, that could cause results to
differ significantly from our expectations. Some of these factors are described in more detail in
the section captioned Risk Factors. Other factors, such as market, operational, liquidity,
interest rate, regulatory and other risks are described elsewhere in this prospectus and the
documents incorporated by reference in this prospectus. Any factor described in this prospectus or
the documents incorporated by reference could by itself, or together with one or more factors,
adversely affect our business, results of operations and/or financial condition. There may be
factors not described in this prospectus or the documents incorporated by reference herein that
could cause results to differ from our expectations.
SUMMARY
This summary highlights selected information contained elsewhere or incorporated by reference
in this prospectus and does not contain all of the information you should consider before investing
in the notes. You should read carefully this entire prospectus and the documents incorporated by
reference. Please read Risk Factors, beginning on page 13 of this prospectus for more information
about important risks that you should consider before making an investment descision. Unless the
context otherwise requires, LifePoint Hospitals, Inc. and its subsidiaries are referred to herein
as LifePoint, the Company, we, our or us.
Our Company
We operate general acute care hospitals in non-urban communities in the United States. At
March 31, 2011, we operated 52 hospital campuses in 17 states, having a total of 5,798 licensed
beds. We generate revenue primarily through hospital services offered at our facilities. We
generated $3,262.4 million in revenues from continuing operations for the year ended December 31,
2010 and $888.6 million for the three months ended March 31, 2011.
Our hospitals typically provide the range of medical and surgical services commonly available
in hospitals in non-urban markets. These services include general surgery, internal medicine,
obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care,
rehabilitation services, pediatric services, and, in some of our hospitals, specialized services
such as open-heart surgery, skilled nursing, psychiatric care and neuro-surgery. In many markets,
we also provide outpatient services such as same-day surgery, laboratory, x-ray, respiratory
therapy, imaging, sports medicine and lithotripsy. Like most hospitals located in non-urban
markets, our hospitals do not engage in extensive medical research and medical education programs.
However, three of our hospitals have an affiliation with medical schools, including the clinical
rotation of medical students, and one of our hospitals owns and operates a school of health
professions with a nursing program and a radiologic technology program.
We derived 42.8% of our revenues from continuing operations from the Medicare and Medicaid
programs, collectively for the year ended December 31, 2010 and 42.9% for the three months ended
March 31, 2011. Payments made to our hospitals pursuant to the Medicare and Medicaid programs for
services rendered rarely exceed our costs for such services. The hospital industry is also enduring
a period where the costs of providing care are rising faster than reimbursement rates. As a result,
we rely largely on payments made by private or commercial payors, together with certain limited
services provided to Medicare recipients, to generate an operating profit.
Industry Overview
We believe that non-urban communities present opportunities for us because of the following
factors:
|
|
|
Less Competition than Urban Markets. Because non-urban communities have smaller
populations, they generally have fewer hospitals and other healthcare service providers.
Because non-urban hospitals are generally the sole providers of inpatient services in their
markets, there is limited competition. However, we are experiencing an increase in
competition from other specialized care providers, including outpatient surgery, oncology,
physical therapy and diagnostic centers, as well as competing services rendered in
physician offices. |
|
|
|
|
Community Focus. We believe that the local hospital generally is viewed as an integral
part of the community. In addition, we believe that non-urban communities can have a higher
level of patient and physician loyalty that fosters cooperative relationships among the
local hospitals, physicians, employees, patients and local government authorities. |
|
|
|
|
Acquisition Opportunities. Currently, not-for-profit and governmental entities own most
non-urban hospitals. These entities often have limited access to the capital needed to keep
pace with advances in medical technology. In addition, these entities sometimes lack the
resources to leverage their professional staff in the manner necessary to control hospital
expenses, recruit and retain physicians, expand healthcare services and comply with
increasingly complex reimbursement and managed care requirements. As a result, patients may
migrate, be referred by local physicians, or be encouraged by managed care plans to travel
to hospitals in larger, urban markets. We believe that, as a result of these pressures,
many not-for-profit and governmental owners of non-urban hospitals who wish to maximize the
value of their |
1
|
|
|
community assets and preserve the local availability of quality healthcare services are
interested in selling or leasing these hospitals to a company like ours, that is committed
to the local delivery of healthcare and that has greater access to capital and management
resources. Of the 52 hospitals that we operated at March 31, 2011, 28 were previously
operated by either not-for-profit or governmental entities. |
Operating Philosophy
Since inception, our primary mission has been to acquire, develop and operate strong
community-based hospitals in non-urban markets. As a result, we adhere to an operating philosophy
that is focused on the unique patient and provider needs and opportunities in these communities. We
seek to fulfill our mission of Making Communities Healthier® by striving to:
|
|
|
improve the quality and types of healthcare services available in our communities; |
|
|
|
|
provide physicians with a positive environment in which to practice medicine, with
access to necessary equipment and resources; |
|
|
|
|
develop and provide a positive work environment for employees; |
|
|
|
|
expand each hospitals role as a community asset; and |
|
|
|
|
improve each hospitals financial performance. |
We expect our hospitals to be the place where patients choose to come for care, where
physicians want to practice medicine and where employees want to work.
Business Strategy
We manage our hospitals in accordance with our operating philosophy and have developed the
following strategies as part of our philosophy, tailored for each of our existing markets and for
new markets.
|
|
|
Provide a Positive Environment. We seek to fulfill our mission of Making Communities
Healthier® by striving to improve the quality and types of healthcare services
available in our communities, provide physicians with a positive environment in which to
practice medicine, with access to necessary equipment and resources, develop and provide a
positive work environment for employees, expand each hospitals role as a community asset,
and improve each hospitals financial performance. |
|
|
|
|
Focus on Improving Quality. The quality of healthcare services provided at our
hospitals (and the perceived quality of such services) is an increasingly important factor
to patients when deciding where to seek care and to physicians when deciding where to
practice. Because in virtually every case the Center for Medicare and Medicaid Services
(CMS) core measure scores ascribed to our hospitals are impacted by the practice
decisions of the physicians on our medical staffs, we have implemented new strategies to
work with medical staff members to improve scores at all of our hospitals, especially those
that are below our average or below managements expectations. Recently, we have seen
improvements in our CMS core measure scores and Hospital Consumer Assessment of Healthcare
Providers & Systems scores, an important measure of patients perspectives of hospital
care. We are committed to further improve our scores at our hospitals through targeted
strategies, including increased education, when necessary, awareness campaigns and hospital
specific action plans. |
|
|
|
|
Expand the Breadth of Our Services. We believe that growth can also be achieved by
adding new service lines in our existing markets, investing in new technologies desired by
physicians and patients, and demonstrating the quality of care provided in our facilities.
For the past two years, we have undertaken redesigned operating reviews of our hospitals to
pinpoint new service lines or technologies that could reduce the outmigration of patients
leaving our markets to receive healthcare services. Where needed service lines have been
identified, we have focused on recruiting the physicians necessary to correctly operate
such service lines. For example, our hospitals have responded to physician interest in
requests for hospitalists by introducing or strengthening hospitalist programs where
appropriate. Our hospitals have |
2
|
|
taken other steps, such as structured efforts to solicit input from medical staff members
and to promptly respond to legitimate unmet physicians needs, to limit or offset the impact
of outmigration and to grow. |
|
|
|
Invest in New Technology and Facilities. While responsibly managing our operating
expenses, we have also made significant, targeted investments in our hospitals to add new
technologies, modernize facilities and expand the services available. These investments
should assist in our efforts to attract and retain physicians, to offset outmigration of
patients and to make our hospitals more desirable to our employees and potential patients. |
|
|
|
Increase Efficiency. We also continue to strive to improve our operating performance by
improving our revenue cycle processes, making an even higher level of purchases through our
group purchasing organization, operating more efficiently and effectively, and working to
appropriately standardize our policies, procedures and practices across all of our
affiliated hospitals. We also believe that our position as the sole acute care hospital in
the majority of our communities has allowed us, and will continue to allow us, in many
cases to negotiate preferred reimbursement rates with commercial insurance payors. |
Additional Information
We are a Delaware corporation. Our principal executive offices are located at 103 Powell Court
Brentwood, Tennessee 37027 and our telephone number at that address is (615) 372-8500. Our
corporate website address is www.lifepointhospitals.com. Information contained on our website or
that can be accessed through our website is not incorporated by reference in this prospectus and
does not constitute a part of this prospectus and you should not rely on that information.
3
The Exchange Offer
The summary below describes the principal terms of the exchange offer. See also the section of this
prospectus titled The Exchange Offer, which contains a more detailed description of the terms and
conditions of the exchange offer.
|
|
|
General
|
|
In connection with the private
placement, we entered into a
registration rights agreement
with the purchasers in which we
agreed, among other things, to
deliver this prospectus to you
and to obtain the effectiveness
of the registration statement on
Form S-4 of which this prospectus
is a part within 360 days after
the date of original issuance of
the outstanding notes. You are
entitled to exchange in the
exchange offer your outstanding
notes for exchange notes, which
are identical in all material
respects to the outstanding notes
except: |
|
|
|
|
|
the exchange notes will
have been registered under the
Securities Act; |
|
|
|
|
|
the exchange notes are
not entitled to any registration
rights that are applicable to the
outstanding notes under the
registration rights agreement;
and |
|
|
|
|
|
the provisions of the
registration rights agreement
that provide for payment of
special interest upon a
registration default are no
longer applicable. |
|
|
|
The Exchange Offer
|
|
We are offering to exchange up to
$400,000,000 aggregate principal
amount of our 6.625% Senior Notes
due 2020 and the related
guarantees, which have been
registered under the Securities
Act, for any and all of our
outstanding 6.625% Senior Notes
due 2020 and the related
guarantees. |
|
|
|
|
|
Outstanding notes may be
exchanged only in denominations
of $2,000 and in integral
multiples of $1,000 in excess
thereof; provided that the
untendered portion of any
outstanding note must be in a
minimum denomination of $2,000. |
|
|
|
|
|
Subject to the satisfaction or
waiver of specified conditions,
we will exchange the exchange
notes for all outstanding notes
that are validly tendered and not
validly withdrawn prior to the
expiration of the exchange offer.
We will cause the exchange to be
effected promptly after the
expiration of the exchange offer. |
|
|
|
Resale
|
|
Based on interpretations by the
staff of the SEC set forth in
no-action letters issued to third
parties, we believe that the
exchange notes issued pursuant to
the exchange offer in exchange
for outstanding notes may be
offered for resale, resold and
otherwise transferred by you
(unless you are our affiliate
within the meaning of Rule 405
under the Securities Act) without
compliance with the registration
and prospectus delivery
provisions of the Securities Act,
provided that: |
|
|
|
|
|
you are acquiring the
exchange notes in the ordinary
course of your business; and |
4
|
|
|
|
|
you have not engaged in,
do not intend to engage in, and
have no arrangement or
understanding with any person to
participate in, a distribution of
the exchange notes. |
|
|
|
|
|
If you are a broker-dealer and
receive exchange notes for your
own account in exchange for
outstanding notes that you
acquired as a result of
market-making activities or other
trading activities, you must
acknowledge that you have not entered into any arrangement or understanding with the
Company or an affiliate of the Company to distribute such exchange notes and that you will deliver
this prospectus in connection
with any resale of the exchange
notes. See Plan of
Distribution. Any broker-dealer who holds outstanding securities acquired for its own account as a
result of market-making activities or other trading activities and who receives exchange
notes in exchange for such outstanding notes pursuant to the exchange offer, may be
considered an underwriter; however, by so acknowledging and delivering a prospectus,
such broker-dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act.
|
|
|
|
Expiration Date
|
|
The exchange offer expires at
11:59 p.m., New York City time,
on June 28, 2011, unless extended
by us. We do not currently intend
to extend the expiration date. |
|
|
|
Withdrawal
|
|
You may withdraw any tender of
your outstanding notes at any
time prior to the expiration of
the exchange offer. We will
return to you any of your
outstanding notes that are not
accepted for any reason for
exchange, without expense to you,
promptly after the expiration or
termination of the exchange
offer. |
|
|
|
Interest on the Exchange
Notes and the Outstanding
Notes
|
|
No interest will be paid on
either the exchange notes or the
outstanding notes at the time of
the exchange. The exchange notes
will accrue interest from and
including the last interest
payment date on which interest
has been paid on the outstanding
notes. |
|
|
|
|
|
Accordingly, the holders of
outstanding notes that are
accepted for exchange will not
receive accrued but unpaid
interest on such outstanding
notes at the time of tender.
Rather, that interest will be
payable on the exchange notes
delivered in exchange for the
outstanding notes on the first
interest payment date after the
expiration date of the exchange
offer, which will be October 1,
2011. |
|
|
|
Conditions to the Exchange
Offer
|
|
The exchange offer is subject to
customary conditions, which we
may assert or waive. See The
Exchange OfferConditions to the
Exchange Offer. |
|
|
|
Procedures for Tendering Outstanding
Notes
|
|
If you wish to participate in the
exchange offer, you must
complete, sign and date the
accompanying letter of
transmittal, or a facsimile of
the letter of transmittal,
according to the instructions
contained in this prospectus and
the letter of transmittal. You
must then mail or otherwise
deliver the letter of
transmittal, or a facsimile of
the letter of transmittal,
together with the outstanding
notes and any other required
documents, to the exchange agent
at the address set forth on the
cover page of the letter of
transmittal. |
|
|
|
|
|
If you hold outstanding notes
through The Depository Trust
Company (DTC) and wish to
participate in the exchange
offer, you must comply with the
procedures under DTCs Automated
Tender Offer Program by which you
will agree to be bound by the
letter of transmittal.
By signing, or agreeing to be
bound by, the letter of
transmittal, you will represent
to us that, among other things: |
5
|
|
|
|
|
you do not have an
arrangement or understanding with
any person or entity to
participate in the distribution
of the exchange notes; |
|
|
|
|
|
you are not our
affiliate within the meaning of
Rule 405 under the Securities
Act; |
|
|
|
|
|
you are not engaged in,
and do not intend to engage in, a
distribution of the exchange
notes; |
|
|
|
|
|
you are acquiring the
exchange notes in the ordinary
course of your business; and |
|
|
|
|
|
if you are a
broker-dealer that receives
exchange notes for your own
account in exchange for
outstanding notes that were
acquired as a result of
market-making activities, that you have not entered into any arrangement or understanding with the
Company or an affiliate of the Company to distribute such exchange notes and
you will deliver a prospectus, as
required by law, in connection
with any resale of such exchange
notes. |
|
|
Any broker-dealer who holds outstanding securities acquired for its own account as a
result of market-making activities or other trading activities and who receives exchange
notes in exchange for such outstanding notes pursuant to the exchange offer, may be
considered an underwriter; however, by so acknowledging and delivering a prospectus,
such broker-dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act.
|
|
|
|
Special Procedures for
Beneficial Owners
|
|
If you are a beneficial owner of
outstanding notes that are
registered in the name of a
broker, dealer, commercial bank,
trust company or other nominee,
and you wish to tender those
outstanding notes in the exchange
offer, you should contact the
registered holder promptly and
instruct the registered holder to
tender those outstanding notes on
your behalf. If you wish to
tender on your own behalf, you
must, prior to completing and
executing the letter of
transmittal and delivering your
outstanding notes, either make
appropriate arrangements to
register ownership of the
outstanding notes in your name or
obtain a properly completed bond
power from the registered holder.
The transfer of registered
ownership may take considerable
time and may not be able to be
completed prior to the expiration
date. |
|
|
|
Guaranteed Delivery
Procedures
|
|
If you wish to tender your
outstanding notes and your
outstanding notes are not
immediately available or you
cannot deliver your outstanding
notes, the letter of transmittal
or any other required documents,
or you cannot comply with the
procedures under DTCs Automated
Tender Offer Program for transfer
of book-entry interests, prior to
the expiration date, you must
tender your outstanding notes
according to the guaranteed
delivery procedures described
under The Exchange
OfferGuaranteed Delivery
Procedures. |
|
|
|
Effect on Holders of
Outstanding Notes
|
|
As a result of the making of, and
upon acceptance for exchange of
all validly tendered outstanding
notes pursuant to the terms of,
the exchange offer, we will have
fulfilled a covenant under the
registration rights agreement.
Accordingly, there will be no
increase in the interest rate on
the outstanding notes under the
circumstances described in the
registration rights agreement. If
you do not tender your
outstanding notes in the exchange
offer, you will continue to be
entitled to all the rights and
limitations applicable to the
outstanding notes as set forth in
the indenture under which the
outstanding notes were issued,
except we will not have any
further obligation to you to
provide for the exchange and
registration of the outstanding
notes and related guarantees
under the registration rights
agreement. To the extent that
outstanding notes are tendered
and accepted in the exchange
offer, the trading market for
outstanding notes could be
adversely affected. |
6
|
|
|
Consequences of Failure
to Exchange
|
|
All untendered outstanding notes
will continue to be subject to
the restrictions on transfer set
forth in the outstanding notes
and in the indenture under which
the outstanding notes were
issued. In general, the
outstanding notes may not be
offered or sold, unless
registered under the Securities
Act, except pursuant to an
exemption from, or in a
transaction not subject to, the
Securities Act and applicable
state securities laws. Other than
in connection with the exchange
offer, we do not anticipate that
we will register the outstanding
notes under the Securities Act. |
|
|
|
U.S. Federal Income Tax Consequences of
the Exchange Offer
|
|
The exchange of outstanding notes
for exchange notes in the
exchange offer will not be a
taxable event for United States
federal income tax purposes. See
Certain Material U.S. Federal
Income Tax ConsiderationsThe
Exchange Offer. |
|
|
|
Use of Proceeds
|
|
We will not receive any cash
proceeds from the issuance of
exchange notes in the exchange
offer. See Use of Proceeds. |
|
|
|
Exchange Agent
|
|
The Bank of New York Mellon Trust
Company, N.A. is the exchange
agent for the exchange offer. The
addresses and telephone numbers
of the exchange agent are set
forth under The Exchange
OfferExchange Agent. |
7
The Exchange Notes
The summary below describes the principal terms of the notes. Some of the terms and conditions
described below are subject to important limitations and exceptions. You should carefully read the
Description of Notes section of this prospectus for a more detailed description of the notes.
|
|
|
Issuer
|
|
LifePoint Hospitals, Inc. |
|
|
|
Securities Offered
|
|
$400,000,000 aggregate principal amount of senior notes due 2020. |
|
|
|
Maturity Date
|
|
October 1, 2020. |
|
|
|
Interest
|
|
Interest on the notes will accrue at the rate of 6.625% per annum,
payable semi-annually in arrears. |
|
|
|
Interest Payment Dates
|
|
We will pay interest on the notes semi-annually on April 1 and October
1 of each year, commencing October 1, 2011. |
|
|
|
Ranking
|
|
The notes will be our senior unsecured obligations. Accordingly, they
will rank: |
|
|
|
|
|
equal in right of payment to our existing and future senior
indebtedness; |
|
|
|
|
|
senior in right of payment to our existing and future
subordinated indebtedness; |
|
|
|
|
|
effectively subordinated in right of payment to our secured
debt to the extent of the value of the assets securing such debt; and |
|
|
|
|
|
structurally subordinated in right of payment to all existing
and future indebtedness and other liabilities of any of our existing or
future non-guarantor subsidiaries. |
|
|
|
Guarantees
|
|
The notes will be jointly and severally guaranteed on an unsecured
senior basis by certain of our current and future domestic
subsidiaries. Each subsidiary guarantee will rank: |
|
|
|
|
|
equal in right of payment to the guarantors existing and
future senior indebtedness; |
|
|
|
|
|
senior in right of payment to the guarantors existing and
future subordinated indebtedness; and |
|
|
|
|
|
effectively subordinated in right of payment to the secured
debt of the guarantors to the extent of the value of the assets
securing such debt. |
|
|
|
|
|
Our non-guarantor subsidiaries accounted for $80.3 million, or 9.0%, of
our total revenues for the three months ended March 31, 2011 and $358.8
million, or 8.4%, of our assets (excluding intercompany receivables)
and $45.0 million, or 2.0%, of our liabilities (excluding intercompany
liabilities) as of March 31, 2011. |
|
|
|
Optional Redemption
|
|
We may redeem the notes, in whole or in part, at any time prior to
October 1, 2015 at a price equal to 100% of the principal amount of the
notes redeemed plus an applicable makewhole premium (as described in
Description of NotesOptional Redemption), plus accrued and |
8
|
|
|
|
|
unpaid
interest, if any, to the date of redemption. We may redeem the notes,
in whole or in part, at any time on or after October 1, 2015, at the
redemption prices listed under Description of NotesOptional
Redemption plus accrued and unpaid interest, if any, to the date of
redemption. |
|
|
|
|
|
At any time before October 1, 2013, we may redeem up to 35% of the
aggregate principal amount of the notes issued under the indenture with
the net cash proceeds of one or more qualified equity offerings at a
redemption price equal to 106.625% of the principal amount of the notes
to be redeemed, plus accrued and unpaid interest; provided that: |
|
|
|
|
|
at least 65% of the aggregate principal amount of the notes
remains outstanding immediately after the occurrence of such
redemption; and |
|
|
|
|
|
such redemption occurs within 180 days of the date of the
closing of any such qualified equity offering. |
|
|
|
|
|
See Description of NotesOptional Redemption. |
|
|
|
Change of Control
|
|
If we experience a change of control under certain circumstances, we
must offer to repurchase all of the notes at a price equal to 101% of
their principal amount, plus accrued and unpaid interest, if any, to
the repurchase date. See Description of NotesRepurchase at the
Option of HoldersChange of control. |
|
|
|
Covenants
|
|
The indenture will contain covenants that, among other things, will
limit our ability and the ability of certain of our subsidiaries to: |
|
|
|
|
|
incur additional indebtedness; |
|
|
|
|
|
pay dividends or repurchase or redeem capital stock; |
|
|
|
|
|
make certain investments; |
|
|
|
|
|
create liens; |
|
|
|
|
|
enter into certain types of transactions with our affiliates;
and |
|
|
|
|
|
sell assets or consolidate or merge with or into other
companies. |
|
|
|
|
|
These and other covenants that will be contained in the indenture are
subject to important exceptions and qualifications, which are described
under Description of Notes. |
|
|
|
|
|
If, on any date following the issuance date, certain conditions are
met, including that during such time the notes maintain an investment
grade rating, the application to the notes of certain covenants
described above will be suspended during such period that the notes
maintain an investment grade rating. The covenants above are also
subject to a number of other important limitations and exceptions. See
Description of NotesCertain Covenants. |
|
|
|
Risk Factors
|
|
See Risk Factors beginning on page 13 of this prospectus for
important information regarding us and an investment in the notes. |
|
|
|
No Prior Market
|
|
The exchange notes will be freely transferable but will be new
securities for which there will not initially be a market. Accordingly, |
9
|
|
|
|
|
we cannot assure you whether a market for the exchange notes will
develop or as to the liquidity of any such market that may develop. The
initial purchasers in the private offering of the outstanding notes
have informed us that they currently intend to make a market in the
exchange notes; however, they are not obligated to do so, and they may
discontinue any such market-making activities at any time without
notice. |
10
Summary Consolidated Historical Financial Data
The following summary consolidated historical financial data is derived from our audited
consolidated financial statements for the fiscal years ended December 31, 2010, 2009, 2008, 2007
and 2006 and from our unaudited consolidated financial statements for the three months ended March
31, 2011 and 2010. The unaudited consolidated financial statements have been prepared on the same
basis as our audited consolidated financial statements and, in our opinion, include all
adjustments, consisting of normal recurring adjustments, that we consider necessary for a fair
presentation of our results of operations for such periods. Operating results for any historical
period are not necessarily indicative of the results that may be expected for any future period.
This information is only a summary and should be read in conjunction with the more detailed
information contained in our Consolidated Financial Statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Report on Form 10-Q for
the period ended March 31, 2011, which are incorporated by reference into this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Year Ended December 31, |
|
|
March 31, |
|
(Dollars in millions) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Revenues |
|
$ |
3,262.4 |
|
|
$ |
2,962.7 |
|
|
$ |
2,700.8 |
|
|
$ |
2,568.4 |
|
|
$ |
2,336.5 |
|
|
$ |
888.6 |
|
|
$ |
786.2 |
|
|
Salaries and benefits |
|
|
1,270.3 |
|
|
|
1,170.9 |
|
|
|
1,065.4 |
|
|
|
1,006.1 |
|
|
|
918.0 |
|
|
|
334.4 |
|
|
|
303.3 |
|
Supplies |
|
|
443.0 |
|
|
|
409.1 |
|
|
|
372.6 |
|
|
|
352.2 |
|
|
|
326.1 |
|
|
|
118.7 |
|
|
|
108.4 |
|
Other operating expenses |
|
|
605.2 |
|
|
|
538.0 |
|
|
|
499.8 |
|
|
|
464.0 |
|
|
|
397.4 |
|
|
|
161.6 |
|
|
|
140.4 |
|
Provision for doubtful accounts |
|
|
443.8 |
|
|
|
375.4 |
|
|
|
313.2 |
|
|
|
307.0 |
|
|
|
250.0 |
|
|
|
130.1 |
|
|
|
102.1 |
|
Depreciation and amortization |
|
|
148.5 |
|
|
|
143.0 |
|
|
|
132.1 |
|
|
|
129.4 |
|
|
|
105.4 |
|
|
|
39.7 |
|
|
|
36.1 |
|
Interest expense, net |
|
|
108.1 |
|
|
|
103.2 |
|
|
|
107.7 |
|
|
|
107.4 |
|
|
|
105.5 |
|
|
|
29.2 |
|
|
|
25.1 |
|
Debt extinguishment costs |
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges |
|
|
|
|
|
|
1.1 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,021.3 |
|
|
|
2,740.7 |
|
|
|
2,492.0 |
|
|
|
2,366.1 |
|
|
|
2,102.4 |
|
|
|
813.7 |
|
|
|
715.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
|
|
241.1 |
|
|
|
222.0 |
|
|
|
208.8 |
|
|
|
202.3 |
|
|
|
234.1 |
|
|
|
74.9 |
|
|
|
70.8 |
|
Provision for income taxes |
|
|
82.4 |
|
|
|
80.3 |
|
|
|
79.9 |
|
|
|
80.5 |
|
|
|
91.2 |
|
|
|
28.4 |
|
|
|
26.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
158.7 |
|
|
|
141.7 |
|
|
|
128.9 |
|
|
|
121.8 |
|
|
|
142.9 |
|
|
|
46.5 |
|
|
|
44.2 |
|
Less: Net income attributable to
noncontrolling interests |
|
|
(3.1 |
) |
|
|
(2.5 |
) |
|
|
(2.2 |
) |
|
|
(1.7 |
) |
|
|
(1.4 |
) |
|
|
(0.7 |
) |
|
|
(0.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations attributable to
LifePoint Hospitals, Inc. |
|
$ |
155.6 |
|
|
$ |
139.2 |
|
|
$ |
126.7 |
|
|
$ |
120.1 |
|
|
$ |
141.5 |
|
|
$ |
45.8 |
|
|
$ |
43.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Year Ended December 31, |
|
|
March 31, |
|
(Dollars in millions) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2011 |
|
|
2010 |
|
Balance Sheet Data (as
of end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents |
|
$ |
207.4 |
|
|
$ |
187.2 |
|
|
$ |
75.7 |
|
|
$ |
53.1 |
|
|
$ |
12.2 |
|
|
$ |
276.2 |
|
|
$ |
219.4 |
|
Working capital |
|
$ |
498.8 |
|
|
$ |
485.9 |
|
|
$ |
376.2 |
|
|
$ |
373.6 |
|
|
$ |
377.7 |
|
|
$ |
569.6 |
|
|
$ |
539.8 |
|
Property & equipment, net |
|
$ |
1,668.6 |
|
|
$ |
1,499.4 |
|
|
$ |
1,416.0 |
|
|
$ |
1,383.0 |
|
|
$ |
1,305.4 |
|
|
$ |
1,683.5 |
|
|
$ |
1,502.4 |
|
Total assets |
|
$ |
4,162.9 |
|
|
$ |
3,873.3 |
|
|
$ |
3,680.3 |
|
|
$ |
3,635.9 |
|
|
$ |
3,638.3 |
|
|
$ |
4,258.1 |
|
|
$ |
3,939.6 |
|
Total debt, excluding
unamortized discount of
convertible debt
instruments |
|
$ |
1,651.7 |
|
|
$ |
1,502.2 |
|
|
$ |
1,516.7 |
|
|
$ |
1,517.1 |
|
|
$ |
1,668.5 |
|
|
$ |
1,651.3 |
|
|
$ |
1,501.9 |
|
Total LifePoint
Hospitals, Inc
stockholders equity |
|
$ |
1,887.5 |
|
|
$ |
1,827.7 |
|
|
$ |
1,652.0 |
|
|
$ |
1,629.1 |
|
|
$ |
1,471.5 |
|
|
$ |
1,957.1 |
|
|
$ |
1,879.0 |
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Year Ended December 31, |
|
|
March 31, |
|
(Dollars in millions) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2011 |
|
|
2010 |
|
Additional Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
$ |
168.7 |
|
|
$ |
166.6 |
|
|
$ |
157.6 |
|
|
$ |
158.4 |
|
|
$ |
194.0 |
|
|
$ |
55.9 |
|
|
$ |
34.0 |
|
Net cash provided by operating
activitiescontinuing operations |
|
$ |
375.7 |
|
|
$ |
350.3 |
|
|
$ |
346.6 |
|
|
$ |
241.4 |
|
|
$ |
257.8 |
|
|
$ |
115.8 |
|
|
$ |
83.5 |
|
Net cash used in investing
activitiescontinuing operations |
|
$ |
(353.6 |
) |
|
$ |
(244.1 |
) |
|
$ |
(185.3 |
) |
|
$ |
(158.3 |
) |
|
$ |
(475.8 |
) |
|
$ |
(58.5 |
) |
|
$ |
(50.9 |
) |
Net cash (used in) provided by
financing activitiescontinuing
operations |
|
$ |
(0.3 |
) |
|
$ |
(13.9 |
) |
|
$ |
(119.3 |
) |
|
$ |
(165.6 |
) |
|
$ |
(148.5 |
) |
|
$ |
11.3 |
|
|
$ |
(0.2 |
) |
12
RISK FACTORS
Before deciding to tender your notes in the exchange offer, you should carefully consider the
risks described below, together with all of the other information included or incorporated by
reference in this prospectus. Any of the risks described herein could have a material adverse
effect on our results of operation and financial condition. In such case, you may lose all or part
of your investment in the notes.
Risks relating to our business
We cannot predict the effect that healthcare reform and other changes in government programs may
have on our business, financial condition or results of operations.
The Patient Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010 (collectively, the Affordable Care Act) dramatically alters the United
States healthcare system and is intended to decrease the number of uninsured Americans and reduce
overall healthcare costs. The Affordable Care Act attempts to achieve these goals by, among other
things, requiring most Americans to obtain health insurance, expanding Medicare and Medicaid
eligibility, reducing Medicare and Medicaid payments, including disproportionate share hospital
(DSH) payments to providers, expanding the Medicare programs use of value-based purchasing
programs, tying hospital payments to the satisfaction of certain quality criteria, and bundling
payments to hospitals and other providers. The Affordable Care Act also contains a number of
measures that are intended to reduce fraud and abuse in the Medicare and Medicaid programs, such as
requiring the use of recovery audit contractors (RACs) in the Medicaid program, expanding the
scope of the federal False Claims Act and generally prohibiting physician-owned hospitals from
adding new physician owners or increasing the number of beds and operating rooms for which they are
licensed. Because a majority of the measures contained in the Affordable Care Act do not take
effect until 2013, it is difficult to predict the impact the Affordable Care Act will have on our
facilities. In addition, there have been a number of challenges to the Affordable Care Act, and
some courts have ruled that the requirement for individuals to carry health insurance or the
Affordable Health Care Act in its entirety is unconstitutional. Several bills have been and will
likely continue to be introduced in Congress to repeal or amend all or significant provisions of
the Affordable Care Act. It is difficult to predict the full impact of the Affordable Care Act due
to its complexity, lack of implementing regulations and interpretive guidance, gradual and
potentially delayed implementation, pending court challenges, and possible repeal and/or amendment,
as well as our inability to foresee how individuals and businesses will respond to the choices
afforded them by the Affordable Care Act. Depending on further legislative developments, how the
pending court challenges are resolved, and how the Affordable Care Act is ultimately interpreted
and implemented, it could have an adverse effect on our business, financial condition and results
of operations.
Our revenues will decline if federal or state programs reduce our Medicare or Medicaid payments
or if managed care companies reduce reimbursement amounts. In addition, the financial condition
of payors and healthcare cost containment initiatives may limit our revenues and profitability.
For the first quarter of 2011, we derived 42.9% of our revenues from the Medicare and Medicaid
programs, collectively. The Medicare and Medicaid programs are subject to statutory and regulatory
changes, administrative rulings, interpretations and determinations concerning patient eligibility
requirements, funding levels and the method of calculating payments or reimbursements, among other
things; requirements for utilization review; and federal and state funding restrictions, all of
which could materially increase or decrease payments from these government programs in the future,
as well as affect the timing of payments to our facilities.
We are unable to predict the effect of future government healthcare funding policy changes on
our operations. If the rates paid by governmental payors are reduced, if the scope of services
covered by governmental payors is limited or if we, or one or more of our subsidiaries hospitals,
are excluded from participation in the Medicare or Medicaid program or any other government
healthcare program, there could be a material adverse effect on our business, financial condition,
results of operations or cash flows.
During the past several years, healthcare payors, such as federal and state governments,
insurance companies and employers, have undertaken initiatives to revise payment methodologies and
monitor healthcare costs. As part of their efforts to contain healthcare costs, payors increasingly
are demanding discounted fee structures or the assumption by healthcare providers of all or a
portion of the financial risk relating to paying for care provided, often
13
in exchange for exclusive or preferred participation in their benefit plans. We expect efforts
to impose greater discounts and more stringent cost controls by government and other payors to
continue, thereby reducing the payments we receive for our services. In addition, these payors have
instituted policies and procedures to substantially reduce or limit the use of inpatient services.
For example, CMS has transitioned to full implementation of the MS-DRG system, which represents a
refinement to the existing diagnosis-related group system. Future realignments in the MS-DRG system
could impact the margins we receive for certain services. Furthermore, the Affordable Care Act
provides for material reductions in the growth of Medicare program spending, including reductions
in Medicare market basket updates, and Medicare DSH funding. Medicare payments in federal fiscal
year 2011 for inpatient hospital services are expected to be slightly lower than payments for the
same services in federal fiscal year 2010 because of reductions resulting from the Affordable Care
Act and the MS-DRG implementation.
All of our hospitals are certified as providers of Medicaid services. Medicaid programs are
jointly funded by federal and state governments and are administered by states under an approved
plan that provides hospital and other healthcare benefits to qualifying individuals who are unable
to afford care. A number of states, however, are experiencing budget problems and have adopted or
are considering legislation designed to reduce their Medicaid expenditures, including enrolling
Medicaid recipients in managed care programs and imposing additional taxes on hospitals to help
finance or expand states Medicaid systems. The American Recovery and Reinvestment Act of 2009 (the
ARRA) and the Education, Jobs, and Medicaid Assistance Act (the Assistance Act) include
increased federal funding for Medicaid through June 30, 2011. However, we are unable to predict at
this time how this will impact states ability to provide Medicaid coverage in the future,
particularly in light of the expanded Medicaid eligibility requirements that become effective in
2014 as part of the Affordable Care Act. It is possible that, despite Congresss actions, budgetary
pressures will force states to resort to some of the cost saving measures mentioned above. These
efforts could have a material adverse effect on our business, financial condition, results of
operations or cash flows.
For example, one of our hospitals, Memorial Medical Center of Las Cruces, New Mexico (MMC),
received approximately $38.5 million during 2010 under the New Mexico Sole Community Provider
Program (the SCPP). While the funds made available to MMC (and other New Mexico hospitals that
participate in the SCPP) are not tied directly to the cost of actual services provided, MMC is
required to provide an annual report of its costs to Dona Ana County (the county primarily served
by MMC). Once desired funding levels were established by Dona Ana County for 2009, the county
submitted funds to the New Mexico Human Services Department (the NMHSD), which in turn were
combined with funds sent by other New Mexico counties and then used by the NMHSD to request
matching funds from the federal government. Once the federal matching dollars were made available
to the state, the resulting sole community provider payment was made under the SCPP directly to MMC
(and other hospitals participating in the SCPP) by the NMHSD. The payments made by the NMHSD to
hospitals pursuant to the SCPP are based on formulas established with respect to each participating
hospital. The SCPP was created in 1993 and has resulted in significant payments to MMC in prior
years. Like many other states, there is a general concern in New Mexico that the SCPP cannot be
sustained at current funding levels as a result of budget concerns and other factors. It seems
likely, as a result, that the SCPP will soon be reconstituted. We are not able to predict what
changes may be made to the SCPP, but any change in the SCPP is likely to reduce payments made to
MMC.
We are subject to increasingly stringent governmental regulation, and may be subjected to
allegations that we have failed to comply with governmental regulations which could result in
sanctions and even greater scrutiny that reduce our revenues and profitability.
All participants in the healthcare industry are required to comply with many laws and
regulations at the federal, state and local government levels. These laws and regulations require
that hospitals meet various requirements, including those relating to hospitals relationships with
physicians and other referral sources, the adequacy and quality of medical care, equipment,
personnel, operating policies and procedures, billing and cost reports, payment for services and
supplies, maintenance of adequate records, privacy, compliance with building codes and
environmental protection, among other matters. Many of the laws and regulations applicable to
healthcare are complex, and, in public statements, governmental authorities have taken positions on
issues for which little official interpretation was previously available. Some of these positions
appear to be inconsistent with common practices within the industry but have not previously been
challenged. In addition, the monitoring of compliance with and the enforcing of penalties for
violations of these laws and regulations is changing and increasing. For example, in 2010, CMS
issued a self-referral disclosure protocol for hospitals and other providers that wish to
self-disclose potential
14
violations of the provision of the Social Security Act commonly known as the Stark law and
attempt to resolve those potential violations and any related overpayment liabilities at levels
below the maximum penalties and amounts set forth in the statute. In light of the provisions of the
Affordable Care Act that created potential False Claims Act liabilities for failing to report and
repay known overpayments and return an overpayment within sixty (60) days of the identification of
the overpayment or the date by which a corresponding cost report is due, whichever is later,
hospitals and other healthcare providers are encouraged to disclose potential violations of the
Stark law to CMS. It is likely that self-disclosure of Stark violations will continue in the
future. Moreover, some government investigations that have in the past been conducted under the
civil provisions of federal law are now being conducted as criminal investigations under the
Medicare fraud and abuse laws.
The healthcare industry has seen a number of ongoing investigations related to patient
referrals, physician recruiting practices, cost reporting and billing practices, laboratory and
home healthcare services, physician ownership of hospitals and other healthcare providers, and
joint ventures involving hospitals and physicians. Federal and state government agencies have
announced heightened and coordinated civil and criminal enforcement efforts. In addition, the
Office of Inspector General of the Department of Health and Human Services (the OIG) (which is
responsible for investigating fraud and abuse activities in government programs) and the U.S.
Department of Justice periodically establish targeted enforcement initiatives that focus on
specific billing practices or other areas that are highly susceptible to fraud and abuse. The OIG
reported savings and expected recoveries for federal healthcare programs of more than $25.9 billion
for federal fiscal year 2010 as a result of its enforcement activities.
Hospitals continue to be one of the primary focal areas of the OIG and other governmental
fraud and abuse programs. In January 2005, the OIG issued Supplemental Compliance Program Guidance
for Hospitals that focuses on hospital compliance risk areas. Some of the risk areas highlighted by
the OIG include correct outpatient procedure coding, revising admission and discharge policies to
reflect current CMS rules, submitting appropriate claims for supplemental payments such as
pass-through costs and outlier payments and a general discussion of the fraud and abuse risks
related to financial relationships with referral sources. Each federal fiscal year, the OIG also
publishes a General Work Plan that provides a brief description of the activities that the OIG
plans to initiate or continue with respect to the programs and operations of the Department of
Health and Human Services (HHS) and details the areas that the OIG believes are prone to fraud
and abuse. In addition, the claims review strategies used by the RACs generally include a review of
high dollar claims, including inpatient hospital claims. As a result, a large majority of the total
amounts recovered by RACs has come from hospitals. The Affordable Care Act expands the RAC
programs scope to include managed Medicare and to include Medicaid claims by requiring all states
to establish programs to contract with RACs in 2011. In addition, CMS employs Medicaid Integrity
Contractors (MICs) to perform post-payment audits of Medicaid claims and identify overpayments.
The Affordable Care Act increases federal funding for the MIC program for federal fiscal year 2011
and later years. In addition to RACs and MICs, the state Medicaid agencies and other contractors
have also increased their review activities.
The laws and regulations with which we must comply are complex and subject to change. In the
future, different interpretations or enforcement of these laws and regulations could subject our
practices to allegations of impropriety or illegality or could require us to make changes in our
facilities, equipment, personnel, services, capital expenditure programs and operating expenses. If
we fail to comply with applicable laws and regulations, we could suffer civil or criminal
penalties, including the loss of our licenses to operate our hospitals and our ability to
participate in the Medicare, Medicaid and other federal and state healthcare programs.
Finally, we are subject to various federal, state and local statutes and ordinances regulating
the discharge of materials into the environment. Our healthcare operations generate medical waste,
such as pharmaceuticals, biological materials and disposable medical instruments that must be
disposed of in compliance with federal, state and local environmental laws, rules and regulations.
Our operations are also subject to various other environmental laws, rules and regulations.
Environmental regulations also may apply when we renovate or refurbish hospitals, particularly
older facilities.
We may continue to see the growth of uninsured and patient due accounts, and deterioration in
the collectability of these accounts could adversely affect our collections of accounts
receivable, results of operations and cash flows.
The primary collection risks associated with our accounts receivable relate to the uninsured
patient accounts and patient accounts for which the primary insurance carrier has paid the amounts
covered by the applicable agreement,
15
but patient responsibility amounts (deductibles and co-payments) remain outstanding. The
provision for doubtful accounts relates primarily to amounts due directly from patients. This risk
has increased, and will likely continue to increase, as more individuals enroll in high deductible
insurance plans or those with high co-payments or who have no insurance coverage. These trends will
likely be exacerbated if general economic conditions remain challenging or if unemployment levels
in the communities in which we operate rise. As unemployment rates increase, our business
strategies to generate organic growth and to improve admissions and adjusted admissions at our
hospitals could become more difficult to accomplish.
The amount of our provision for doubtful accounts is based on our assessments of historical
collection trends, business and economic conditions, trends in federal and state governmental and
private employer health coverage and other collection indicators. A continuation in trends that
results in increasing the proportion of accounts receivable being comprised of uninsured accounts
and deterioration in the collectability of these accounts could adversely affect our collections of
accounts receivable, results of operations and cash flows. As enacted, the Affordable Care Act
seeks to decrease, over time, the number of uninsured individuals. Among other things, the
Affordable Care Act will, beginning in 2014, expand Medicaid and incentivize employers to offer,
and require individuals to carry, health insurance or be subject to penalties. However, it is
difficult to predict the full impact of the Affordable Care Act due to its complexity, lack of
implementing regulations and interpretive guidance, gradual and potentially delayed implementation,
pending court challenges, and possible repeal and/or amendment, as well as our inability to foresee
how individuals and businesses will respond to the choices afforded them by the Affordable Care
Act. In addition, even after implementation of the Affordable Care Act, we may continue to
experience bad debts and be required to provide uninsured discounts and charity care for
undocumented aliens who are not permitted to enroll in a health insurance exchange or government
healthcare programs.
Controls designed to reduce inpatient services may reduce our revenues.
Controls imposed by Medicare, Medicaid, and commercial third-party payors designed to reduce
admissions and lengths of stay, commonly referred to as utilization review, have affected and are
expected to continue to affect our facilities. Federal law contains numerous provisions designed to
ensure that services rendered by hospitals to Medicare and Medicaid patients meet professionally
recognized standards and are medically necessary and that claims for reimbursement are properly
filed. These provisions include a requirement that a sampling of admissions of Medicare and
Medicaid patients must be reviewed by quality improvement organizations, which review the
appropriateness of Medicare and Medicaid patient admissions and discharges, the quality of care
provided, the validity of MS-DRG classifications and the appropriateness of cases of extraordinary
length of stay or cost on a post-discharge basis. Quality improvement organizations may deny
payment for services or assess fines and also have the authority to recommend to the HHS that a
provider which is in substantial noncompliance with the standards of the quality improvement
organization be excluded from participation in the Medicare program. The Affordable Care Act
potentially expands the use of prepayment review by Medicare contractors by eliminating statutory
restrictions on their use, and, as a result, efforts to impose more stringent cost controls are
expected to continue. Utilization review is also a requirement of most non-governmental managed
care organizations and other third-party payors. Inpatient utilization, average lengths of stay and
occupancy rates continue to be negatively affected by payor-required preadmission authorization and
utilization review and by third party payor pressure to maximize outpatient and alternative
healthcare delivery services for less acutely ill patients. Although we are unable to predict the
effect these controls and changes will have on our operations, significant limits on the scope of
services reimbursed and on reimbursement rates and fees could have a material, adverse effect on
our business, financial position and results of operations.
The industry trend towards value-based purchasing may negatively impact our revenues.
There is a trend in the healthcare industry toward value-based purchasing of healthcare
services. These value-based purchasing programs include both public reporting of quality data and
preventable adverse events tied to the quality and efficiency of care provided by facilities.
Governmental programs including Medicare and Medicaid currently require hospitals to report certain
quality data to receive full reimbursement updates. In addition, Medicare does not reimburse for
care related to certain preventable adverse events. Many large commercial payors currently require
hospitals to report quality data, and several commercial payors do not reimburse hospitals for
certain preventable adverse events.
16
The Affordable Care Act contains a number of provisions intended to promote value-based
purchasing. Effective July 1, 2011, the Affordable Care Act will prohibit the use of federal funds
under the Medicaid program to reimburse providers for medical assistance provided to treat hospital
acquired conditions (HACs). A HAC is a condition that is acquired by a patient while admitted as
an inpatient at a hospital, such as a surgical site infection. Beginning in federal fiscal year
2015, hospitals that fall into the top 25% of national risk-adjusted HAC rates for all hospitals in
the previous year will receive a 1% reduction in their total Medicare payments. Hospitals with
excessive readmissions for conditions designated by HHS will receive reduced payments for all
inpatient discharges, not just discharges relating to the conditions subject to the excessive
readmission standard.
The Affordable Care Act also requires HHS to implement a value-based purchasing program for
inpatient hospital services. The Affordable Care Act requires HHS to reduce inpatient hospital
payments for all discharges by a percentage beginning at 1% in federal fiscal year 2013 and
increasing by 0.25% each fiscal year up to 2% in federal fiscal year 2017 and subsequent years. HHS
will pool the amount collected from these reductions to fund payments to reward hospitals that meet
or exceed certain quality performance standards established by HHS. HHS will determine the amount
each hospital that meets or exceeds the quality performance standards will receive from the pool of
dollars created by these payment reductions.
We expect value-based purchasing programs, including programs that condition reimbursement on
patient outcome measures, to become more common and to involve a higher percentage of reimbursement
amounts. We are unable at this time to predict how this trend will affect our results of
operations, but it could negatively impact our revenues.
The lingering effects of the economic recession could materially adversely affect our financial
position, results of operations or cash flows.
The United States economy recently emerged from an economic recession and unemployment levels
remain high. While certain healthcare spending is considered non-discretionary and may not be
significantly impacted by economic downturns, other types of healthcare spending may be adversely
impacted by such conditions. When patients are experiencing personal financial difficulties or have
concerns about general economic conditions, they may choose:
|
|
|
to defer or forego elective surgeries and other non-emergent procedures, which are
generally more profitable lines of business for hospitals; or |
|
|
|
|
a high-deductible insurance plan or no insurance at all, which increases a hospitals
dependence on self-pay revenue. Moreover, a greater number of uninsured patients may seek
care in our emergency rooms. |
We are unable to determine the specific impact of these economic conditions on our business at
this time, but we believe that the lingering effects of the economic recession could have an
adverse impact on our operations and could impact not only the healthcare decisions of our
patients, but also the solvency of managed care providers and other counterparties to transactions
with us.
The failure of certain employers, or the closure of certain manufacturing and other facilities
in our markets, can have a disproportionate impact on our hospitals.
The economies in the non-urban communities in which our hospitals operate are often dependant
on a small number of large employers, especially manufacturing or other facilities. These employers
often provide income and health insurance for a disproportionately large number of community
residents who may depend on our hospitals for care. The failure of one or more large employers, or
the closure or substantial reduction in the number of individuals employed at manufacturing or
other facilities located in or near many of the non-urban communities in which our hospitals
operate, could cause affected employees to move elsewhere for employment or lose insurance coverage
that was otherwise available to them. The occurrence of these events may cause a material reduction
in our revenues and results of operations or impede our business strategies intended to generate
organic growth and improve operating results at our hospitals.
17
If we do not effectively attract, recruit and retain qualified physicians, our ability to
deliver healthcare services efficiently will be adversely affected.
As a general matter, only physicians on our medical staffs may direct hospital admissions and
the services ordered once a patient is admitted to a hospital. As a result, the success of our
hospitals depends in part on the number and quality of the physicians on the medical staffs of our
hospitals, the admitting practices of those physicians and maintaining good relations with those
physicians.
The success of our efforts to recruit and retain quality physicians depends on several
factors, including the actual and perceived quality of services provided by our hospitals, our
ability to meet demands for new technology and our ability to identify and communicate with
physicians who want to practice in non-urban communities. In particular, we face intense
competition in the recruitment and retention of specialists because of the difficulty in convincing
these individuals of the benefits of practicing or remaining in practice in non-urban communities.
If the non-urban communities in which our hospitals operate are not seen as attractive, then we
could experience difficulty attracting and retaining physicians to practice in our communities. We
may not be able to recruit all of the physicians we target. In addition, we may incur increased
malpractice expense if the quality of physicians we recruit does not meet our expectations.
Additionally, our ability to recruit physicians is closely regulated. For example, the types,
amount and duration of assistance we can provide to recruited physicians are limited by the Stark
law, the anti-kickback provisions of the Social Security Act (the Anti-kickback Statute), state
anti-kickback statutes, and related regulations. For example, the Stark law requires, among other
things, that recruitment assistance can only be provided to physicians who meet certain geographic
and practice requirements, that the amount of assistance cannot be changed during the term of the
recruitment agreement, and that the recruitment payments cannot generally benefit physicians
currently in practice in the community beyond recruitment costs actually incurred by them. In
addition to these legal requirements, there is competition from other communities and facilities
for these physicians, and this competition continues after the physician is practicing in one of
our communities.
The profitability of our employed physicians will be affected by changes in the Medicare and
Medicaid payment rates.
In recent years, physician payment amounts have been determined on a year by year basis. If
the sustainable growth rate provision of the Social Security Act is applied to the physician fee
schedule in January 2012 as required by current legislation, Medicare payments will decrease by
approximately 29.5%. We believe that physician employment by acute care hospitals has become more
common as a result of actual and potential reductions in payment amounts for physician services.
Our experience in employing physicians is consistent with industry trends. Employed physicians
could present more direct risks to us than those presented by independent members of our hospitals
medical staffs. The combination of increased salary cuts and potential liabilities are significant
and if this trend continues, could have an adverse effect on our results of operations.
Our hospitals face competition for staffing, which may increase labor costs and reduce
profitability.
In addition to our physicians, the operations of our hospitals are dependent on the efforts,
abilities and experience of our management and medical support personnel, such as nurses,
pharmacists and lab technicians. We compete with other healthcare providers in recruiting and
retaining qualified management and staff personnel responsible for the day-to-day operations of
each of our hospitals, including nurses and other non-physician healthcare professionals. In some
markets, the scarce availability of nurses and other medical support personnel presents a
significant operating issue. This shortage may require us to enhance wages and benefits to recruit
and retain nurses and other medical support personnel, recruit personnel from foreign countries,
and hire more expensive temporary or contract personnel. In addition, the states in which we
operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse staffing ratios
already in place. State-mandated nurse-staffing ratios could significantly affect labor costs and
have an adverse impact on revenues if we are required to limit admissions in order to meet the
required ratios. If our labor costs increase, we may not be able to raise rates to offset these
increased costs. We also depend on the available labor pool of semi-skilled and unskilled employees
in each of the markets in which we operate. Because a significant percentage of our revenue
consists of fixed, prospective payments, our ability to pass along increased labor costs is
constrained. Our failure to recruit and retain qualified
18
management, nurses and other medical support personnel, or to control our labor costs could
have a material adverse effect on our financial condition or results of operations.
The loss of certain physicians can have a disproportionate impact on certain of our hospitals.
Generally, the top ten attending physicians within each of our facilities represent a large
share of our inpatient revenues and admissions. The loss of one or more of these physicians even
if temporary could cause a material reduction in our revenues, which could take significant time
to replace given the difficulty and cost associated with recruiting and retaining physicians.
We may be subjected to actions brought by the government under anti-fraud and abuse provisions
or by individuals on the governments behalf under the False Claims Acts qui tam or
whistleblower provisions.
We are subject to the Anti-kickback Statute, which prohibits healthcare service providers from
paying or receiving remuneration to induce or arrange for the referral of patients or purchase of
items or services covered by a federal or state healthcare program. We are also subject to the
Stark law, which prohibits a physician from referring Medicare and Medicaid patients to selected
types of healthcare entities in which they or any of their immediate family members have ownership
or a compensation relationship unless an exception applies. If regulatory authorities determine
that any of our hospitals arrangements violate the Anti-kickback Statute or Stark law, we could be
subject to a number of significant liabilities such as criminal penalties (for violations of the
Anti-kickback Statute), civil monetary penalties, and/or exclusion from participation in Medicare,
Medicaid or other federal healthcare programs, any of which could impair our ability to operate one
or more of our hospitals profitably.
The federal False Claims Act prohibits providers from, among other things, knowingly
submitting false claims for payment to the federal government. The qui tam or whistleblower
provisions of the False Claims Act allow private individuals to bring actions under the False
Claims Act on behalf of the government. These private parties are entitled to share in any amounts
recovered by the government, and, as a result, the number of whistleblower lawsuits that have
been filed against providers has increased significantly in recent years. Defendants found to be
liable under the federal False Claims Act may be required to pay three times the actual damages
sustained by the government, plus mandatory civil penalties ranging between $5,500 and $11,000 for
each separate false claim.
There are many potential bases for liability under the False Claims Act. The government has
used the False Claims Act to prosecute Medicare and other government healthcare program fraud such
as coding errors, billing for services not provided, submitting false cost reports, and providing
care that is not medically necessary or that is substandard in quality. The Affordable Care Act
also provides that claims submitted in connection with patient referrals that result from
violations of the Anti-kickback Statute constitute false claims for the purposes of the federal
False Claims Act, and some courts have held that a violation of the Stark law can result in False
Claims Act liability, as well. In addition, a number of states have adopted their own false claims
and whistleblower provisions whereby a private party may file a civil lawsuit in state court. We
are required to provide information to our employees and certain contractors about state and
federal false claims laws and whistleblower provisions and protections.
Although we intend and will endeavor to conduct our business in compliance with all applicable
federal and state fraud and abuse laws, many of these laws are broadly worded and may be
interpreted or applied in ways that cannot be predicted. Therefore, we cannot assure you that our
arrangements or business practices will not be subject to government scrutiny or be found to be in
compliance with applicable fraud and abuse laws.
If our access to licensed information systems is interrupted or restricted, or if we are not
able to integrate changes to our existing information systems or information systems of acquired
hospitals, our operations could suffer.
Our business depends significantly on effective information systems to process clinical and
financial information. Information systems require an ongoing commitment of significant resources
to maintain and enhance existing systems and develop new systems in order to keep pace with
continuing changes in information processing technology. We rely heavily on HCA-Information
Technology and Services, Inc., (HCA-IT), for information systems. HCA-IT provides us with
financial, clinical, patient accounting and network information services. HCAs
19
primary business is to own and operate hospitals, not to provide information systems. We do
not control HCA-ITs systems. If these systems fail or are interrupted, if our access to these
systems is limited in the future or if HCA-IT develops systems more appropriate for the urban
healthcare market and not suited for our hospitals, our operations could suffer. Our existing
contract with HCA-IT, expires on December 31, 2017 (including a wind-down period) unless extended
by the parties.
System conversions are costly, time consuming and disruptive for physicians and employees.
Some of our hospitals have recently converted or are currently converting from the system provided
by HCA-IT to another third party information system. Implementation of such conversions are very
costly and, if such conversions occurred on a large scale, could have a material adverse effect on
our business, financial condition, results of operations or cash flows.
In addition, as new information systems are developed in the future, we will need to integrate
them into our existing systems. Evolving industry and regulatory standards, such as the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) and meaningful use regulations, may
require changes to our information systems in the future. We may not be able to integrate new
systems or changes required to our existing systems or systems of acquired hospitals in the future
effectively or on a cost-efficient basis.
If we fail to effectively and timely implement electronic health record systems, our operations
could be adversely affected.
As required by ARRA, the Secretary of HHS is in the process of developing and implementing an
incentive payment program for eligible hospitals and healthcare professionals that adopt and
meaningfully use electronic health record (EHR) technology. HHS intends to use the Provider
Enrollment, Chain and Ownership System (PECOS) to verify Medicare enrollment prior to making EHR
incentive program payments. If our hospitals and employed professionals are unable to meet the
requirements for participation in the incentive payment program, including having an enrollment
record in PECOS, we will not be eligible to receive incentive payments that could offset some of
the costs of implementing EHR systems. Further, beginning in federal fiscal year 2015, eligible
hospitals and professionals that fail to demonstrate meaningful use of certified EHR technology
will be subject to reduced payments from Medicare. System conversions to comply with EHR could be
time consuming and disruptive for physicians and employees. Failure to implement EHR systems
effectively and in a timely manner could have a material adverse effect on our financial position
and results of operations.
We may have difficulty acquiring hospitals on favorable terms.
One element of our business strategy is expansion through the acquisition of acute care
hospitals in non-urban markets. We face significant competition to acquire other attractive
non-urban hospitals, and we may not find suitable acquisitions on favorable terms. Our primary
competitors for acquisitions have included for-profit and tax-exempt hospitals and hospital systems
and privately capitalized start-up companies. Buyers with a strategic desire for any particular
hospital for example, a hospital located near existing hospitals or those who will realize
economic synergies have demonstrated an ability and willingness to pay premium prices for
hospitals. Strategic buyers, as a result, can present a competitive barrier to our acquisition
efforts.
Given the increasingly challenging regulatory and enforcement environment, our ability to
acquire hospitals could be negatively impacted if targets are found to have material unresolved
compliance issues, including obligations to self-report violations of law or outstanding
obligations to pay amounts under the voluntary self-referral protocol or other laws. We could
experience delays in closing or fail to close transactions with targets that initially were
attractive but became unattractive as a result of a poor compliance program, material
non-compliance with laws or failure to timely address compliance risks.
The cost of an acquisition could result in a dilutive effect on our results of operations,
depending on various factors, including the amount paid for the acquisition, the acquired
hospitals results of operations, allocation of purchase price, effects of subsequent legislation
and limitations on rate increases. In the past, we have occasionally experienced temporary delays
in improving the operating margins or effectively integrating the operations of our acquired
hospitals. In the future, if we are unable to improve the operating margins of acquired hospitals,
operate them profitably or effectively integrate their operations, we may be unable to achieve our
growth strategy.
20
Even if we are able to identify an attractive target, we may not be able to obtain financing,
if necessary, for any acquisitions or joint ventures that we might make or may be required to
borrow at higher rates and on less favorable terms. We may incur or assume additional indebtedness
as a result of acquisitions. Our failure to acquire non-urban hospitals consistent with our growth
plans could prevent us from increasing our revenues.
In recent years, the legislatures and attorneys general of several states have become more
interested in sales of hospitals by tax-exempt entities. This heightened scrutiny may increase the
cost and difficulty, or prevent the completion, of transactions with tax-exempt organizations in
the future.
We may encounter difficulty operating and integrating acquired hospitals.
We may be unable to timely and effectively integrate any hospitals that we acquire with our
ongoing operations. We may experience delays in implementing operating procedures and systems in
newly acquired hospitals. Integrating an acquired hospital could be expensive and time consuming
and could disrupt our ongoing business, negatively affect cash flow and distract management and
other key personnel. In addition, acquisition activity requires transitions from, and the
integration of, operations and, usually, information systems that are used by acquired hospitals.
We will rely heavily on HCA-IT and other third parties for information systems integration as part
of a contractual arrangement for information technology services. We may not be successful in
causing HCA-IT and other third parties to convert our newly acquired hospitals information systems
in a timely manner.
If we acquire hospitals with unknown or contingent liabilities, we could become liable for
material obligations.
Businesses we have acquired, or businesses we may acquire may have unknown or contingent
liabilities for past activities of acquired businesses, including liabilities for failure to comply
with healthcare laws and regulations, medical and general professional liabilities, workers
compensation liabilities, previous tax liabilities and unacceptable business practices. Although we
have historically obtained, and we intend to continue to obtain, contractual indemnification from
sellers covering these matters, any indemnification obtained from sellers may be insufficient to
cover material claims or liabilities for past activities of acquired businesses.
Other hospitals and outpatient facilities provide services similar to those which we offer. In
addition, physicians provide services in their offices that could be provided in our hospitals.
These factors increase the level of competition we face and may therefore adversely affect our
revenues, profitability and market share.
Competition among hospitals and other healthcare service providers, including outpatient
facilities, has intensified in recent years. We compete with other hospitals, including larger
tertiary care centers located in larger metropolitan areas, and with physicians who provide
services in their offices which could otherwise be provided in our hospitals. Although the
hospitals with which we compete may be a significant distance away from our facilities, patients in
our markets may migrate on their own to, may be referred by local physicians to, or may be
encouraged by their health plan to travel to these hospitals. Furthermore, some of the hospitals
with which we compete may offer more or different services than those available at our hospitals,
may have more advanced equipment or may have a medical staff that is thought to be better
qualified. Also, some of the hospitals that compete with our facilities are owned by tax-supported
governmental agencies or not-for-profit entities supported by endowments and charitable
contributions. These hospitals, in most instances, are also exempt from paying sales, property and
income taxes.
We also face very significant and increasing competitions from services offered by physicians
(including physicians on our medical staffs) in their offices and from other specialized care
providers, including outpatient surgery, oncology, physical therapy and diagnostic centers
(including many in which physicians may have an ownership interest). Some of our hospitals have and
will seek to develop outpatient facilities where necessary to compete effectively. However, to the
extent that other providers are successful in developing outpatient facilities or physicians are
able to offer additional, advanced services in their offices, our market share for these services
will likely decrease in the future.
Quality of care and value-based purchasing have also become significant trends and competitive
factors in the healthcare industry. In 2005, CMS began making public performance data relating to
ten quality measures that hospitals submit in connection with their Medicare reimbursement. Since
that time, CMS has on several occasions
21
increased the number of quality measures hospitals are required to report in order to receive
the full Medicare inpatient prospective payment system (IPPS) and outpatient prospective payment
system (OPPS) market basket updates. In addition, the Medicare program no longer reimburses
hospitals for the cost of care relating to certain preventable adverse events, and many private
healthcare payors have adopted similar policies. If the public performance data become a primary
factor in where patients choose to receive care, and if competing hospitals have better results
than our hospitals on those measures, we would expect that our patient volumes could decline.
Our revenues are especially concentrated in a small number of states which will make us
particularly sensitive to regulatory and economic changes in those states.
Our revenues are particularly sensitive to regulatory and economic changes in states in which
we generate the majority of our revenues including Kentucky, Virginia, New Mexico, Tennessee, West
Virginia, Alabama, Arizona, Louisiana and Texas. The following table contains our revenues and
revenues as a percentage of our total revenues by state for each of these states for the years
presented (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Concentration by State |
|
|
|
Amount |
|
|
% of Total Revenues |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Kentucky |
|
$ |
544.8 |
|
|
$ |
485.5 |
|
|
$ |
465.0 |
|
|
|
16.7 |
% |
|
|
16.4 |
% |
|
|
17.2 |
% |
Virginia |
|
|
404.7 |
|
|
|
384.1 |
|
|
|
381.6 |
|
|
|
12.4 |
|
|
|
13.0 |
|
|
|
14.1 |
|
New Mexico |
|
|
295.4 |
|
|
|
288.0 |
|
|
|
245.7 |
|
|
|
9.1 |
|
|
|
9.7 |
|
|
|
9.1 |
|
Tennessee |
|
|
293.9 |
|
|
|
225.5 |
|
|
|
223.2 |
|
|
|
9.0 |
|
|
|
7.6 |
|
|
|
8.3 |
|
West Virginia |
|
|
273.7 |
|
|
|
250.7 |
|
|
|
243.4 |
|
|
|
8.4 |
|
|
|
8.5 |
|
|
|
9.0 |
|
Alabama |
|
|
236.9 |
|
|
|
209.6 |
|
|
|
203.2 |
|
|
|
7.3 |
|
|
|
7.1 |
|
|
|
7.5 |
|
Arizona |
|
|
216.7 |
|
|
|
195.2 |
|
|
|
173.8 |
|
|
|
6.6 |
|
|
|
6.6 |
|
|
|
6.4 |
|
Louisiana |
|
|
212.3 |
|
|
|
204.2 |
|
|
|
194.6 |
|
|
|
6.5 |
|
|
|
6.9 |
|
|
|
7.2 |
|
Texas |
|
|
148.2 |
|
|
|
139.9 |
|
|
|
142.3 |
|
|
|
4.5 |
|
|
|
4.7 |
|
|
|
5.3 |
|
Accordingly, any change in the current demographic, economic, competitive or regulatory
conditions in the above-mentioned states could have an adverse effect on our business, financial
condition, results of operations and/or prospects. Medicaid changes in these states could also have
a material adverse effect on our business, financial condition, results of operations or cash
flows.
If we do not continually enhance our hospitals with the most recent technological advances in
diagnostic and surgical equipment, our ability to maintain and expand our markets may be
adversely affected.
Technological advances, including with respect to computer-assisted tomography scanner (CTs),
magnetic resonance imaging (MRIs) and positron emission tomography scanner (PETs) equipment,
continue to evolve. In addition, the manufacturers of such equipment often provide incentives to
try to increase their sales, including providing favorable financing to higher credit risk
organizations. In an effort to compete, we must continually assess our equipment needs and upgrade
our equipment as a result of technological improvements. We believe that the direction of the
patient flow correlates directly to the level and intensity of such diagnostic equipment.
We have substantial indebtedness and we may incur significant amounts of additional indebtedness
in the future which could affect our ability to finance operations and capital expenditures,
pursue desirable business opportunities or successfully operate our business in the future.
As of March 31, 2011, our consolidated debt, excluding the unamortized discount of convertible
debt instruments, was approximately $1,651.3 million. We also have the ability to incur significant
amounts of additional indebtedness, subject to the conditions imposed by the terms of our credit
agreement and the agreements or indentures governing any additional indebtedness that we incur in
the future. As of December 31, 2010, revolving loans available for borrowing under our credit
agreement were up to $318.9 million, net of outstanding letters of credit of $31.1 million.
Additionally, our credit agreement contains uncommitted accordion features that permit us to
borrow at a later date additional aggregate principal amounts of up to $650.0 million under the
term A and the term B loan components and up to $300.0 million under the revolving loan component,
subject to obtaining additional lender commitments and the satisfaction of other conditions. Our
ability to repay or refinance our
22
indebtedness will depend upon our ability to monetize our interests in our hospital assets and
our operating performance, which may be affected by general economic, financial, competitive,
regulatory, business and other factors beyond our control.
Although we believe that our future operating cash flow, together with available financing
arrangements, will be sufficient to fund our operating requirements, our leverage and debt service
obligations could have important consequences, including the following:
|
|
|
Under our credit agreement, we are required to satisfy and maintain specified financial
ratios and tests. Failure to comply with these obligations may cause an event of default
which, if not cured or waived, could require us to repay substantial indebtedness
immediately. Moreover, if debt repayment is accelerated, we will be subject to higher
interest rates on our debt obligations as a result of these covenants and our credit
ratings may be adversely impacted. |
|
|
|
|
We may be vulnerable in the event of downturns and adverse changes in the general
economy or our industry. Specific examples of industry changes that could have an adverse
impact on our cash flow include the implementation by the government of further limitations
on reimbursement under Medicare and Medicaid. |
|
|
|
|
We may have difficulty obtaining additional financing at favorable interest rates to
meet our requirements for working capital, capital expenditures, acquisitions, general
corporate or other purposes. |
|
|
|
|
We will be required to dedicate a substantial portion of our cash flow to the payment of
principal and interest on indebtedness, which will reduce the amount of funds available for
operations, capital expenditures and future acquisitions. |
|
|
|
|
Any borrowings we incur at variable interest rates expose us to increases in interest
rates generally. |
|
|
|
|
A breach of any of the restrictions or covenants in our debt agreements could cause a
cross-default under other debt agreements. We may be required to pay our indebtedness
immediately if we default on any of the numerous financial or other restrictive covenants
contained in the debt agreements. It is not certain whether we will have, or will be able
to obtain, sufficient funds to make these accelerated payments. If any senior debt is
accelerated, our assets may not be sufficient to repay such indebtedness and our other
indebtedness. |
|
|
|
|
In the event of a default, we may be forced to pursue one or more alternative
strategies, such as restructuring or refinancing our indebtedness, selling assets, reducing
or delaying capital expenditures or seeking additional equity capital. There can be no
assurances that any of these strategies could be effected on satisfactory terms, if at all,
or that sufficient funds could be obtained to make these accelerated payments. |
Covenant restrictions under our senior secured credit facilities and our indenture will impose
significant operating and financial restrictions on us and may limit our ability to operate our
business and to make payments on the notes and other outstanding indebtedness. The exceptions to
the covenants in our indenture may allow us to refinance subordinated indebtedness with senior
indebtedness.
The credit agreement that governs our senior secured credit facilities and the indenture that
will govern the notes contain covenants that restrict our ability to finance future operations or
capital needs, to take advantage of other business opportunities that may be in our interest or to
satisfy our obligations under the notes. These covenants restrict our ability to, among other
things:
|
|
|
incur or guarantee additional debt or extend credit; |
|
|
|
|
pay dividends or make distributions on, or redeem or repurchase, our capital stock or
certain |
|
|
|
|
other debt; |
23
|
|
|
make other restricted payments, including investments; |
|
|
|
|
dispose of assets; |
|
|
|
|
engage in transactions with affiliates; |
|
|
|
|
enter into agreements restricting our subsidiaries ability to pay dividends; |
|
|
|
|
create liens on our assets or engage in sale/leaseback transactions; and |
|
|
|
|
effect a consolidation or merger, or sell, transfer, lease all or substantially all of
our assets. |
The limitations in our credit agreement for our senior secured credit facilities, our
indenture or other instruments governing indebtedness that we may incur in the future may restrict
our ability to repay existing outstanding indebtedness. Subject to certain conditions, holders of
the 31/2% convertible senior subordinated notes due 2014 and the 31/4% convertible senior subordinated
debentures due 2025 may convert their securities for cash, and if applicable, shares in common
stock prior to the maturation of the notes offered hereby. Failure to repay the 31/2% convertible
senior subordinated notes due 2014 or 31/4% convertible senior subordinated debentures due 2025 upon
maturity or upon conversion of the securities may result in a default.
Subject to certain conditions, the provisions of our indenture may also allow us to refinance
indebtedness that is subordinated in right of payment to the notes with indebtedness that would
rank pari passu with the notes.
We may be subject to liabilities because of malpractice and related legal claims brought against
our hospitals or our employed physicians. If we become subject to these claims, we could be
required to pay significant damages, which may not be covered by insurance.
We may be subject to medical malpractice lawsuits and other legal actions arising out of the
operations of our owned and leased hospitals and the activities of our employed physicians. These
actions may involve large claims and significant defense costs. In an effort to resolve one or more
of these matters, we may choose to negotiate a settlement. Amounts we pay to settle any of these
matters may be material. We maintain professional and general liability insurance with unrelated
commercial insurance carriers to provide for losses in excess of our SIR amount. As a result, one
or more successful claims against us that are within our SIR amounts could have an adverse effect
on our results of operations, cash flows, financial condition or liquidity. Also, some of these
claims could exceed the scope of the coverage in effect, or coverage of particular claims could be
denied. In addition, we operate a wholly-owned captive insurance company under the name Point of
Life Indemnity, Ltd., which, issues malpractice insurance policies to our employed physicians.
Insurance coverage in the future may not continue to be available at a cost allowing us to
maintain adequate levels of insurance with acceptable SIR level amounts. One or more of our
insurance carriers may become insolvent and unable to fulfill its obligation to defend, pay or
reimburse us when that obligation becomes due. In addition, physicians using our hospitals may be
unable to obtain insurance on acceptable terms, which could result in these physicians not being
able to meet the minimum insurance requirements in the applicable hospital medical staff bylaws or
necessitate a reduction in the level of insurance required to be carried under such bylaws.
Our revenues and volume trends may be adversely affected by certain factors over which we have
no control.
Our revenues and volume trends are dependent on many factors, including physicians clinical
decisions and availability, payor programs shifting to a more outpatient-based environment, whether
or not certain services are offered, seasonal and severe weather conditions, including the effects
of extreme low temperatures, hurricanes and tornados, earthquakes, current local economic and
demographic changes, the intensity and timing of yearly flu outbreaks. In addition, technological
developments and pharmaceutical improvements may reduce the demand for healthcare services or the
profitability of the services we offer.
24
If our fair value declines, a material non-cash charge to earnings from impairment of our
goodwill could result.
As of March 31, 2011, we had approximately $1,551.2 million of goodwill. We expect to recover
the carrying value of this goodwill through our future cash flows. We evaluate annually, based on
our fair value, whether the carrying value of our goodwill is impaired. If the carrying value of
our goodwill is impaired, we may incur a material non-cash charge to earnings.
Certificate of need laws and regulations regarding licenses, ownership and operation may impair
our future expansion in some states.
Some states require prior approval for the purchase, construction and expansion of healthcare
facilities, based on the states determination of need for additional or expanded healthcare
facilities or services. Ten states in which we operate hospitals require a certificate of need for
capital expenditures exceeding a prescribed amount, changes in bed capacity or services, and for
certain other planned activities. We may not be able to obtain certificates of need required for
expansion activities in the future. In addition, all of the states in which we operate facilities
require hospitals and most healthcare providers to maintain one or more licenses. If we fail to
obtain any required certificate of need or license, our ability to operate or expand operations in
those states could be impaired.
In states without certificate of need laws, competing providers of healthcare services are able
to expand and construct facilities without the need for significant regulatory approval.
In the seven states in which we operate that do not require certificates of need for the
purchase, construction and expansion of healthcare facilities or services, competing healthcare
providers face low barriers to entry and expansion. If competing providers of healthcare services
are able to purchase, construct or expand healthcare facilities without the need for regulatory
approval, we may face decreased market share and revenues in those markets.
Different interpretations of accounting principles could have a material adverse effect on our
results of operations or financial condition.
Generally accepted accounting principles are complex, continually evolving and may be subject
to varied interpretation by us, our independent registered public accounting firm and the SEC. Such
varied interpretations could result from differing views related to specific facts and
circumstances. Differences in interpretation of generally accepted accounting principles could have
a material adverse effect on our results of operations or financial condition.
Our stock price has been and may continue to be volatile; any significant decline may result in
litigation.
The trading price of our common stock has been and may continue to be subject to wide
fluctuations. This may result in stockholder lawsuits, which could divert managements time away
from operations and could result in higher legal fees and proxy costs.
|
|
|
Our stock price may fluctuate in response to the results of our operations and to a
number of events and factors, including: |
|
|
|
|
actual or anticipated quarterly variations in operating results, particularly if they
differ from investors expectations; |
|
|
|
|
changes in financial estimates and recommendations by securities analysts; |
|
|
|
|
changes in government regulations including those relating to reimbursement and
operational policies and procedures; |
|
|
|
|
the operating and stock price performance of other companies that investors may deem
comparable; |
|
|
|
|
changes in overall economic factors in our markets; |
25
|
|
|
news reports relating to trends or events in our markets; and |
|
|
|
|
issues associated with integration of the hospitals that we acquire. |
Broad market and industry fluctuations may adversely affect the price of our common stock,
regardless of our operating performance.
As a result of the above factors, we could be subjected to potential stockholder lawsuits.
Such lawsuits are time consuming and expensive. Among other things, such lawsuits divert
managements time and attention from operations. Such lawsuits also force us to incur substantial
legal fees and proxy costs in defending our position.
Risks relating to the notes
Your ability to enforce the guarantees of the notes may be limited.
Although the notes are our obligations, they will be unconditionally guaranteed on an
unsecured senior basis by certain of our domestic subsidiaries. The performance by each guarantor
of its obligations with respect to its guarantee may be subject to review under relevant federal
and state fraudulent conveyance and similar statutes in a bankruptcy or reorganization case or
lawsuit by or on behalf of unpaid creditors of such subsidiary guarantor. Under these statutes, if
a court were to find under relevant federal or state fraudulent conveyance statutes that a
subsidiary guarantor did not receive fair consideration or reasonably equivalent value for
incurring its guarantee of the notes, and that, at the time of such incurrence, the subsidiary
guarantor: (i) was insolvent; (ii) was rendered insolvent by reason of such incurrence or grant;
(iii) was engaged in a business or transaction for which the assets remaining with such subsidiary
guarantor constituted unreasonably small capital; or (iv) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they matured, then the court, subject to
applicable statutes of limitation, could void the subsidiary guarantors obligations under its
guarantee, recover payments made under the guarantee, subordinate the guarantee to other
indebtedness of the subsidiary guarantor or take other action detrimental to the holders of the
notes.
In the event of a finding that a fraudulent transfer or conveyance occurred, you may not
receive any repayment on the notes. In addition, each guarantee will contain a provision intended
to limit the guarantors liability to the maximum amount that it could incur without causing the
incurrence of obligations under its guarantee to be a fraudulent conveyance. This provision may not
be effective to protect the guarantees from being voided under fraudulent conveyance laws, or may
eliminate the guarantors obligations or reduce the guarantors obligations to an amount that
effectively makes the guarantee worthless. In a recent Florida bankruptcy case, this kind of
provision was found to be ineffective to protect the guarantees. Further, the voidance of the notes
could result in an event of default with respect to our and our subsidiaries other debt that could
result in acceleration of such debt.
The measure of insolvency for these purposes will depend upon the governing law of the
relevant jurisdiction. Generally, however, a company will be considered insolvent for these
purposes if the sum of that companys debts is greater than the fair value of all of that companys
property or if the present fair salable value of that companys assets is less than the amount that
will be required to pay its probable liability on its existing debts as they become absolute and
matured or if a company is not able to pay its debts as they become due. Moreover, regardless of
solvency, a court could void an incurrence of indebtedness, including the guarantees, if it
determined that such transaction was made with the intent to hinder, delay or defraud creditors. In
addition, a court could subordinate the indebtedness, including the guarantees, to the claims of
all existing and future creditors on similar grounds. The guarantees also could be subject to the
claim that, since the guarantees were incurred for our benefit and only indirectly for the benefit
of the subsidiary guarantors, the obligations of the subsidiary guarantors under the guarantees
were incurred for less than reasonably equivalent value or fair consideration.
There can be no assurance as to what standard a court would apply in order to determine
whether a subsidiary guarantor was insolvent upon the sale of the notes or that, regardless of
the method of valuation, a court would not determine that the subsidiary guarantor was insolvent
upon consummation of the sale of the notes. If the court concludes that a guarantee is voided or
limited on fraudulent conveyance grounds, other senior creditors of ours may have priority over the
holders of the notes in respect of the assets of the relevant guarantor.
26
The notes will be structurally subordinated to all obligations of our non-guarantor subsidiaries
and effectively subordinated to our secured obligations.
We are a holding company and hold most of our assets at, and conduct most of our operations
through, direct and indirect subsidiaries. As a holding company, our results of operations depend
on the results of operations of our subsidiaries. Moreover, we are dependent on dividends or other
intercompany transfers of funds from our subsidiaries to meet our debt service and other
obligations. The ability of our subsidiaries to pay dividends or make other payments or advances to
us will depend on their operating results and will be subject to applicable laws and restrictions
contained in agreements governing the debt of such subsidiaries.
The claims of creditors of our non-guarantor subsidiaries, including trade creditors, will
generally have priority as to the assets of such subsidiaries over the claims of our creditors,
including the holders of notes. As of March 31, 2011, the aggregate amount of debt of our
non-guarantor subsidiaries, including trade payables and excluding intercompany payables, was
approximately $45.0 million. Our non-guarantor subsidiaries accounted for $80.3 million, or 9.0%,
of our total revenues for the fiscal year ended March 31, 2011 and $358.8 million, or 8.4%, of our
assets (excluding intercompany receivables) and $45.0 million, or 2.0%, of our liabilities
(excluding intercompany liabilities) as of March 31, 2011.
In addition, the notes are our general unsecured obligations. Therefore, the notes will be
effectively subordinated to our and the guarantors secured debt to the extent of the value of the
collateral. As of March 31, 2011, we and the guarantors had approximately $451.2 million of
secured debt.
We are permitted to create unrestricted subsidiaries, which generally will not be subject to any
of the covenants in the indenture, and we may not be able to rely on the cash flow or assets of
those unrestricted subsidiaries to pay our indebtedness.
Unrestricted subsidiaries will generally not be subject to the covenants under the indenture.
Unrestricted subsidiaries may enter into financing arrangements that limit their ability to make
loans or other payments to fund payments in respect of the notes. Accordingly, we may not be able
to rely on the cash flow or assets of unrestricted subsidiaries to pay any of our indebtedness,
including the notes. See Description of Notes for further information.
Our ability to repurchase the notes upon a change of control or in connection with an asset sale
repurchase may be limited.
In the event of certain changes of control involving us, you will have the right, at your
option, to require us to purchase all or a portion of the notes you hold at a purchase price equal
to 101% of the aggregate principal amount of your notes, plus accrued interest thereon to the
repurchase date. In addition, under certain circumstances we may be required by the terms of the
indenture to make an offer to repurchase notes with proceeds from asset sales. Our ability to
repurchase the notes upon a change of control or in connection with an asset sale repurchase will
be dependent on the availability of sufficient funds and our ability to comply with applicable
securities laws. Accordingly, there can be no assurance that we will be in a position to repurchase
the notes upon a change of control or in connection with an asset sale repurchase.
Also, our ability to repurchase the notes upon a change of control is materially limited by
covenants in our senior secured credit facilities. Our inability to repurchase the notes upon the
occurrence of a change in control will constitute an event of default under the indenture governing
the notes. This default would, in turn, constitute an event of default under our senior secured
credit facilities and may constitute an event of default under any future agreement governing our
senior indebtedness, which may cause the related indebtedness to be accelerated after any
applicable notice or cure periods. If such indebtedness were to be accelerated, we may not have
sufficient funds to repurchase the Notes and repay the indebtedness.
The term change of control under the indenture is limited to certain specified transactions
and may not include other events that might adversely affect our financial condition or result in a
downgrade of the credit rating (if any) of the notes, nor would the requirement that we offer to
repurchase the notes upon a change of control necessarily afford holders of the notes protection in
the event of a highly leveraged reorganization. See Description of NotesRepurchase at the Option
of HoldersChange of control.
27
We must rely on payments from our subsidiaries to make cash payments on the Notes, and our
subsidiaries are subject to various restrictions on making such payments.
We are a holding company and hold our assets at, and conduct our operations through, direct
and indirect subsidiaries. In order to make payments on the notes or to meet our other obligations,
we depend upon receiving payments from our subsidiaries. In particular, we may be dependant on
dividends and other payments by our direct and indirect subsidiaries to service our obligations.
You will not have any direct claim on the cash flow or assets of our non-guarantor operating
subsidiaries and our non-guarantor operating subsidiaries have no obligation, contingent or
otherwise, to pay amounts due under the notes or the subsidiary guarantees, or to make funds
available to us for those payments. In addition, the payment of dividends and the making of loans
and advances to us by our subsidiaries may be subject to various restrictions. Existing and future
debt of certain of these subsidiaries may prohibit the payment of dividends or the making of loans
or advances to us. In addition, the ability of our subsidiaries to make payments, loans or advances
to us may be limited by the laws of the relevant jurisdictions in which such subsidiaries are
organized or located. Any of the situations described above could make it more difficult for a
guarantor to service its obligations and therefore adversely affect our ability to service our
obligations in respect of the notes. If payments are not made to us by our subsidiaries, we may not
have any other sources of funds available that would permit us to make payments on the notes.
There is currently no public market for the notes, and an active trading market may not develop
for the notes. The failure of a market to develop for the notes could adversely affect the
liquidity and value of your notes.
The notes are a new issue of securities, and there is no existing market for the notes. We do
not intend to apply for listing of the notes on any securities exchange or for quotation of the
notes on any automated dealer quotation system. We have been advised by the initial purchasers that
following the completion of the offering, certain of the initial purchasers currently intend to
make a market in the notes. However, they are not obligated to do so and any market-making
activities with respect to the notes may be discontinued by them at any time without notice. In
addition, any market-making activity will be subject to limits imposed by law. A market may not
develop for the notes, and there can be no assurance as to the liquidity of any market that may
develop for the notes. If an active, liquid market does not develop for the notes, the market price
and liquidity of the notes may be adversely affected. If any of the notes are traded after their
initial issuance, they may trade at a discount from their initial offering price.
The liquidity of the trading market, if any, and future trading prices of the notes will
depend on many factors, including, among other things, prevailing interest rates, our operating
results, financial performance and prospects, the market for similar securities and the overall
securities market, and may be adversely affected by unfavorable changes in these factors.
A breach of a covenant in our debt instruments could cause acceleration of a significant portion
of our outstanding indebtedness.
A breach of a covenant or other provision in any debt instrument governing our current or
future indebtedness could result in a default under such instruments. Our ability to comply with
these covenants and other provisions may be affected by events beyond our control, and we cannot
assure you that we will be able to comply with these covenants and other provisions. Upon the
occurrence of an event of default under any debt instrument, the lenders or holders of such debt
instruments could elect to declare all amounts outstanding to be immediately due and payable and
terminate all commitments to extend further credit. If we were unable to repay those amounts, the
lenders or holders of such debt instruments could proceed against collateral granted to them, if
any, to secure the indebtedness. If our current or future lenders or holders of such debt
instruments accelerate the payment of the indebtedness owed to them, we cannot assure you that our
assets would be sufficient to repay in full our outstanding indebtedness.
If the notes are rated investment grade at any time by both Standard & Poors Ratings Service
and Moodys Investors Service, Inc., most of the restrictive covenants contained in the
indenture governing the notes will be suspended.
If, at any time, the credit rating on the notes, as determined by both Standard & Poors
Ratings Service or Moodys Investors Service, Inc., equals or exceeds BBB- and Baa3, respectively,
or any equivalent replacement ratings, and no default has occurred and is continuing under the
indenture then, we will not be subject to most of the
28
restrictive covenants contained in the indenture governing the notes. As a result, you may
have less credit protection than you will at the time the notes are issued. In the event that one
or both of the ratings later drops below investment grade, we will thereafter again be subject to
such restrictive covenants.
Insurance coverage in the future may not continue to be available at a cost allowing us to
maintain adequate levels of insurance with acceptable SIR level amounts. One or more of our
insurance carriers may become insolvent and unable to fulfill its obligation to defend, pay or
reimburse us when that obligation becomes due. In addition, physicians using our hospitals may be
unable to obtain insurance on acceptable terms, which could result in these physicians not being
able to meet the minimum insurance requirements in the applicable hospital medical staff bylaws or
necessitate a reduction in the level of insurance required to be carried under such bylaws.
As a result of the above factors, we could be subjected to potential stockholder lawsuits.
Such lawsuits are time consuming and expensive. Among other things, such lawsuits divert
managements time and attention from operations. Such lawsuits also force us to incur substantial
legal fees and proxy costs in defending our position.
Risks relating to the exchange offer
If you do not exchange your outstanding notes in the exchange offer, the transfer restrictions
currently applicable to your outstanding notes will remain in force and the market price of your
outstanding notes could decline.
If you do not exchange your outstanding notes for exchange notes in the exchange offer, then
you will continue to be subject to the transfer restrictions on the outstanding notes as set forth
in the prospectus distributed in connection with the private offering of the outstanding notes. In
general, the outstanding notes may not be offered or sold unless they are registered, or exempt
from registration, under the Securities Act (including pursuant to Rule 144 under the Securities
Act, as and when available) and applicable state securities laws. Except as required by the
registration rights agreement, we do not intend to register resales of the outstanding notes under
the Securities Act. You should refer to Prospectus SummaryThe Exchange Offer and The Exchange
Offer for information on how to tender your outstanding notes.
The tender of outstanding notes under the exchange offer will reduce the aggregate principal
amount of the outstanding notes, which may have an adverse effect upon, and increase the volatility
of, the market prices of the outstanding notes due to reduction in liquidity. In addition, if you
do not exchange your outstanding notes in the exchange offer, you will no longer be entitled to
exchange your outstanding notes for exchange notes registered under the Securities Act and you will
no longer be entitled to have your outstanding notes registered for resale under the Securities
Act.
Your ability to transfer the exchange notes may be limited by the absence of an active trading
market, and there is no assurance that any active trading market will develop for the exchange
notes.
We do not intend to apply for listing of the exchange notes on a securities exchange or
market. The exchange notes are a new issue of securities for which there is no established public
market. The initial purchasers in the private offering of the outstanding notes have advised us
that they intend to make a market in the exchange notes as permitted by applicable laws and
regulations; however, the initial purchasers are not obligated to make a market in any of the
exchange notes, and they may discontinue their market-making activities at any time without notice.
In addition, such market-making activity may be limited during the pendency of the exchange offer.
Therefore, an active market for any of the exchange notes may not develop or, if developed, it may
not continue. In addition, subsequent to their initial issuance, the exchange notes may trade at a
discount from their initial offering price, depending upon prevailing interest rates, the market
for similar notes, our performance and other factors.
29
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange notes pursuant to the
exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus,
we will receive in exchange a like principal amount of outstanding notes, the terms of which are
identical in all material respects to the exchange notes, except that the exchange notes will not
contain terms with respect to transfer restrictions, registration rights or special interest upon a
failure to fulfill certain of our obligations under the registration rights agreement. The
outstanding notes surrendered in exchange for the exchange notes will be retired and cancelled and
cannot be reissued. Accordingly, the issuance of the exchange notes will not result in any change
in our capitalization.
30
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for the years ended
December 31, 2010, 2009, 2008, 2007 and 2006 and for the three months ended March 31, 2011 and
2010. For the purpose of determining the ratio of earnings to fixed charges, earnings consist of
earnings (loss) before income tax expense (benefit) plus fixed charges, and fixed charges consist
of interest expense, including amortization of deferred financing costs, plus the portion of rental
expense representative of the interest factor.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Three Months Ended March 31, |
|
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2011 |
|
2010 |
Ratio of earnings
to fixed charges |
|
|
3.02x |
|
|
|
2.93x |
|
|
|
2.73x |
|
|
|
2.59x |
|
|
|
2.87x |
|
|
|
3.31x |
|
|
|
3.57x |
|
31
CAPITALIZATION
The following table sets forth our consolidated cash and cash equivalents and our consolidated
capitalization as of March 31, 2011. The following should be read in connection with our
consolidated financial statements and related notes incorporated by reference in this prospectus.
|
|
|
|
|
|
|
As of |
|
|
|
March 31, 2011 |
|
|
|
(in millions) |
|
Cash and cash equivalents |
|
$ |
276.2 |
|
|
Debt: |
|
|
|
|
Senior Secured Credit Facilities: |
|
|
|
|
$350.0
million Revolving Credit Facility due 2012(1) |
|
|
|
|
Term B Loans due 2011 and 2012 |
|
|
|
|
Term B Loans due 2015 |
|
|
443.7 |
|
6.625% Senior Notes, due 2020 |
|
|
400.0 |
|
7.50% Province Senior Subordinated Notes due 2013 |
|
|
0.1 |
|
3.50% Convertible Senior Subordinated Notes due 2014 |
|
|
575.0 |
|
3.25% Convertible Senior Subordinated Debentures, due 2025 |
|
|
225.0 |
|
Capital lease obligations |
|
|
7.5 |
|
|
|
|
|
Subtotal |
|
|
1,651.3 |
|
Unamortized discount of convertible debt instruments |
|
|
(73.9 |
) |
|
|
|
|
Total Debt |
|
|
1,577.4 |
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
LifePoint Hospitals, Inc. stockholders equity: |
|
|
|
|
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no
shares issued |
|
|
|
|
Common stock, $0.01 par value; 90,000,000 shares authorized;
62,471,721 shares issued at March 31, 2011 |
|
|
0.6 |
|
Capital in excess of par value |
|
|
1,315.9 |
|
Accumulated other comprehensive loss |
|
|
(1.5 |
) |
Retained earnings |
|
|
950.1 |
|
Common stock in treasury, at cost, 10,135,495 shares at March 31, 2011 |
|
|
(308.0 |
) |
|
|
|
|
Total LifePoint Hospitals, Inc. stockholders equity: |
|
|
1,957.1 |
|
Noncontrolling interests |
|
|
3.5 |
|
|
|
|
|
Total equity |
|
|
1,960.6 |
|
|
|
|
|
Total capitalization |
|
|
3,608.4 |
|
|
|
|
|
|
|
|
(1) |
|
Excludes approximately $31.1 million of outstanding letters of credit. |
32
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is derived from our audited consolidated
financial statements for the fiscal years ended December 31, 2010, 2009, 2008, 2007 and 2006 and
from our unaudited consolidated financial statements for the three months ended March 31, 2011 and
2010. The unaudited consolidated financial statements have been prepared on the same basis as our
audited consolidated financial statements and, in our opinion, include all adjustments, consisting
of normal recurring adjustments, that we consider necessary for a fair presentation of our results
of operations for such periods. Operating results for any historical period are not necessarily
indicative of the results that may be expected for any future period.
This information is only a summary and should be read in conjunction with the more detailed
information contained in our Consolidated Financial Statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Report on Form 10-Q for
the period ended March 31, 2011, which are incorporated by reference into this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Year Ended December 31, |
|
|
March 31, |
|
(Dollars in millions) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Revenues |
|
$ |
3,262.4 |
|
|
$ |
2,962.7 |
|
|
$ |
2,700.8 |
|
|
$ |
2,568.4 |
|
|
$ |
2,336.5 |
|
|
$ |
888.6 |
|
|
$ |
786.2 |
|
|
Salaries and benefits |
|
|
1,270.3 |
|
|
|
1,170.9 |
|
|
|
1,065.4 |
|
|
|
1,006.1 |
|
|
|
918.0 |
|
|
|
334.4 |
|
|
|
303.3 |
|
Supplies |
|
|
443.0 |
|
|
|
409.1 |
|
|
|
372.6 |
|
|
|
352.2 |
|
|
|
326.1 |
|
|
|
118.7 |
|
|
|
108.4 |
|
Other operating expenses |
|
|
605.2 |
|
|
|
538.0 |
|
|
|
499.8 |
|
|
|
464.0 |
|
|
|
397.4 |
|
|
|
161.6 |
|
|
|
140.4 |
|
Provision for doubtful accounts |
|
|
443.8 |
|
|
|
375.4 |
|
|
|
313.2 |
|
|
|
307.0 |
|
|
|
250.0 |
|
|
|
130.1 |
|
|
|
102.1 |
|
Depreciation and amortization |
|
|
148.5 |
|
|
|
143.0 |
|
|
|
132.1 |
|
|
|
129.4 |
|
|
|
105.4 |
|
|
|
39.7 |
|
|
|
36.1 |
|
Interest expense, net |
|
|
108.1 |
|
|
|
103.2 |
|
|
|
107.7 |
|
|
|
107.4 |
|
|
|
105.5 |
|
|
|
29.2 |
|
|
|
25.1 |
|
Debt extinguishment costs |
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges |
|
|
|
|
|
|
1.1 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,021.3 |
|
|
|
2,740.7 |
|
|
|
2,492.0 |
|
|
|
2,366.1 |
|
|
|
2,102.4 |
|
|
|
813.7 |
|
|
|
715.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
|
|
241.1 |
|
|
|
222.0 |
|
|
|
208.8 |
|
|
|
202.3 |
|
|
|
234.1 |
|
|
|
74.9 |
|
|
|
70.8 |
|
Provision for income taxes |
|
|
82.4 |
|
|
|
80.3 |
|
|
|
79.9 |
|
|
|
80.5 |
|
|
|
91.2 |
|
|
|
28.4 |
|
|
|
26.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
158.7 |
|
|
|
141.7 |
|
|
|
128.9 |
|
|
|
121.8 |
|
|
|
142.9 |
|
|
|
46.5 |
|
|
|
44.2 |
|
Less: Net income attributable to
noncontrolling interests |
|
|
(3.1 |
) |
|
|
(2.5 |
) |
|
|
(2.2 |
) |
|
|
(1.7 |
) |
|
|
(1.4 |
) |
|
|
(0.7 |
) |
|
|
(0.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations attributable to
LifePoint Hospitals, Inc. |
|
$ |
155.6 |
|
|
$ |
139.2 |
|
|
$ |
126.7 |
|
|
$ |
120.1 |
|
|
$ |
141.5 |
|
|
$ |
45.8 |
|
|
$ |
43.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Year Ended December 31, |
|
|
March 31, |
|
(Dollars in millions) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2011 |
|
|
2010 |
|
Balance Sheet Data (as
of end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents |
|
$ |
207.4 |
|
|
$ |
187.2 |
|
|
$ |
75.7 |
|
|
$ |
53.1 |
|
|
$ |
12.2 |
|
|
$ |
276.2 |
|
|
$ |
219.4 |
|
Working capital |
|
$ |
498.8 |
|
|
$ |
485.9 |
|
|
$ |
376.2 |
|
|
$ |
373.6 |
|
|
$ |
377.7 |
|
|
$ |
569.6 |
|
|
$ |
539.8 |
|
Property & equipment, net |
|
$ |
1,668.6 |
|
|
$ |
1,499.4 |
|
|
$ |
1,416.0 |
|
|
$ |
1,383.0 |
|
|
$ |
1,305.4 |
|
|
$ |
1,683.5 |
|
|
$ |
1,502.4 |
|
Total assets |
|
$ |
4,162.9 |
|
|
$ |
3,873.3 |
|
|
$ |
3,680.3 |
|
|
$ |
3,635.9 |
|
|
$ |
3,638.3 |
|
|
$ |
4,258.1 |
|
|
$ |
3,939.6 |
|
Total debt, excluding
unamortized discount of
convertible debt
instruments |
|
$ |
1,651.7 |
|
|
$ |
1,502.2 |
|
|
$ |
1,516.7 |
|
|
$ |
1,517.1 |
|
|
$ |
1,668.5 |
|
|
$ |
1,651.3 |
|
|
$ |
1,501.9 |
|
Total LifePoint
Hospitals, Inc
stockholders equity |
|
$ |
1,887.5 |
|
|
$ |
1,827.7 |
|
|
$ |
1,652.0 |
|
|
$ |
1,629.1 |
|
|
$ |
1,471.5 |
|
|
$ |
1,957.1 |
|
|
$ |
1,879.0 |
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Year Ended December 31, |
|
|
March 31, |
|
(Dollars in millions) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2011 |
|
|
2010 |
|
Additional Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
$ |
168.7 |
|
|
$ |
166.6 |
|
|
$ |
157.6 |
|
|
$ |
158.4 |
|
|
$ |
194.0 |
|
|
$ |
55.9 |
|
|
$ |
34.0 |
|
Net cash provided by operating
activitiescontinuing operations |
|
$ |
375.7 |
|
|
$ |
350.3 |
|
|
$ |
346.6 |
|
|
$ |
241.4 |
|
|
$ |
257.8 |
|
|
$ |
115.8 |
|
|
$ |
83.5 |
|
Net cash used in investing
activitiescontinuing operations |
|
$ |
(353.6 |
) |
|
$ |
(244.1 |
) |
|
$ |
(185.3 |
) |
|
$ |
(158.3 |
) |
|
$ |
(475.8 |
) |
|
$ |
(58.5 |
) |
|
$ |
(50.9 |
) |
Net cash (used in) provided by
financing activitiescontinuing
operations |
|
$ |
(0.3 |
) |
|
$ |
(13.9 |
) |
|
$ |
(119.3 |
) |
|
$ |
(165.6 |
) |
|
$ |
(148.5 |
) |
|
$ |
11.3 |
|
|
$ |
(0.2 |
) |
34
DESCRIPTION OF OTHER INDEBTEDNESS
Credit Agreement
Terms
Our credit agreement with Citicorp North America, Inc., as administrative agent and the
lenders time to time party thereto, Bank of America, N.A., CIBC World Markets Corp., SunTrust Bank
and UBS Securities LLC, as co-syndication agents and Citigroup Global Markets Inc. as sole lead
arranger and sole book runner, as amended, provides for Term B Loans, Term A Loans and Revolving
Loans. The maturity date of our Term B Loans is contingent upon the refinancing of our outstanding
31/2% Notes beyond their current maturity date of May 15, 2014. Assuming that we refinance our
outstanding 31/2% Notes beyond their current maturity date, our Term B Loans will mature on April 15,
2015. If we do not refinance our outstanding 31/2% Notes at least 91 days prior to their current
maturity date our Term B Loans will mature on February 13, 2014. Additionally, our Term B Loans
are subject to additional mandatory prepayments with a certain percentage of excess cash flow, as
well as upon the occurrence of certain other events, as specifically described in our Credit
Agreement. Our Term A Loans and our Revolving Loans components mature on December 15, 2012. Our
Credit Agreement is guaranteed on a senior secured basis by our subsidiaries with certain limited
exceptions.
Letters of Credit and Availability
Our Credit Agreement provides for the issuance of letters of credit up to $75.0 million. As
of March 31, 2011, we had $31.1 million in letters of credit outstanding that were related to the
self-insured retention level of our general and professional liability insurance and workers
compensation programs as security for payment of claims. Issued letters of credit reduce the
amounts available under our Revolving Loans. In accordance with the terms of our Credit Agreement,
Revolving Loans available for borrowing were $318.9 million as of March 31, 2011.
Our Credit Agreement contains uncommitted accordion features that permit us to borrow at a
later date additional aggregate principal amounts of up to $400.0 million of Term B Loans, $250.0
million of Term A Loans and $300.0 million of Revolving Loans, subject to obtaining additional
lender commitments and the satisfaction of other conditions.
Interest Rates
Interest on the outstanding balance of the Term B Loans is payable at an adjusted LIBOR plus a
margin of 2.750%. Interest on the Revolving Loans is payable at our option at either an adjusted
base rate or an adjusted LIBOR plus a margin. The margin on Revolving Loans subject to an adjusted
base rate ranges from 1.00% to 1.75%, based on our total leverage ratio. The margin on the
Revolving Loans subject to an adjusted LIBOR ranges from 2.00% to 2.75% based on our total leverage
ratio.
As of March 31, 2011, the applicable annual interest rate under the Term B Loans was 3.07%,
which was based on the 90-day Adjusted LIBOR plus the applicable margins. The 90-day Adjusted LIBOR
was 0.32% at March 31, 2011. The weighted-average applicable annual interest rate for the three
months ended March 31, 2011 under the Term B Loans was 3.09%.
Covenants
Our Credit Agreement requires us to satisfy certain financial covenants, including a minimum
interest coverage ratio and a maximum total leverage ratio. The interest coverage ratio can be no
less than 3.50:1.00 and the total leverage ratio cannot exceed 3.75:1.00, both determined on a
trailing four quarter basis. In addition, the Credit Agreement generally limits the amount we can
spend on capital expenditures to no more than 10.0% of annual revenues. We were in compliance with
these covenants as of March 31, 2011.
In addition, our Credit Agreement contains customary affirmative and negative covenants, which
among other things, limit our ability to incur additional debt, create liens, pay dividends, effect
transactions with our affiliates,
35
sell assets, pay subordinated debt, merge, consolidate, enter into acquisitions and effect
sale leaseback transactions. It does not contain provisions that would accelerate the maturity
dates upon a downgrade in our credit rating. However, a downgrade in our credit rating could
adversely affect our ability to obtain other capital sources in the future and could increase our
cost of borrowings.
Interest Rate Swap
We have an interest rate swap agreement with Citibank, N. A. as counterparty that requires us
to make quarterly fixed rate payments to Citibank, N. A. calculated on a notional amount at an
annual fixed rate of 5.585% while Citibank, N. A. is obligated to make quarterly floating payments
to us based on the three-month LIBOR on the same referenced notional amount.
3.5% Convertible Senior Subordinated Notes due 2014
Our convertible senior subordinated notes bear interest at the rate of 3.5% per year, payable
semi-annually on May 15 and November 15. Our convertible senior subordinated notes are convertible
prior to March 15, 2014 under the following circumstances: (1) if the price of our common stock
reaches a specified threshold during specified periods; (2) if the trading price of our convertible
senior subordinated notes is below a specified threshold; or (3) upon the occurrence of specified
corporate transactions or other events. On or after March 15, 2014, holders may convert our
convertible senior subordinated notes at any time prior to the close of business on the scheduled
trading day immediately preceding May 15, 2014, regardless of whether any of the foregoing
circumstances has occurred.
Subject to certain exceptions, we will deliver cash and shares of our common stock upon
conversion of each $1,000 principal amount of our convertible senior subordinated notes as follows:
(i) an amount in cash, which we refer to as the principal return, equal to the sum of, for each of
the 20 volume-weighted average price trading days during the conversion period, the lesser of the
daily conversion value for such volume-weighted average price trading day and $50; and (ii) a
number of shares in an amount equal to the sum of, for each of the 20 volume-weighted average price
trading days during the conversion period, any excess of the daily conversion value above $50. Our
ability to pay the principal return in cash is subject to important limitations imposed by the
credit agreement governing our senior secured credit facilities and other credit facilities or
indebtedness we may incur in the future. If we do not make any payments we are obligated to make
under the terms of our convertible senior subordinated notes, holders may declare an event of
default.
The initial conversion rate is 19.3095 shares of our common stock per $1,000 principal amount
of our convertible senior subordinated notes (subject to certain events). This represents an
initial conversion price of approximately $51.79 per share of our common stock. In addition, if
certain corporate transactions that constitute a change of control occur prior to maturity, we will
increase the conversion rate in certain circumstances.
Upon the occurrence of a fundamental change (as specified in the indenture), each holder of
our convertible senior subordinated notes may require us to repurchase some or all of our
convertible senior subordinated notes at a purchase price in cash equal to 100% of the principal
amount of the 3.5% Notes surrendered, plus any accrued and unpaid interest.
The indenture governing our convertible senior subordinated notes does not contain any
financial covenants or any restrictions on the payment of dividends, the incurrence of senior or
secured debt or other indebtedness, or the issuance or repurchase of securities by us. The
indenture contains no covenants or other provisions to protect holders of our convertible senior
subordinated notes in the event of a highly leveraged transaction or other events that do not
constitute a fundamental change.
3.25% Convertible Senior Subordinated Debentures due August 15, 2025
Our 3.25% convertible senior subordinated debentures due August 15, 2025 bear interest at the
rate of 3.25% per year, payable semi-annually on February 15 and August 15. Our convertible senior
subordinated debentures are convertible (subject to certain limitations imposed by the credit
agreement governing our senior secured credit facilities) under the following circumstances: (1) if
the price of our common stock reaches a specified threshold during the specified periods; (2) if
the trading price of our convertible senior subordinated debentures is below a specified threshold;
(3) if our convertible senior subordinated debentures have been called for redemption; or (4) if
36
specified corporate transactions or other specified events occur. Subject to certain
exceptions, we will deliver cash and shares of our common stock, as follows: (i) an amount in cash,
which we refer to as the principal return, equal to the lesser of (a) the principal amount of our
convertible senior subordinated debentures surrendered for conversion and (b) the product of the
conversion rate and the average price of our common stock, as set forth in the indenture governing
our convertible senior subordinated debentures, which we refer to as the conversion value; and (ii)
if the conversion value is greater than the principal return, an amount in shares of our common
stock. Our ability to pay the principal return in cash is subject to important limitations imposed
by the credit agreement governing our senior secured credit facilities and other indebtedness we
may incur in the future. Based on the terms of the credit agreement governing our senior secured
credit facilities, in certain circumstances, even if any of the foregoing conditions to conversion
have occurred, our convertible senior subordinated debentures will not be convertible, and holders
of our convertible senior subordinated debentures will not be able to declare an event of default
under our convertible senior subordinated debentures.
The initial conversion rate for our convertible senior subordinated debentures is 16.3345
shares of our common stock per $1,000 principal amount of our convertible senior subordinated
debentures (subject to adjustment in certain events). This is equivalent to a conversion price of
$61.22 per share of common stock. In addition, if certain corporate transactions that constitute a
change of control occur on or prior to February 20, 2013, we will increase the conversion rate in
certain circumstances, unless such transaction constitutes a public acquirer change of control and
we elect to modify the conversion rate into public acquirer common stock.
On or after February 20, 2013, we may redeem for cash some or all of our convertible senior
subordinated debentures at any time at a price equal to 100% of the principal amount of our
convertible senior subordinated debentures to be purchased, plus any accrued and unpaid interest.
Holders may require us to repurchase for cash some or all of our convertible senior subordinated
debentures on February 15, 2013, February 15, 2015 and February 15, 2020 or upon the occurrence of
a fundamental change, at 100% of the principal amount of our convertible senior subordinated
debentures to be purchased, plus any accrued and unpaid interest.
The indenture governing our convertible senior subordinated debentures does not contain any
financial covenants or any restrictions on the payment of dividends, the incurrence of senior or
secured debt or other indebtedness, or the issuance or repurchase of securities by us. The
indenture contains no covenants or other provisions to protect holders of our convertible senior
subordinated debentures in the event of a highly leveraged transaction or fundamental change.
37
THE EXCHANGE OFFER
General
We are offering to exchange a like principal amount of exchange notes for any or all
outstanding notes on the terms and subject to the conditions set forth in this prospectus and
accompanying letter of transmittal. We refer to the offer as the exchange offer. You may tender
some or all of your outstanding notes pursuant to the exchange offer.
As of the date of this prospectus, $400,000,000 aggregate principal amount of 6.625% Senior
Notes due 2020 is outstanding. This prospectus, together with the letter of transmittal, is first
being sent to all registered holders of outstanding notes known to us on or about June 1,
2011. Our obligation to accept outstanding notes for exchange pursuant to the exchange offer is
subject to the satisfaction or waiver of certain conditions set forth under Conditions to the
Exchange Offer below. We anticipate that each of the conditions will be satisfied and that no
waivers will be necessary.
Purpose and Effect of the Exchange Offer
In connection with the private offering and sale of the outstanding notes, we and the
guarantors of the notes entered into a registration rights agreement with the initial purchasers of
the outstanding notes in which we agreed, under certain circumstances, to file a registration
statement relating to an offer to exchange the outstanding notes for exchange notes. The following
description of the registration rights agreement is only a brief summary of the agreement. It does
not purport to be complete and is qualified in its entirety by reference to all of the terms,
conditions and provisions of the registration rights agreement. For further information, please
refer to the registration rights agreement attached as an exhibit to our Current Report on Form 8-K
filed with the SEC on September 27, 2010. We also agreed to use all commercially reasonable efforts
to cause the exchange offer to be consummated on the earliest practicable date after the exchange
offer registration statement has become effective but in no event later than the 360th
day following the issuance date of the outstanding notes. The form and terms of the exchange notes
will be identical in all material respects to the form and terms of the outstanding notes, except
that the exchange notes will be registered under the Securities Act, and will not contain terms
with respect to transfer restrictions, registration rights and additional payments upon a failure
to fulfill certain of our obligations under the registration rights agreement. The outstanding
notes were issued on September 23, 2010.
Pursuant to the registration rights agreement and under the circumstances set forth below, we
and the guarantors of the notes will use commercially reasonable efforts to cause the SEC to
declare effective a shelf registration statement with respect to the resale of the outstanding
notes within the time periods specified in the registration rights agreement and to keep the shelf
registration statement effective for up to two years after the effective date of the shelf
registration statement. These circumstances include:
|
|
|
if we determine that this exchange offer is not permitted because it would violate any
applicable law or applicable interpretations of the staff of the SEC; or |
|
|
|
|
if for any other reason the exchange offer is not consummated within 360 days after the
issuance date of the outstanding notes; or |
|
|
|
|
any holder notifies the Company prior to the 20th business day following the
consummation of the exchange offer that: |
|
(A) |
|
the holder is prohibited by law or SEC policy from participating in the
exchange offer |
|
|
(B) |
|
the holder may not resell the exchange notes acquired by it in the exchange
offer to the public without delivering a prospectus and the prospectus contained in
the exchange offer registration statement is not appropriate or available for such
resales by such holder; or |
|
|
(C) |
|
such holder is an initial purchaser and holds exchange notes acquired directly
from the Company and any if its affiliates. |
38
If we fail to comply with specified obligations under the registration rights agreement, we
will be required to pay special interest to holders of the outstanding notes. These obligations
include:
|
|
|
the obligation to consummate the exchange offer within 360 days after the issuance date
of the outstanding notes; |
|
|
|
|
the obligation to cause a shelf registration statement, if required, to be filed within
the applicable timeframes required by the registration rights agreement; |
|
|
|
|
the obligation to cause a shelf registration statement, if required, to be declared
effective within the applicable timeframes required by the registration rights agreement;
and |
|
|
|
|
the obligation to keep the exchange offer registration statement or the shelf
registration statement, as the case may be, effective and usable for its intended purpose,
during the periods specified in the registration rights agreement. |
If you wish to exchange your outstanding notes for exchange notes in the exchange offer, you
will be required to make the following written representations:
|
|
|
you are not our affiliate or an affiliate of any guarantor of the notes; |
|
|
|
|
you are not engaged in, and do not intend to engage in, a distribution of the exchange
notes; and |
|
|
|
|
you will acquire the exchange notes in the ordinary course of your business. |
Each broker-dealer that receives exchange notes for its own account in exchange for
outstanding notes, where the broker-dealer acquired the outstanding notes as a result of
market-making activities or other trading activities, must acknowledge that
(i) it has not entered into any arrangement or understanding with the
Company or an affiliate of the Company to distribute such exchange
notes and (ii)
it will deliver a
prospectus, as required by law, in connection with any resale of such exchange notes. See Plan of
Distribution. Any broker-dealer who holds outstanding securities acquired for its own account as a
result of market-making activities or other trading activities and who receives exchange
notes in exchange for such outstanding notes pursuant to the exchange offer, may be
considered an underwriter; however, by so acknowledging and delivering a prospectus,
such broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Resale of Exchange Notes
Based on interpretations by the SEC set forth in no-action letters issued to third parties, we
believe that you may resell or otherwise transfer exchange notes issued in the exchange offer
without complying with the registration and prospectus delivery provisions of the Securities Act,
if:
|
|
|
you are acquiring the exchange notes in the ordinary course of your business; |
|
|
|
|
you do not have an arrangement or understanding with any person to participate in a
distribution of the exchange notes; |
|
|
|
|
you are not our affiliate or an affiliate of any guarantor of the notes as defined
by Rule 405 of the Securities Act; and |
|
|
|
|
you are not engaged in, and do not intend to engage in, a distribution of the exchange
notes. |
If you are our affiliate, or are engaging in, or intend to engage in, or have any
arrangement or understanding with any person to participate in, a distribution of the exchange
notes, or are not acquiring the exchange notes in the ordinary course of your business, then:
|
|
|
you cannot rely on the position of the SEC set forth in Morgan Stanley & Co.
Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May
13, 1988), as interpreted in the SECs letter to Shearman & Sterling, dated July 2, 1993,
or similar no-action letters; and |
|
|
|
|
in the absence of an exception from the position stated immediately above, you must
comply with the registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the exchange notes. |
39
This prospectus may be used for an offer to resell, or for the resale or other transfer of
exchange notes only as specifically set forth in this prospectus. With regard to broker-dealers,
only broker-dealers that acquired the outstanding notes as a result of market-making activities or
other trading activities may participate in the exchange offer. Each broker-dealer that receives
exchange notes for its own account in exchange for outstanding notes where such outstanding notes
were acquired by such broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it has not entered into any arrangement
or understanding with the Company or an affiliate of the Company to
distribute such exchange notes and that it will deliver a prospectus in connection with any resale of the
exchange notes. Please read Plan of Distribution for more details regarding the transfer of
exchange notes. Any broker-dealer who holds outstanding securities acquired for its own account as a
result of market-making activities or other trading activities and who receives exchange
notes in exchange for such outstanding notes pursuant to the exchange offer, may be
considered an underwriter; however, by so acknowledging and delivering a prospectus,
such broker-dealer will not be deemed to admit that it is an
underwriter within the
meaning of the Securities Act.
Terms of the Exchange Offer
On the terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal, we will accept for exchange in the exchange offer any
outstanding notes that are validly tendered and not validly withdrawn prior to the expiration date.
Outstanding notes may only be tendered in denominations of $2,000 and integral multiples of $1,000
in excess of $2,000; provided, that the untendered portion of any outstanding note must be in a
minimum denomination of $2,000. We will issue $2,000 principal amount or an integral multiple of
$1,000 of exchange notes in exchange for a corresponding principal amount of outstanding notes
surrendered in the exchange offer. In exchange for each outstanding note surrendered in the
exchange offer, we will issue exchange notes with a like principal amount.
The form and terms of the exchange notes will be identical in all material respects to the
form and terms of the outstanding notes, except that the exchange notes will be registered under
the Securities Act and will not contain terms with respect to transfer restrictions, registration
rights and additional payments upon a failure to fulfill certain of our obligations under the
registration rights agreement. The exchange notes will be issued under and entitled to the benefits
of the indenture that authorized the issuance of the outstanding notes. For a description of the
indenture, see Description of the Notes.
The exchange offer is not conditioned upon any minimum aggregate principal amount of
outstanding notes being tendered for exchange.
As of the date of this prospectus, $400,000,000 aggregate principal amount of the 6.625%
Senior Notes due 2020 is outstanding. This prospectus and the letter of transmittal is being sent
to all registered holders of outstanding notes. There will be no fixed record date for determining
registered holders of outstanding notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions of the registration
rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act
of 1934, as amended (the Exchange Act), and the rules and regulations of the SEC. Outstanding
notes that are not tendered for exchange in the exchange offer will remain outstanding and continue
to accrue interest and will be entitled to the rights and benefits that such holders have under the
indenture relating to such holders outstanding notes and the registration rights agreement, except
we will not have any further obligations to provide for the registration of the outstanding notes
under the registration rights agreement.
We will be deemed to have accepted for exchange properly tendered outstanding notes when we
have given written notice of the acceptance to the exchange agent. The exchange agent will act as
agent for the tendering holders for the purposes of receiving the exchange notes from us and
delivering exchange notes to holders. Subject to the terms of the registration rights agreement, we
expressly reserve the right to amend or terminate the exchange offer and to refuse to accept
outstanding notes for exchange upon the occurrence of any of the conditions specified below under
"Conditions to the Exchange Offer.
If you tender your outstanding notes in the exchange offer, you will not be required to pay
brokerage commissions or fees or, subject to the instructions in the letter of transmittal,
transfer taxes with respect to the exchange of outstanding notes. We will pay all charges and
expenses, other than certain applicable taxes described below, in connection with the exchange
offer. It is important that you read Fees and Expenses below for more details regarding fees
and expenses incurred in the exchange offer.
40
Expiration Date, Extensions and Amendments
As used in this prospectus, the term expiration date means 11:59 p.m., New York City time,
on June 28, 2011. However, if we, in our sole discretion, extend the period of time for which
the exchange offer is open, the term expiration date will mean the latest time and date to which
we shall have extended the expiration of such exchange offer.
To extend the period of time during which an exchange offer is open, we will notify the
exchange agent of any extension by written notice, followed by notification by press release or
other public announcement to the registered holders of the outstanding notes no later than 9:00
a.m., New York City time, on the next business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
|
|
|
to delay accepting for exchange any outstanding notes (only in the case that we amend or
extend the exchange offer); |
|
|
|
|
to extend the exchange offer or to terminate the exchange offer if any of the conditions
set forth below under Conditions to the Exchange Offer have not been satisfied by
giving written notice of such delay, extension or termination to the exchange agent; and |
|
|
|
|
subject to the terms of the registration rights agreement, to amend the terms of the
exchange offer in any manner. In the event of a material change in the exchange offer,
including the waiver of a material condition, we will extend the offer period, if
necessary, so that at least five business days remain in such offer period following notice
of the material change. |
Any delay in acceptance, extension, termination or amendment will be followed as promptly as
practicable by written notice to the registered holders of the outstanding notes. If we amend an
exchange offer in a manner that we determine to constitute a material change, we will promptly
disclose the amendment in a manner reasonably calculated to inform the holders of applicable
outstanding notes of that amendment.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to accept for exchange,
or to issue exchange notes in exchange for, any outstanding notes, and we may terminate or amend
the exchange offer as provided in this prospectus prior to the expiration date if in our reasonable
judgment:
|
|
|
the exchange offer, or the making of any exchange by a holder, violates any applicable
law or interpretation of the SEC; |
|
|
|
|
any action or proceeding has been instituted or threatened in writing in any court or by
or before any governmental agency with respect to the exchange offer that, in our judgment,
would reasonably be expected to impair our ability to proceed with the exchange offer. |
In addition, we will not be obligated to accept for exchange the outstanding notes of any
holder that has not made to us:
|
|
|
the representations described under Purpose and Effect of the Exchange Offer and
Procedures for Tendering Outstanding Notes and Plan of Distribution; and |
|
|
|
|
any other representations as may be reasonably necessary under applicable SEC rules,
regulations, or interpretations to make available to us an appropriate form for
registration of the exchange notes under the Securities Act. |
We expressly reserve the right at any time or at various times to extend the period of time
during which the exchange offer is open. Consequently, we may delay acceptance of any outstanding
notes by giving oral or written notice of such extension to their holders. We will return any
outstanding notes that we do not accept for exchange
41
for any reason without expense to their tendering holder promptly after the expiration or
termination of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer and to reject for
exchange any outstanding notes not previously accepted for exchange upon the occurrence of any of
the conditions of the exchange offer specified above. We will give oral or written notice of any
extension, amendment, non-acceptance or termination to the holders of the outstanding notes as
promptly as practicable. In the case of any extension, such notice will be issued no later than
9:00 a.m., New York City time, on the next business day after the previously scheduled expiration
date.
These conditions are for our sole benefit, and we may assert them regardless of the
circumstances that may give rise to them or waive them in whole or in part at any or at various
times prior to the expiration date in our sole discretion. If we fail at any time to exercise any
of the foregoing rights, this failure will not constitute a waiver of such right. Each such right
will be deemed an ongoing right that we may assert at any time or at various times prior to the
expiration date.
In addition, we will not accept for exchange any outstanding notes tendered, and will not
issue exchange notes in exchange for any such outstanding notes, if at such time any stop order is
threatened or in effect with respect to the registration statement of which this prospectus
constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as
amended.
Procedures for Tendering Outstanding Notes
To tender your outstanding notes in the exchange offer, you must comply with either of the
following:
|
|
|
complete, sign and date the letter of transmittal or a facsimile of the letter of
transmittal, have the signature(s) on the letter of transmittal guaranteed if required by
the letter of transmittal and mail or deliver such letter of transmittal or facsimile
thereof to the exchange agent at the address set forth below under Exchange
AgentNotes prior to the expiration date; or |
|
|
|
|
comply with DTCs Automated Tender Offer Program procedures described below. |
In addition, you will comply with either of the following conditions:
|
|
|
the exchange agent must receive certificates for outstanding notes along with the letter
of transmittal prior to the expiration date; |
|
|
|
|
the exchange agent must receive a timely confirmation of book-entry transfer of
outstanding notes into the exchange agents account at DTC according to the procedures for
book-entry transfer described below including a properly transmitted agents message prior
to the expiration date; or |
|
|
|
|
you must comply with the guaranteed delivery procedures described below. |
Your tender, if not withdrawn prior to the expiration date, constitutes an agreement between
us and you upon the terms and subject to the conditions described in this prospectus and in the
letter of transmittal.
The method of delivery of outstanding notes, letters of transmittal and all other required
documents to the exchange agent is at your election and risk. We recommend that instead of delivery
by mail, you use an overnight or hand delivery service, properly insured. In all cases, you should
allow sufficient time to assure timely delivery to the exchange agent before the expiration date.
You should not send letters of transmittal or certificates representing outstanding notes to us.
You may request that your broker, dealer, commercial bank, trust company or nominee effect the
above transactions for you.
If you are a beneficial owner whose outstanding notes are held in the name of a broker,
dealer, commercial bank, trust company, or other nominee and you wish to tender your outstanding
notes, you should promptly instruct the registered holder to tender outstanding notes on your
behalf. If you wish to tender the outstanding notes yourself, you must, prior to completing and
executing the letter of transmittal and delivering your outstanding notes, either:
42
|
|
|
make appropriate arrangements to register ownership of the outstanding notes in your
name; or |
|
|
|
|
obtain a properly completed bond power from the registered holder of outstanding notes. |
The transfer of registered ownership may take considerable time and may not be able to be
completed prior to the expiration date.
Signatures on the letter of transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by a member firm of a registered national securities exchange or of the Financial
Industry Regulatory Authority, a commercial bank or trust company having an office or correspondent
in the United States or another eligible guarantor institution within the meaning of Rule
17A(d)-15 under the Exchange Act unless the outstanding notes surrendered for exchange are
tendered:
|
|
|
by a registered holder of the outstanding notes who has not completed the box entitled
Special Registration Instructions or Special Delivery Instructions on the letter of
transmittal; or |
|
|
|
|
for the account of an eligible guarantor institution. |
If the letter of transmittal is signed by a person other than the registered holder of any
outstanding notes listed on the outstanding notes, such outstanding notes must be endorsed or
accompanied by a properly completed bond power. The bond power must be signed by the registered
holder as the registered holders name appears on the outstanding notes and an eligible guarantor
institution must guarantee the signature on the bond power.
If the letter of transmittal or any certificates representing outstanding notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, those persons should also
indicate when signing and, unless waived by us, they should also submit evidence satisfactory to us
of their authority to so act.
The exchange agent and DTC have confirmed that any financial institution that is a participant
in DTCs system may use DTCs Automated Tender Offer Program to tender. Participants in the program
may, instead of physically completing and signing the letter of transmittal and delivering it to
the exchange agent, electronically transmit their acceptance of the exchange by causing DTC to
transfer the outstanding notes to the exchange agent in accordance with DTCs Automated Tender
Offer Program procedures for transfer. DTC will then send an agents message to the exchange agent.
The term agents message means a message transmitted by DTC, received by the exchange agent and
forming part of the book-entry confirmation, which states that:
|
|
|
DTC has received an express acknowledgment from a participant in its Automated Tender
Offer Program that is tendering outstanding notes that are the subject of the book-entry
confirmation; |
|
|
|
|
the participant has received and agrees to be bound by the terms of the letter of
transmittal, or in the case of an agents message relating to guaranteed delivery, that
such participant has received and agrees to be bound by the notice of guaranteed delivery;
and |
|
|
|
|
we may enforce that agreement against such participant. |
DTC is referred to herein as a book-entry transfer facility.
Acceptance of Exchange Notes
In all cases, we will promptly issue exchange notes for outstanding notes that we have
accepted for exchange under the exchange offer only after the exchange agent timely receives:
|
|
|
outstanding notes or a timely book-entry confirmation of such outstanding notes into the
exchange agents account at the book-entry transfer facility; and |
|
|
|
|
a properly completed and duly executed letter of transmittal and all other required
documents or a properly transmitted agents message. |
43
By tendering outstanding notes pursuant to the exchange offer, you will represent to us that,
among other things:
|
|
|
you are not our affiliate or an affiliate of any guarantor of the notes within the
meaning of Rule 405 under the Securities Act; |
|
|
|
|
you do not have an arrangement or understanding with any person or entity to participate
in a distribution of the exchange notes; and |
|
|
|
|
you are acquiring the exchange notes in the ordinary course of your business. |
In addition, each broker-dealer that is to receive exchange notes for its own account in
exchange for outstanding notes must represent that such outstanding notes were acquired by that
broker-dealer as a result of market-making activities or other trading activities and must
acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in
connection with any resale of the exchange notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the Securities Act. See Plan of Distribution.
Our interpretation of the terms and conditions of the exchange offer, including the letters of
transmittal and the instructions to the letters of transmittal, and our resolution of all questions
as to the validity, form, eligibility, including time of receipt, and acceptance of outstanding
notes tendered for exchange will be final and binding on all parties. We reserve the absolute right
to reject any and all tenders of any particular outstanding notes not properly tendered or to not
accept any particular outstanding notes if the acceptance might, in our or our counsels judgment,
be unlawful. We also reserve the absolute right to waive any defects or irregularities as to any
particular outstanding notes prior to the expiration date.
Unless waived, any defects or irregularities in connection with tenders of outstanding notes
for exchange must be cured within such reasonable period of time as we determine. Neither we, the
exchange agent, nor any other person will be under any duty to give notification of any defect or
irregularity with respect to any tender of outstanding notes for exchange, nor will we or any of
them incur any liability for any failure to give notification. Any outstanding notes received by
the exchange agent that are not properly tendered and as to which the irregularities have not been
cured or waived will be returned by the exchange agent to the tendering holder, unless otherwise
provided in the letter of transmittal, promptly after the expiration date.
Book-Entry Delivery Procedures
Promptly after the date of this prospectus, the exchange agent will establish an account with
respect to the outstanding notes at DTC, as the book-entry transfer facility, for purposes of the
exchange offer. Any financial institution that is a participant in the book-entry transfer
facilitys system may make book-entry delivery of the outstanding notes by causing the book-entry
transfer facility to transfer those outstanding notes into the exchange agents account at the
facility in accordance with the facilitys procedures for such transfer. To be timely, book-entry
delivery of outstanding notes requires receipt of a confirmation of a book-entry transfer, a
book-entry confirmation, prior to the expiration date. In addition, although delivery of
outstanding notes may be effected through book-entry transfer into the exchange agents account at
the book-entry transfer facility, the letter of transmittal or a manually signed facsimile thereof,
together with any required signature guarantees and any other required documents, or an agents
message, as defined below, in connection with a book-entry transfer, must, in any case, be
delivered or transmitted to and received by the exchange agent at its address set forth on the
cover page of the letter of transmittal prior to the expiration date to receive exchange notes for
tendered outstanding notes, or the guaranteed delivery procedure described below must be complied
with. Tender will not be deemed made until such documents are received by the exchange agent.
Delivery of documents to the book-entry transfer facility does not constitute delivery to the
exchange agent.
Holders of outstanding notes who are unable to deliver confirmation of the book-entry tender
of their outstanding notes into the exchange agents account at the book-entry transfer facility or
all other documents required by the letter of transmittal to the exchange agent prior to the
expiration date must tender their outstanding notes according to the guaranteed delivery procedures
described below.
44
Guaranteed Delivery Procedures
If you wish to tender your outstanding notes, but your outstanding notes are not immediately
available or you cannot deliver your outstanding notes, the letter of transmittal or any other
required documents to the exchange agent or comply with the procedures under DTCs Automatic Tender
Offer Program in the case of outstanding notes, prior to the expiration date, you may still tender
if:
|
|
|
the tender is made through an eligible guarantor institution; |
|
|
|
|
prior to the expiration date, the exchange agent receives from such eligible guarantor
institution either a properly completed and duly executed notice of guaranteed delivery, by
facsimile transmission, mail, or hand delivery or a properly transmitted agents message
relating to the notice of guaranteed delivery, that (1) sets forth your name and address,
the certificate number(s) of such outstanding notes and the principal amount of outstanding
notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that,
within three New York Stock Exchange trading days after the expiration date, the letter of
transmittal, or facsimile thereof, together with the outstanding notes or a book-entry
confirmation (including an agents message), and any other documents required by the letter
of transmittal, will be deposited by the eligible guarantor institution with the exchange
agent; and |
|
|
|
|
the exchange agent receives the properly completed and executed letter of transmittal or
facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in
proper form for transfer or a book-entry confirmation of transfer of the outstanding notes
(including an agents message) into the exchange agents account at DTC and all other
documents required by the letter of transmittal within three New York Stock Exchange
trading days after the expiration date. |
Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish
to tender your outstanding notes according to the guaranteed delivery procedures.
Withdrawal Rights
Except as otherwise provided in this prospectus, you may withdraw your tender of outstanding
notes at any time prior to 11:59 p.m., New York City time, on the expiration date. For a withdrawal
to be effective:
|
|
|
the exchange agent must receive a written notice, which may be by telegram, telex,
facsimile or letter, of withdrawal at its address set forth below under Exchange Agent;
or |
|
|
|
|
you must comply with the appropriate procedures of DTCs Automated Tender Offer Program
system. |
Any notice of withdrawal must:
|
|
|
specify the name of the person who tendered the outstanding notes to be withdrawn; |
|
|
|
|
identify the outstanding notes to be withdrawn, including the certificate numbers and
principal amount of the outstanding notes; and |
|
|
|
|
where certificates for outstanding notes have been transmitted, specify the name in
which such outstanding notes were registered, if different from that of the withdrawing
holder. |
If certificates for outstanding notes have been delivered or otherwise identified to the
exchange agent, then, prior to the release of such certificates, you must also submit:
|
|
|
the serial numbers of the particular certificates to be withdrawn; and |
|
|
|
|
a signed notice of withdrawal with signatures guaranteed by an eligible guarantor
institution unless you are an eligible guarantor institution. |
45
If outstanding notes have been tendered pursuant to the procedures for book-entry transfer
described above, any notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility to be credited with the withdrawn outstanding notes and otherwise
comply with the procedures of the facility. We will determine all questions as to the validity,
form, and eligibility, including time of receipt of notices of withdrawal and our determination
will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes
that have been tendered for exchange but that are not exchanged for any reason will be returned to
their holder, without cost to the holder, or, in the case of book-entry transfer, the outstanding
notes will be credited to an account at the book-entry transfer facility, promptly after
withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn
outstanding notes may be retendered by following the procedures described under Procedures for
Tendering Outstanding Notes above at any time on or prior to the expiration date.
Exchange Agent
The Bank of New York Mellon Trust Company, N.A. has been appointed as the exchange agent for the
exchange offer. The Bank of New York Mellon Trust Company, N.A., also acts as trustee under the
indenture governing the notes. You should direct all executed letters of transmittal and all
questions and requests for assistance with respect to exchange offer procedures, requests for
additional copies of this prospectus or of the letters of transmittal, and requests for notices of
guaranteed delivery to the exchange agent addressed as follows:
By Mail, Hand Delivery or Overnight Courier:
The Bank of New York Mellon Trust Company, N.A.
c/o The Bank of New York Mellon Corporation
Corporate Trust Reorganization Unit
480 Washington Boulevard,
27th Floor
Jersey City, New Jersey 07310
Attn: David Mauer Processor
(if by mail, registered or certified recommended)
|
|
|
By Facsimile:
|
|
To Confirm by Telephone: |
212-298-1915
|
|
212-815-3687 |
Attn: Bondholder Communications
|
|
Attn: Bondholder Communications |
If you deliver the letter of transmittal to an address other than the one set forth above or
transmit instructions via facsimile other than the one set forth above, that delivery or those
instructions will not be effective.
Fees and Expenses
The registration rights agreement provides that we will bear all expenses in connection with
the performance of our obligations relating to the registration of the exchange notes and the
conduct of the exchange offer. These expenses include registration and filing fees, accounting and
legal fees and printing costs, among others. We will pay the exchange agent reasonable and
customary fees for its services and reasonable out-of-pocket expenses. We will also reimburse
brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling
expenses incurred by them in forwarding this prospectus and related documents to their clients that
are holders of outstanding notes and for handling or tendering for such clients.
We have not retained any dealer manager in connection with the exchange offer and will not pay
any fee or commission to any broker, dealer, nominee or other person, for soliciting tenders of
outstanding notes pursuant to the exchange offer.
46
Accounting Treatment
We will record the exchange notes in our accounting records at the same carrying value as the
outstanding notes, which is the aggregate principal amount as reflected in our accounting records
on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes upon the consummation of the exchange offer. We will capitalize, as appropriate, the
expenses of the exchange offer and amortize them over the life of the notes.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchanges of outstanding notes under
the exchange offer. The tendering holder, however, will be required to pay any transfer taxes,
whether imposed on the registered holder or any other person, if:
|
|
|
certificates representing outstanding notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of outstanding notes tendered; |
|
|
|
|
tendered outstanding notes are registered in the name of any person other than the
person signing the letter of transmittal; or |
|
|
|
|
a transfer tax is imposed for any reason other than the exchange of outstanding notes
under the exchange offer. |
If satisfactory evidence of payment of such taxes is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed to that tendering holder.
Holders who tender their outstanding notes for exchange notes will not be required to pay any
transfer taxes. However, holders who instruct us to register exchange notes in the name of, or
request that outstanding notes not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be required to pay any applicable transfer
tax.
Consequences of Failure to Exchange
If you do not exchange your outstanding notes for exchange notes under the exchange offer,
your outstanding notes will remain subject to the restrictions on transfer of such outstanding
notes:
|
|
|
as set forth in the legend printed on the outstanding notes as a consequence of the
issuance of the outstanding notes pursuant to the exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable state
securities laws; and |
|
|
|
|
as otherwise set forth in the offering memorandum distributed in connection with the
private offering of the outstanding notes. |
In general, you may not offer or sell your outstanding notes unless they are registered under
the Securities Act or if the offer or sale is exempt from registration under the Securities Act and
applicable state securities laws. Except as required by the registration rights agreement, we do
not intend to register resales of the outstanding notes under the Securities Act.
Other
Participating in the exchange offer is voluntary, and you should carefully consider whether to
accept. You are urged to consult your financial and tax advisors in making your own decision on
what action to take.
We may in the future seek to acquire untendered outstanding notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans
to acquire any outstanding notes that are not tendered in the exchange offer or to file a
registration statement to permit resales of any untendered outstanding notes.
47
DESCRIPTION OF THE EXCHANGE NOTES
LifePoint issued the outstanding notes under the indenture dated as of September 23, 2010 (the
indenture) among the Company, the guarantors party thereto and The Bank of New York Mellon Trust
Company, N.A., N.A. as trustee (the Trustee). The exchange notes will also be issued under the
indenture. The exchange notes are part of the same series of notes previously issued under such
indenture.
The following description is a summary of certain provisions of the indenture, the exchange
notes, and the guarantees. It does not restate the indenture, the exchange notes, or the guarantees
in their entirety and is qualified in its entirety by reference to such documents. You may request
copies of the indenture at LifePoints address set forth under Where You Can Find More
Information; Incorporation by Reference.
The definitions of certain capitalized terms used in the following summary are set forth below
under Certain Definitions. For purposes of this section, references to the Company include only
LifePoint Hospitals Inc. and not its subsidiaries.
The exchange notes will be issued only in fully registered book-entry form without coupons
only in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The
exchange notes will be issued in the form of global notes, registered in the name of a nominee of
DTC, New York, New York, as described under Book-Entry Settlement and Clearance.
The registered Holder of a note will be treated as the owner of it for all purposes. Only
registered Holders will have rights under the indenture.
Brief Description of the Notes and the Guarantees
The notes
The notes:
|
|
|
are senior unsecured obligations of LifePoint; |
|
|
|
|
are senior in right of payment to all existing and future obligations of LifePoint that
are by their terms expressly subordinated or junior in right of payment to the notes,
including our 3.5% Convertible Senior Subordinated Notes due 2014 and our 3.25% Convertible
Senior Subordinated Debentures due 2025; |
|
|
|
|
are pari passu in right of payment with all existing and future unsubordinated
obligations of LifePoint; |
|
|
|
|
are effectively junior to any of LifePoints existing and future secured obligations to
the extent of the value of the assets securing such obligations; and |
|
|
|
|
are structurally subordinated to all existing and future obligations, including trade
payables, of those LifePoint Subsidiaries that will not guarantee the notes. |
The guarantees
The notes will be unconditionally guaranteed by each of LifePoints Domestic Subsidiaries
except the Excluded Subsidiaries.
Each guarantee of the notes:
|
|
|
is a senior unsecured obligation of the Guarantor; |
|
|
|
|
is senior in right of payment all existing and future obligations of that Guarantor that
are expressly subordinated to its guarantee; |
48
|
|
|
is pari passu in right of payment with all existing and future unsubordinated
obligations of that Guarantor; and |
|
|
|
|
are effectively junior to any existing and future secured obligations of that Guarantor
to the extent of the value of the assets securing such obligations. |
As of March 31, 2011, LifePoint and the Guarantors had approximately:
|
|
|
$851.2 million of unsubordinated Indebtedness, $451.2 million of which was secured and
would effectively rank senior to the notes and the Guarantees to the extent of the value of
the collateral securing such Indebtedness; in addition, we would have had the ability to
borrow an additional $1,268.9 million under our secured Credit Agreement, including $350.0
million available under our revolving credit facility thereunder, net of outstanding
letters of credit of $31.1 million, and also including $950.0 million available under the
uncommitted accordion features of our term loans and revolving loan thereunder that are
subject to obtaining additional lender commitments and the satisfaction of other
conditions; and |
|
|
|
|
$800.1 million of Subordinated Indebtedness, which may be refinanced with pari passu or
secured Indebtedness under the terms of the indenture under certain circumstances; |
As of the date of this prospectus, substantially all of our Subsidiaries will be Restricted
Subsidiaries, a portion of which are Excluded Subsidiaries and, therefore, will not provide
Guarantees. Claims of creditors of the Excluded Subsidiaries, including trade creditors, secured
creditors and creditors holding indebtedness and guarantees issued by the Excluded Subsidiaries,
will have priority with respect to the assets and earnings of such Subsidiaries over the claims of
creditors of LifePoint, including holders of the note. As of March 31, 2011, the Excluded
Subsidiaries had total indebtedness of approximately $45.0 million. The Excluded Subsidiaries
accounted for $80.3 million, or 9.0% of our total revenues for the three months ended March 31,
2011 and $358.8 million, or 8.4% of our assets (excluding intercompany receivables), and $45.0
million, or 2.0% of our liabilities (excluding intercompany liabilities) as of March 31, 2011.
Principal, Maturity and Interest
LifePoint will issue the exchange notes in an aggregate principal amount of up to $400
million. LifePoint may issue additional notes from time to time after this offering. Any offering
of additional notes is subject to the covenant described below under the caption Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock. The notes and any
additional notes of the same series subsequently issued under the indenture will be treated as a
single class for all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. LifePoint will issue notes in minimum denominations
of $2,000 and integral multiples of $1,000 in excess thereof. The notes will mature on October 1,
2020.
Interest on the notes will accrue at the rate of 6.625% per annum. Interest on the notes will
be payable semi-annually in arrears on April 1 and October 1, commencing on April 1, 2011.
LifePoint will make each interest payment to the Holders of record at the close of business on the
immediately preceding March 15 and September 15 (whether or not a business day).
Interest on the notes will accrue from the date of original issuance or, if interest has
already been paid or duly provided for from the date it was most recently paid or duly provided
for. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to LifePoint and the trustee at least 15 days
prior to the applicable payment date, all principal, interest and premium on that Holders notes
will be paid in accordance with those instructions, subject to surrender of the note in the case of
payment of principal and premium. All payments of interest on notes will be made at the office or
agency of the paying agent and registrar unless LifePoint elects to make interest payments by check
mailed to the Holders at their address set forth in the register of Holders.
49
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. LifePoint may change the paying
agent or registrar without prior notice to the Holders of the notes, and LifePoint or any of its
Subsidiaries may act as paying agent or registrar.
Transfer and Exchange
A Holder may transfer or exchange notes in accordance with the indenture. The registrar and
the trustee may require a Holder to furnish appropriate endorsements and transfer documents in
connection with a transfer of notes. Holders will be required to pay all taxes due on transfer.
LifePoint is not required to transfer or exchange any note selected for redemption. Also, LifePoint
is not required to transfer or exchange any note for a period of 15 days before a selection of
notes to be redeemed.
Subsidiary Guarantees
The notes will be guaranteed by each of LifePoints current and future Domestic Subsidiaries
except the Excluded Subsidiaries. The Subsidiary Guarantees will be full and unconditional, and
joint and several obligations of the Guarantors. Each Subsidiary Guarantee will be a senior
unsecured obligation of that Guarantor. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from constituting a
fraudulent conveyance under applicable law. See Risk FactorsYour ability to enforce the
guarantees of the notes may be limited.
A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into (whether or not such Guarantor is the surviving Person),
another Person, other than LifePoint or another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or Event of Default
exists; and
(2) subject to the provisions of the following paragraph, the Person acquiring the
property in any such sale or disposition or the Person formed by or surviving any such
consolidation or merger assumes all the obligations of that Guarantor under the indenture and
its Subsidiary Guarantee pursuant to a supplemental indenture in form satisfactory to the
trustee.
The Subsidiary Guarantee of a Guarantor will be released, and any Person acquiring assets
(including by way of merger or consolidation) or Capital Stock of a Guarantor shall not be required
to assume the obligations of any such Guarantor:
(1) in connection with any sale or other disposition of all or substantially all of the
assets of such Guarantor (including by way of merger or consolidation) to a Person that is not
(either before or after giving effect to such transaction) a Restricted Subsidiary, if the sale
or other disposition complies with the first paragraph of the covenant described under
Repurchase at the Option of HoldersAsset Sales;
(2) in connection with any sale of the Capital Stock of such Guarantor to a Person that is
not (either before or after giving effect to such transaction) a Restricted Subsidiary, if as a
result of such sale such Guarantor ceases to be a Subsidiary of LifePoint and the sale complies
with the first paragraph of the covenant described under Repurchase at the Option of
HoldersAsset Sales;
(3) if LifePoint designates such Guarantor to be an Unrestricted Subsidiary or an Excluded
Subsidiary in accordance with the requirements of the indenture;
(4) if such Guarantor is otherwise no longer obligated to provide a Subsidiary Guarantee
pursuant to the indenture;
(5) upon LifePoints exercise of its legal defeasance option or covenant defeasance option
as described under Legal Defeasance and Covenant Defeasance below or if LifePoints
obligations under the indenture and notes are discharged in accordance with the terms of the
indenture; or
50
(6) pursuant to the covenant described below under the caption Certain
CovenantsCovenant Suspension.
Optional Redemption
At any time prior to October 1, 2013, LifePoint may on any one or more occasions redeem up to
35% of the aggregate principal amount of the notes (including any additional notes) at a redemption
price of 106.625% of the principal amount, plus accrued and unpaid interest, if any, to (but not
including) the redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of such notes remains outstanding
immediately after the occurrence of such redemption (excluding notes held by LifePoint and its
Subsidiaries); and
(2) the redemption occurs within 180 days of the date of the closing of such Equity
Offering.
At any time prior to October 1, 2015, LifePoint may redeem all or a part of the notes, upon
not less than 30 nor more than 60 days notice, at a redemption price equal to 100% of the
principal amount thereof, plus the Applicable Redemption Premium and accrued and unpaid interest to
(but not including) the redemption date.
Except pursuant to the preceding two paragraphs, the notes will not be redeemable at
LifePoints option prior to October 1, 2015. On or after October 1, 2015, LifePoint may redeem all
or a part of the notes upon not less than 30 nor more than 60 days notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid
interest, if any, on the notes redeemed, to (but not including) the applicable redemption date, if
redeemed during the twelve-month period beginning on October 1 of the years indicated below:
|
|
|
|
|
Period |
|
Redemption Price |
|
2015 |
|
|
103.313 |
% |
2016 |
|
|
102.208 |
% |
2017 |
|
|
101.104 |
% |
2018 and thereafter |
|
|
100.000 |
% |
Mandatory Redemption
Except as set forth below under Repurchase at the Option of Holders, LifePoint is not
required to make mandatory redemption or sinking fund payments with respect to the notes.
Repurchase at the Option of Holders
Change of control
If a Change of Control occurs, unless LifePoint has exercised its right to redeem all of the
notes as described above under Optional Redemption by giving notice of such redemption to the
holders of the notes, each Holder of notes will have the right to require LifePoint to repurchase
all or any part (equal to $1,000 or an integral multiple of $1,000 in excess thereof; provided,
that the unrepurchased portion of a note must be in a minimum denomination of $2,000) of that
Holders notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In
the Change of Control Offer, LifePoint will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of notes repurchased plus accrued and unpaid interest, if any, on
the notes repurchased, to (but not including) the date of purchase. Within 30 days following any
Change of Control, LifePoint will mail a notice to each Holder stating the transaction or
transactions that constitute the Change of Control and offering to repurchase notes on the Change
of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no
later than 60 days from the date such notice is mailed, pursuant to the procedures required by the
indenture and described in such notice. LifePoint will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the Exchange Act), and any other
securities laws and
regulations thereunder to the extent those laws and regulations are applicable in connection
with the repurchase of the notes as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with the Change of Control provisions of
the indenture, LifePoint will comply with the applicable securities laws and regulations and
51
will
not be deemed to have breached its obligations under the Change of Control provisions of the
indenture by virtue of such conflict.
On the Change of Control Payment Date, LifePoint will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly tendered pursuant to the
Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of Control Payment in
respect of all notes or portions of notes properly tendered; and
(3) deliver or cause to be delivered to the trustee the notes properly accepted together
with an officers certificate stating the aggregate principal amount of notes or portions of
notes being purchased by LifePoint.
The paying agent will promptly mail to each Holder of notes properly tendered the Change of
Control Payment for such notes, and the trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new note equal in principal amount to any unpurchased
portion of the notes surrendered, if any; provided that each new note will be in a principal amount
of $2,000 or an integral multiple of $1,000 in excess thereof. LifePoint will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date. The provisions described above that require LifePoint to make a Change of Control
Offer following a Change of Control will be applicable whether or not any other provisions of the
indenture are applicable.
LifePoint will not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the indenture applicable to a Change of Control Offer
made by LifePoint and purchases all notes properly tendered and not withdrawn under the Change of
Control Offer. Any Change of Control Offer may be made in advance of, and conditioned on the
consummation of, such Change of Control.
A Change of Control Offer may be made in advance of a Change of Control, and conditioned upon
such Change of Control, if a definitive agreement is in place for the Change of Control at the time
of making of the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the direct or indirect sale,
transfer, conveyance or other disposition of all or substantially all of the properties or assets
of LifePoint and its Restricted Subsidiaries taken as a whole. Although there is a limited body of
case law interpreting the phrase substantially all, there is no precise established definition of
the phrase under applicable law. Accordingly, the ability of a Holder of notes to require LifePoint
to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of LifePoint and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Under clause (4) of the definition of Change of Control, a Change of Control will occur when a
majority of LifePoints board of directors are not Continuing Directors. In a recent decision in
connection with a proxy contest, the Delaware Court of Chancery held that the occurrence of a
change of control under a similar indenture provision may nevertheless be avoided if the existing
directors were to approve the slate of new director nominees (who would constitute a majority of
the new board) as continuing directors, provided the incumbent directors give their approval in
the good faith exercise of their fiduciary duties owed to the corporation and its stockholders.
Therefore, in certain circumstances involving a significant change in the composition of
LifePoints board of directors, including in connection with a proxy contest where LifePoints
board of directors does not endorse a dissident slate of directors but approves them as Continuing
Directors, holders of the notes may not be entitled to require LifePoint to make a Change of
Control Offer.
The Change of Control purchase feature of the notes may in certain circumstances make more
difficult or discourage a sale or takeover of LifePoint and, thus, the removal of incumbent
management. The Change of Control purchase feature is a result of negotiations between us and the
initial purchasers. We have no present intention to engage in a transaction involving a Change of
Control, although it is possible that we could decide to do so in the future. Subject to the
limitations discussed below, we could, in the future, enter into certain other transactions,
52
including acquisitions, refinancings or other recapitalizations, that would not constitute a Change
of Control under the indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability
to incur additional Indebtedness are contained in the Incurrence of Indebtedness and Issuance of
Preferred Stock covenant. Such restrictions can only be waived with the consent of the holders of
a majority in principal amount of the notes then outstanding. Except for the limitations contained
in such covenants, however, the indenture will not contain any covenants or provisions that may
afford Holders protection in the event of a highly leveraged transaction. Future indebtedness that
we may incur may contain prohibitions on the occurrence of certain events that would constitute a
Change of Control or require the repurchase of such indebtedness upon a Change of Control.
Moreover, the exercise by the holders of their right to require us to repurchase their notes could
cause a default under such indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on us.
The provisions under the indenture relative to our obligation to make an offer to repurchase
the notes as a result of a Change of Control may be waived or modified with the consent of the
holders of a majority in principal amount of the notes.
Asset Sales
LifePoint will not, and will not permit any of the Restricted Subsidiaries to, consummate an
Asset Sale unless:
(1) LifePoint (or a Restricted Subsidiary) receives consideration at the time of the Asset
Sale at least equal to the fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of;
(2) the fair market value is determined by LifePoints Board of Directors and evidenced by
a resolution of the Board of Directors; and
(3) at least 75% of the consideration received in the Asset Sale by LifePoint or such
Restricted Subsidiary is in the form of cash, Cash Equivalents and/or Replacement Assets. For
purposes of this provision, each of the following will be deemed to be cash:
(a) any liabilities, as shown on LifePoints or any Restricted Subsidiarys most
recent balance sheet, of LifePoint or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such assets and from which
LifePoint or such Restricted Subsidiary is released from further liability;
(b) any securities, notes or other obligations received by LifePoint or any such
Restricted Subsidiary from such transferee that are converted by LifePoint or such
Restricted Subsidiary into cash within 180 days of receipt, to the extent of the cash
received in that conversion; and
(c) any Designated Non-cash Consideration received by LifePoint or any of its
Restricted Subsidiaries in such Asset Sale having an aggregate fair market value, taken
together with all other Designated Non-cash Consideration received pursuant to this clause
(c) that is at that time outstanding, not to exceed $50 million at the time of the receipt
of such Designated Non-cash Consideration (with the fair market value of each item of
Designated Non-cash Consideration being measured at the time received and without giving
effect to subsequent changes in value).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, LifePoint or a
Restricted Subsidiary may apply those Net Proceeds at its option:
(1) to repay, prepay, redeem or purchase (x) Indebtedness of LifePoint or any Guarantor
that is not Subordinated Indebtedness or (y) any Indebtedness of a Restricted Subsidiary that
is not a Guarantor;
(2) to acquire all or substantially all of the assets of, or a majority of the Voting
Stock of, another Permitted Business;
(3) to make a capital expenditure;
(4) to acquire Replacement Assets; or
53
(5) to acquire other long-term assets that are used or useful in a Permitted Business.
LifePoint or the Restricted Subsidiary will be deemed to have complied with the immediately
preceding sentence with respect to any such Net Proceeds if it enters into a binding agreement to
make an acquisition or capital expenditure permitted pursuant to clause (2), (3), (4) or (5) of the
immediately preceding sentence in an amount equal to such Net Proceeds within such 365 days;
provided that, if the relevant acquisition or capital expenditure is not consummated or completed,
as the case may be, within the later of (x) 365 days after the receipt of the relevant Net Proceeds
and (y) 180 days after the date of such binding agreement, such Net Proceeds will constitute
Excess Proceeds. Pending the final application of any Net Proceeds, LifePoint or the Restricted
Subsidiary may temporarily invest the Net Proceeds in any manner that is not prohibited by the
indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided in the
preceding paragraph will constitute Excess Proceeds. When the aggregate amount of Excess Proceeds
exceeds $50 million, LifePoint will make an offer (an Asset Sale Offer) to all Holders of notes
(and, at the option of LifePoint, to holders of any other Indebtedness of LifePoint or any
Guarantor that is not Subordinated Indebtedness and/or any Indebtedness of any Restricted
Subsidiary of LifePoint (collectively, other indebtedness)) to purchase the maximum principal
amount of notes (and such other Indebtedness), in minimum denominations of $1,000 principal amount
and in integral multiples of $1,000 in excess thereof; provided, that the unrepurchased portion of
a note must be in a minimum denomination of $2,000, out of the Excess Proceeds at a purchase price
of 100% of their principal amount (or, in the event such other Indebtedness was issued with
significant original issue discount, 100% of the accreted value thereof) without premium, plus
accrued but unpaid interest (or, in respect of such other Indebtedness, such lesser price, if any,
as may be provided for by the terms of such Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the indenture. To the extent
that the aggregate amount of notes (and such other Indebtedness) tendered pursuant to such an offer
is less than the Excess Proceeds, LifePoint may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of notes (and such other Indebtedness)
surrendered by holders thereof exceeds the amount of Excess Proceeds, the trustee shall select the
notes to be purchased in the manner described in the indenture. Upon completion of each Asset Sale
Offer, the amount of Excess Proceeds will be reset at zero.
LifePoint will comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent those laws and regulations are applicable
in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale provisions of the
indenture, LifePoint will comply with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under the Asset Sale provisions of the indenture by
virtue of such conflict.
Selection and notice
If less than all of the notes are to be redeemed at any time, the trustee will select notes
for redemption on a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of $2,000 or less can be redeemed in part. Notices of redemption will be mailed by
first class mail at least 30 but not more than 60 days before the redemption date to each Holder of
notes to be redeemed at its registered address, except that redemption notices may be mailed more
than 60 days prior
to a redemption date if the notice is issued in connection with a defeasance of the notes or a
satisfaction and discharge of the indenture. Notices of redemption may be conditional upon the
occurrence of certain events, including equity offerings.
If any note is to be redeemed in part only, the notice of redemption that relates to that note
will state the portion of the principal amount of that note that is to be redeemed. A new note in
principal amount equal to the unredeemed portion of the original note will be issued in the name of
the Holder of notes upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on
notes or portions of them called for redemption.
54
Certain Covenants
Covenant Suspension
From and after the first date on which both (a) the notes are rated Investment Grade by each
of Moodys Investor Service, Inc. (Moodys) and Standard & Poors Ratings Group (S&P and
together with Moodys the Rating Agencies) and (b) there shall not exist a Default or Event of
Default under the indenture (the occurrence of the events described in the foregoing clauses (a)
and (b) being collectively referred to as a Covenant Suspension Event), LifePoint and the
Restricted Subsidiaries will no longer be subject to the covenants described below under the
captions Repurchase at the Option of HoldersAsset Sales, Restricted Payments,
Incurrence of Indebtedness and Issuance of Preferred Stock, Liens, Dividend and other
Payment Restrictions Affecting Restricted Subsidiaries, Limitation on Sale and Leaseback
Transactions, clause (4) of the first paragraph under Merger, Consolidation or Sale of Assets,
Transactions with Affiliates and Additional Subsidiary Guarantees (collectively, the
Suspended Covenants); provided that, during the Suspension Period (as defined below), LifePoint
and its Restricted Subsidiaries will be subject to the covenant described below under the caption
Limitation on Secured Indebtedness. Upon the occurrence of a Covenant Suspension Event (the
Suspension Date), the Subsidiary Guarantees of each of the Guarantors will be automatically
released.
In the event that LifePoint and the Restricted Subsidiaries are not subject to the Suspended
Covenants under the indenture for any period of time as a result of the foregoing, and on any
subsequent date (the Reversion Date) one or both of the Rating Agencies withdraw their Investment
Grade rating or downgrade the rating assigned to the notes below an Investment Grade rating then,
following the Reversion Date, LifePoint and the Restricted Subsidiaries will again be subject to
the Suspended Covenants under the indenture and all required Subsidiary Guarantees will be
reinstated and issued. Following the Reversion Date, LifePoint and its Restricted Subsidiaries will
not be subject to the covenant described below under the caption Limitation on Secured
Indebtedness.
The period of time between the Suspension Date and the Reversion Date is referred to in this
description as the Suspension Period. Additionally, upon the occurrence of a Covenant Suspension
Event, the amount of Excess Proceeds from Net Proceeds shall be reset at zero. In the event of any
such reinstatement, no action taken or omitted to be taken by LifePoint or any of its Restricted
Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under the
indenture with respect to notes. Calculations made after the Reversion Date of the amount available
to be made as Restricted Payments under the covenant described under the caption Restricted
Payments will be made as though such covenant had been in effect since the Issue Date and during
the Suspension Period. For purposes of the Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, all Indebtedness incurred, or Disqualified Stock or preferred stock issued, during
the Suspension Period will be classified to have been incurred or issued pursuant to clause (2) of
the second paragraph of such covenant. For purposes of the Liens covenant, on the Reversion
Date, any Lien securing Indebtedness, which Lien was permitted by the Limitation on Secured
Indebtedness covenant and did not require that a Lien be created for the benefit of note Holders
pursuant to the requirements of the Limitation on Secured Indebtedness covenant, shall be
deemed to have been outstanding on the Issue Date so that it is classified as permitted under
clause (5) of the definition of Permitted Lien. For purposes of the Dividend and other Payment
Restrictions Affecting Restricted Subsidiaries covenant, on the Reversion Date, any encumbrance or
restriction on the ability of any Restricted Subsidiary described under clauses (1), (2) or (3) of
the first paragraph thereof
created, otherwise caused or permitted to exist or become effective during the Suspension
Period shall be deemed to have been outstanding on the Issue Date, so that it is classified as
permitted under clause (1) of the second paragraph of such covenant. For purposes of the
Transactions with Affiliates covenant, on the Reversion Date, any Affiliate Transaction entered
into or permitted to exist during the Suspension Period shall be deemed to have been outstanding on
the Issue Date, so that it is classified as permitted under clause (2) of the second paragraph of
such covenant.
In the event Moodys or S&P is no longer in existence or issuing ratings, such organization
may be replaced by a nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act) designated by LifePoint with notice to the trustee and the foregoing
provisions will apply to the rating issued by the replacement rating agency.
55
Limitation on Secured Indebtedness
During any Suspension Period, LifePoint will not, and will not permit any Subsidiary that is
not an Excluded Subsidiary to, incur any Indebtedness secured by a Lien (other than a Permitted
Lien) on any Principal Property or on any share of stock or Indebtedness of a Subsidiary without
making effective provisions whereby LifePoint or such Restricted Subsidiary, as the case may be,
will secure the notes equally and ratably with (or, if the Indebtedness to be secured by such Lien
is subordinated in right of payment to the notes, prior to) the Indebtedness so secured until such
time as such Indebtedness is no longer secured by a Lien, unless the aggregate amount of all
Indebtedness secured by all such Liens (excluding any Permitted Lien) would not exceed 5% of Total
Assets. Any Lien created for the benefit of the holders of the notes pursuant to the preceding
sentence shall provide by its terms that such Lien shall be automatically and unconditionally
released and discharged upon the release and discharge of the initial Lien. For purposes of this
Limitation on Secured Indebtedness covenant, Excluded Subsidiary shall include, in addition to
any Subsidiary included within the meaning thereof, any Subsidiary that is an Unrestricted
Subsidiary on the Suspension Date.
Restricted Payments
LifePoint will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly:
(1) declare or pay any dividend or make any other payment or distribution on account of
LifePoints or any Restricted Subsidiarys Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving LifePoint or any of its
Restricted Subsidiaries) or to the direct or indirect holders of LifePoints or any of its
Restricted Subsidiaries Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of LifePoint or to
LifePoint or a Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving LifePoint) any Equity
Interests of LifePoint;
(3) make any voluntary or optional payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Subordinated Indebtedness, except a
payment of interest or principal at the Stated Maturity thereof or the purchase, redemption,
defeasance, acquisition or retirement for value of any such Indebtedness within 365 days of the
Stated Maturity thereof; or
(4) make any Restricted Investment
(all such payments and other actions set forth in these clauses (1) through (4) above being
collectively referred to as Restricted Payments), unless, at the time of and after giving effect
to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or would occur as a
consequence of such Restricted Payment;
(2) LifePoint would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption Incurrence of Indebtedness and Issuance of
Preferred Stock; and
(3) such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by LifePoint and its Restricted Subsidiaries after June 30, 2010 (excluding
Restricted Payments permitted by clauses (2), (3), (4), (6), (7), (8), (9), (10), (12), (13),
(14) and (15) of the next succeeding paragraph) is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of LifePoint for the period (taken as one
accounting period) from June 30, 2010 to the end of LifePoints most recently ended fiscal
quarter for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus
56
(b) 100% of the aggregate net cash proceeds received by LifePoint since June 30, 2010
as a contribution to its common equity capital or from the issue or sale of Equity
Interests of LifePoint (other than Disqualified Stock) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or exchangeable debt
securities that have been converted into or exchanged for such Equity Interests of
LifePoint (other than Equity Interests (or Disqualified Stock or debt securities) sold to a
Restricted Subsidiary), plus
(c) to the extent that any Restricted Investment that was made after June 30, 2010 is
sold for cash or Cash Equivalents (or a combination thereof) or otherwise liquidated or
repaid for cash or Cash Equivalents (or a combination thereof), the lesser of (i) the
return of capital with respect to such Restricted Investment (less the cost of disposition,
if any) and (ii) the initial amount of such Restricted Investment, plus
(d) an amount equal to the sum of (x) the net reduction in Investments in Unrestricted
Subsidiaries resulting from cash dividends, repayments of loans or advances or other
transfers of assets, in each case to LifePoint or any Restricted Subsidiary from
Unrestricted Subsidiaries, plus (y) the portion (proportionate to LifePoints equity
interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary,
in each case since June 30, 2010 (provided, however, that the foregoing sum shall not
exceed, in the case of any Unrestricted Subsidiary, the amount of Investments made since
June 30, 2010 by LifePoint or any Restricted Subsidiary that were treated as Restricted
Payments, and provided, further, that no amount will be included under this clause (d) to
the extent it is already included in clauses (a), (b) or (c) above).
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration of the
dividend, if at the date of declaration the dividend payment would have complied with the
provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition of any
Subordinated Indebtedness of LifePoint or any Restricted Subsidiary or of any Equity Interests
of LifePoint in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary) of, Equity Interests of LifePoint (other than
Disqualified Stock);
(3) the defeasance, redemption, repurchase or other acquisition of Subordinated
Indebtedness of LifePoint or any Restricted Subsidiary with the net cash proceeds from an
incurrence of (a) Permitted Refinancing Indebtedness or (b) any other Indebtedness to the
extent that the Consolidated Senior Leverage Ratio for LifePoints most recently ended four
full fiscal quarters for which internal financial statements are available immediately
preceding the date on which such Indebtedness other than Subordinated Indebtedness is incurred
is less than 4.5 to 1, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if such Indebtedness had been
incurred at the beginning of such four-quarter period;
(4) the payment of any dividend or similar distribution by a Restricted Subsidiary to the
holders of its Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for value of any Equity
Interests of LifePoint or any Restricted Subsidiary held by any officer, director or employee
of LifePoint or any Subsidiary of LifePoint in connection with any management equity
subscription agreement, any compensation, retirement, disability, severance or benefit plan or
agreement, any stock option or incentive plan or agreement, any employment agreement or any
other similar plans or agreements; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may not exceed $15 million in any
calendar year (with unused amounts in any calendar year being carried over to succeeding
years);
(6) the repurchase of Equity Interests deemed to occur upon the exercise of stock options
or stock appreciation rights or the lapsing of restrictions on restricted stock, to the extent
such Equity Interests represent a portion of the exercise price of those stock options or stock
appreciation rights or the withholding taxes payable in connection with such stock options,
stock appreciation rights or restricted stock;
57
(7) the repurchase of any class of Capital Stock of a Restricted Subsidiary (other than
Disqualified Stock) if such repurchase is made pro rata among all holders of such class of
Capital Stock;
(8) the payment of any scheduled dividend or similar distribution, and any scheduled
repayment of the stated amount, liquidation preference or any similar amount at final maturity
or on any scheduled redemption or repurchase date, in respect of any series of preferred stock
or similar securities of LifePoint or any Restricted Subsidiary (including Disqualified Stock),
provided that such series of preferred stock or similar securities was issued in compliance
with the Incurrence of Indebtedness and Issuance of Preferred Stock covenant;
(9) payments in lieu of fractional shares;
(10) the purchase of any Indebtedness that is subordinate to the notes at a purchase price
no greater than 101% of the principal amount thereof in the event of a Change of Control in
accordance with provisions similar to those described under the caption Repurchase at the
Option of HoldersChange of control; provided that prior to such purchase LifePoint has made
the Change of Control Offer as provided in such section and has purchased all notes validly
tendered for payment in connection with such Change of Control Offer;
(11) payments or distributions to dissenting stockholders pursuant to applicable law in
connection with any merger, consolidation or disposition in accordance with the terms of the
indenture;
(12) the purchase, redemption, cancellation or other retirement for a nominal value per
right of any rights granted to holders of LifePoint common stock pursuant to a shareholder
rights plan;
(13) the repurchase, redemption or other acquisition of Disqualified Stock of LifePoint or
any of its Restricted Subsidiaries in exchange for or out of the proceeds of a substantially
concurrent offering of, Disqualified Stock of LifePoint; and
(14) the repurchase of Equity Interests of LifePoint in an aggregate amount not to exceed
$225 million; and
(15) additional Restricted Payments pursuant to this clause (15) in an aggregate amount
not to exceed $300 million at the time of such Restricted Payment (with each such Restricted
Payment being valued as of the date made and without regard to subsequent changes in value);
provided, that at the time of, and after giving effect to, any Restricted Payment permitted under
subclause (b) of clause 3 and clause (15) above, no Default has occurred and is continuing or would
be caused thereby.
The amount of all Restricted Payments (other than cash) will be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued
by LifePoint or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued by this covenant
will be determined by the Board of Directors of LifePoint in good faith, whose determination with
respect thereto will be conclusive.
For purposes of determining compliance with this Restricted Payments covenant, in the event
that a Restricted Payment meets the criteria of more than one of the categories of Restricted
Payments described in clauses (1) through (15) above, or is entitled to be incurred pursuant to the
first paragraph of this covenant, LifePoint will be entitled to classify such Restricted Payment
(or portion thereof) on the date of its payment or later reclassify such Restricted Payment (or
portion thereof) in any manner that complies with this covenant.
Incurrence of Indebtedness and Issuance of Preferred Stock
LifePoint will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, incur) any Indebtedness
(including Acquired Debt), and LifePoint will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that
LifePoint and any Restricted Subsidiary may incur Indebtedness (including Acquired Debt) and
LifePoint may issue Disqualified Stock and any Restricted Subsidiary may issue preferred stock
(including Disqualified Stock) if the Fixed Charge Coverage Ratio for LifePoints most recently
ended four full fiscal quarters for which internal financial statements are available immediately
preceding the date on which such additional
58
Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the following (collectively, Permitted
Debt):
(1) the incurrence by LifePoint and its Restricted Subsidiaries of additional Indebtedness
and letters of credit under Credit Facilities in an aggregate principal amount at any one time
outstanding under this clause (1) (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of LifePoint and its Restricted Subsidiaries
thereunder) not to exceed $1,000 million (less the aggregate principal amount of Indebtedness
incurred by Securitization Subsidiaries and then outstanding pursuant to clause (17) of this
paragraph);
(2) Existing Indebtedness;
(3) the incurrence by LifePoint and the Guarantors of Indebtedness represented by (a) the
notes and the related Subsidiary Guarantees to be issued on the Issue Date and (b) the Exchange
Notes and the Exchange Subsidiary Guarantees to be issued pursuant to the indenture in exchange
for the notes and the Subsidiary Guarantees in accordance with the terms of the Registration
Rights Agreement;
(4) the incurrence by LifePoint or any of its Restricted Subsidiaries of Indebtedness
represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in
each case, incurred for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the business of
LifePoint or such Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (4), not to exceed the greater of $100 million and 2.5% of Total Assets
at any time outstanding;
(5) the incurrence by LifePoint or any of its Restricted Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease, or refund Indebtedness (other than intercompany
Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of
this covenant or clauses (2), (3), (4), (12), (13), (15), (26) or this clause (5) of this
paragraph;
(6) the incurrence by LifePoint or any of its Restricted Subsidiaries of intercompany
Indebtedness or the issuance of Disqualified Stock or Preferred Stock between or among
LifePoint and any of its Restricted Subsidiaries; provided, however, that (a) any subsequent
issuance or transfer of Equity Interests that results in any such Indebtedness, Disqualified
Stock or Preferred Stock being held by a Person other than LifePoint or a Restricted Subsidiary
and (b) any sale or other transfer of any such Indebtedness, Disqualified Stock or Preferred
Stock to a Person that is not either LifePoint or a Restricted Subsidiary, will be deemed, in
each case, to constitute an incurrence of such Indebtedness, Disqualified Stock or Preferred
Stock by LifePoint or such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (6);
(7) the incurrence by LifePoint or any of its Restricted Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging (a) interest rate risk with
respect to any Indebtedness that is permitted by the terms of the indenture to be outstanding
or (b) exchange rate risk with respect to obligations under any agreement or Indebtedness, or
with respect to any asset, of such Person that is payable or denominated in a currency other
than U.S. Dollars;
(8) the guarantee by LifePoint or any of the Restricted Subsidiaries of Indebtedness of
LifePoint or a Restricted Subsidiary that was permitted to be incurred by another provision of
this covenant;
(9) the accrual of interest, the accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness with the same
terms, and the payment of dividends on preferred stock (including Disqualified Stock) in the
form of additional shares of the same class of preferred stock (including Disqualified Stock)
will not be deemed to be an incurrence of Indebtedness or an issuance of
59
preferred stock
(including Disqualified Stock) for purposes of this covenant; provided, in each such case, that
the amount thereof is included in Fixed Charges of LifePoint as accrued;
(10) Indebtedness of LifePoint or any Restricted Subsidiary consisting of guarantees,
indemnities, hold backs or obligations in respect of purchase price adjustments in connection
with the acquisition or disposition of assets, including, without limitation, shares of Capital
Stock of Restricted Subsidiaries, or contingent payment obligations incurred in connection with
the acquisition or disposition of assets which are contingent on the performance of the assets
acquired or disposed of;
(11) Indebtedness represented by (a) letters of credit for the account of LifePoint or any
Restricted Subsidiary or (b) other obligations to reimburse third parties pursuant to any
surety bond or other similar arrangements, to the extent that such letters of credit and other
obligations, as the case may be, are intended to provide security for workers compensation
claims, payment obligations in connection with self-insurance, in connection with participation
in government reimbursement or other programs or other similar requirements in the ordinary
course of business;
(12) the incurrence by LifePoint or any Restricted Subsidiary of Indebtedness to the
extent the proceeds thereof are used to purchase notes pursuant to a Change of Control Offer or
to defease or discharge notes in accordance with the terms of the indenture;
(13) Indebtedness arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of daylight overdrafts)
drawn against insufficient funds in the ordinary course of business; provided, however, that
such Indebtedness is extinguished within five Business Days of incurrence;
(14) Indebtedness incurred in the ordinary course of business in connection with cash
pooling arrangements, cash management and other Indebtedness incurred in the ordinary course of
business in
respect of netting services, overdraft protections and similar arrangements in each case
in connection with cash management and deposit accounts;
(15) Indebtedness consisting of (a) the financing of insurance premiums or (b) take or pay
obligations in supply agreements, in each case in the ordinary course of business;
(16) Indebtedness of LifePoint and its Subsidiaries representing the obligation of such
Person to make payments with respect to the cancellation or repurchase of Capital Stock of
officers, employees or directors (or their estates) of LifePoint or such Subsidiaries pursuant
to the terms of employment, severance or termination agreements, benefit plans or similar
documents;
(17) Indebtedness incurred by a Securitization Subsidiary in connection with a Qualified
Securitization Transaction that is not recourse with respect to LifePoint and its Restricted
Subsidiaries; provided, however, that in the event such Securitization Subsidiary ceases to
qualify as a Securitization Subsidiary or such Indebtedness becomes recourse to LifePoint or
any of its Restricted Subsidiaries, such Indebtedness will, in each case, be deemed to be, and
must be classified by LifePoint as, incurred at such time (or at the time initially incurred)
under one more of the other provisions of this covenant;
(18) the disposition of accounts receivable in connection with receivables factoring
arrangements in the ordinary course of business;
(19) unsecured Indebtedness in respect of obligations of LifePoint or any of its
Restricted Subsidiaries to pay the deferred purchase price of goods or services or progress
payments in connection with such goods and services; provided that such obligations are
incurred in connection with open accounts extended by suppliers on customary trade terms (which
require that all such payments be made within 60 days after the incurrence of the related
obligations) in the ordinary course of business;
(20) Indebtedness representing deferred compensation to employees of LifePoint or any of
its Restricted Subsidiaries incurred in the ordinary course of business;
60
(21) reimbursement obligations with respect to letters of credit, bank guarantees,
warehouse receipts or similar instruments issued in the ordinary course of business, and
Indebtedness of LifePoint in respect of letters of credit issued by LifePoint for its own
account or for the account of any of its Restricted Subsidiaries;
(22) Indebtedness arising from any Sale and Leaseback Transaction, provided that the
principal amount of any Indebtedness incurred pursuant to this clause may not exceed (a) $35
million less (b) the aggregate amount of Permitted Refinancing Indebtedness incurred to
refinance Indebtedness incurred pursuant to this clause;
(23) Physician Support Obligations incurred by LifePoint or any Restricted Subsidiary;
(24) Indebtedness incurred on behalf of or representing Guarantees of Indebtedness of
Permitted Joint Ventures of LifePoint or any Restricted Subsidiary not in excess of $35 million
at any one time outstanding;
(25) the incurrence by LifePoint or any of its Restricted Subsidiaries of additional
Indebtedness (which may include, but is not limited to, Indebtedness of the types referred to
in the foregoing clauses (1) through (24) and clause (26)) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (26), not to exceed the greater of $200 million and 5.0% of Total Assets; and
(26) Indebtedness of a Restricted Subsidiary outstanding on the date on which such
Restricted Subsidiary was acquired by LifePoint or otherwise became a Restricted Subsidiary
(other than Indebtedness incurred as consideration in, or to provide all or any portion of the
funds or credit support
utilized to consummate, the transaction or series of transactions pursuant to which such
Restricted Subsidiary became a Subsidiary of LifePoint or was otherwise acquired by LifePoint),
provided that after giving effect thereto, (a) LifePoint would be permitted to incur at least
$1 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test in the first
paragraph above, or (b) the Fixed Charge Coverage Ratio would be no worse than immediately
prior thereto.
For purposes of determining compliance with this Incurrence of Indebtedness and Issuance of
Preferred Stock covenant, in the event that an item of proposed Indebtedness meets the criteria of
more than one of the categories of Permitted Debt described in clauses (1) through (26) above, or
is entitled to be incurred pursuant to the first paragraph of this covenant, LifePoint will be
permitted to classify and reclassify such item of Indebtedness in any manner that complies with
this covenant. Indebtedness under Credit Facilities outstanding on the date on which notes are
first issued and authenticated under the indenture will be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of Permitted Debt.
Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that
may be incurred pursuant to this covenant will not be deemed to be exceeded with respect to any
Indebtedness solely as a result of fluctuations in exchange rates or currency values.
Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness that
is otherwise included in the determination of particular amount of Indebtedness shall not be
included in the determination of such amount of Indebtedness; provided that the incurrence of the
Indebtedness represented by such guarantee or letter of credit, as the case may be, was in
compliance with this covenant.
Liens
LifePoint will not, and will not permit any Restricted Subsidiary to, directly or indirectly,
issue, assume or guarantee any Indebtedness secured by any Lien (other than a Permitted Lien) on
any property or asset now owned or hereafter acquired by LifePoint or such Restricted Subsidiary
without making effective provision whereby any and all notes then or thereafter outstanding will be
secured by a Lien equally and ratably with or prior to any and all other obligations thereby
secured for so long as any such obligations shall be so secured. Any Lien created for the benefit
of the holders of the notes pursuant to the preceding sentence shall provide by its terms that such
Lien shall be automatically and unconditionally released and discharged upon the release and
discharge of the initial Lien.
61
Dividend and other Payment Restrictions Affecting Restricted Subsidiaries
LifePoint will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or permit to exist or become effective any consensual encumbrance or restriction
on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to LifePoint or any
of its Restricted Subsidiaries, or with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to LifePoint or any of its Restricted
Subsidiaries;
(2) make loans or advances to LifePoint or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to LifePoint or any of its Restricted
Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or restrictions existing
under or by reason of:
(1) agreements governing Existing Indebtedness and Credit Facilities or other agreements
as in effect on the Issue Date and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings of those agreements, provided
that the amendments, modifications, restatements, renewals, increases, supplements, refundings,
replacement
or refinancings are not materially more restrictive, taken as a whole, with respect to
such dividend and other payment restrictions than those contained in those agreements on the
Issue Date;
(2) the indenture, the notes, the Subsidiary Guarantees, the Exchange Notes and the
Exchange Subsidiary Guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person, or such
encumbrances or restrictions with respect to other property or assets, in any case acquired by
LifePoint or any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such encumbrances or restrictions relate to Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other than the Person,
the property or assets of the Person, so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the indenture to be incurred;
(5) customary non-assignment provisions in leases, licences and other agreements entered
into in the ordinary course of business;
(6) purchase money obligations or Capital Lease Obligations for property acquired or
leased in the ordinary course of business that impose restrictions on that property or the
assets otherwise subject thereto of the nature described in clause (3) of the preceding
paragraph;
(7) any agreement for the sale or other disposition of a Restricted Subsidiary or any
assets thereof that restricts distributions by that Restricted Subsidiary pending the sale or
other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are not materially more
restrictive, taken as a whole, than those contained in the agreements governing the
Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of
the covenant described above under the caption Liens;
(10) provisions with respect to the disposition or distribution of assets or property in
joint venture agreements, assets sale agreements, stock sale agreements and other similar
agreements entered into in the ordinary course of business;
62
(11) restrictions imposed in connection with a financing transaction involving a sale or
other disposition of accounts receivable and related assets (including, without limitation, in
connection with a securitization or similar financing) or in connection with a financing
involving a subsidiary trust or similar financing vehicle that is permitted by the covenant
described above under the caption Incurrence of Indebtedness and Issuance of Preferred
Stock, provided, that such restrictions do not materially adversely affect LifePoints ability
to pay interest and principal on the notes when due;
(12) restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business or imposed by governmental agencies
or authorities;
(13) in the case of clause (3) of the preceding paragraph, encumbrances or restrictions
arising or agreed to in the ordinary course of business, not relating to Indebtedness and that
do not materially detract from the value of the property or assets of LifePoint and its
Restricted Subsidiaries; and
(14) encumbrances or restrictions contained in the terms of Indebtedness if the
encumbrance or restriction is not materially more disadvantageous to Holders than is customary
in comparable financings and will not materially affect LifePoints ability to make principal
or interest payments on the notes (in each case determined by LifePoint in good faith); and
(15) agreements with respect to Insurance Subsidiaries or with respect to securities
thereof, in each case in connection with the operation of any Insurance Subsidiary.
Limitation on Sale and Leaseback Transactions
LifePoint will not, and will not permit any Restricted Subsidiary to, enter into any Sale and
Leaseback Transaction with respect to any property or asset unless LifePoint or the Restricted
Subsidiary would be entitled to:
(1) incur Indebtedness in an amount equal to the Attributable Debt with respect to such
Sale and Leaseback Transaction pursuant to the covenant described above under the caption
Incurrence of Indebtedness and Issuance of Preferred Stock; and
(2) create a Lien on such property securing such Attributable Debt pursuant to the
covenant described above under the caption Liens,
In which case, the corresponding Indebtedness and Lien will be deemed incurred pursuant to
those provisions.
Merger, Consolidation or Sale of Assets
LifePoint may not, directly or indirectly: (1) consolidate or merge with or into another
Person (whether or not LifePoint is the surviving corporation); or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or assets of LifePoint
and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another
Person; unless:
(1) either: (a) LifePoint is the surviving corporation; or (b) the Person formed by or
surviving any such consolidation or merger (if other than LifePoint) or to which such sale,
assignment, transfer, conveyance or other disposition has been made is a Person organized or
existing under the laws of the United States, any state of the United States or the District of
Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if other than
LifePoint) or the Person to which such sale, assignment, transfer, conveyance or other
disposition has been made assumes all the obligations of LifePoint under the notes and the
indenture pursuant to a supplemental indenture in form reasonably satisfactory to the trustee;
(3) immediately after such transaction, on a pro forma basis giving effect to such
transaction or series of transactions (and treating any obligation of LifePoint or any
Restricted Subsidiary incurred in connection with or as a result of such transaction or series
of transactions as having been incurred at the time of such transaction), no Default or Event
of Default exists; and
63
(4) except in the case of a transaction entered into to reincorporate LifePoint in another
jurisdiction, LifePoint or the Person formed by or surviving any such consolidation or merger
(if other than LifePoint), or to which such sale, assignment, transfer, conveyance or other
disposition has been made, will, on the date of such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had occurred at the beginning of
the applicable four-quarter period, (a) be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph
of the covenant described above under the caption Incurrence of Indebtedness and Issuance of
Preferred Stock or (b) have a Fixed Charge Coverage Ratio that is no worse than the Fixed
Charge Coverage Ratio of LifePoint for such applicable four-quarter period without giving pro
forma effect to such transactions and the related financing transactions.
In addition, LifePoint may not, directly or indirectly, lease all or substantially all of the
properties or assets of LifePoint and its Restricted Subsidiaries, taken as a whole, in one or more
related transactions, to any other Person. This Merger, Consolidation or Sale of Assets covenant
will not apply to a sale,
assignment, transfer, conveyance or other disposition of assets between or among LifePoint and
any of the Guarantors.
Upon any consolidation or merger, or any sale, assignment, transfer, conveyance, transfer or
other disposition of all or substantially all of the properties or assets of LifePoint and its
Restricted Subsidiaries, taken as a whole, in accordance with the foregoing provisions, the
successor Person formed by such consolidation or into which LifePoint is merged or to which such
sale, assignment, transfer, conveyance or other disposition is made, shall succeed to, and be
substituted for, and may exercise every right and power of, LifePoint under the indenture with the
same effect as if such successor had been named as LifePoint therein. When a successor assumes all
the obligations of its predecessor under the indenture and the notes following a consolidation or
merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially
all of the assets of the predecessor in accordance with the foregoing provisions, the predecessor
shall be released from those obligations.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of LifePoint may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary
is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding
Investments owned by LifePoint and its Restricted Subsidiaries in the Subsidiary so designated will
be deemed to be an Investment made as of the time of the designation and will reduce the amount
available for Restricted Payments under the first paragraph of the covenant described above under
the caption Restricted Payments or Permitted Investments, as determined by LifePoint. That
designation will only be permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of
Directors of LifePoint may re-designate any Unrestricted Subsidiary to be a Restricted Subsidiary
if the redesignation would not cause a Default. As of the Issue Date, our Subsidiary, Life
Indemnity, LTD, is an Unrestricted Subsidiary.
Transactions with Affiliates
LifePoint will not, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate
(each, an Affiliate Transaction), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to LifePoint or the
relevant Restricted Subsidiary than those that would have been obtained in a comparable
transaction by LifePoint or such Restricted Subsidiary with an unrelated Person; and
(2) with respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $30 million LifePoint delivers to the trustee a
resolution of LifePoints Board of Directors set forth in an officers certificate certifying
that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction
has been approved by a majority of the disinterested members of LifePoints Board of Directors,
or an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking firm of national
standing in the United States.
64
The following items will not be deemed to be Affiliate Transactions and, therefore, will not
be subject to the provisions of the prior paragraph:
(1) directors fees, indemnification and similar arrangements, consulting fees, employee
salaries, bonuses or employment agreements, compensation, retirement, disability, severance or
employee benefit arrangements and incentive arrangements with, and loans and advances to, any
officer, director or employee in the ordinary course of business,
(2) performance of all agreements in existence on the Issue Date and any modification
thereto or any transaction contemplated thereby in any replacement agreement therefor so long
as such
modification or replacement is not materially more disadvantageous to LifePoint or any of
its Restricted Subsidiaries than the original agreement in effect on the Issue Date;
(3) transactions in connection with a financing transaction involving a sale or other
disposition of accounts receivable and related assets (including, without limitation, in
connection with a securitization or similar financing) or in connection with a financing
involving a subsidiary trust or similar financing vehicle that is permitted by the covenant
described above under the caption Incurrence of Indebtedness and Issuance of Preferred
Stock;
(4) transactions in the ordinary course of business with any joint venture that is
otherwise permitted by the indenture; provided, that such joint venture is between and among
LifePoint and/or any of its Subsidiaries on the one hand and third parties that are not
otherwise Affiliates of LifePoint on the other hand;
(5) transactions between or among LifePoint and/or its Restricted Subsidiaries;
(6) transactions with a Person (other than an Unrestricted Subsidiary) that is an
Affiliate of LifePoint solely because LifePoint or a Restricted Subsidiary owns an Equity
Interest in, or controls, such Person;
(7) sales of Equity Interests (other than Disqualified Stock) to Affiliates of LifePoint
and the granting of registration and other customary rights in connection therewith;
(8) Restricted Payments and Permitted Investments that are permitted by the provisions of
the indenture described above under the caption Restricted Payments;
(9) transactions complying with the covenant described above under the caption Merger,
Consolidation or Sale of Assets;
(10) pledges of Equity Interests of Unrestricted Subsidiaries;
(11) any transaction effected as part of a Qualified Securitization Financing; and
(12) any transaction with an Insurance Subsidiary in the ordinary course of business.
Additional Subsidiary Guarantees
If LifePoint or any of its Restricted Subsidiaries acquires or creates another Domestic
Subsidiary after the Issue Date, then that newly acquired or created Domestic Subsidiary (other
than an Excluded Subsidiary) will become a Guarantor and execute a supplemental indenture and
deliver an opinion of counsel in form satisfactory to the trustee as promptly as possible after the
end of the fiscal quarter in which it was acquired or created.
Reports
Whether or not required by the Commission, so long as any notes are outstanding, LifePoint
will furnish to the Holders of notes and file with the Commission (unless the Commission will not
accept such filing), within the time periods specified in the Commissions rules and regulations:
(1) all quarterly and annual financial information that would be required to be contained
in a filing with the Commission on Forms 10-Q and 10-K if LifePoint were required to file such
Forms, including a
65
Managements Discussion and Analysis of Financial Condition and Results of
Operations and, with respect to the annual information only, a report on the annual financial
statements by LifePoints certified independent accountants; and
(2) all current reports that would be required to be filed with the Commission on Form 8-K
if LifePoint were required to file such reports; provided, that any information accepted for
filing with the Commission shall be deemed to have been furnished to Holders of the notes.
Events of Default and Remedies
Each of the following is an Event of Default with respect to the notes:
(1) default for 30 days in the payment when due of interest on the notes;
(2) default in payment when due of the principal of, or premium, if any, on the notes
(including the failure to repurchase notes pursuant to a Change of Control Offer or Asset Sale
Offer);
(3) failure by LifePoint or any of its Restricted Subsidiaries to comply with the
covenants described above under the caption Certain CovenantsMerger, Consolidation or Sale
of Assets;
(4) failure by LifePoint or any of its Restricted Subsidiaries for 60 days after notice to
comply with any of the other agreements in the indenture;
(5) default under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed by LifePoint or
any of its Restricted Subsidiaries (or the payment of which is guaranteed by LifePoint or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, if that default:
(a) is caused by a failure to pay principal of such Indebtedness at its final stated
maturity after giving effect to any grace period provided in such Indebtedness on the date
of such default (a Payment Default); or
(b) results in the acceleration of such Indebtedness prior to its express maturity,
and, in each case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $25 million or more;
(6) failure by LifePoint or any of its Restricted Subsidiaries to pay final,
non-appealable judgments aggregating in excess of $25 million that are not covered by insurance
or as to which an insurer has not acknowledged coverage in writing, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any Subsidiary Guarantee of a Significant
Subsidiary of notes shall be held in any final, non-appealable judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and effect or any
Guarantor that is a Significant Subsidiary, or any Person acting on behalf of any such
Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee for the
notes; and
(8) certain events of bankruptcy or insolvency described in the indenture with respect to
LifePoint or any of its Restricted Subsidiaries that is a Significant Subsidiary.
A Default under clause (4) is not an Event of Default in respect of the notes until the trustee or
the Holders of at least 25% in principal amount of the notes then outstanding notify LifePoint and
the trustee (in the case of a notice given by holders) of the Default and LifePoint does not cure
such default within the time specified after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a Notice of Default.
66
In the case of an Event of Default arising from certain events of bankruptcy or insolvency
with respect to LifePoint, all outstanding notes will become due and payable immediately without
further action or notice. If any other Event of Default occurs and is continuing, the trustee or
the Holders of at least 25% in principal amount of the then outstanding notes may declare all the
notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as provided in the
indenture. Subject to certain limitations, Holders of a majority in principal amount of the then
outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may
withhold from Holders of the notes notice of any continuing Default or Event of Default if it
determines that withholding notice is in their interest, except a Default or Event of Default
relating to the payment of principal or interest.
The Holders of a majority in aggregate principal amount of the notes then outstanding by
notice to the trustee may on behalf of the Holders of all of the notes waive any existing Default
or Event of Default and its consequences under the indenture except a continuing Default or Event
of Default in the payment of interest or premium on, or the principal of, the notes.
LifePoint is required to deliver to the trustee annually a statement regarding compliance with
the indenture. Upon becoming aware of any Default or Event of Default, LifePoint is required to
deliver to the trustee a statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of LifePoint or any Guarantor, as
such, will have any liability for any obligations of LifePoint or the Guarantors under the notes,
the indenture, the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of notes by accepting a note waives and
releases all such liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
LifePoint may, at its option and at any time, elect to have all of its obligations discharged
with respect to the outstanding notes and all obligations of the Guarantors discharged with respect
to their Subsidiary Guarantees (Legal Defeasance) except for:
(1) the rights of Holders of outstanding notes to receive payments in respect of the
principal of, or interest or premium on, such notes when such payments are due from the trust
referred to below;
(2) LifePoints obligations with respect to the notes concerning issuing temporary notes,
registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an
office or agency for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and LifePoints and
the Guarantors obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, LifePoint may, at its option and at any time, elect to have the obligations of
LifePoint and the Guarantors released with respect to certain covenants that are described in the
indenture (Covenant Defeasance) and thereafter any omission to comply with those covenants will
not constitute a Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs in respect of the notes, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events with respect to LifePoint) described under
Events of Default and Remedies will no longer constitute an Event of Default with respect to
the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) LifePoint must irrevocably deposit with the trustee, in trust, for the benefit of the
Holders of the notes, cash in U.S. dollars sufficient, non-callable Government Securities, the
scheduled payments of principal of and
67
interest on which will be sufficient, or a combination
of cash in U.S. dollars and non-callable Government Securities, the scheduled payments of
principal of and interest on which will together with such cash be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, without consideration of any
reinvestment of interest, to pay the principal of, or
interest and premium on, the outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be, and LifePoint must specify whether such notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, LifePoint has delivered to the trustee an opinion of
counsel in form reasonably acceptable to the trustee confirming that (a) LifePoint has received
from, or there has been published by, the Internal Revenue Service a ruling or (b) since the
Issue Date, there has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel will confirm that, the Holders of
the outstanding notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, LifePoint has delivered to the trustee an opinion
of counsel in form reasonably acceptable to the trustee confirming that the Holders of the
outstanding notes will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on the date of such
deposit (other than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit and the grant of any Lien securing such borrowing);
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other than the
indenture and the agreements governing any other Indebtedness being defeased, discharged or
replaced) to which LifePoint or any of its Subsidiaries is a party or by which LifePoint or any
of its Subsidiaries is bound;
(6) LifePoint must deliver to the trustee an officers certificate stating that the
deposit was not made by LifePoint with the intent of preferring the Holders of notes over the
other creditors of LifePoint with the intent of defeating, hindering, delaying or defrauding
creditors of LifePoint or others; and
(7) LifePoint must deliver to the trustee an officers certificate and an opinion of
counsel, each stating that all conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with or waived.
Notwithstanding the foregoing, the opinion of counsel required by clause (2) above with
respect to a Legal Defeasance need not be delivered if all notes not theretofore delivered to the
trustee for cancellation (i) have become due and payable or (ii) will become due and payable on the
maturity date or on a redemption date within one year (in the case of a redemption) under
arrangements satisfactory to the trustee for the giving of notice of redemption by the trustee in
the name, and at the expense, of LifePoint.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the indenture or the notes may be
amended or supplemented with the consent of the Holders of at least a majority in principal amount
of the notes then outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer
for, notes).
Without the consent of each Holder affected, an amendment or waiver may not (with respect to
any notes held by a non-consenting Holder):
68
(1) reduce the principal amount of notes whose Holders must consent to an amendment,
supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or alter the
provisions with respect to the redemption of the notes (other than provisions relating to the
covenants described above under the caption Repurchase at the Option of Holders and other
than notice provisions with respect to any optional redemption by LifePoint);
(3) reduce the rate of or change the time for payment of interest on any note;
(4) waive a Default or Event of Default in the payment of principal of, or interest or
premium on, the notes (except a rescission of acceleration of the notes by the Holders of at
least a majority in aggregate principal amount of the notes and a waiver of the payment default
in respect of the notes that resulted from such acceleration);
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to waivers of past
Defaults or the rights of Holders of notes to receive payments of principal of, or interest or
premium on, the notes;
(7) after the date of an event giving rise to a redemption, waive a redemption payment
with respect to any note (other than a payment required by one of the covenants described above
under the caption Repurchase at the Option of Holders);
(8) release any Guarantor from any of its obligations under its Subsidiary Guarantee or
the indenture, except in accordance with the terms of the indenture; or
(9) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any Holder of notes, LifePoint, the
Guarantors, if applicable, and the trustee may amend or supplement the indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of certificated notes;
(3) to provide for the assumption of LifePoints or a Guarantors obligations to Holders
of notes in the case of a merger or consolidation or sale of all or substantially all of
LifePoints or a Guarantors assets;
(4) to make any change that would provide any additional rights or benefits to the Holders
of notes or that does not adversely affect the legal rights under the indenture of any such
Holder;
(5) to comply with requirements of the Commission in order to effect or maintain the
qualification of the indenture under the Trust indenture Act;
(6) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary
Guarantee with respect to the notes;
(7) to evidence and provide the acceptance of the appointment of a successor trustee under
the indenture;
(8) to mortgage, pledge, hypothecate or grant a security interest in favor of the trustee
for the benefit of the Holders of notes as additional security for the payment and performance
of LifePoints or a Guarantors obligations;
(9) to release a Guarantor from its Subsidiary Guarantee pursuant to the terms of the
indenture when permitted or required pursuant to the terms of the indenture; or
69
(10) to conform the text of the indenture, the notes or the Subsidiary Guarantees to any
provision of this Description of Notes to the extent that such provision in this Description of
Notes was intended to be a substantially verbatim recitation of a provision of the indenture,
the notes or the Subsidiary Guarantees.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect as to all notes issued
thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost, stolen or destroyed notes
that have been replaced or paid and notes for whose payment money has been deposited in
trust and thereafter repaid to LifePoint, have been delivered to the trustee for
cancellation; or
(b) all notes that have not been delivered to the trustee for cancellation have become
due and payable by reason of the mailing of a notice of redemption or otherwise or will
become due and payable within one year and LifePoint or any Guarantor has irrevocably
deposited or caused to be deposited with the trustee as trust funds in trust solely for the
benefit of the Holders of notes, cash in U.S. dollars, non-callable Government Securities,
the scheduled payments of principal of and interest on which will be sufficient, or a
combination of cash in U.S. dollars and non-callable Government Securities, the scheduled
payments of principal of and interest on which will, together with such cash, be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants (which opinion need only be provided if non-callable Government Securities have
been deposited), without consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the notes not delivered to the trustee for
cancellation for principal, premium and accrued interest to the date of maturity or
redemption;
(2) no Default or Event of Default with respect to the notes has occurred and is
continuing on the date of the deposit (other than a Default or Event of Default resulting from
the borrowing of funds to be applied to such deposit and any similar deposit relating to other
Indebtedness and, in each case, the granting of Liens to secure such borrowing) and the deposit
will not result in a breach or violation of, or constitute a default under, any other
instrument to which LifePoint or any Guarantor is a party or by which LifePoint or any
Guarantor is bound (other than with respect to the borrowing of funds to make the deposit
required to effect such satisfaction and discharge and any similar deposit relating to other
Indebtedness and in each case the granting of Liens to secure such borrowings);
(3) LifePoint or any Guarantor has paid or caused to be paid all sums payable by it under
the indenture with respect to the notes; and
(4) LifePoint has delivered irrevocable instructions to the trustee under the indenture to
apply the deposited money toward the payment of the notes at maturity or the redemption date,
as the case may be.
In addition, LifePoint must deliver an officers certificate and an opinion of counsel to the
trustee stating that all conditions precedent to satisfaction and discharge have been satisfied or
waived.
Concerning the Trustee
If the trustee becomes a creditor of LifePoint or any Guarantor, the indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding notes will have the
right to direct the time, method and place of conducting any proceeding for exercising any remedy
available to the trustee, subject to certain exceptions. The indenture provides that in case an
Event of Default occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the trustee will be under no obligation to exercise any of its rights or powers
under the
70
indenture at the request of any Holder of notes, unless such Holder has offered to the
trustee security and indemnity satisfactory to it against any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference is made to the
indenture for a full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
3.25% Convertible Senior Subordinated Debentures due 2025 means the $225 million in
aggregate principal amount of 3.25% Convertible Senior Subordinated Debentures due 2025 issued by
LifePoint pursuant to an indenture dated August 10, 2005 between LifePoint and Citibank, N.A., as
trustee.
3.5% Convertible Senior Subordinated Notes due 2014 means the $575 million in aggregate
principal amount of 3.5% Convertible Senior Subordinated Notes due 2014 issued by LifePoint
pursuant to an indenture dated May 29, 2007 between LifePoint and The Bank of New York Mellon Trust
Company, N.A., as trustee.
Acquired Debt means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is merged with
or into or became a Restricted Subsidiary of such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation of, such other Person merging
with or into, or becoming a Restricted Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person
(limited to the maximum amount of liability of the specified Person with respect to such Lien).
Affiliate of any specified Person means any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified Person. For
purposes of this definition, control, as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies
of such Person, whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to
be control. For purposes of this definition, the terms controlling, controlled by and under
common control with have correlative meanings.
Applicable Redemption Premium means, with respect to any note on any redemption date, the
excess of
(1) the present value at such redemption date of the redemption price of such note if such
note were redeemed on October 1, 2015 plus all required interest payments due on such note
through October 1, 2015 (not including any portion of such payments of interest accrued to the
redemption date) computed using a discount rate equal to the Treasury Rate at such redemption
date plus 50 basis points, over
(2) the then-outstanding principal amount of the note.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition by LifePoint or any of its Restricted
Subsidiaries of any assets, other than sales of products and services in the ordinary course of
business consistent with past practices; provided that the sale, conveyance or other
disposition of all or
substantially all of the assets of LifePoint and its Restricted Subsidiaries taken as a
whole will be governed by the covenant described above under the caption Repurchase at the
Option of HoldersChange of control and/or the covenant described above under the caption
Certain CovenantsMerger, Consolidation or Sale of Assets and not by the provisions of the
Asset Sale covenant; and
(2) the issuance of Equity Interests (other than directors qualifying shares) by any
Restricted Subsidiary or the sale of Equity Interests in any Restricted Subsidiary.
Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:
71
(1) any single transaction or series of related transactions that involves assets having a
fair market value of less than $30 million;
(2) a transfer of assets between or among LifePoint and one or more Restricted
Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to LifePoint or to another
Restricted Subsidiary;
(4) the sale, lease, assignment, sublease or other disposition of equipment, inventory,
accounts receivable or other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment (or Payment that would constitute a Restricted Payment but for
the exclusions from the definition thereof) or Permitted Investment that is permitted by the
covenant described above under the caption Certain CovenantsRestricted Payments;
(7) a sale or other disposition of accounts receivable and related assets in connection
with a financing transaction involving such assets (including, without limitation, in
connection with a securitization or similar financing);
(8) any disposition of property in the ordinary course of business by LifePoint or any
Restricted Subsidiary that, in the good faith judgment of management of LifePoint, has become
obsolete, worn out, damaged or no longer useful in the conduct of the business of LifePoint or
the Restricted Subsidiaries;
(9) any Asset Swap;
(10) any sale of securities constituting Equity Interests that are issued by a subsidiary
trust or other financing vehicle in a transaction permitted by the covenant described above
under the caption Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred
Stock;
(11) the discount or forgiveness of accounts receivable in the ordinary course of business
in connection with the collection or compromise thereof;
(12) licenses and sublicenses by LifePoint or any of its Restricted Subsidiaries of
software or intellectual property in the ordinary course of business or consistent with past
practice;
(13) a Sale and Leaseback Transaction, provided that at least 75% of the consideration
paid to LifePoint or the Restricted Subsidiary for such Sale and Leaseback Transaction consists
of cash received at closing;
(14) the sale, transfer or other disposition of Hedging Obligations incurred pursuant to
the covenant described above under the caption Incurrence of Indebtedness and Issuance of
Preferred Stock;
(15) the creation of any Permitted Lien and dispositions in connection with Permitted
Liens;
(16) dispositions of assets resulting from the assertion by federal, state or local
governmental authorities (or similarly empowered Persons) of rights of eminent domain,
condemnation or expropriation or similar rights;
(17) long-term leases of Hospitals to another Person; provided that the aggregate book
value of all such properties subject to such leases does not exceed 10% of the Total Assets of
LifePoint;
(18) sales of assets received by LifePoint or any of its Restricted Subsidiaries upon the
foreclosure on a Lien; and
(19) the disposition of Receivables and Related Assets in a Qualified Securitization
Transaction.
Asset Sale Offer has the meaning set forth in the covenant described above under the caption
Repurchase at the Option of HoldersAsset Sales.
72
Asset Swap means an exchange by LifePoint or any Restricted Subsidiary of property or
assets for property or assets of another Person; provided that (i) LifePoint or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time of such exchange at
least equal to the fair market value of the assets or other property sold, issued or otherwise
disposed of (as evidenced by a resolution of LifePoints Board of Directors), and (ii) at least 75%
of the consideration received in such exchange constitutes assets or other property of a kind
usable by LifePoint and its Restricted Subsidiaries in a Permitted Business; provided, further that
any cash and Cash Equivalents received by LifePoint or any of its Restricted Subsidiaries in
connection with such an exchange shall constitute Net Proceeds subject to the provisions under
Repurchase at the Option of HoldersAsset Sales.
Attributable Debt means, in respect of a Sale and Leaseback Transaction, the present value,
discounted at the interest rate implicit in the Sale and Leaseback Transaction, of the total
obligations of the lessee for rental payments during the remaining term of the lease in the Sale
and Leaseback Transaction.
Beneficial Owner has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that in calculating the beneficial ownership of any particular person
(as that term is used in Section 13(d)(3) of the Exchange Act), such person will be deemed to
have beneficial ownership of all securities that such person has the right to acquire by
conversion or exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms Beneficially Owns and
Beneficially Owned have a corresponding meaning.
Board of Directors means:
(1) with respect to a corporation, the board of directors of the corporation (or any duly
authorized committee thereof);
(2) with respect to a partnership, the Board of Directors (or any duly authorized committee
thereof) of the general partner of the partnership;
(3) with respect to a limited liability company, the managing member or members or any
controlling committee of managing members thereof; and
(4) with respect to any other Person, the board or committee of such Person serving a
similar function.
Capital Lease Obligation means, at the time any determination is to be made, the amount of
the liability in respect of a capital lease that would at that time be required to be capitalized
on a balance sheet in accordance with GAAP.
Capital Stock means:
|
(1) |
|
in the case of a corporation, corporate stock; |
(2) in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or membership
interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing Person.
Cash Equivalents means:
(1) United States dollars;
(2) Securities constituting direct obligations of the United States or any agency or
instrumentality of the United States, the payment or guarantee of which constitutes a full faith
and credit obligation of the United States, maturing in three years or less from the date of
acquisition thereof;
73
(3) securities constituting direct obligations of any State or municipality within the
United States maturing in three years or less from the date of acquisition thereof which, in any
such case, at the time of acquisition by LifePoint or any Restricted Subsidiary, is accorded one
of the two highest long-term or short-term, as applicable, debt ratings by S&P or Moodys or any
other United States nationally recognized credit rating agency of similar standing;
(4) certificates of deposit with a maturity of one year or less or bankers acceptances
issued by a bank or trust company having capital, surplus and undivided profits aggregating at
least $500 million and having a short-term unsecured debt rating of at least P-1 by Moodys or
A-1 by S&P;
(5) eurodollar time deposits with maturities of one year or less and overnight bank
deposits with any bank or trust company having capital, surplus and undivided profits
aggregating at least $500 million and having a short-term unsecured debt rating of at least
P-1 by Moodys or A-1 by S&P;
(6) repurchase obligations with a term of not more than thirty days for underlying
securities of the types described in clauses (2), (3), (4) and (5) above entered into with any
financial institution meeting the qualifications specified in such clauses above;
(7) commercial paper maturing in 365 days or less from the date of issuance which, at the
time of acquisition by LifePoint or any Restricted Subsidiary, is accorded a rating of A2 or
better by S&P or P2 or better by Moodys or any other United States nationally recognized
credit rating agency of similar standing; and
(8) any fund or other pooling arrangement at least 95% of the assets of which constitute
Investments described in clauses (1) through (7) of this definition.
Change of Control means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of LifePoint and its Restricted Subsidiaries taken
as a whole to any person (as that term is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution of LifePoint;
(3) LifePoint becomes aware of (by way of a report or other filing pursuant to Section
13(d) of the Exchange Act, proxy, written notice or otherwise) the consummation of any
transaction (including, without limitation, any merger or consolidation) the result of which is
that any person (as defined above), becomes the Beneficial Owner, directly or indirectly, of
more than 50% of the Voting Stock of LifePoint, measured by voting power rather than number of
shares;
(4) the first day on which a majority of the members of the Board of Directors of LifePoint
are not Continuing Directors; or
(5) a change of control under our 3.25% Convertible Senior Subordinated Debentures due 2025
or our 3.5% Convertible Senior Subordinated Notes due 2014.
Code means the Internal Revenue Code of 1986, as amended.
Consolidated Assets of any Person as of any date means the total assets of such Person and
its Restricted Subsidiaries on a consolidated basis at such date, as determined in accordance with
GAAP.
Consolidated Cash Flow means, with respect to any specified Person for any period, the
Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary, unusual or non-recurring loss plus any net loss
realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale
(without regard to the dollar limitation in the definition thereof), to the extent such losses
were deducted in computing such Consolidated Net Income; plus
74
(2) provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was deducted in
computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers acceptance financings, and net of the effect
of all payments made or received pursuant to Hedging Obligations), to the extent that any such
expense was deducted in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and other intangibles
but excluding amortization of prepaid cash expenses that were paid in a prior period) and other
non-cash expenses (excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; plus
(5) severance payments related to management employment contracts, non-cash stock-based
compensation expense, and net income attributable to non-controlling interests in LifePoints
non-wholly-owned Subsidiaries; minus
(6) any amortization of discounts of convertible debt instruments resulting from the
application of APB 14-1 Accounting for Convertible Debt Instruments; minus
(7) non-cash items increasing such Consolidated Net Income for such period, other than the
accrual of revenue in the ordinary course of business,
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary will be
added to Consolidated Net Income to compute Consolidated Cash Flow of LifePoint only to the extent
that a corresponding amount would be permitted at the date of determination to be dividended to
LifePoint by such Restricted Subsidiary without prior governmental approval (that has not been
obtained), pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
Consolidated Net Income means, with respect to any specified Person for any period, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that
is accounted for by the equity method of accounting will be included only to the extent of the
amount of dividends or distributions paid in cash to the specified Person or a Restricted
Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders;
(3) for purposes of the covenant described above under the caption Certain
CovenantsRestricted Payments covenant above, the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such acquisition will be
excluded; and
75
(4) the cumulative effect of a change in accounting principles will be excluded.
Consolidated Secured Debt Ratio as of the date of any event for which a calculation is
required (the date of determination) means the ratio of (a) the aggregate amount of all
Indebtedness of LifePoint and its Restricted Subsidiaries that is secured by Liens as of the date
of determination to (b) the Consolidated Cash Flow of LifePoint for the most recently ended four
full fiscal quarters for which internal financial statements are available immediately preceding
the date of determination, in each case with such pro forma adjustments as are appropriate and
consistent with the pro forma adjustment provisions set forth in the definition of Consolidated
Senior Leverage Ratio.
Consolidated Senior Leverage Ratio means, as of the date of any event for which a
calculation is required (the date of determination), the ratio (x) of the aggregate amount of all
Indebtedness (other than Subordinated Indebtedness) of LifePoint and its Restricted Subsidiaries
and preferred stock of Restricted Subsidiaries that are not Guarantors as of the date of the
determination to (y) the Consolidated Cash Flow of LifePoint for the most recently ended four full
fiscal quarters for which internal financial statements are available immediately preceding the
date of determination.
In addition, for purposes of calculating the Consolidated Senior Leverage Ratio, pro forma
effect will be given to:
(1) acquisitions of any operations or businesses or assets (other than assets acquired in
the ordinary course of business) that have been made by the specified Person or any of its
Restricted Subsidiaries, including through purchases or through mergers or consolidations and
including any related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the date of determination, as if they had
occurred on the first day of the four-quarter reference period; and
(2) the discontinuance of operations or businesses and dispositions of operations or
businesses or assets (other than assets disposed of in the ordinary course of business) during
the four quarter reference period or subsequent to such reference period and on or prior to the
date of determination, as if they had occurred on the first day of the four quarter reference
period.
For purposes of this definition, whenever pro forma effect is to be given to a transaction,
the pro forma calculations shall be determined in good faith by a responsible financial or
accounting officer of LifePoint.
Continuing Directors means, as of any date of determination, any member of the Board of
Directors of LifePoint who:
(1) was a member of such Board of Directors immediately after the annual stockholders
meeting of LifePoint following the Issue Date; or
(2) was nominated for election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such Board at the time of such
nomination or election.
Credit Agreement means the Credit Agreement, dated as of April 15, 2005, by and among
LifePoint, as borrower, the lenders parties thereto, Citicorp North America, Inc., as
administrative agent, Bank of America, N.A., CIBC World Markets Corp., SunTrust Bank, UBS
Securities LLC, as co-syndication agents and Citigroup Global Markets Inc. as sole lead arranger
and sole bookrunner, including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended (including, without
limitation, as to principal amount), modified, renewed, refunded, replaced or refinanced from time
to time (whether or not with the original agents or lenders and whether or not contemplated under
the original agreement relating thereto).
Credit Facilities means one or more debt facilities (including, without limitation, the
Credit Agreement), note purchase agreements, commercial paper facilities or indentures, in each
case with banks, institutional or other lenders or a trustee providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such receivables), letters of
credit or debt securities, in each case, as amended (including, without limitation, as to principal
amount), restated, modified, renewed, refunded, replaced or refinanced in whole or in part from
time to
76
time (whether or not with the original agents or lenders or parties and whether or not
contemplated under the original agreement relating thereto).
Default means any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.
Designated Non-cash Consideration means any non-cash consideration received by LifePoint or
one of its Restricted Subsidiaries in connection with an Asset Sale that is designated as
Designated Non-cash Consideration pursuant to an officers certificate executed by the principal
financial officer and any of the other executive officers of LifePoint or such Restricted
Subsidiary at the time of such Asset Sale. Any particular item of Designated Non-cash Consideration
will cease to be considered to be outstanding once it has been sold for cash or Cash Equivalents.
Disqualified Stock means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each case at the option
of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders of the Capital Stock have the right
to require LifePoint to repurchase such Capital Stock upon the occurrence of a change of control
with respect to LifePoint or an asset sale by LifePoint or its Restricted Subsidiaries will not
constitute Disqualified Stock if the terms of such Capital Stock provide that LifePoint may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the caption Certain
CovenantsRestricted Payments.
Domestic Subsidiary means any Restricted Subsidiary organized under the laws of the United
States or any state of the United States or the District of Columbia.
Equity Interests means Capital Stock and all warrants, options or other rights to acquire
Capital Stock (but excluding any debt security that is convertible into, or exchangeable for,
Capital Stock).
Equity Offering means any public or private sale by LifePoint for cash of its common stock
or preferred stock (excluding Disqualified Stock).
Excess Proceeds has the meaning set forth in the covenant described above under the caption
Repurchase at the Option of HoldersAsset Sales.
Exchange Notes means the debt securities of LifePoint issued pursuant to the indenture in
exchange for the notes in compliance with the terms of the Registration Rights Agreement.
Exchange Subsidiary Guarantees means the guarantees of the obligation of LifePoint under the
indenture and the notes issued pursuant to the indenture in exchange for the Subsidiary Guarantees
in compliance with the terms of the Registration Rights Agreement.
Excluded Subsidiaries means those Domestic Subsidiaries that are designated by LifePoint as
Domestic Subsidiaries that will not be Guarantors; provided, however, that in no event will the
Excluded Subsidiaries, either individually or collectively, hold more than 25% of the consolidated
assets of LifePoint and its Domestic Subsidiaries as of the end of any fiscal quarter or account
for more than 25% of the consolidated revenue of LifePoint and its Domestic Subsidiaries during the
most recent four-quarter period (in each case determined as of the most recent fiscal quarter for
which LifePoint has internal financial statements available); provided further that any wholly
owned Domestic Subsidiary that guarantees any Indebtedness incurred pursuant to clause (1) of the
second paragraph of the covenant described under Certain CovenantsIncurrence of Indebtedness
and Issuance of Preferred Stock may not be designated as or continue to be an Excluded Subsidiary.
In the event any Domestic Subsidiaries, individually or collectively, previously designated as
Excluded Subsidiaries cease to meet the requirements of the previous sentence, LifePoint will,
within 60 calendar days following such event, cause one or more of such Domestic Subsidiaries to
become Guarantors so that the requirements of the previous sentence are complied with.
77
Existing Indebtedness means Indebtedness of LifePoint and its Restricted Subsidiaries (other
than Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts
are repaid.
Fixed Charges means, with respect to any specified Person for any period, the sum, without
duplication, of:
(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect
of letter of credit or bankers acceptance financings, and net of the effect of all payments
made or received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted Subsidiaries that was
capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries, to the extent such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividends, whether paid or accrued and whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other
than dividends on Equity Interests payable solely in Equity Interests of LifePoint (other than
Disqualified Stock) or to LifePoint or a Restricted Subsidiary, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP; minus
(5) any amortization of discounts of convertible debt instruments resulting from the
application of APB 14-1 Accounting for Convertible Debt Instruments.
Fixed Charge Coverage Ratio means with respect to any specified Person for any period, the
ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such
Person for such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other
than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated and on or prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the Calculation Date), then the Fixed Charge Coverage Ratio will
be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred
stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio, pro forma effect
will be given to:
(1) acquisitions of any operations or businesses or assets (other than assets acquired in
the ordinary course of business) that have been made by the specified Person or any of its
Restricted Subsidiaries, including through purchases or through mergers or consolidations and
including any related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date, as if they had
occurred on the first day of the four-quarter reference period; and
(2) the discontinuance of operations or businesses and dispositions of operations or
businesses or assets (other than assets disposed of in the ordinary course of business) during
the four quarter reference period or subsequent to such reference period and on or prior to the
Calculation Date, as if they had occurred on the first day of the four quarter reference period.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness shall he calculated as if the rate in effect on the Calculation Date
had been the applicable rate for the entire period. Interest on a Capital Lease Obligation shall he
deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting
officer of LifePoint to be the rate of interest implicit in such
78
Capital Lease Obligation in accordance with GAAP. For purposes of making the computation
referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro
forma basis shall be computed based upon the average daily balance of such Indebtedness during the
applicable period. Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other
rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as LifePoint may designate.
For purposes of this definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of consolidated interest
expense associated with any Indebtedness incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or accounting officer of
LifePoint. In addition, any such pro forma calculation may include adjustments appropriate, in the
reasonable determination of LifePoint as set forth in an officers certificate, to reflect
operating expense reductions reasonably expected to result from any acquisition or merger.
GAAP means generally accepted accounting principles in the United States as in effect as of
the Issue Date, including those set forth in:
(1) the Financial Accounting Standards Boards FASB Accounting Standards Codification; and
(2) the rules and regulations of the SEC with respect to generally accepted accounting
principles, including those governing the inclusion of financial statements in periodic reports
required to be filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements from the accounting
staff of the SEC.
Government Securities means securities that are:
(1) direct obligations of the United States of America for the timely payment of which its
full faith and credit is pledged; or
(2) obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of the issuers thereof, and
shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such Government Securities or a specific payment
of principal of or interest on any such Government Securities held by such custodian for the
account of the holder of such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the Government
Securities or the specific payment of principal of or interest on the Government Securities
evidenced by such depository receipt.
Guarantee means a guarantee other than by endorsement of negotiable instruments for
collection in the ordinary course of business, direct or indirect, in any manner including, without
limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements
in respect thereof, of all or any part of any Indebtedness.
Guarantors means each of:
(1) the Domestic Subsidiaries of LifePoint as of the Issue Date other than Excluded
Subsidiaries; and
(2) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the indenture, and their respective successors and assigns; provided that upon the
release and discharge of any Person from its Subsidiary Guarantee in accordance with the
indenture, such Person shall cease to be a Guarantor.
Hedging Obligations means, with respect to any specified Person, the obligations of such
Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest rate collar
agreements; and
79
(2) other agreements or arrangements designed to protect such Person against fluctuations
in interest rates or foreign exchange rates.
Hospital means a hospital, outpatient clinic, outpatient surgical center, long-term care
facility, diagnostic facility, medical office building or other facility or business that is used
or useful in or related to the provision of healthcare services.
Indebtedness means, with respect to any specified Person, any indebtedness of such Person,
whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof);
(3) in respect of bankers acceptances;
(4) representing Capital Lease Obligations of such Person and Attributable Debt in respect
of Sale and Leaseback Transactions entered into by such Person;
(5) representing the balance deferred and unpaid of the purchase price of any property; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in
accordance with GAAP. In addition, the term Indebtedness includes all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed
by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified
Person of any indebtedness of any other Person, in each case limited to the maximum amount of
liability of the specified Person with respect to such Lien or Guarantee on the date in question.
Notwithstanding anything in the foregoing to the contrary, Indebtedness shall not include trade
payables or accrued expenses for property or services incurred in the ordinary course of business,
any liability for federal, state, local or other taxes or any settlements or judgments relating to
governmental litigations and/or investigations. The amount of any Indebtedness issued with original
issue discount will be the accreted value of such Indebtedness.
Insurance Subsidiary means a Subsidiary of LifePoint or any Restricted Subsidiary
established for the purpose of insuring the businesses or facilities owned or operated by LifePoint
or any of its Subsidiaries or any joint venture to which they are party or any Person employed by
or on the staff of any such business or facility.
Investment Grade means (1) with respect to S&P, any of the rating categories from and
including AAA to and including BBB- and (2) with respect to Moodys, any of the rating categories
from and including Aaa to and including Baa3.
Investments means, with respect to any Person, all direct or indirect investments by such
Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other
obligations), advances or capital contributions (excluding commission, travel and similar advances
to directors, officers and employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with
all items that are or would be classified as investments on a balance sheet prepared in accordance
with GAAP. If LifePoint or any Restricted Subsidiary sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any
such sale or disposition, such Person is no longer a Restricted Subsidiary, LifePoint will be
deemed to have made an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described above under the
caption Certain CovenantsRestricted Payments; provided that LifePoint shall not have been
deemed to have made an Investment pursuant to the foregoing if LifePoint shall have previously or
concurrently therewith been deemed to have made an Investment in connection with such Equity
Interests. The acquisition by LifePoint or any Restricted Subsidiary of a Person that holds an
Investment in a third Person will be deemed to be an Investment by
80
LifePoint or such Restricted Subsidiary in such third Person in an amount equal to the fair
market value of the Investment held by the acquired Person in such third Person in an amount
determined as provided in the final paragraph of the covenant described above under the caption
Certain CovenantsRestricted Payments; provided, LifePoint or such Restricted Subsidiary shall
not have been deemed to have made an Investment pursuant to the foregoing if LifePoint or any
Restricted Subsidiary shall have previously or concurrently therewith been deemed to have made an
Investment in connection with such acquisition. Investments shall exclude extensions of trade
credit.
Issue Date means the original issue date for the first issuance of notes offered hereby
under the indenture.
Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale or other title retention agreement,
any lease in the nature thereof, any option or other agreement to sell or give a security interest
in and any filing of or agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction.
Limited Originator Recourse means a reimbursement obligation of LifePoint in connection with
a drawing on a letter of credit, revolving loan commitment, cash collateral account or other such
credit enhancement issued to support Indebtedness of a Securitization Subsidiary that LifePoints
board of directors (or a duly authorized committee thereof) determines is necessary to effectuate a
Qualified Securitization Transaction; provided that the available amount of any such form of credit
enhancement at any time shall not exceed 10% of the principal amount of such Indebtedness at such
time; and provided, further, that such reimbursement obligation is permitted to be incurred by
LifePoint pursuant to the covenant described above under the caption Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock.
Net Income means, with respect to any specified Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect of preferred stock
dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on such gain or loss,
realized in connection with: (a) any Asset Sale (without regard to the dollar limitation in the
definition thereof); (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its
Restricted Subsidiaries; or (c) any acquisition, recapitalization or Permitted Investment of
such Person or any of its Restricted Subsidiaries;
(2) any extraordinary, unusual or non-recurring gain, charge, expense or loss (together
with any related provision for taxes on such extraordinary, unusual or non-recurring gain,
charge, expense or loss), including, without limitation, (a) restructuring charges, reserves or
other related expenses, (b) fees, expenses or charges relating to facility shutdowns and
discontinued operations, (c) acquisition integration costs, (d) severance or other employee
termination or relocation costs, expenses or charges, (e) non-cash compensation charges recorded
from grants of stock options, restricted stock, stock appreciation rights and other equity
equivalents to officers, directors and employees and (f) litigation and investigation settlement
costs and related expenses; and
(3) the net income (or loss) from disposed or discontinued operations for the four fiscal
quarters preceding the date of determining Net Income.
Net Proceeds means the aggregate cash proceeds and Cash Equivalents received by LifePoint or
its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash
received upon the sale or other disposition of any non-cash consideration received in any Asset
Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal,
accounting and investment banking fees, sales commissions, any relocation expenses incurred as a
result of the Asset Sale, any taxes paid or payable as a result of the Asset Sale, in each case,
after taking into account any available tax credits or deductions and any tax sharing arrangements,
amounts required to be applied to the repayment of Indebtedness, all distributions and other
payments required to be made to non-majority interest holders in subsidiaries or joint ventures as
a result of such Asset Sale and appropriate amounts to be provided by LifePoint or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by LifePoint or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit
81
liabilities, liabilities related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
Obligations means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation governing any
Indebtedness.
Permitted Business means the business or businesses conducted by LifePoint and its
Restricted Subsidiaries, or any of them, as of the Issue Date and any business ancillary or
complementary thereto.
Permitted Debt has the meaning set forth in the covenant described above under the caption
Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock.
Permitted Investments means:
(1) any Investment in LifePoint or in a Restricted Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by LifePoint or any Restricted Subsidiary in a Person, if as a result of
such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, LifePoint or a Restricted
Subsidiary;
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset
Sale (including any Asset Swap) that was made pursuant to and in compliance with the covenant
described above under the caption Repurchase at the Option of HoldersAsset Sales;
(5) any Investment received to the extent the consideration therefor was the issuance of
Equity Interests (other than Disqualified Stock) of LifePoint;
(6) Hedging Obligations;
(7) intercompany Indebtedness to the extent permitted under the covenant described above
under the caption the Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred
Stock;
(8) Investments in prepaid expenses, negotiable instruments held for collection and lease,
utility and workers compensation, performance and other similar deposits made in the ordinary
course of business and Investments to secure participation in government reimbursement programs;
(9) loans and advances to officers, directors and employees made in the ordinary course of
business;
(10) Investments represented by accounts and notes receivable created or acquired in the
ordinary course of business;
(11) Investments existing on the Issue Date and any renewal or replacement thereof on terms
and conditions not materially less favorable than that being renewed or replaced;
(12) Investments by any qualified or nonqualified benefit plan established by LifePoint or
its Restricted Subsidiaries made in accordance with the terms of such plan, or any Investments
made by LifePoint or any Restricted Subsidiary in connection with the funding thereof;
(13) Investments received in settlement of debts or judgments owed to LifePoint or any
Restricted Subsidiary, including, without limitation, as a result of foreclosure, perfection or
enforcement of any Lien or indebtedness or in connection with any bankruptcy, liquidation,
receivership or insolvency proceeding;
82
(14) Investments in any Subsidiary that constitutes a special purpose entity formed for the
primary purpose of issuing trust preferred or similar securities in a transaction permitted by
the covenant described above under the caption Certain CovenantsIncurrence of Indebtedness
and Issuance of Preferred Stock covenant;
(15) Investments deemed to have been made as a result of the acquisition of a Person
permitted under clause (3) of this definition to the extent that the aggregate fair market value
of such Investments does not exceed 25% of the fair market value of the total consideration paid
to acquire such Person;
(16) Investments by LifePoint or a Restricted Subsidiary in a Securitization Subsidiary in
connection with a Qualified Securitization Transaction, which investment consists of a retained
interest in transferred Receivables and Related Assets;
(17) Investments made within 90 days after the date of the commitment to make the
Investment, that when such commitment was made would have complied with the terms of the
indenture;
(18) Guarantees issued in accordance with the covenant described above under the caption
Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock;
(19) payroll, travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and that are made in
the ordinary course of business;
(20) Investments in a Permitted Joint Venture, together with all other Investments made by
LifePoint or any Restricted Subsidiary pursuant to this clause (20) in an aggregate amount at
the time of such Investment not to exceed $35 million outstanding at any one time;
(21) Investments in any Insurance Subsidiary in an amount which does not at the time made
exceed 125% of the minimum amount of capital required under the laws of the jurisdiction in
which the Insurance Subsidiary is formed (other than any excess capital that would result in any
unfavorable tax or reimbursement impact if distributed), in any self-insurance trust in an
amount not to exceed 125% of the aggregate amount of the risk retained by the Insurance
Subsidiary, LifePoint or any of its Subsidiaries on an annual basis and any Investment by such
Insurance Subsidiary or self-insurance trust which is a legal investment for an insurance
company under the laws of the jurisdiction in which the Insurance Subsidiary is formed or for a
self-insurance trust under the applicable laws;
(22) Investments consisting of Physician Support Obligations made by LifePoint or any
Restricted Subsidiary; and
(23) other Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent changes in value),
when taken together with all other outstanding Investments made pursuant to this clause (23),
not to exceed the greater of $250 million and 5% of Total Assets in the aggregate at any one
time outstanding.
Permitted Joint Venture means, with respect to any Person, (1) any corporation, association,
or other business entity (other than a partnership) of which 50% or less of the total voting power
of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time of determination owned or
controlled, directly or indirectly, by such Person or one or more of the Restricted Subsidiaries of
that Person or a combination thereof and (2) any partnership, joint venture, limited liability
company or similar entity of which 50% or less of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as applicable, are owned
or controlled, directly or indirectly, by such Person or one or more of the other Restricted
Subsidiaries of that Person or a combination thereof whether in the form of membership, general,
special or limited partnership interests or otherwise.
Permitted Liens means:
(1) Liens in favor of LifePoint or its Restricted Subsidiaries;
83
(2) Liens on property of a Person existing at the time such Person is merged with or into
or consolidated with LifePoint or any Restricted Subsidiary; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with LifePoint or the
Restricted Subsidiary;
(3) Liens on property existing at the time of acquisition of the property by LifePoint or
any Restricted Subsidiary, provided that such Liens were in existence prior to the contemplation
of such acquisition;
(4) Liens to secure Indebtedness (including, without limitation, Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant described above under the
caption Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock
covering only the assets acquired with such Indebtedness;
(5) Liens existing on the Issue Date;
(6) Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other appropriate provision as
is required in conformity with GAAP has been made therefor;
(7) Liens securing any Hedging Obligations of LifePoint or any Restricted Subsidiary;
(8) Liens securing any Indebtedness otherwise permitted to be incurred under the indenture,
the proceeds of which are used to refinance Indebtedness of LifePoint or any Restricted
Subsidiary, provided that such Liens extend to or cover only the assets secured by the
Indebtedness being refinanced;
(9) Liens on property of a Person existing at the time such Person becomes a Restricted
Subsidiary, provided that such Liens were not incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary;
(10) statutory Liens and other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith, if LifePoint or any
applicable Restricted Subsidiaries shall have made any reserves or other appropriate provision
required by GAAP;
(11) Liens incurred or deposits made in the ordinary course of business in connection with
workers compensation, unemployment insurance and other types of social security, or to secure
the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance, return-of-money bonds, participation in government
reimbursement programs and other similar obligations;
(12) judgment Liens not giving rise to an Event of Default, so long as any appropriate
legal proceedings which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceedings may be initiated shall
not have expired;
(13) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect with the
conduct of the business of LifePoint or any of its Restricted Subsidiaries;
(14) any interest or title of a lessor in assets or property subject to Capital Lease
Obligations or an operating lease of LifePoint or any Restricted Subsidiary;
(15) Liens incurred in connection with a financing involving the sale or other disposition
of accounts receivable and related assets (including, without limitation, in connection with a
securitization or similar financing);
(16) leases or subleases granted to others not interfering with the ordinary conduct of the
business of LifePoint or any of the Restricted Subsidiaries;
84
(17) bankers liens with respect to the right of set-off arising in the ordinary course of
business against amounts maintained in bank accounts or certificates of deposit in the name of
LifePoint or any Restricted Subsidiary;
(18) the interest of any issuer of a letter of credit in any cash or Cash Equivalents
deposited with or for the benefit of such issuer as collateral for such letter of credit;
provided that the Indebtedness so collateralized is permitted to be incurred by the terms of the
indenture;
(19) any Lien consisting of a right of first refusal or option to purchase an ownership
interest in any Restricted Subsidiary or to purchase assets of LifePoint or any Restricted
Subsidiary, which right of first refusal or option is entered into in the ordinary course of
business or is otherwise permitted under the indenture;
(20) any Lien granted to the trustee pursuant to the terms of the indenture and any
substantially equivalent Lien granted to the respective trustees under the indentures for other
debt securities of LifePoint;
(21) statutory, contractual or common law Liens of landlords and mortgagees of landlords
and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or workmen in
the ordinary course of business;
(22) licenses and sublicenses of intellectual property granted to third parties in the
ordinary course of business;
(23) Liens upon specific items of inventory or other goods and proceeds of any Person
securing such Persons Obligations in respect of bankers acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of such inventory or
other goods;
(24) Liens securing Indebtedness of any Restricted Subsidiary (other than a Guarantor) that
was permitted by the terms of this indenture to be incurred, and related Obligations, which
Liens encumber only assets of such Restricted Subsidiary;
(25) Liens securing Indebtedness incurred pursuant to clause (1) or (22) of the second
paragraph of the covenant described above under the caption Certain CovenantsIncurrence of
Indebtedness and Issuance of Preferred Stock;
(26) Liens securing any Indebtedness incurred pursuant to the first paragraph of the
covenant described above under the caption Certain CovenantsIncurrence of Indebtedness and
Issuance of Preferred Stock so long as, after giving effect to such incurrence, the
Consolidated Secured Debt Ratio shall be equal to or less than 3.0 to 1 as of the date on which
such Lien is incurred;
(27) Liens with respect to obligations that do not at any one time outstanding exceed the
greater of $200 million and 5% of Total Assets; and
(28) Liens on assets transferred to a Securitization Subsidiary or on assets of a
Securitization Subsidiary, in either case, incurred in connection with a Qualified
Securitization Transaction.
Permitted Refinancing Indebtedness means any Indebtedness of LifePoint or any Restricted
Subsidiary issued in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other Indebtedness of LifePoint or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount of such Permitted Refinancing Indebtedness does not exceed the
principal amount of the Indebtedness extended, refinanced, renewed, replaced, defeased or
refunded (plus all accrued interest on the Indebtedness and the amount of all fees, expenses and
premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date not earlier than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than,
the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, except that, notwithstanding the foregoing, in the case of a
refinancing, replacement, defeasance or refunding of the 3.25%
85
Convertible Senior Subordinated Debentures due 2025, such Permitted Refinancing
Indebtedness may have a final maturity date and a Weighted Average Life to Maturity of no
earlier than one year after the final maturity date and Weighted Average Life to Maturity of the
notes;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness is
subordinated in right of payment to the notes on terms not materially less favorable to the
Holders of notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, except, in the case of the 3.25%
Convertible Senior Subordinated Debentures due 2025 and the 3.5% Convertible Senior Subordinated
Notes due 2014, as may be permitted under the covenant described above under the caption
Certain CovenantsLimitation on Restricted Payments; and
(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
was incurred by LifePoint or a Guarantor, the obligor on the Permitted Refinancing Indebtedness
may not be a Restricted Subsidiary that is not a Guarantor.
Person means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability company or government or
other entity.
Physician Support Obligation means:
(1) a loan to or on behalf of, or a Guarantee of Indebtedness of or income of, (x) a
physician or healthcare professional providing service to patients in the service area of a
Hospital operated by LifePoint or any of its Restricted Subsidiaries or (y) any independent
practice association or other entity that is majority owned by any Person or group of Persons
described in clause (x), in either case made or given by LifePoint or any Restricted Subsidiary
of LifePoint:
(a) in the ordinary course of its business; and
(b) pursuant to a written agreement having a period not to exceed five years; or
(2) Guarantees by LifePoint or any Restricted Subsidiary of leases and loans to acquire
property (real or personal) for or on behalf of a physician, healthcare professional or any
independent practice association or other entity that is majority owned by any Person or group
of Persons described in clause (x) above providing service to patients in the service area of a
Hospital operated by LifePoint or any of its Restricted Subsidiaries.
Principal Property means each Hospital (excluding personal property, office fixtures and
equipment (including data processing equipment, vehicles and equipment used on, or useful with,
vehicles)) owned solely by LifePoint and/or one or more of its Subsidiaries and located in the
United States of America unless the Board of Directors of LifePoint determines that any such
hospital is not material to LifePoint and its Subsidiaries taken as a whole.
Qualified Securitization Transaction means any transaction or series of transactions that
may be entered into by LifePoint or any Restricted Subsidiary pursuant to which (a) LifePoint or
any Restricted Subsidiary may sell, convey or otherwise transfer to a Securitization Subsidiary its
interests in Receivables and Related Assets and (b) such Securitization Subsidiary transfers to any
other person, or grants a security interest in, such Receivables and Related Assets, pursuant to a
transaction which is customarily used to achieve a transfer of financial assets under GAAP.
Receivables and Related Assets means any account receivable (whether now existing or arising
thereafter) of LifePoint or any Restricted Subsidiary, and any assets related thereto including all
collateral securing such accounts receivable, all contracts and contract rights and all Guarantees
or other obligations in respect of such accounts receivable, proceeds of such accounts receivable
and other assets which are customarily transferred or in respect of which security interest are
customarily granted in connection with asset securitization transaction involving accounts
receivable.
86
Registration Rights Agreement means the Registration Rights Agreement to be dated September
23, 2010, among LifePoint, the Guarantors identified therein and Barclays Capital Inc., as
representative of the several initial purchasers.
Replacement Assets mean properties or assets substantially similar to the assets disposed of
in a particular Asset Sale and acquired to replace the properties or assets that were the subject
of such Asset Sale or that are otherwise useful in a Permitted Business.
Restricted Investment means an Investment other than a Permitted Investment.
Restricted Subsidiary means any direct or indirect Subsidiary of LifePoint other than an
Unrestricted Subsidiary.
Sale and Leaseback Transaction means, with respect to any Person, an arrangement whereby
such Person enters into a lease of property previously transferred by such Person to the lessor in
contemplation of such leasing.
Securitization Subsidiary means a Subsidiary of LifePoint:
(1) that is designated a Securitization Subsidiary by the board of directors of LifePoint
(or a duly authorized committee thereof);
(2) that does not engage in any activities other than Qualified Securitization Transactions
and any activity necessary or incidental thereto;
(3) no portion of the Indebtedness or any other obligation, contingent or otherwise, of
which
(A) is Guaranteed by LifePoint or any Restricted Subsidiary in any way other than
pursuant to Standard Securitization Undertakings or Limited Originator Recourse,
(B) is recourse to or obligates LifePoint or any other Restricted Subsidiary in any way
other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse,
or
(C) subjects any property or asset of LifePoint or any other Restricted Subsidiary,
directly or indirectly, contingently or otherwise, to the satisfaction thereof other than
pursuant to Standard Securitization Undertakings or Limited Originator Recourse;
(4) with respect to which neither LifePoint nor any other Restricted Subsidiary has any
obligation to maintain or preserve its financial condition or cause it to achieve certain levels
of operating results; and
(5) with which neither LifePoint nor any Restricted Subsidiary has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to LifePoint or
such Restricted Subsidiary than those that might be obtained at the time from persons that are
not Affiliates of LifePoint, other than Standard Securitization Undertakings and fees payable in
the ordinary course of business in connection with servicing accounts receivable of such entity.
Any designation of a Subsidiary as a Securitization Subsidiary shall be evidenced to the trustee by
filing with the trustee a certified copy of the resolution of the board of directors of LifePoint
giving effect to the designation and an officers certificate certifying that the designation
complied with the preceding conditions.
Significant Subsidiary means any Subsidiary that would be a significant subsidiary as
defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as
such Regulation is in effect on the date hereof.
Standard Securitization Undertakings means representations, warranties, covenants and
indemnities entered into by LifePoint or any Restricted Subsidiary that are reasonably customary in
accounts receivable securitization transactions, as the case may be.
87
Stated Maturity means, with respect to any installment of interest or principal on any
series of Indebtedness, the date on which the payment of interest or principal was scheduled to be
paid in the original documentation governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
Subordinated Indebtedness means any Indebtedness of LifePoint or any Guarantor which is
subordinated in right of payment to the notes or any Subsidiary Guarantee, as applicable, pursuant
to a written agreement to that effect.
Subsidiary means, with respect to any specified Person, (a) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the time be owned or
controlled, directly or indirectly, by such Person or by one or more of its Restricted Subsidiaries
or by such Person and one or more of its Restricted Subsidiaries, or (b) any partnership, limited
liability company, association, joint venture or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall at the time be so owned or
controlled.
Subsidiary Guarantee means a guarantee of notes pursuant to the indenture.
Total Assets means, as of any date of determination, the total assets of LifePoint and its
Restricted Subsidiaries as shown on the balance sheet for the most recently completed quarter for
which internal financial statements are available determined in accordance with GAAP.
Treasury Rate means, as of the date the redemption notice is given to holders of the notes,
the yield to maturity as of such date (as compiled by and published in the most recent Federal
Reserve Statistical Release H. 15(519), which has become publicly available at least two business
days prior to the date of the redemption notice for which such computation is being made (or if
such Statistical Release is no longer published, as reported in any publicly available source of
similar market data)), of United States Treasury securities with a constant maturity most nearly
equal to the period from the relevant redemption date to October 1, 2015; provided that, if such
period is not equal to the constant maturity of the United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if such period is less than one
year, the weekly average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
Unrestricted Subsidiary means any Subsidiary of LifePoint that is designated by the Board of
Directors of LifePoint as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to
the extent that such Subsidiary:
(1) has no Indebtedness other than Indebtedness that is without recourse to LifePoint or
its Restricted Subsidiaries;
(2) is not party to any agreement, contract, arrangement or understanding with LifePoint or
any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or
understanding are not materially less favorable to LifePoint or such Restricted Subsidiary than
those that might be obtained at the time from Persons who are not Affiliates of LifePoint;
(3) is a Person with respect to which neither LifePoint nor any of its Restricted
Subsidiaries has any (a) continuing direct or indirect obligation to subscribe for additional
Equity Interests or (b) direct or indirect obligation to maintain or preserve such Persons
financial condition or to cause such Person to achieve any specified levels of operating
results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of LifePoint or any of its Restricted Subsidiaries.
In addition, any Subsidiary that constitutes a special purpose entity formed for the primary
purpose of financing receivables or for the primary purpose of issuing trust preferred or similar
securities in connection with a transaction permitted by the covenant described above under the
caption Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock shall be,
and any Insurance Subsidiary may be, an Unrestricted Subsidiary.
88
Any designation of a Subsidiary of LifePoint as an Unrestricted Subsidiary after the Issue
Date will be evidenced to the trustee by filing with the trustee a certified copy of the resolution
of the Board of Directors of LifePoint giving effect to such designation and an officers
certificate certifying that such designation complied with the preceding conditions and was
permitted by the covenant described above under the caption Certain CovenantsRestricted
Payments. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to
be incurred by a Restricted Subsidiary of LifePoint as of such date and, if such Indebtedness is
not permitted to be incurred as of such date under the covenant described above under the caption
Certain CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock, LifePoint will
be in default of such covenant. The Board of Directors of LifePoint may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1)
such Indebtedness is permitted under the covenant described above under the caption Certain
CovenantsIncurrence of Indebtedness and Issuance of Preferred Stock, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four quarter reference period;
and (2) no Default or Event of Default would be in existence following such designation.
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at
the time entitled to vote in the election of the Board of Directors of such Person.
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the
number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect of the Indebtedness, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and the making of
such payment; by
(2) the then outstanding principal amount of such Indebtedness.
89
BOOK-ENTRY SETTLEMENT AND CLEARANCE
The Global Notes
The outstanding notes were initially issued in the form of several registered notes in global
form, without interest coupons, as follows:
|
|
notes sold to qualified institutional buyers under Rule 144A were represented by the Rule
144A global note; and |
|
|
|
notes sold in offshore transactions to non-U.S. persons in reliance on Regulation S were
represented by the Regulation S global note. |
Upon issuance, each of the outstanding notes were, and each of the exchange notes will be,
deposited with the Trustee as custodian for The Depository Trust Company (DTC) and registered in
the name of Cede & Co., as nominee of DTC. |
Ownership of beneficial interests in each note was, and will be, limited to persons who have
accounts with DTC (DTC participants) or persons who hold interests through DTC participants. We
expect that under procedures established by DTC:
|
|
upon deposit of each global note with DTCs custodian, DTC will credit portions of the
principal amount of the global note to the accounts of the DTC participants; and |
|
|
|
ownership of beneficial interests in each global note will be shown on, and transfer of
ownership of those interests will be effected only through, records maintained by DTC (with
respect to interests of DTC participants) and the records of DTC participants (with respect to
other owners of beneficial interests in the global note). |
Beneficial interests in the global notes may not be exchanged for notes in physical,
certificated form except in the limited circumstances described below.
Exchanges Among the Global Notes
After consummation of the exchange offer, beneficial interests in one old note may generally
be exchanged for interests in another old note and beneficial interest in one new note may
generally be exchanged for interest in another new note. Depending on which global note the
transfer is being made, the Trustee may require the seller to provide certain written
certifications in the form provided in the indenture.
A beneficial interest in a global note that is transferred to a person who takes delivery
through another global note will, upon transfer, become subject to any transfer restrictions and
other procedures applicable to beneficial interests in the other global note.
Book-Entry Procedures for the Global Notes
All interests in the global notes will be subject to the operations and procedures of DTC. We
provide the following summaries of those operations and procedures solely for the convenience of
investors. The operations and procedures of DTC are controlled by DTC and may be changed at any
time. Neither we nor the initial purchasers are responsible for those operations or procedures.
DTC has advised us that it is:
|
|
a limited purpose trust company organized under the laws of the State of New York; |
|
|
|
a banking organization within the meaning of the New York State Banking Law; |
|
|
|
a member of the Federal Reserve System; |
90
|
|
a clearing corporation within the meaning of the Uniform Commercial Code; and |
|
|
|
a clearing agency registered under Section 17A of the Securities Exchange Act of 1934. |
DTC was created to hold securities for its participants and to facilitate the clearance and
settlement of securities transactions between its participants through electronic book-entry
changes to the accounts of its participants. DTCs participants include securities brokers and
dealers, including the initial purchasers, banks and trust companies, clearing corporations and
other organizations. Indirect access to DTCs system is also available to others such as banks,
brokers, dealers and trust companies; these indirect participants clear through or maintain a
custodial relationship with a DTC participant, either directly or indirectly. Investors who are
not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC
participants or indirect participants in DTC.
So long as DTCs nominee is the registered owner of a global note, that nominee will be
considered the sole owner or holder of the notes represented by that global note for all purposes
under the indenture. Except as provided below, owners of beneficial interests in a global note:
|
|
will not be entitled to have notes represented by the global note registered in their
names; |
|
|
|
will not receive or be entitled to receive physical, certificated notes; and |
|
|
|
will not be considered the owners or holders of the notes under the indenture for any
purpose, including with respect to the giving of any direction, instruction or approval to the
Trustee under the indenture. |
As a result, each investor who owns a beneficial interest in a global note must rely on the
procedures of DTC to exercise any rights of a holder of notes under the indenture (and, if the
investor is not a participant or an indirect participant in DTC, on the procedures of the DTC
participant through which the investor owns its interest).
Payments of principal, premium (if any) and interest with respect to the notes represented by
a global note will be made by the Trustee to DTCs nominee as the registered holder of the global
note. Neither we nor the Trustee will have any responsibility or liability for the payment of
amounts to owners of beneficial interests in a global note, for any aspect of the records relating
to or payments made on account of those interests by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to those interests.
Payments by participants and indirect participants in DTC to the owners of beneficial
interests in a global note will be governed by standing instructions and customary industry
practice and will be the responsibility of those participants or indirect participants and DTC.
Transfers between participants in DTC will be effected under DTCs procedures and will be
settled in same-day funds. If the laws of a jurisdiction require that certain persons take
physical delivery of securities in definitive form, the ability to transfer beneficial interests in
a global note to such persons may be limited. Because DTC can only act on behalf of participants,
who in turn act on behalf of indirect participants and certain banks, the ability of a person
holding a beneficial interest in a global note to pledge its interest to a person or entity that
does not participate in the DTC system, or otherwise take actions in respect of its interest, may
be affected by the lack of a physical security.
DTC has agreed to the above procedures to facilitate transfers of interests in the global
notes among participants in DTC. However, DTC is not obligated to perform these procedures and may
discontinue or change these procedures at any time. Neither we nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect participants of their
obligations under the rules and procedures governing its operations.
Certificated Notes
Notes in physical, certificated form will be issued and delivered to each person that DTC
identifies as a beneficial owner of the related notes only if:
|
|
DTC notifies us at any time that it is unwilling or unable to continue as depositary for
the global notes and a successor depositary is not appointed within 90 days;
|
91
|
|
DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934
and a successor depositary is not appointed within 90 days; |
|
|
we, at our option, notify the Trustee that we elect to cause the issuance of certificated
notes; or |
|
|
|
certain other events provided in the indenture should occur. |
92
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax consequences to U.S.
holders and non-U.S. holders (each, as defined below) of the acquisition, ownership and disposition
of the exchange notes acquired pursuant to the Exchange Offer. This discussion is limited to U.S.
holders and non-U.S. holders who hold the exchange notes as capital assets (generally, property
held for investment).
This discussion does not address all aspects of U.S. federal income tax that may be important
to beneficial owners in light of their particular circumstances or the U.S. federal income tax
consequences to beneficial owners subject to special treatment under U.S. federal tax law,
including, without limitation, banks and other financial institutions, insurance companies, mutual
funds, tax-exempt organizations, retirement plans, expatriates, partnerships or other pass-through
entities, broker-dealers, traders in securities or persons holding the exchange notes as part of a
straddle, hedge, conversion transaction, synthetic security or other integrated investment,
U.S. holders (as defined below) whose functional currency is not the U.S. dollar, and persons
subject to the alternative minimum tax. In addition, this discussion does not address any tax
considerations arising under other U.S. federal tax laws (such as estate or gift tax laws), or
state, local or non-U.S. tax laws.
If an entity treated as a partnership for U.S. federal income tax purposes is the beneficial
owner of an exchange note, the tax treatment of a partner in the partnership will generally depend
upon the status of the partner and the activities of the partnership. A beneficial owner of
exchange notes that is a partnership for U.S. federal income tax purposes and partners in such a
partnership are not included in the discussions pertaining to U.S. holders and non-U.S. holders,
below, and should consult their own tax advisors about the U.S. federal income and other tax
consequences of acquiring, owning and disposing of the exchange notes.
The following discussion is based on the Internal Revenue Code of 1986, as amended (the
Code), Treasury regulations promulgated thereunder (Treasury Regulations) and administrative
and judicial interpretations, all as in effect as of the date hereof, and all of which are subject
to change, possibly on a retroactive basis, which may materially and adversely affect the tax
consequences described herein. There can be no assurance that the IRS could not successfully
challenge any of the conclusions set forth below.
This summary of certain U.S. federal income tax considerations is not intended to be, and
should not be construed to be, legal or tax advice to any particular beneficial owner of the
exchange notes. Potential investors should consult their own tax advisors as to the U.S. federal
income, estate and gift tax consequences to them resulting from their acquisition, ownership or
disposition of the exchange notes acquired in the Exchange Offer, as well as the consequences to
them arising under the laws of any state, local, non-U.S. or other taxing jurisdiction or any
applicable tax treaties, and the possible effect of changes in applicable tax laws.
The Exchange Offer
The exchange of outstanding notes for exchange notes pursuant to the Exchange Offer will not
constitute a taxable event for U.S. federal income tax purposes. As a result:
|
|
a holder will not recognize taxable gain or loss as a result of the exchange of its
outstanding notes for exchange notes pursuant to the Exchange Offer; |
|
|
|
the holding period of the exchange notes will include the holding period of the
outstanding notes surrendered in exchange therefor; and |
|
|
|
a holders adjusted tax basis in the exchange notes will be the same as the holders
adjusted tax basis in the outstanding notes surrendered therefor. |
Effect of Certain Additional Payments
In certain circumstances (see Description of the Exchange NotesOptional Redemption and
Description of the Exchange NotesRepurchase at the Option of HoldersChange of Control), we
may be obligated to pay amounts on the exchange notes that are in excess of stated interest or
principal on the exchange notes. These
93
potential payments may implicate the provisions of the Treasury Regulations relating to contingent
payment debt instruments (the CPDI Regulations). One or more contingencies will not cause the
exchange notes to be treated as contingent payment debt instruments if, as of the issue date, each
such contingency is considered remote or incidental or, in certain circumstances, it is
significantly more likely that none of the contingencies will occur. We believe that the potential
for additional payments on the exchange notes should not cause the exchange notes to be treated as
contingent payment debt instruments under the CPDI Regulations. Our determination is binding on a
holder unless such a holder discloses its contrary position in the manner required by applicable
Treasury Regulations. However, the Internal Revenue Service (IRS) may take a different position,
which could require a holder to accrue income on its exchange notes in excess of stated interest
and any otherwise applicable original issue discount (OID), and to treat any income realized on
the taxable disposition of an exchange note as ordinary income rather than capital gain. The
remainder of this discussion assumes that the exchange notes will not be treated as contingent
payment debt instruments. Investors should consult their own tax advisors regarding the possible
application of the contingent payment debt instrument rules to the exchange notes.
Tax Consequences to U.S. Holders
As used in this discussion, the term U.S. holder means a beneficial owner of the exchange
notes that is, for U.S. federal income tax purposes:
|
|
|
an individual who is a citizen or resident of the United States; |
|
|
|
|
a corporation created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; |
|
|
|
|
an estate the income of which is subject to U.S. federal income tax regardless of its
source; or |
|
|
|
|
a trust if (1) a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (2) it was in existence before August 20,
1996 and has a valid election in effect under applicable Treasury regulations to be treated
as a domestic trust. |
Interest on the Exchange Notes
We expect, and this discussion assumes, that the exchange notes will not be issued with more
than a de minimis amount of OID, if any. As such, interest paid on the exchange notes will
generally be taxable to a U.S. holder as ordinary interest income at the time it accrues or is
received in accordance with the holders method of accounting for U.S. federal income tax purposes.
If, contrary to such expectations, the exchange notes are issued with more than a de minimis
amount of OID, a U.S. holder generally will be required to include the OID in gross income (as
ordinary income) as it accrues in accordance with the constant yield method, in advance of the
receipt of cash attributable to that income (regardless of the U.S. holders method of tax
accounting).
The rules regarding OID are complex and the rules above may not apply in all cases.
Accordingly, U.S. holders should consult their own tax advisors regarding their application.
Sale or Other Taxable Disposition of the Exchange Notes
Upon the sale or other taxable disposition of an exchange note (including a retirement or a
redemption), a U.S. holder generally will recognize taxable gain or loss equal to the difference
between the amount realized on such disposition and the holders adjusted tax basis in the exchange
note. For these purposes, the amount realized does not include any amount attributable to accrued
but unpaid stated interest, which is treated as ordinary income to the extent not previously
included in income. A U.S. holders adjusted tax basis in an exchange note will generally be the
holders cost for the exchange note, increased by OID, if any, such holder has previously included
in income.
Gain or loss realized on the sale or other taxable disposition of an exchange note will
generally be capital gain or loss and will be long term capital gain or loss if at the time of such
disposition the exchange note has been held
94
for more than one year. Long-term capital gains of non-corporate taxpayers are generally
eligible for reduced rates of taxation. The deductibility of capital losses is subject to certain
limitations.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection with interest payments on the
exchange notes, accruals of OID (if any), and the proceeds from a sale or other taxable disposition
(including a retirement or redemption) of the exchange notes, unless the U.S. holder is an exempt
recipient such as a corporation. A U.S. holder will be subject to backup withholding on these
amounts at the applicable rate if the U.S. holder fails to provide its taxpayer identification
number to the paying agent and comply with certain certification procedures or otherwise establish
an exemption from backup withholding. Backup withholding is not an additional tax and the amount of
any backup withholding will be allowed as a credit against the holders U.S. federal income tax
liability and may entitle the holder to a refund, provided that the required information is timely
furnished to the IRS.
Medicare Tax
For taxable years beginning after December 31, 2012, a U.S. holder that is an individual or
estate, or a trust that does not fall into a special class of trusts that is exempt from such tax,
will be subject to a 3.8% tax on the lesser of (1) the U.S. holders net investment income (in
the case of individuals) or undistributed net investment income (in the case of estates and
trusts) for the relevant taxable year and (2) the excess of the U.S. holders modified adjusted
gross income (in the case of individuals) or adjusted gross income (in the case of estates and
trusts) for the taxable year over a certain threshold (which in the case of individuals will be
between $125,000 and $250,000, depending on the individuals circumstances). A U.S. holders net
investment income generally will include its interest income on the exchange notes and its net
gains from the disposition of the exchange notes, unless such interest income or net gains are
derived in the ordinary course of the conduct of a trade or business (other than a trade or
business that consists of certain passive or trading activities). U.S. holders that are
individuals, estates or trusts should consult their own tax advisors regarding the applicability of
the Medicare tax to their income and gains in respect of the exchange notes.
Tax Consequences to Non-U.S. Holders
As used herein, the term non-U.S. holder means a beneficial owner of the exchange notes that
is, for U.S. federal income tax purposes:
|
|
|
an individual nonresident alien; |
|
|
|
|
a foreign corporation; or |
|
|
|
|
a foreign estate or trust. |
Interest on the Exchange Notes
Subject to the discussion of backup withholding below, payments of interest (which, for
purposes of this discussion of non-U.S. holders, includes any OID) on the exchange notes to a
non-U.S. holder will generally not be subject to the U.S. federal income tax or withholding tax
under the portfolio interest rule, provided that:
(1) the non-U.S. holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock entitled to vote;
(2) the non-U.S. holder is not a controlled foreign corporation that is related to us,
actually or by attribution;
(3) the non-U.S. holder is not a bank receiving the interest pursuant to a loan agreement
entered into in the ordinary course of its trade or business;
(4) such payments are not effectively connected with a trade or business of the non-U.S.
holder conducted in the United States; and
95
(5) either:
(a) the non-U.S. holder certifies under penalties of perjury on IRS Form W-8 BEN or a
suitable substitute form that it is not a U.S. person as defined in the Code, and provides
its name and address, and taxpayer identification number, if any; or
(b) a securities clearing organization, bank or other financial institution that holds
customers securities in the ordinary course of its trade or business and holds the exchange
notes certifies under penalties of perjury that such statement has been received from the
non-U.S. holder and furnishes a copy thereof.
Interest that does not qualify for the portfolio interest rule and that is not effectively
connected income will generally be subject to withholding tax at a rate of 30% unless a non-U.S.
holder is entitled to a reduced rate of withholding tax or an exemption from U.S. withholding tax
under an applicable income tax treaty and provides a properly executed IRS Form W-8BEN or a
suitable substitute form, certifying its entitlement to such reduction or exemption.
If the interest accrued on an exchange note is effectively connected with a trade or
business of a non-U.S. holder conducted in the United States, the non-U.S. holder can obtain an
exemption from withholding tax by providing a properly completed IRS Form W-8ECI or a suitable
substitute form prior to the payment of interest. Payments of interest on an exchange note exempt
from the withholding tax as effectively connected income nevertheless may be subject to net income
tax in generally the same manner as those of a U.S. holder. In addition, if such non-U.S. holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30% (or lower applicable
treaty rate) of its earnings and profits for the taxable year, subject to adjustments, that are
effectively connected with its conduct of a trade or business in the United States.
Sale or Other Taxable Disposition of the Exchange Notes
Except as described below under Backup Withholding and Information Reporting, a non-U.S.
holder generally will not be subject to U.S. federal income tax or withholding tax with respect to
gain realized on a sale or other taxable disposition of an exchange note (including a retirement or
redemption) unless (1) in the case of an individual, the non-U.S. holder is present in the United
States for 183 days or more in the taxable year of the disposition and certain other conditions are
met, in which case such recognized gain (net of certain U.S. source losses) would be subject to
United States federal income tax at a 30% rate (or lower applicable treaty rate) or (2) such gain
is effectively connected with a trade or business of the non-U.S. holder conducted in the United
States (and, if certain treaties apply, is attributable to a U.S. permanent establishment
maintained by the non-U.S. holder). Effectively connected gain will generally be subject to net
income tax as if the non-U.S. holder were a U.S. holder. In addition, if such non-U.S. holder is a
foreign corporation, it may be subject to the branch profits tax described above).
Backup Withholding and Information Reporting
We must report annually to the IRS and to each non-U.S. holder the amount of interest paid to
that holder and the tax, if any, withheld from those payments. These reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable tax treaty. Copies of
the information returns reporting those payments and withholding may also be made available to the
tax authorities in the country in which the non-U.S. holder is a resident under the provisions of
an applicable income tax treaty or agreement.
Backup withholding and additional information reporting will generally not apply to payments
of interest on the exchange notes made by us or our paying agent to a non-U.S. holder if the
certification described in clause (5) under Interest on the Exchange Notes above is received.
Backup withholding and information reporting generally will not apply to payments of proceeds
from the sale or other taxable disposition (including a retirement or redemption) of an exchange
note made to a non-U.S. holder by or through the foreign office of a broker. However, information
reporting requirements will apply if such broker is, for U.S. federal income tax purposes, a U.S.
person or has certain other enumerated connections with the United States, unless such broker has
documentary evidence in its records that the holder is a non-U.S. person and certain other
conditions are met, or the holder otherwise establishes an exemption. Payments of proceeds from the
sale or
96
other taxable disposition of an exchange note made to a non-U.S. holder by or through the
United States office of a broker are subject to information reporting and backup withholding at the
applicable rate unless the holder certifies, under penalty of perjury, that it is a non-U.S. person
and that it satisfies certain other conditions, or otherwise establishes an exemption. Backup
withholding is not an additional tax and a non-U.S. holder may obtain a refund or a credit against
such non-U.S. holders U.S. federal income tax liability of any amounts withheld under the backup
withholding rules, provided the required information is furnished to the IRS in a timely manner.
Non-U.S. holders should consult their own tax advisors regarding the application of
information reporting and backup withholding rules in their particular situations, the availability
of an exemption therefrom and the procedure for obtaining such an exemption, if available.
Recently Enacted Legislation
Recently enacted legislation regarding foreign account tax compliance, effective for payments
made after December 31, 2012, imposes a withholding tax of 30% on interest and gross proceeds from
the disposition of certain debt instruments paid to certain foreign entities unless various
information reporting and certain other requirements are satisfied. However, the withholding tax
will not be imposed on payments pursuant to obligations outstanding as of March 18, 2012. In
addition, certain account information with respect to U.S. holders who hold the exchange notes
through certain foreign financial institutions may be reportable to the IRS. Investors should
consult with their own tax advisors regarding the possible implications of this recently enacted
legislation to them.
The preceding discussion is for general information purposes only and is not tax advice. Each
potential investor should consult its own tax advisors as to its particular tax consequences with
respect to the acquisition, ownership and disposition of the exchange notes acquired in the
Exchange Offer, including the applicability and effect of other federal or state, local and foreign
tax laws, and the possible effects of changes in tax laws.
97
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant to an exchange
offer must acknowledge that
(i) it has not entered into any arrangement or understanding with the
Company or an affiliate of the Company to distribute such exchange
notes and (ii)
it will deliver a prospectus in connection with any resale of such
exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of exchange notes received in exchange for
outstanding notes where such outstanding notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period of 90 days after the
consummation of the exchange offers, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In addition, all dealers
effecting transactions in the exchange notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange
notes received by broker-dealers for their own account pursuant to an exchange offer may be sold
from time to time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the exchange notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to purchasers or
through brokers or dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account pursuant to an exchange
offer and any broker or dealer that participates in a distribution of such exchange notes may be
deemed to be an underwriter within the meaning of the Securities Act, and any profit of any such
resale of exchange notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of transmittal states
that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an underwriter within the meaning of the Securities Act.
For a period of 90 days after the consummation of the exchange offers, we will promptly send
additional copies of this prospectus and any amendments or supplements to this prospectus to any
broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all
expenses incident to the exchange offers (including the expenses of one counsel for the holders of
the outstanding notes) other than commissions or concessions of any broker-dealers and will
indemnify you (including any broker-dealers) against certain liabilities, including liabilities
under the Securities Act.
98
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for us by Dewey & LeBoeuf LLP,
New York, New York.
EXPERTS
The consolidated financial statements of LifePoint Hospitals, Inc. appearing in LifePoint
Hospitals, Inc.s Annual Report (Form 10-K) for the year ended December 31, 2010, and the
effectiveness of LifePoint Hospitals, Inc.s internal control over financial reporting as of
December 31, 2010 have been audited by Ernst & Young LLP, independent registered public accounting
firm, as set forth in their reports thereon, included therein, and incorporated herein by
reference. Such consolidated financial statements and LifePoint Hospitals, Inc.s managements
assessment of the effectiveness of internal control over financial reporting as of December 31,
2010 are incorporated herein by reference in reliance upon such reports given on the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
We file annual, quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements or other information we file at the SECs public
reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also available to the
public from commercial document retrieval services and at the Internet website maintained by the
SEC at http://www.sec.gov.
This prospectus incorporates by reference the documents set forth below that LifePoint has
previously filed with the SEC. These documents contain important information about LifePoint. The
information incorporated by reference is deemed to be part of this prospectus, except for any
information superseded by information in, or incorporated by reference in, this prospectus.
|
|
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2010; |
|
|
|
|
Quarterly Report on Form 10-Q for the three months ended March 31, 2011; and |
|
|
|
|
Current Report on Form 8-K dated January 26, 2011. |
We are also incorporating by reference additional documents that we file with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this prospectus and
termination or completion of this exchange offer (excluding any information furnished pursuant to
Items 2.02 or 7.01 on any current report on Form 8-K).
You can obtain any of the documents incorporated by reference through us or the SEC. Documents
incorporated by reference are available from us without charge, excluding all exhibits unless we
have specifically incorporated by reference an exhibit in this prospectus. You may obtain documents
incorporated by reference in this prospectus by requesting them in writing or by telephone from:
LifePoint Hospitals, Inc.
Attention: Investor Relations
103 Powell Court
Brentwood, Tennessee 37027
Telephone: (615) 372-8532
You can also get more information by visiting our investor relations website at
http://www.lifepointhospitals.com. Information contained on our website or that can be accessed
through our website is not incorporated by reference in this prospectus and does not constitute a
part of this prospectus and you should not rely on that information.
99
$400,000,000
Offer to Exchange Registered 6.625% Senior Notes due 2020 for all of our Outstanding Unregistered
6.625% Senior Notes due 2020
June 1, 2011