-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QuUR5TBvctAaAyAmDq9lf8oXtzAh09yZfzI3dxCET0MBOzoHnFxkVmF7oWU92nbT oBmaYmwH4jmpy4CiNTbGcQ== 0000898430-00-000240.txt : 20000203 0000898430-00-000240.hdr.sgml : 20000203 ACCESSION NUMBER: 0000898430-00-000240 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOTAL RENAL CARE HOLDINGS INC CENTRAL INDEX KEY: 0000927066 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 510354549 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-69227 FILM NUMBER: 518950 BUSINESS ADDRESS: STREET 1: 21250 HAWTHORNE BLVD STREET 2: SIE 800 CITY: TORRANCE STATE: CA ZIP: 90503-5517 BUSINESS PHONE: 3107922600 MAIL ADDRESS: STREET 1: 21250 HAWTHORNE BLVD SUITE 800 STREET 2: 21250 HAWTHORNE BLVD SUITE 800 CITY: TORRANCE STATE: CA ZIP: 90503-5517 FORMER COMPANY: FORMER CONFORMED NAME: TOTAL RENAL CARE INC DATE OF NAME CHANGE: 19940719 424B3 1 FINAL PROSPECTUS FILED PURSUANT TO RULE 424(b)(3) REGISTRATION NO. 333-69227 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Prospectus January 28, 2000 [Logo of Total Renal Care Holdings, Inc.] Total Renal Care Holdings, Inc. $345,000,000 Principal Amount 7% Convertible Subordinated Notes due 2009 10,515,087 Shares of Common Stock - -------------------------------------------------------------------------------- . Maturity The notes are due on May 15, 2009. . Conversion You may convert the notes into shares of our common stock at any time, in whole or in part, at $32.81 per share, subject to adjustment. . Redemption We may redeem the notes on or after November 15, 2001. . Mandatory offer to repurchase If we sell all or substantially all of our assets or experience specific kinds of changes in control, we must offer to repurchase the notes. . Ranking The notes are general, unsecured obligations, junior to all of our existing and future senior debt and, effectively, all existing and future liabilities of our subsidiaries. . Interest Interest on the notes is payable on May 15 and November 15 of each year at the rate of 7% per year, commencing on May 15, 1999. . Markets for our securities The notes trade on the PORTAL market. The common stock trades on the New York Stock Exchange under the symbol "TRL." On January 27, 2000, the last reported sales price for the common stock was $4.75 per share. . Selling securityholders The selling securityholders listed on page 9 are offering the notes and common stock for resale. - -------------------------------------------------------------------------------- This investment involves risk. See "Risk Factors" beginning on page 1. - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- Our Business............................................................... i Recent Developments........................................................ i Risk Factors............................................................... 1 Use of Proceeds............................................................ 8 Ratio of Earnings to Fixed Charges......................................... 8 Selling Securityholders.................................................... 9 Description of Notes....................................................... 13 Description of Capital Stock............................................... 25 Description of Debt........................................................ 27 U.S. Federal Tax Considerations............................................ 30 Plan of Distribution....................................................... 36 Disclosure Regarding Forward-Looking Statements............................ 37 Market Data................................................................ 37 Incorporation by Reference................................................. 37 Legal Matters.............................................................. 38 Experts.................................................................... 38 Where to Learn About Us.................................................... 38
OUR BUSINESS We are the largest worldwide independent provider of integrated dialysis services for patients suffering from chronic kidney failure, also known as end stage renal disease, or ESRD. We provide dialysis and ancillary services to our patients through a network of outpatient dialysis facilities. In addition, we provide inpatient dialysis services at hospitals. We also offer ancillary services including ESRD laboratory and pharmacy services, physician network development and management, pre- and post-transplant services, ESRD clinical research programs, and vascular access management, which is the care of the entry site to a patient's bloodstream. Our principal executive offices are located at Suite 800, 21250 Hawthorne Boulevard, Torrance, California 90503-5517 and our telephone number is (310) 792-2600. RECENT DEVELOPMENTS Our credit facilities contain numerous financial and operating covenants. Throughout 1999 we either complied with these covenants or obtained waivers and continued to utilize these credit facilities. Based on our expectations regarding our fourth quarter 1999 financial results, we anticipate not being in compliance with the covenants in our credit facilities when measured as of December 31, 1999. Our anticipated inability to maintain compliance results from an expected loss for the fourth quarter of 1999, primarily due to asset impairments and valuation losses. Preliminary fourth quarter asset impairments and valuation losses include the following: . Impairment loss of $65 to $85 million on non-continental U.S. operations held for sale as of December 31, 1999. We are actively pursuing the sale of most of our non-continental U.S operations and plan to discontinue all other non-continental U.S. operations. . Provision for uncollectible accounts receivable of $55 to $65 million based on current collection experience. . Other asset impairments and valuation losses of $25 to $40 million associated with facility closures and other facility related assessments. If our lenders do not waive this failure to comply, a majority of the lenders could declare an event of default, which would allow the lenders to accelerate payment of all amounts due under our credit facilities. Additionally, this noncompliance will result in higher interest costs, and the lenders may require additional concessions from us before giving us a waiver. In the event of default under the credit facilities, the holders of our convertible subordinated notes could also declare us to be in default. We are highly leveraged, and we would be unable to pay the accelerated amounts that would become immediately payable if a default is declared. i RISK FACTORS In addition to the other information set forth in this prospectus, you should carefully consider the following factors. If we become insolvent, we may not have sufficient assets to pay our debt to you. If we become insolvent, file for bankruptcy, reorganize our business or close it down, we will have to repay all of the debt senior to the notes before we can pay the amounts we owe to you. If we default on payments due on any of our debt, or if our debt under the notes is accelerated because we have violated a covenant in the indenture governing the notes, we must repay all of our senior debt before we repay you. If any of these things happen, our assets may not be sufficient to repay all of the debt we owe to you. The notes are unsecured obligations, junior to all of our existing and future senior debt, including our credit facilities, and, effectively, all existing and future liabilities, including trade payables, of our subsidiaries. As of September 30, 1999, the notes were subordinate to approximately $952.9 million of senior debt, primarily our credit facilities. We had an aggregate of $1.69 billion of liabilities as of September 30, 1999, $160.0 million of which is debt of our subsidiaries. The indenture governing the notes does not prevent us or our subsidiaries from incurring substantial additional debt in the future, including debt senior to the notes. As of September 30, 1999, our borrowing availability under our credit facilities was approximately $89.1 million. If new debt is added to our current debt levels, the risks described above could intensify. For more details, see the "Description of Debt" section and the heading "How the notes rank in comparison to our other debt" in the "Description of Notes" section. We may not have sufficient cash flow from our business to pay the notes. The amount of our outstanding debt is large compared to the net book value of our assets, and we have substantial repayment obligations under our outstanding debt. As of September 30, 1999 we had: . Total consolidated debt of approximately $1.5 billion; . Stockholders' equity of approximately $476 million; and . A ratio of earnings to fixed charges of 1.12. The following chart shows our aggregate interest and principal payments due on all of our currently outstanding debt for each of the next five fiscal years. Under interest swap agreements covering $700 million of debt, the interest rate under our credit facilities varies based on the amount of debt we incur relative to our assets and equity. Accordingly, the amount of these interest payments could fluctuate in the future. In addition, because of our anticipated inability to maintain compliance with all of the financial covenants in our credit facilities, our lenders could accelerate payment of all amounts due under our credit facilities.
Interest Payments Principal Payments ----------------- ------------------ For the year ending December 31: 2000 $119,833,000 $ 23,702,000 2001 118,907,000 8,774,000 2002 109,390,000 103,442,000 2003 77,172,000 446,959,000 2004 66,200,000 4,000,000
Due to the large amount of these principal and interest payments, we may not have enough cash to pay the interest on the notes as it becomes due. . If our subsidiaries could not make payments to us, we could not make payments on the notes. TRCH is a holding company, and our only material assets are the stock of our subsidiaries. Our subsidiaries conduct all of our operations and own almost all of our assets. Consequently, our operating cash 1 flow and our ability to repay our debt, including the notes, depends upon the operating cash flow of our subsidiaries and their payment of funds to us. In addition, the ability of our subsidiaries to make payments to us depends on applicable law and restrictions under our credit facilities and other present or future contracts of our subsidiaries. These contracts may include requirements to maintain minimum levels of working capital and other assets. The notes do not limit the ability of our subsidiaries to agree to these contractual restrictions in the future. The large amount and terms of our outstanding debt may prevent us from taking actions we would otherwise consider in our best interest. Our credit facilities contain numerous financial and operating covenants that limit our ability, and the ability of most of our subsidiaries, to engage in activities such as incurring additional senior debt and disposing of our assets. These covenants require that we meet interest coverage, net worth and leverage tests. Additionally, we are highly leveraged and, if we are not in compliance with our covenants, we may be required to renegotiate the terms of our credit facilities on terms that are more unfavorable including: higher interest rates, shorter maturities or more restrictive borrowing terms; all of which may have an adverse impact on net income. As of September 30, 1999, as a result of the waivers granted by our lenders, we were in compliance with our credit facility covenants. Based upon our expectations regarding our fourth quarter 1999 financial results, we anticipate that we will not be in compliance with all of our credit facility covenants. Our lenders may require additional concessions from us before giving us a waiver of this anticipated failure to comply. Our level of debt and the limitations our credit facilities impose on us could have other important consequences to you, including: . We will have to use a portion of our cash flow from operations, approximately $143.5 million in 2000 and $208.6 million in 2001, for debt service rather than for our operations; . We may not be able to obtain additional debt financing for future working capital, capital expenditures, acquisitions or other corporate purposes; . We could be less able to take advantage of significant business opportunities, including acquisitions, and react to changes in market or industry conditions. For additional information regarding our credit facilities, see the "Description of Debt" section. If we default on any of our outstanding debt, we may not be able to repay our obligations to you. If we cannot secure a waiver from our lenders, any failure to comply with our credit facility covenants may result in our lenders declaring us in default under our credit facilities. This default could result in our lenders declaring all or part of the debt outstanding under our credit facilities, which is senior to the notes, immediately payable in full. If we default in the payment of any obligation of more than $10 million, which would include our credit facilities, this would also be a default under the indenture governing the notes. This default under the indenture would permit the holders of at least 25% in aggregate principal amount of the notes to declare all of the notes immediately payable in full. Any acceleration of our obligations as a result of these cross-default provisions would make it more difficult for us to repay the notes. We would have to pay any senior debt that has become payable in full before paying you. We might not have sufficient assets to satisfy all of these obligations. For more details, see the heading "Events of default and remedies" in the "Description of Notes" section and the heading "Credit facilities" in the "Description of Debt" section. If a change of control occurs, we may not have sufficient funds to repurchase your notes. Upon a change of control, generally the sale or transfer of a majority of our voting stock or almost all of our assets, you may require us to repurchase all or a portion of your notes. If a change of control occurs, we 2 may not be able to pay the repurchase price for all of the notes submitted for repurchase. In addition, the terms of our credit facilities generally prohibit us from purchasing any notes until we have repaid all debt outstanding under these credit facilities. Future credit agreements or other agreements relating to debt may contain similar provisions. We may not be able to secure the consent of our lenders to repurchase the notes or refinance the borrowings that prohibit us from repurchasing the notes. If we do not obtain a consent or repay the borrowings, we could not repurchase the notes. For more details, see the heading "You may require us to repurchase your notes if we go through a change of control" in the "Description of Notes" section. A public market for the notes is unlikely to develop, which may restrict your ability to sell the notes at the price you expect, or at all. There is currently no public market for the notes. An active public market will likely never develop for the notes because the notes are not investment grade and we will not apply to list the notes on any exchange or Nasdaq. As a result, you may be required to bear the financial risk of your investment in the notes for an indefinite period of time. If we fail to build adequate internal systems and controls then our revenue and net income may be adversely affected. We have experienced rapid growth in the last five years, and especially in 1998, as a result of our business strategy to acquire, develop and manage a large number of dialysis centers. This historical growth and business strategy subjects us to the following risks: . Our billing and collection structures, systems and personnel may prove inadequate to collect all amounts owed to us for services we have rendered, resulting in a lack of sufficient cash flow; . We may require additional management, administrative and clinical personnel to manage and support our expanded operations, and we may not be able to attract and retain sufficient personnel; . Our assessment of the requirements of our growth on our information systems may prove inaccurate, and we may have to spend substantial amounts to enhance or replace our information systems; . Our expanded operations may require cash expenditures in excess of the cash available to us after paying our debt service obligations; . We may inaccurately assess the historical and projected results of operations of acquisition candidates, which may cause us to overpay for acquisitions; . We may inaccurately assess the historical and projected results of operations of existing and recently acquired facilities, which may cause us not to achieve the results of operations expected for these facilities; and . We may not be able to integrate acquired facilities as quickly or smoothly as we expect, which may cause us not to achieve the results of operations expected for these acquired facilities. These risks are enhanced when we acquire entire regional networks or other national dialysis providers, such as Renal Treatment Centers, Inc., or RTC, or enter into multi-facility management agreements. Future declines, or the lack of further increases, in Medicare reimbursement rates could substantially decrease our net income. We are reimbursed for dialysis services primarily at fixed rates established in advance under the Medicare ESRD program. Unlike many other Medicare programs, the Medicare ESRD program has not provided periodic cost of living increases in its reimbursement rates. Congress recently enacted two increases of 1.2% each, effective 3 January 1, 2000 and January 1, 2001, to the Medicare composite reimbursement rate for dialysis. These were the first increases since 1991, and are significantly less than the increases in the cost of living since 1991. Increases in operating costs that are subject to inflation, such as labor and supply costs, have occurred and are expected to continue to occur without a compensating increase in reimbursement rates. In addition, if Medicare should begin to include in its composite reimbursement rate any ancillary services that it currently reimburses separately, our revenue would decrease to the extent there was not a corresponding increase in that composite rate. We cannot predict whether future rate changes will be made. Approximately 50% of our net operating revenues in the first nine months of 1999 was generated from patients who had Medicare as the primary payor. The Department of Health and Human Services, or HHS, had recommended, and the Clinton administration had included in its fiscal year 2000 budget proposal to the Congress, a 10% reduction in Medicare reimbursement for erythropoietin, or EPO, which the Congress did not pass. We cannot predict whether any successive administration or member of Congress will reintroduce this proposal, or whether other future rate or reimbursement method changes will be made. Approximately 14% of our net operating revenues in the first nine months of 1999 was generated from EPO reimbursement through Medicare and Medicaid programs. Consequently, any reduction in the rate of EPO reimbursement through Medicare and Medicaid programs could materially reduce our revenues and net income. Medicare separately reimburses us for other outpatient prescription drugs that we administer to dialysis patients at the rate of 95% of the average wholesale price of each drug. The Clinton administration had also included in its fiscal year 2000 budget proposal to the Congress a reduction in the reimbursement rate for outpatient prescription drugs to 83% of average wholesale price, which the Congress did not pass. We cannot predict whether any successive administration or member of Congress will reintroduce this proposal, or whether other reductions in reimbursement rates for outpatient prescription drugs will be made. If such changes are implemented, they could have a material adverse effect on our revenues and net income. Many Medicaid programs base their reimbursement rates for the services we provide on the Medicare reimbursement rates. Any reductions in the Medicare rates could also result in reductions in the Medicaid reimbursement rates. Approximately 5% of our net operating revenues in the first nine months of 1999 was generated from patients who had Medicaid or comparable state programs as the primary payor. If Medicare changes its ESRD program to a capitated reimbursement system, our revenues and profits could be materially reduced. The Health Care Financing Administration, or HCFA, has initiated a pilot demonstration project, expected to end in 2001, to test the feasibility of allowing managed care plans to participate in the Medicare ESRD program on a capitated basis. Under a capitated plan we or managed care plans would receive a fixed periodic payment for servicing all of our Medicare-eligible ESRD patients regardless of certain fluctuations in the number of services provided in that period or the number of patients treated. Under the current demonstration project, Medicare is paying managed care plans a capitated rate equal to 95% of Medicare's current average cost of treating dialysis patients. If HCFA considers this pilot program successful, HCFA or Congress could lower the average Medicare reimbursement for dialysis. If we charge private payors at rates less than our current rates, then our revenues and net income could be substantially reduced. Approximately 39% of our net operating revenues in the first nine months of 1999 was generated from patients who had domestic private payors as the primary payor. Domestic private payors, particularly managed care payors, have become more aggressive in demanding contract rates approaching or at Medicare reimbursement rates. We believe that the financial pressures on private payors to decrease the rates at which they reimburse us will continue to increase and could have a material impact on our revenues and net income. 4 If our assumptions regarding the beneficial life of our goodwill prove to be inaccurate, or subsequently change, our current earnings may be overstated and future earnings also may be affected. Our balance sheet has an amount designated as "goodwill" that represents 45% of our assets and 205% of our stockholders' equity at September 30, 1999. Goodwill arises when an acquiror pays more for a business than the fair value of the tangible and separately measurable intangible net assets. Generally accepted accounting principles require the amortization of goodwill and all other intangible assets over the period benefited. The current average useful life is 34 years for our goodwill and 21 years for all of our intangible assets that relate to business combinations. We have determined that most acquisitions after December 31, 1996 will continue to provide a benefit to us for no less than 40 years after the acquisition. In making this determination, we have reviewed with our independent accountants the significant factors that we considered in arriving at the consideration we paid for, and the expected period of benefit from, acquired businesses. We continuously review the appropriateness of the amortization periods we are using and change them as necessary to reflect current expectations. This information is also reviewed with our independent accountants. If the factors we considered, and which give rise to a material portion of our goodwill, result in an actual beneficial period shorter than our determined useful life, earnings reported in periods immediately following some acquisitions would be overstated. In addition, in later years, we would be burdened by a continuing charge against earnings without the associated benefit to income. Earnings in later years could also be affected significantly if we subsequently determine that the remaining balance of goodwill has been impaired. Interruption in the supply of, or cost increases in, EPO could materially reduce our net income and affect our ability to care for our patients. A single manufacturer, Amgen Corporation, produces EPO. In the future, Amgen may be unwilling or unable to supply us with EPO. Additionally, shortages in the raw materials or other resources necessary to manufacture EPO, or simply an arbitrary decision on the part of this sole supplier, may increase the wholesale price of EPO. Interruptions of the supply of EPO or increases in the price we pay for EPO could have a material adverse effect on our financial condition as well as our ability to provide appropriate care to our patients. If we sell our non-continental U.S. operations for less than we expect, our estimated impairment loss of between $65 and $85 million for the fourth quarter of 1999 may be understated. We recently entered into agreements to sell most of our operations outside of the continental U.S. to a competitor for approximately $161 million, including the assumption of $3 million in debt and subject to final closing adjustments. We expect to record a charge of between $65 and $85 million for the impairment of the value of these operations in the fourth quarter of 1999. If we do not complete the sale as we anticipate, then our actual losses may prove higher than the expected charge. The agreements are conditioned on the consent of our lenders under our credit facilities, regulatory approvals and other closing conditions. If we fail to adhere to all of the complex government regulations that apply to our business, we could incur substantial fines or be excluded from participating in government reimbursement programs. Our dialysis operations are subject to extensive federal, state and local government regulations. Any of the following could adversely impact our revenues: . Loss of required government certifications; . Loss of authorizations to participate in or exclusion from government reimbursement programs, such as the Medicare ESRD Program and Medicaid programs; . Suspension of payments from government programs; and . Loss of licenses required to operate health care facilities in some of the states in which we operate. 5 The regulatory scrutiny of healthcare providers, including dialysis providers, has increased significantly in recent years. For example, the Office of Inspector General of HHS has reported that it recovered $1.2 billion in fiscal year 1997 and $480 million in fiscal year 1998 from health care fraud investigations. Also, in January 2000 one of our competitors entered into a $427 million settlement as a result of an Office of Inspector General of HHS investigation into some of its practices. . We may never collect the revenues from the payments suspended as a result of an investigation of our laboratory subsidiary Our Florida-based laboratory subsidiary is the subject of a third-party carrier review relating to claims the laboratory submitted for Medicare reimbursement. In May 1998, the carrier suspended all further Medicare payments to this laboratory. Medicare revenues from this laboratory represent approximately 2% of our net revenues. For the review periods the carrier has identified, January 1995 to April 1996, and May 1996 to March 1998, the carrier has alleged that the prescribing physician's medical justification did not properly support approximately 97% of the tests this laboratory performed. The carrier has determined that it overpaid this laboratory $5.6 million for the period from January 1995 to April 1996, and $14.2 million for the period from May 1996 to March 1998. The suspension of payments relates to all payments due after the suspension started, regardless of when this laboratory performed the tests. From the beginning of the suspension through September 30, 1999, the carrier had withheld approximately $27 million, which has adversely affected our cash flow. We may never recover the amounts withheld. . Our failure to comply with federal and state fraud and abuse statutes could result in sanctions Neither our arrangements with the medical directors of our facilities nor the minority ownership interests of referring physicians in some of our dialysis facilities meet all of the requirements of published safe harbors to the anti- kickback provisions of the Social Security Act and similar state laws. These laws impose civil and criminal sanctions on anyone who receives or makes payments for referring a patient for any service reimbursed by Medicare, Medicaid or similar federal and state programs. Arrangements within published safe harbors are deemed not to violate these provisions. Enforcement agencies may subject arrangements that do not fall within a safe harbor to greater scrutiny. If we are challenged under these statutes, we may have to change our relationships with our medical directors and with referring physicians holding minority ownership interests. The laws of several states in which we do business prohibit a physician from making referrals for laboratory services to entities with which the physician, or an immediate family member, has a financial interest. We currently operate a large number of facilities in these states, which account for a significant percentage of our business. These state statutes could apply to laboratory services incidental to dialysis services. If so, we may have to change our relationships with referring physicians who serve as medical directors of our facilities or hold minority interests in any of our facilities. We may experience material unanticipated negative consequences beginning in the year 2000 due to undetected computer defects. The Year 2000, or Y2K, issue concerns the potential exposures related to the automated generation of incorrect information from the use of computer programs which have been written using two digits, rather than four, to define the applicable year of business transactions. We have not experienced any material negative consequences to date. However, due to the overall complexity of the Y2K issues and the uncertainty surrounding third party responses to Y2K issues, we cannot assure you that undetected errors or defects in our or third party systems or our failure to prepare adequately for the results of those errors or defects will not cause us material unanticipated problems or costs. 6 The extent and magnitude of the Y2K problem as it will affect us for some period after January 1, 2000 are difficult to predict or quantify for a number of reasons. Among the most important are: . Our lack of control over third party systems that are critical to our operations, especially those of governmental and non-governmental payors; . The complexity of testing interconnected internal and external computer networks, software applications and dialysis equipment; and . The uncertainty surrounding how others will deal with liability issues raised by Y2K-related failures. Moreover, the estimated costs of implementing our plans for fixing Y2K problems did not take into account the costs, if any, that we might incur as a result of Y2K-related failures that occur despite our implementation of these plans. While we implemented contingency plans to address possible computer failure scenarios, we recognize that there are "worst case" scenarios which may yet occur. We may yet experience the extended failure of external and internal computer networks and equipment that control . Medicare, Medicaid and other third party payors' ability to reimburse us; . Regional infrastructures, such as power, water and telecommunications systems; . Equipment and machines that are essential for the delivery of patient care; and . Computer software necessary to support our billing process. If any one of these events occurs, our cash flow could be materially reduced. Even in the absence of a failure of these networks and equipment, we will likely continue to incur costs related to remediation efforts, the replacement or upgrade of equipment, and the possible implementation of alternative payment schemes with our payors. Provisions in our charter documents may deter a change of control which our stockholders may otherwise determine to be in their best interests. Our certificate of incorporation and bylaws and the Delaware General Corporation Law, or DGCL, include provisions which may deter hostile takeovers, delay or prevent changes in control or changes in our management, or limit the ability of our stockholders to approve transactions that they may otherwise determine to be in their best interests. These provisions may have a negative impact on your investment in our common stock, should you choose to convert your notes. These provisions include: . A provision requiring that our stockholders may take action only at a duly called annual or special meeting of our stockholders and not by written consent; . A provision requiring a stockholder to give at least 60 days' advance notice of a proposal or director nomination that the stockholder desires to present at any annual or special meeting of stockholders; and . A provision granting our board of directors the authority to issue up to five million shares of preferred stock and to determine the rights and preferences of the preferred stock without the need for further stockholder approval. The existence of this "blank-check" preferred stock could discourage an attempt to obtain control of us by means of a tender offer, merger, proxy contest or otherwise. Furthermore, this "blank- check" preferred stock may have other rights, including economic rights, senior to our common stock. Therefore, issuance of the preferred stock could have an adverse effect on the market price of our common stock. We may, in the future, adopt other measures that may have the effect of delaying, deferring or preventing an unsolicited takeover, even if such a change in control were at a premium price or favored by a majority of unaffiliated stockholders. We may adopt certain of these measures without any further vote or action by our stockholders. 7 USE OF PROCEEDS As the notes and any shares of common stock issuable upon conversion of the notes, sometimes referred to in this prospectus as conversion shares, are offered by the selling securityholders and not by us, we will not receive any proceeds from the resale of the notes or any conversion shares. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings. Earnings is defined as pretax income from continuing operations adjusted by adding fixed charges and excluding interest capitalized during the period. Fixed charges means the total of interest expense and amortization of financing costs, the estimated interest component of rental expense on operating leases and preferred stock dividends. In 1995, we changed our fiscal year end to December 31 from May 31. The following table sets forth our ratio of earnings to fixed charges for each of the periods indicated.
Year Seven months ended May ended Year ended Nine months 31, December 31, December 31, ended --------- ------------- ------------------- September 30, 1994 1995 1994 1995 1995 1996 1997 1998 1999 ---- ---- ------ ------ ---- ---- ---- ---- ------------- Ratio of earnings to fixed charges.......... 6.06 2.97 3.17 3.48 3.22 3.82 3.11 1.51 1.12
8 SELLING SECURITYHOLDERS The selling securityholders may, from time to time, offer and sell any or all of the notes and the conversion shares under this prospectus. All of the notes and the conversion shares offered pursuant to this prospectus are offered by the selling securityholders. Any sales of the notes or the conversion shares will be for the account of the selling securityholders and we will not receive any of the proceeds from these sales. The information in the following table is as of January 27, 2000 and assumes that no selling securityholder beneficially owns any shares of our common stock other than shares issuable pursuant to the conversion of the notes. In addition, the information in the table assumes the conversion of all notes owned by each selling securityholder at the initial conversion price of $32.81 per share. This initial conversion price may be adjusted under certain circumstances. As a result, the number of shares issuable upon conversion of the notes may increase or decrease. Under the terms of the indenture governing the notes, cash will be paid instead of issuing fractional shares upon conversion. The selling securityholders listed below provided us the information contained in the following table with respect to themselves and the respective principal amount of notes that may be sold by each of them under this prospectus. We have not independently verified this information. For more details, see the section "Description of Notes."
Principal amount of Shares of common Percentage of notes owned that Percentage stock that may common stock Name may be sold of notes be sold outstanding(1) ---- ------------------- ---------- ---------------- -------------- AAFES Medical Dental & Life Insurance......... $ 350,000 * 10,667 * AAFES Ret. Annuity Basic Plan................... 1,800,000 * 54,861 * AAFES Supplemental Deferred Compensation Plan................... 185,000 * 5,638 * Alpine Associates....... 6,600,000 1.9% 201,158 * Alpine Partners, LP..... 450,000 * 13,715 * Alta Partners Holdings, LDC.................... 1,500,000 * 45,717 * Argent Classic Convertible Arbitrage Fund (Bermuda) L.P. ... 25,960,000 7.5% 791,222 * Argent Classic Convertible Arbitrage Fund L.P. ............. 21,516,000 6.2% 655,775 * Argent Convertible Arbitrage Fund Ltd. ... 2,500,000 * 76,196 * Argent Convertible Growth Fund Ltd. ...... 1,000,000 * 30,478 * Aristeia International, Ltd. .................. 859,000 * 26,181 * Aristeia Trading, LLC... 641,000 * 19,536 * Associated Electric & Gas Insurance Services, Ltd.................... 300,000 * 9,143 * Automobile Club of Southern California.... 150,000 * 4,571 * Automobile Club Pension Plan................... 300,000 * 9,143 * BancBoston Robertson Stephens............... 3,000,000 * 91,435 * Bank of America Pension Plan................... 1,100,000 * 33,526 * BBT Fund, L.P. ......... 9,500,000 2.8% 289,545 * Bear, Stearns & Co. .... 900,000 * 27,430 * BNP Arbitrage SNC....... 7,500,000 2.2% 228,588 * Brookside Capital Partners Fund LP....... 5,000,000 1.4% 152,392 * BT Alex Brown, Inc...... 4,900,000 1.4% 149,344 * BT Holdings Corp........ 2,000,000 * 60,957 * Canadian Imperial Holdings, Inc.......... 1,500,000 * 45,717 * Century National Insurance Co. ......... 500,000 * 15,239 * Chase Vista Growth & Income Fund............ 10,000,000 2.9% 304,785 * Classic IC Co. LTD...... 1,500,000 * 45,717 * Common Fund for NonProfit Organizations.......... 1,245,000 * 37,945 * Conseco Direct Life..... 500,000 * 15,239 *
9
Principal amount of Shares of common Percentage of notes owned that Percentage stock that may common stock Name may be sold of notes be sold outstanding(1) ---- ------------------- ---------- ---------------- -------------- Continental Assurance Co..................... 800,000 * 24,382 * Continental Casualty Co..................... 5,200,000 1.5% 158,488 * CPR (USA) Inc........... 165,000 * 5,028 * Deeprock & Co........... 2,100,000 * 64,004 * Deutsche Bank AG........ 34,700,000 10.1% 1,057,604 1.3% Donaldson, Lufkin & Jenrette Securities Corp.(4)............... 12,445,000 3.6% 379,305 * Double Black Diamond Offshore, LDC.......... 1,611,000 * 49,100 * Duckbill & Co........... 850,000 * 25,906 * Equity Trustees Ltd. Common Fund No. 8 (Global High Yield).... 400,000 * 12,191 * Family Service Life Insurance Co. ......... 500,000 * 15,239 * Fidelity Advisor Series I: Fidelity Advisor Asset Allocation Fund(2)................ 30,000 * 914 * Fidelity Advisor Series II: Fidelity Advisor High Income Fund....... 160,000 * 4,876 * Fidelity Advisor Series II: Fidelity Advisor High Yield Fund........ 22,020,000 6.4% 671,136 * Fidelity Charles Street Trust: Fidelity Asset Manager(2)............. 9,630,000 2.8% 293,508 * Fidelity Charles Street Trust: Fidelity Asset Manager: Aggressive(2).......... 10,000 * 304 * Fidelity Charles Street Trust: Fidelity Asset Manager: Growth(2)..... 4,590,000 1.3% 139,896 * Fidelity Charles Street Trust: Fidelity Asset Manager: Income(2)..... 490,000 * 14,934 * Fidelity Financial Trust: Fidelity Convertible Securities Fund................... 3,446,000 1.0% 105,028 * Fidelity Fixed-Income Trust: Fidelity High Income Fund(2)......... 9,760,000 2.8% 297,470 * Fidelity Global Asset Allocation Fund(2)..... 440,000 * 13,410 * Fidelity Management Trust Company on behalf of accounts managed by it(3).................. 11,350,000 3.3% 345,931 * Fidelity Summer Street Trust: Fidelity Capital & Income Fund(2)....... 6,050,000 1.8% 184,395 * First Delta Securities, Inc. .................. 200,000 * 6,095 * First Mercury Insurance Co. ................... 30,000 * 914 * General Motors Employee Domestic Group Pension Trust.................. 6,160,000 1.8% 187,747 * General Motors Welfare Benefit Trust.......... 850,000 * 25,906 * GM Pension.............. 2,395,000 * 72,996 * Goldman Sachs and Company................ 530,000 * 16,153 * Guardian Life Insurance Company of America..... 9,000,000 2.6% 274,306 * Guardian Master Pension Trust.................. 500,000 * 15,239 * Hamilton Partners Limited LDC............ 5,000,000 1.5% 152,392 * HBK Cayman LP........... 350,000 * 10,667 * Highbridge Capital Corp. ................. 2,500,000 * 76,196 * Interinsurance Exchange of the Automobile Club................... 1,560,000 * 47,546 * International Paper Company................ 765,000 * 23,316 * Iowa Public Employees' Retirement System...... 3,890,000 1.1% 118,561 * JMG Convertible Investments, LP........ 1,750,000 * 53,337 * LB Series Fund Inc. .... 1,500,000 * 45,717 * Libertyview Plus Fund... 335,000 * 10,210 * Lincoln National Convertible Securities Fund................... 2,205,000 * 67,205 * LLT Limited............. 350,000 * 10,667 *
10
Principal amount of Shares of common Percentage of notes owned that Percentage stock that may common stock Name may be sold of notes be sold outstanding(1) ---- ------------------- ---------- ---------------- -------------- Lutheran Brotherhood.... 1,800,000 * 54,861 * McMahan Securities Company, LP............ 147,000 * 4,480 * Merrill Lynch P.F.S. ... 4,195,000 1.2% 127,857 * MFS Series Trust V--MFS Total Return Fund...... 3,000,000 * 91,435 * Millennium Trading Co, LP..................... 500,000 * 15,239 * Monticello Service Agency, Inc. .......... 500,000 * 15,239 * Monumental Life Insurance Co. (Teamsters--Camden Non- enhanced).............. 4,000,000 1.2% 121,914 * Morgan Stanley Dean Witter Convertible Securities Trust....... 3,000,000 * 91,435 * NationsBanc Montgomery Securities............. 1,100,000 * 33,526 * NMS Services, Inc....... 10,000,000 2.9% 304,785 Norinchukin High Yield.. 650,000 * 19,811 * Northrop Grumman Corporation Master Trust.................. 500,000 * 15,239 * Northwestern Mutual Life Insurance Company...... 10,000,000 2.9% 304,785 * OCM High Yield Limited Partnership............ 7,535,000 2.2% 229,655 * Orrington International Fund Ltd............... 1,300,000 * 39,622 * Orrington Investments Limited Partnership.... 1,950,000 * 59,433 * Pacific Gas & Electric Bargained Veba......... 185,000 * 5,638 * Pacific Gas & Electric Company Retirement Plan................... 2,750,000 * 83,815 * Pacific Life Insurance Company................ 1,000,000 * 30,478 * Palladin Securities LLC.................... 500,000 * 15,239 * PIMCO GIS plc High Yield Bond Fund.............. 300,000 * 9,143 * PIMCO High Yield Fund... 20,100,000 5.8% 612,618 * PVIT High Yield Bond Fund................... 800,000 * 24,382 * Quattro Global Capital, LLC.................... 500,000 * 15,239 * Ramius Fund, Ltd........ 2,000,000 * 60,957 * Raphael, L.P. .......... 1,000,000 * 30,478 * Reserve Convertible Securities Fund........ 500,000 * 15,239 * Retail Clerks Pension Trust.................. 1,100,000 * 33,526 * Sage Capital............ 2,000,000 * 60,957 * San Francisco City & County Employee Retirement System...... 3,710,000 1.1% 113,075 * South Dakota Retirement System................. 4,000,000 1.2% 121,914 * Southport Management Partners, LP........... 900,000 * 27,430 * Southport Partners International, Ltd. ... 1,750,000 * 53,337 * Texas County & District Retirement System...... 895,000 * 27,278 * Tribeca Investments, LLC.................... 8,000,000 2.3% 243,828 * Trigon Healthcare Inc. .................. 500,000 * 15,239 * Trigon Insurance Company................ 750,000 * 22,858 * Triton Capital Investments, Ltd....... 1,750,000 * 53,337 * United Methodist Church................. 1,795,000 * 54,708 * United Parcel Service... 500,000 * 15,239 * University of Virginia.. 600,000 * 18,287 * Variable Insurance Products Fund II: Asset Manager: Growth Portfolio(2)........... 500,000 * 15,239 * Variable Insurance Products Fund: High Income Portfolio(2).... 14,680,000 4.3% 447,424 * Variable Insurance Products Fund II: Asset Manager Portfolio(2)... 2,940,000 * 89,606 * Walker Art Center....... 295,000 * 8,991 * Worldwide Transactions, Ltd. .................. 187,000 * 5,699 * Xerox Retirement........ 1,890,000 * 57,604 *
11 - --------------------- * Less than 1%. (1) Based on 81,215,233 shares of our common stock outstanding at January 27, 2000. In accordance with the rules of the Securities and Exchange Commission, or SEC, the percentage of common stock outstanding owned by each selling securityholder is computed as follows: (a) the numerator is the number of shares of common stock held by that selling securityholder upon conversion of all notes owned by that selling securityholder and (b) the denominator includes the number of shares of common stock outstanding and the number of shares of common stock held by that selling securityholder upon conversion of all notes owned by that selling securityholder. (2) The selling securityholder is either an investment company or a portfolio of an investment company registered under Section 8 of the Investment Company Act of 1940, as amended, or a private investment account advised by Fidelity Management & Research Company, or FMR. FMR is an investment advisor registered under Section 203 of the Investment Advisers Act of 1940, as amended, and provides investment advisory services to the selling securityholder and to other registered investment companies and to certain other funds which are generally offered to a limited group of investors. FMR is a wholly-owned subsidiary of FMR Corp. (3) The securities owned by the selling securityholder are owned directly by various private investment accounts, primarily employee benefit plans for which Fidelity Management Trust Company, or FMTC, serves as trustee or managing agent. FMTC is a wholly-owned subsidiary of FMR Corp. (4) Donaldson, Lufkin & Jenrette Securities Corporation and certain of its affiliates from time to time perform various investment banking and other services for us, for which we pay customary consideration. Peter T. Grauer, an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation, serves on our board of directors. 12 DESCRIPTION OF NOTES The notes were issued pursuant to an indenture dated as of November 18, 1998 between TRCH and United States Trust Company of New York, as trustee. The following description of the terms of the indenture and the related registration rights agreement is a summary. It summarizes only those portions of the indenture which we believe will be most important to your decision to invest in the notes. You should keep in mind, however, that it is the indenture, and not this summary, which defines your rights as a noteholder. There may be other provisions in the indenture which are also important to you. You should read the indenture itself for a full description of the terms of the notes. We will provide a copy, at no charge, if you contact us. The indenture is also an exhibit to the registration statement we filed with the SEC. For details on how you can view or copy the exhibits to our registration statement, see "Where to Learn About Us" on page 38 of this prospectus. General description of the notes The notes: . Are our general, unsecured obligations; . Are limited in aggregate principal amount to $345.0 million; . Are junior in right of payment to all our existing and future senior debt; . Are effectively junior to all of the liabilities of our subsidiaries; . Mature on May 15, 2009; . Bear interest at the rate of 7% per year, payable twice a year on May 15 and November 15 to record holders of the notes; and . Accrue interest calculated on the basis of a 360-day year consisting of twelve 30-day months. United States Trust Company of New York is the trustee under the indenture. It will also perform the following services for you on our behalf: . mail all payments we owe you on the notes . convert the notes into common stock at your request . register the transfer or exchange of your notes at your request The trustee's address is: United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 We may pay interest and damages on the notes by mailing a check to you. You will not have to pay a service charge for any registration of transfer or exchange of notes, but we may require you to pay any related tax or other governmental charge. The indenture does not contain any financial covenants, or any restrictions on our ability to: . Pay dividends; . Issue or repurchase securities; or . Incur debt, including senior debt. The indenture defines our debt broadly to include all liabilities and obligations: . Relating to borrowed money; . Under credit or loan agreements, bonds, notes, debentures, letters of credit or similar instruments; . Under bankers' acceptances, bank guarantees or similar instruments issued or accepted by banks; 13 . For the payment of money relating to a capitalized lease obligation if generally accepted accounting principles require us to treat the obligations as debt; . Relating to the deferred purchase price of property or services; . Under interest swap and hedging obligations; . That we have guaranteed or that are otherwise our legal liability; and . That are secured by a lien on our property. The definition of debt in the indenture does not include: . Trade account payables or accrued liabilities arising in the ordinary course of our business; and . Carriers', warehousemens', mechanics', repairmens' or other similar statutory liens arising in the ordinary course of our business. "Senior debt" includes any debt that we incur, assume or guarantee, including our obligations under our credit facilities and certain of our interest swap and hedging obligations. Senior debt does not include: . Debt that expressly provides that it is not senior in right of payment to the notes or ranks equally or junior to the notes; . Debt owed to any of our subsidiaries; . Any trade account payable that we incur in the ordinary course of our business; . Any liability for taxes of us or any of our subsidiaries; or . The notes. The indenture allows us to incur additional debt and sell or transfer a majority of our voting stock or almost all of our assets, except as described below under "You may require us to repurchase your notes if we go through a change of control." You may convert your notes into shares of our common stock You will have the right to convert the notes you hold, in $1,000 increments, into shares of our common stock at the conversion price of $32.81 per share. This right will expire on May 15, 2009. The right to convert a note that we have chosen to repurchase or that you have delivered for repurchase and not withdrawn will terminate on the day before the repurchase date for that note, unless we subsequently fail to pay you the repurchase price. If you convert a note into shares of our common stock after the record date for an interest payment but on or before the interest payment date, we will pay the interest to the holder of that note on the record date. To convert a note during that time period, unless we have chosen to repurchase the note, you must pay to us an amount equal to the interest we must pay on the note. However, this payment is not required with respect to interest payable on November 15, 2001. As a result, if you surrender notes for conversion on a date that is not an interest payment date, you will not receive any interest for the most recent interest payment period, except for notes that we choose to repurchase on a date between a record date and the corresponding interest payment date. We will not issue fractional shares upon conversion of a note. Instead, we will pay cash for the fractional shares based on the market price of our common stock at the close of business on the day of conversion. We will adjust the conversion price if we: . Declare a dividend in common stock on any class of our capital stock; 14 . Issue to our stockholders rights, options or warrants to purchase common stock at less than the then current market price for our common stock; unless these rights, options or warrants are only exercisable upon certain triggering events, in which case we will not adjust the conversion price until the triggering events occur; . Subdivide, combine or reclassify our outstanding common stock; . Distribute to our stockholders any debt instruments, shares of capital stock other than common stock, cash or other assets, excluding distributions in connection with our liquidation and excluding dividends and distributions that we pay exclusively in cash and in mergers and consolidations; . Distribute cash to all or almost all holders of our common stock that, combined with: (1) All other all-cash distributions we have made in the prior 12 months for which no adjustment has been made; and (2) The fair market value of consideration paid or payable for any tender offer by us or any of our subsidiaries for common stock concluded within the prior 12 months for which no adjustment has been made, exceeds 15% of the market value of our then-outstanding common stock on the record date of that distribution; and . Complete a tender offer for our common stock, or any of our subsidiaries completes a tender offer for our common stock, if the aggregate consideration, together with: (1) Any consideration payable in other similar tender offers expiring within the 12 months before the expiration of the tender offer for which no adjustment has been made; and (2) The aggregate amount of any all-cash distributions to all holders of our common stock within the 12 months before the expiration of the tender offer for which we have made no adjustments, exceeds 15% of the market value of our then-outstanding common stock on the expiration of the tender offer. If we distribute to our stockholders any other rights, warrants or options to purchase securities, we will either adjust the conversion price of the notes or, when you convert your notes, we will issue you shares of common stock, plus the appropriate number of those rights, warrants or options. We are not required to adjust the conversion price until all required adjustments together amount to one percent or more of the conversion price. We may reduce the conversion price for a period of at least 20 business days, if the reduction is permitted by law and our board of directors has determined that the reduction would be in our best interests. We must give at least 15 days' notice of any reduction to the trustee and to you. We may make other reductions in the conversion price that our board of directors believes are appropriate to reduce federal income taxes to holders of our common stock that result from a dividend or distribution of stock. If we: . Reclassify or change our outstanding shares of common stock issuable upon conversion of the notes; . Consolidate or merge with another entity, with limited exceptions; or . Sell or transfer most of our assets, we will issue to you, when you convert your notes, the kind and amount of securities, cash and other property from that event that you would have received had you converted your notes into common stock immediately prior to that event. We will use all reasonable efforts to make all registrations with, and to obtain any approvals from, any governmental authority under any federal or state law of the United States required of us in connection with the 15 conversion of the notes. If at any time before November 19, 2000 the registration statement containing this prospectus is not effective, or cannot be used, you may not sell or transfer shares received upon conversion of the notes except in accordance with, or pursuant to an exemption from, the registration requirements of the Securities Act of 1933. How the notes rank in comparison to our other debt If we declare bankruptcy, become insolvent, liquidate, dissolve, reorganize or institute a similar proceeding, or if our senior debt becomes due, all of our senior debt will have the right to be paid in full before we can make any payment to you on the notes. Any borrowings under our credit facilities will be senior debt. The credit facilities provide for aggregate borrowings of $1.35 billion. In addition, the notes also are effectively second in right of payment to all existing and future liabilities, including trade payables, of our subsidiaries. The indenture does not restrict our ability, or the ability of our subsidiaries, to borrow more money or incur liabilities. It also generally does not restrict our ability to transfer assets or business operations to our subsidiaries. We also cannot make any payment on the notes if: . We have failed to make any payment due on designated senior debt or payments due on senior debt at maturity; or . We have committed another type of default on designated senior debt that permits the holders of the designated senior debt to require immediate payment in full of that debt and the trustee receives a notice describing the default from us or the holders of the designated senior debt. "Designated senior debt" is: . Any debt outstanding under any of our credit facilities; and . Any other senior debt of at least $10 million that we have expressly designated as "designated senior debt." The payment of cash, property or securities, other than junior securities, upon conversion of a note is considered a payment on a note, and will be subject to these subordination provisions. "Junior securities" mean our capital stock and any of our debt that: . We have authorized and issued pursuant to a plan of reorganization where the authorization states that the securities authorized are junior to all of our senior debt; . Is second in right of payment to all of our senior debt to at least the same extent as the notes are second in right of payment to senior debt; and . Contains terms, provisions, covenants and default provisions that do not benefit you more than the holders of our senior debt. We will resume payments on the notes as follows: . In the case of a payment default, on the date on which we are no longer in default; and . In case of any other default, the earlier of the date on which we are no longer in default or 179 days after the date on which we received the notice of default, unless any designated senior debt has become immediately payable. At the end of the 179-day period, we must pay to you all regularly scheduled payments on the notes that we did not pay during the 179-day period. No new notice of a default may be delivered until 365 days have elapsed since the previous notice became effective. 16 We must promptly notify holders of our senior debt if payment of the notes becomes due because of an event of default. If you or the trustee receive any payment or distribution of our assets or those of any of our subsidiaries, other than junior securities, at a time when the indenture prohibits that payment or distribution, you or the trustee must pay or deliver that payment or distribution to the holders of any senior debt remaining unpaid. As a result of these provisions, in the event that we liquidate, declare bankruptcy, reorganize, become insolvent, or institute a similar proceeding, you may receive a lower percentage of the total amount we owe to you than other creditors. We have an option to repurchase the notes We may repurchase, or redeem, the notes after November 14, 2001 at our option, in whole or in part, at the following prices, expressed as percentages of the principal amount. Except as noted under "You may convert your notes into shares of our common stock" above, we will pay to you accrued and unpaid interest and damages due on the notes upon repurchase in addition to the repurchase price.
12-month period commencing November 15, Percentage ------------ ---------- 2001.................... 104.90% 2002.................... 104.20% 2003.................... 103.50% 2004.................... 102.80%
12-month period commencing November 15, Percentage ------------ ---------- 2005.................... 102.10% 2006.................... 101.40% 2007.................... 100.70% 2008 and thereafter..... 100.00%
In the case of a partial repurchase, the trustee will select the notes or portions of notes you own for repurchase based on the amount of notes you own compared to the total amount of notes outstanding, by lot or in another manner the trustee deems appropriate and fair. We may repurchase the notes in part only in $1,000 increments. We will send, not less than 30 nor more than 60 days in advance, a notice of any repurchase to the holder of each note we intend to repurchase. The notice of repurchase, or redemption, must state the repurchase date, the repurchase price and the amount of accrued interest and damages we will pay. Any notice that relates to a note we will repurchase only in part must state the portion of the principal amount we will repurchase and must state that on and after the repurchase date, upon surrender of the note, we will issue a new note or notes in principal amount equal to the portion of that note not repurchased. On and after the repurchase date, interest will cease to accrue on the notes or portions of notes called for repurchase, unless we default in our repurchase obligations. The notes do not have the benefit of any sinking fund. You may require us to repurchase your notes if we go through a change of control Upon a change of control we generally must make an irrevocable and unconditional offer to purchase all notes. The repurchase date generally will be no later than 45 business days after the change of control. The repurchase price, which we will pay in cash, will be equal to 100% of the principal amount of the notes, together with accrued and unpaid interest and damages due. You may accept the repurchase offer with respect to all or a portion of your notes. We will make the repurchase offer within 25 business days following a change of control. The offer will remain open for 20 business days, unless a longer period is required by law. At the end of the repurchase offer period, we must purchase all notes tendered in response to the repurchase offer. 17 A change of control requiring us to make a repurchase offer will occur if: . Any entity, or group or syndicate of entities, other than us or our wholly owned subsidiaries, acquires ownership, directly or indirectly, by any means, of more than 50% of the total voting power of all shares of our capital stock; or . We consolidate with, or merge into, any other entity, or another entity merges into us, or we sell or transfer all or substantially all of our assets to another entity, unless that merger or sale of assets: (1) Does not result in a material reclassification, conversion, exchange, or cancellation of outstanding shares of our capital stock; (2) Only changes our jurisdiction of incorporation and results in a reclassification, conversion, or exchange of our outstanding shares of common stock only into shares of common stock; (3) Does not result in our stockholders immediately before the transaction owning, directly or indirectly, immediately following the transaction, less than 50% of the combined total voting power of all shares of capital stock of the entity that is the survivor in the transaction; or (4) Does not trigger prepayment rights for lenders under the provisions of our credit facilities. Furthermore, a transaction in which at least 90% of the consideration to be received by the holders of our common stock consists of shares of equity securities traded on a national securities exchange or quoted on the Nasdaq National Market, will not trigger a repurchase offer if, as a result of that transaction, the notes become convertible into those other equity securities. Whether a sale or transfer of "all or substantially all" of our assets has occurred will likely depend on facts and circumstances. As a result, there may be a degree of uncertainty in determining whether a sale or transfer of "all or substantially all" of our assets has occurred. If we are required to make a repurchase offer, we will: . Accept notes or portions of notes properly surrendered for payment; . Deposit with a paying agent enough cash to pay the repurchase price, together with accrued and unpaid interest and other amounts due, of all notes surrendered; and . Deliver to the trustee the notes accepted, together with an officers' certificate listing the notes or portions of the notes we are purchasing. The paying agent promptly will mail to the holders of those notes properly surrendered, the payment owed. The trustee promptly will authenticate and mail or deliver to those holders a new note or notes equal in principal amount to any unpurchased portion of the notes surrendered. We will promptly mail or deliver to you any notes not accepted in the repurchase offer. We will announce publicly the results of the repurchase offer on or as soon as practicable after the repurchase date. Except as follows, no modification of the indenture limiting your repurchase right is permissible without your consent. Holders of more than two-thirds of the outstanding principal amount of the notes may choose, at any time following a change of control and before the repurchase date, to waive the repurchase right for all holders of notes. In that event: . We will not be required to make the repurchase offer; . To the extent we have already made the repurchase offer, it will be deemed revoked; and . To the extent any holders have already surrendered notes, the surrender will be cancelled and we will promptly return the notes surrendered to the former holders. We will comply with the tender offer rules under any securities laws, and will file any schedule required under those rules, in connection with any offer we make to repurchase notes at your option. 18 Limitation on merger, sale or consolidation We may not, directly or indirectly, consolidate with or merge with or into, or sell, lease or otherwise dispose of all or substantially all of our assets to another entity or group of affiliated entities, other than to our wholly owned subsidiaries, unless: . Either: (1) In the case of a merger or consolidation, we are the surviving entity; or (2) The resulting, surviving or transferee entity is a corporation organized under the laws of any state in the United States or the District of Columbia and expressly assumes by supplemental indenture all of our obligations in connection with the notes and the indenture; and . No event of default exists immediately before or after the merger or consolidation. Upon any consolidation or merger or any transfer of all or substantially all of our assets, the successor corporation may exercise all of our rights and powers under the indenture and we will be released from our obligations under the indenture and the notes, except for obligations that arise from that transaction. The transfer by lease, assignment or sale of all or substantially all of the properties and assets of one or more of our subsidiaries, which properties and assets, if we held them directly, would constitute all or substantially all of our properties and assets, will be considered the transfer of all or substantially all of our properties and assets. Reports Whether or not the SEC requires us to file the following documents, we will deliver to the trustee, within 15 days of the date we are, or otherwise would be, required to file them: . Annual and quarterly consolidated financial statements similar to those required in Forms 10-K and 10-Q, including, with respect to annual information only, a certified independent public accountants' report and, in each case, a management's discussion and analysis of financial condition and results of operations; and For so long as the notes or conversion shares are not freely tradeable under federal securities laws, if we cease to be subject to the reporting requirements of the Exchange Act, we will continue to provide the information specified by Rule 144A(d)(4) to you. Events of default and remedies The indenture defines an "event of default" as: . Our failure to pay any installment of interest on the notes when due for 30 days; . Our failure to pay any part of the principal of, or premium on, the notes when due; . Our failure to perform our covenants and agreements regarding any conversion of notes for 30 days; . Our failure to observe or perform any other covenant or agreement contained in the notes or the indenture, subject to certain exceptions, for a period of 60 days after the trustee gives written notice to us or the holders of at least 25% in aggregate principal amount of the notes outstanding give written notice to us and the trustee; . Events of bankruptcy, insolvency or reorganization in respect of us or any of our significant subsidiaries; . Our failure to make any payment at final stated maturity on any debt for which our liability is not limited to specific assets in an amount greater than $10 million for 30 days after the trustee gives written notice to us or the holders of at least 25% in aggregate principal amount of notes outstanding give written notice to us and the trustee; 19 . Any default on any debt for which our liability is not limited to certain assets resulting in more than $10 million of that debt becoming immediately due, unless waived or postponed, for 30 days after the trustee gives written notice to us or the holders of at least 25% in aggregate principal amount of notes outstanding give written notice to us and the trustee; and . A court awards amounts which are not covered by insurance in excess of $10 million against us or any of our significant subsidiaries, and these amounts are not stayed, bonded or discharged within 60 days. "Significant subsidiary" means: . Any of our subsidiaries that have total assets exceeding 10% of our consolidated total assets; or . Any of our subsidiaries for which the net income of that subsidiary and its subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles, during the four fiscal quarters most recently ended, exceeded 10% of our consolidated net income during that period. If a default occurs and is continuing, the trustee must, within 90 days after receiving actual notice of the default, give to the holders notice of that default. The trustee may, however, withhold notice if it in good faith determines that withholding the notice is in the interest of the holders, except in the case of a default regarding any payment due on the notes. If an event of default arises from our bankruptcy, insolvency or reorganization or that of any of our significant subsidiaries, all amounts due on all outstanding notes immediately will be due and payable without any act on the part of the trustee or the holders. If any other event of default occurs and is continuing then, unless the principal of all of the notes is already due and payable, either the trustee or the holders of at least 25% in aggregate principal amount of the notes may declare all principal, premium, accrued interest and damages on or with respect to the notes due and payable immediately. The holders of a majority in principal amount of the notes generally are authorized to rescind this acceleration if we have cured, or the holders have waived, all existing events of default that caused the acceleration, unless the acceleration resulted from the non-payment of amounts due on the notes. Prior to the acceleration of the maturity of the notes, the holders of a majority in principal amount of the notes at the time outstanding may waive any default on behalf of all the holders, except: . A default regarding any payment due on the notes, which we have not yet cured; or . A default with respect to any provision that cannot be modified without the consent of the holder of each outstanding note affected. The trustee does not have to exercise any of its rights or powers under the indenture at your request, order or direction, unless you have offered the trustee reasonable security or indemnity. The holders of a majority in aggregate principal amount of the notes outstanding will have the right to: . Direct the time, method and place of conducting any proceeding for any remedy available to the trustee; or . Exercise any trust or power given to the trustee. You may not directly pursue any remedy under the indenture, except for a default in any payment due on the notes, unless: . You give to the trustee written notice of a continuing event of default; . The holders of at least 25% in principal amount of the outstanding notes make a written request to the trustee to pursue the remedy; 20 . You offer to indemnify the trustee against any loss, liability or expense; . The trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and . The trustee has not received a contrary direction from the holders of a majority in principal amount of the outstanding notes. Amendments and supplements to the indenture We and the trustee may enter into a supplemental indenture for limited purposes without your consent. With the consent of the holders of a majority in principal amount of the outstanding notes, we and the trustee may amend the indenture or modify or waive your rights. However, no modification may, without the consent of each holder affected: . Change the stated maturity or reduce the principal amount of any note; . Change the rate or extend the time for payment of interest on the notes; . Change any premium payable upon the repurchase of a note; . Change the place of payment where, or the currency in which, any note or any premium or interest is payable; . Impair the right to bring suit for the conversion of any note or the enforcement of any payment; . Reduce the repurchase price that we must pay for the notes; . Weaken the repurchase offer; . Reduce the percentage in principal amount of the outstanding notes required to make any amendment, supplemental indenture or waiver provided for in the indenture; or . Weaken your right to convert notes or weaken the protection against dilution provided to you in the form of adjustments to the conversion price. A supplemental indenture entered into in compliance with the covenant described above under "Limitation on merger, sale or consolidation" would not require your consent. No personal liability of stockholders, officers, directors and employees None of our stockholders, employees, officers or directors or those of any successor corporation will have any personal liability regarding our obligations under the indenture or the notes by reason of their status as a stockholder, employee, officer or director. Transfer and exchange of the notes You may transfer or exchange the notes in accordance with the indenture. We or the trustee may require you, among other things, to furnish appropriate endorsements, legal opinions and transfer documents, and to pay any taxes and fees required by law or permitted by the indenture. We are not required to transfer or exchange any notes selected for repurchase. Also, we are not required to transfer or exchange any notes for a period of 15 days before the mailing of a repurchase offer or notice of repurchase. The registered holder of a note may be treated as the note's owner for all purposes. Book entry, delivery and form of the notes We have deposited one or more global notes, representing all of the notes, with, or on behalf of, The Depository Trust Company, as the depositary, and registered the global notes in the name of Cede & Co. 21 as the depositary's nominee. Except as set forth below, the global notes may be transferred, in whole or in part, only to another nominee of the depositary or to a successor of the depositary or its nominee. Qualified institutional buyers, or QIBs, may hold their interests in the global notes: . directly through the depositary, if those holders are participants in the depositary; or . indirectly through organizations which are participants in the depositary. The Depositary's rules will govern all transfers between participants. Transfers will be settled in same-day funds. The depositary has advised us that it is a limited-purpose trust company created to hold securities for its participants and to facilitate the clearance and settlement of transactions in those securities between participants through electronic book-entry changes in accounts of its participants. The depositary's participants include securities brokers and dealers, banks and trust companies, and clearing corporations. Access to the depositary's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. QIBs may elect to hold notes purchased by them through the depositary. QIBs who are not participants may beneficially own securities held by or on behalf of the depositary only through participants or indirect participants. Ownership of the notes represented by the global notes will be shown on, and transferred through, records maintained by the depositary, the participants and the indirect participants. As long as the depositary or its nominee is the registered owner of a note, the depositary or that nominee will be considered the sole owner or holder of the notes represented by the global notes 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 that global note registered in their names; . Receive or be entitled to receive physical delivery of certificates representing notes; and . Be considered the owners or holders of the notes under the indenture for any purpose, including the giving of any directions, instructions or approvals to the trustee. The laws of some states require some persons to take physical delivery of certificates representing securities that they own and that security interests in negotiable instruments can only be perfected by the delivery of certificates representing the instruments. As a result, the ability of a person having a beneficial interest in notes represented by a global note to pledge his or her interest to persons that do not participate in the depositary's system, or to otherwise take actions with respect to that interest, may be affected by the lack of a physical certificate representing that interest. Neither we nor the trustee have any responsibility or liability for any aspect of the depositary's records relating to the notes, or payments made on account of the notes by the depositary, or for maintaining, supervising or reviewing any records of the depositary relating to the notes. The trustee will make payments with respect to any note represented by a global note on the applicable record date to, or at the direction of, the depositary or its nominee in its capacity as the registered holder of the global notes. Under the terms of the indenture, we and the trustee may treat the persons in whose names the global notes are registered as the owners of the notes for all purposes. Consequently, neither we nor the trustee will have any responsibility or liability for any direct payment to beneficial owners of the notes or the crediting of the account of the relevant participants with any payments. Standing instructions and customary practice govern payments by the participants and the indirect participants to the beneficial owners of notes. These payments will be the responsibility of the participants or the indirect participants. Holders who desire to convert their notes should contact their brokers or other participants or indirect participants to obtain information on procedures, including proper forms and cut-off times, for submitting requests. 22 If we notify the trustee in writing that (1) the depositary is no longer willing or able to act as a depositary and we are unable to locate a qualified successor within 90 days or (2) we elect to cause the issuance of certificates representing notes under the indenture, then, upon surrender by the depositary of the global notes, certificates representing notes will be issued to each person that the depositary identifies as the beneficial owner of the notes represented by the global notes. In addition, any person having a beneficial interest in a global note may, upon request to the trustee, exchange that beneficial interest for notes in the form of certificates representing notes. Upon issuance, the trustee is required to register those certificates representing notes in the name of that person, and cause them to be delivered. All certificates representing notes shall bear appropriate legends restricting their transferability. Neither we nor the trustee will be liable for any delay by the depositary or any participant or indirect participant in identifying the beneficial owners of the notes. We and the trustee will also be protected in relying on instructions from the depositary for all purposes. Registration rights regarding the notes and the conversion shares Under the registration rights agreements, we agreed to file with the SEC, on or prior to February 16, 1999, a shelf registration statement under the Securities Act of 1933 to cover resales of the notes and shares of common stock issued upon conversion of the notes, or conversion shares. Accordingly, we have filed the registration statement containing this prospectus. We will use our reasonable best efforts to keep the shelf registration statement effective until the earlier of . November 18, 2000; or . The date all notes and conversion shares covered by the shelf registration statement have been sold or there are no longer any notes and conversion shares outstanding. If the shelf registration statement containing this prospectus ceases to be effective or this prospectus ceases to be usable for more than 90 days during any 365-day period, damages will accrue in favor of each holder of notes and conversion shares. During the first 90-day period immediately following the default, these damages will accrue at a rate of $0.05 per week per $1,000 principal amount of notes or, if applicable, on an equivalent basis per share for conversion shares held by that holder. The rate of accrual will increase by an additional $0.05 per week per $1,000 principal amount of notes or, if applicable, by an equivalent amount per week per share for conversion shares for each subsequent 90-day period until all defaults have been cured. A maximum amount of $0.25 per week per $1,000 principal amount of notes or, if applicable, an equivalent amount per week per share for conversion shares, may be accrued. These damages are adjusted for stock splits, stock recombinations and stock dividends. We will pay all accrued damages to the holders of notes or conversion shares in the same manner as interest payments on the notes. We may suspend the use of the shelf registration statement covering resales of notes and conversion shares in some instances, as described in the registration rights agreement, upon notice to the holders of the notes and conversion shares. The holders of notes and conversion shares will receive damages if the aggregate number of days of these suspensions in any 365-day period exceeds 90 days. We will provide copies of this prospectus to each holder of notes and conversion shares included in the shelf registration statement. We will also notify each holder of the notes when the shelf registration statement has become effective and take other actions as are required to permit resales of the notes and conversion shares. If you sell notes and conversion shares pursuant to the shelf registration statement, you generally must be named as a selling securityholder in this prospectus. You also must deliver this prospectus to purchasers, and will be bound by the provisions of the registration rights agreement. Governing law The laws of the State of New York govern the indenture, the notes and the registration rights agreement. 23 The trustee United States Trust Company of New York is the trustee under the indenture. A successor trustee may be appointed in accordance with the terms of the indenture. The indenture contains limitations on the rights of the trustee, in the event it becomes our creditor, to obtain payment of claims, or to realize on property received in respect of any claim. The trustee is permitted to engage in other transactions with us and our subsidiaries as long as there is no conflict of interest. In case an event of default occurs under the indenture and is not cured or waived, the trustee in the exercise of its powers must use the same degree of care as a prudent person in the conduct of its own affairs. Subject to these provisions, the trustee will have no obligation to exercise any of its rights or powers under the indenture at your request, unless you have offered the trustee reasonable security or indemnity. 24 DESCRIPTION OF CAPITAL STOCK This summary highlights certain provisions of our certificate of incorporation and our bylaws. Our authorized capital stock is 200 million shares, consisting of 195 million shares of common stock and five million shares of preferred stock. Common stock As of January 27, 2000, we had 81,215,233 shares of common stock issued and outstanding. We do not anticipate paying any cash dividends on our common stock in the foreseeable future and we are subject to certain restrictions on our ability to pay dividends on the common stock under our credit facilities. Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. There are no cumulative voting rights applicable to the common stock. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future. Subject to the preferences applicable to shares of preferred stock outstanding at any time, holders of shares of common stock are entitled to receive dividends ratably, if, when and as declared by our board of directors, from funds legally available. These holders are also entitled, in the event of liquidation, to share ratably in all assets remaining after payment of liabilities and preferred stock preferences, if any. Holders of common stock have no preemptive, subscription, redemption or conversion rights and there are no sinking fund provisions relating to these shares. The authorized but unissued shares of common stock are available for issuance by us without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange on which the common stock may be listed. The outstanding shares of our common stock are, and the conversion shares will be, when issued and paid for, fully paid and non-assessable. Preferred stock Our certificate of incorporation authorizes our board of directors to establish series of preferred stock and to determine, with respect to any series of preferred stock, the voting powers, or no voting powers, and designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, as are stated in the resolutions of our board of directors providing for a series. As of January 27, 2000, we had no shares of preferred stock issued and outstanding. The authorized but unissued shares of preferred stock are available for issuance by us without further action by our stockholders. This allows us to issue shares of preferred stock without the expense and delay of a special stockholders' meeting, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be listed. We believe that the preferred stock will provide flexibility in structuring possible future financings and acquisitions, and in meeting other corporate needs. Although our board of directors has no intention at the present time of doing so, it could issue a series of preferred stock, the terms of which, subject to certain limitations imposed by the securities laws, could impede the completion of a merger, tender offer or other takeover attempt. Our board of directors will make any determination to issue such shares based on its judgment as to our best interests and the best interests of our stockholders at the time of issuance. Our board of directors, in so acting, could issue preferred stock having terms that could discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of that stock. 25 Certain charter and bylaw provisions Pursuant to the provisions of the DGCL, we have adopted provisions in our certificate of incorporation and bylaws which require us to indemnify our officers and directors to the fullest extent permitted by law, and eliminate the personal liability of our directors to us or our stockholders for monetary damages for breach of their duty of due care except for; . Any breach of the duty of loyalty; . Acts or omissions not in good faith or which involve intentional misconduct or knowing violations of law; . Liability under Section 174 of the DGCL (relating to certain unlawful dividends, stock repurchases or stock redemptions); or . Any transaction from which the director derived any improper personal benefit. These provisions do not eliminate a director's duty of care. Moreover, these provisions do not apply to claims against a director for violation of certain laws, including federal securities laws. We believe that these provisions will assist us in attracting or retaining qualified individuals to serve as directors and officers. Our certificate of incorporation includes a provision which allows our board of directors to issue up to five million shares of preferred stock with voting, liquidation and conversion rights that could be superior to and adversely affect the voting power of holders of our common stock. We have no present plans to issue any shares of preferred stock. Delaware anti-takeover law We are a Delaware corporation that is subject to Section 203 of the DGCL. Under Section 203 certain "business combinations" between a Delaware corporation, whose stock generally is publicly traded or held of record by more than 2,000 stockholders, and an "interested stockholder" are prohibited for a three-year period following the date that stockholder became an interested stockholder, unless: . The corporation has elected in its certificate of incorporation not to be governed by Section 203 (we have not made this election); . The business combination was approved by the board of directors of the corporation before the other party to the business combination became an interested stockholder; . Upon consummation of the transaction that made it an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction (excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or . The business combination is approved by the board of directors of the corporation and ratified by two-thirds of the voting stock which the interested stockholder did not own. The three-year prohibition also does not apply to business combinations proposed by an interested stockholder following the announcement or notification of certain extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation's directors. The term "business combination" is defined generally to include mergers or consolidations between a Delaware corporation and an interested stockholder, transactions with an interested stockholder involving the assets or stock of the corporation or its majority- owned subsidiaries, and transactions which increase an interested stockholder's percentage ownership of stock. The term "interested stockholder" is defined generally as those stockholders who become beneficial owners of 15% or more of a Delaware corporation's voting stock, together with the affiliates or associates of that stockholder. Transfer agent The registrar and transfer agent for our common stock is The Bank of New York. 26 DESCRIPTION OF DEBT This summary highlights certain provisions of our debt instruments. Credit facilities We may borrow an aggregate of $1.1 billion under our credit facilities. Our credit facilities are with DLJ Capital Funding, Inc., as syndication agent, The Bank of New York, as administrative agent and various banks, as lenders. The following is a summary description of the principal terms of our credit facilities. Structure Our credit facilities provide for an eight-year $400 million senior term facility and a five-year $700 million revolving senior credit facility. Under the revolving facility, up to $100 million may be used in connection with letters of credit, and up to $15 million in short-term funds may be borrowed the same day that notice is given to the banks under a "swing line" facility. Security; Guarantees The obligations under our credit facilities are guaranteed by each of our existing direct and indirect material subsidiaries and future direct and indirect material domestic subsidiaries. Our credit facilities and the guarantees are, subject to certain exceptions, secured by all of the capital stock, or similar equity interests, of our existing direct and indirect material subsidiaries and future direct and indirect material domestic subsidiaries. Interest rate In general, borrowings under our credit facilities bear interest at one of two floating rates selected by us: . The alternate base rate, defined as the higher of The Bank of New York's prime rate or the federal funds rate plus 0.5%, plus a margin ranging from 1.75% to 2.25% for borrowings under the revolving credit facility and a margin of 2.50% for borrowings under the term loan facility; or . Adjusted LIBOR, defined as the 30-, 60-, 90- or 180-day London Interbank Offered Rate, adjusted for statutory reserves, plus a margin ranging from 3.00% to 3.50% for borrowings under the revolving credit facility and a margin of 3.75% for borrowings under the term loan facility. The applicable margin used in determining the interest rate for borrowings under the revolving credit facility is based on our leverage ratio. Currently, the applicable margin is at the top of the ranges listed above. In addition, the most recent of the waiver agreements described below fixed the applicable margin at 2.25% for alternate base rate loans and 3.50% for adjusted LIBOR loans for the period September 30, 1999 through March 15, 2000. The applicable margin used in determining the interest rate for borrowings under the term loan has been fixed for the remainder of the loan period. Swing line borrowings bear interest at either a rate negotiated by us and The Bank of New York, as the swing line lender, at the time of borrowing or, if no rate is negotiated and agreed upon, the alternate base rate. Maturity We are required to repay the amount borrowed under the term facility in yearly installments of $4 million beginning on September 30, 1998 and continuing through September 30, 2005. The remaining balance of $360 million is due when the term facility matures on March 31, 2006. The term facility may be prepaid at any time upon proper notice, but the redemption price will be 100.75% of the outstanding balance if prepayment is made from May 1, 1999 to April 30, 2000. The revolving facility terminates on March 31, 2003. 27 Fees We are required to pay the banks which are party to our credit facilities a commitment fee based on the daily average unused portion of the revolving facility which accrues from the closing date of our credit facilities. We are also obligated to pay letter of credit fees on the aggregate stated amount of outstanding letters of credit. Covenants Our credit facilities contain a number of covenants, in addition to the financial covenants, that, among other things, restrict our ability and that of our subsidiaries to: . Dispose of assets; . Incur additional debt; . Prepay other debt, including the notes, subject to certain exceptions, or amend certain debt instruments, including the indenture; . Pay dividends; . Create liens on assets; . Amend our certificate of incorporation or bylaws; . Make investments, loans or advances; . Make acquisitions; . Engage in mergers or consolidations; . Change the business conducted by us or our subsidiaries; . Make capital expenditures or engage in transactions with affiliates; and . Otherwise restrict certain corporate activities. In addition, our credit facilities contain financial covenants that require us to maintain, on a consolidated basis, specified financial tests including a minimum interest coverage ratio, a minimum net worth test, a minimum cash flow ratio and a maximum leverage ratio. In August 1999 the lenders under our credit facilities waived compliance with a financial covenant that established a maximum leverage ratio which we could not exceed. In November 1999, this waiver was extended on revised terms. The revision to the waiver was required because we had exceeded the maximum leverage ratio allowable under the terms of the original waiver. The revised waiver expires March 15, 2000. The lenders also waived our violation of a covenant that placed a limit on our aggregate borrowings for international acquisitions, which we had exceeded. The terms of the revised waiver: . Permanently reduced the revolving credit facility from $950 million to $700 million; . Reduced our permitted borrowings under the revolving credit facility to $650 million during the waiver period; . Limited the amounts we may spend for acquisitions, de novo developments and expansion or relocation of existing dialysis centers; . Accelerated the maturity dates on the term loan and revolving credit facilities by two years, to March 31, 2006 and March 31, 2003, respectively; and . Increased the applicable margins used to determine the interest rates for our borrowings under our credit facilities. . Increased the maximum allowable debt to EBITDA ratio, as defined in the revolving credit agreement, to 4.8 until March 15, 2000. Other than the issues specifically addressed in the waiver agreement, all other covenants and conditions of the credit facilities remain unchanged. Based upon our expectations regarding our fourth quarter 1999 financial results, we anticipate that we will not be in compliance with all of the covenants of our credit facilities when measured as of December 31, 1999. 28 If the lenders do not waive this anticipated failure to comply, they may declare an event of default, which would allow the lenders to accelerate payment of all amounts due under our credit facilities. The lenders may also require additional concessions from us, including increases in the interest rates for these borrowings, before giving us a waiver. Events of default Our credit facilities contain customary events of default, including: . Nonpayment of principal, interest or fees; . Material inaccuracy of representations and warranties; . Violation of covenants; . Cross-defaults to certain other debt; . Events of bankruptcy and insolvency; . Employee Retirement Income Security Act of 1974 matters; . Material judgments; . Invalidity of any guaranty or security interest; and . A change of control of us. In addition, if we or any of our subsidiaries become ineligible for participation in, or are suspended from receiving reimbursement under, Medicare or Medicaid programs resulting in a material decrease in our consolidated net operating revenues, we will be in default under the credit facilities. Swap agreements During the second quarter of 1998, we entered into forward interest rate cancelable swap agreements with various financial institutions with a combined notional amount of $800 million. The lengths of the agreements are between three and ten years with cancelation clauses at the financial institutions' option from one to seven years. The underlying blended interest rate is fixed at approximately 5.65% plus an applicable margin based upon our current leverage ratio. At September 30, 1999, the effective interest rate for these swaps was 9.30%. During the second quarter of 1999, we received notification from two of our swap agreement counterparties that they had exercised their right to cancel agreements in the aggregate notional amount of $100 million. The remaining $700 million of swap agreements with maturities from the years 2003 through 2008 and cancellation option dates from the years 2001 through 2005 are still in effect. 5 5/8% convertible notes and related guaranty We have guaranteed the $125 million outstanding 5 5/8% convertible subordinated notes due 2006 of Renal Treatment Centers, Inc., our wholly-owned subsidiary. These notes are convertible into shares of our common stock at an effective conversion price of $25.62 per share. Although these notes do not mature until 2006, Renal Treatment Centers, Inc. may repurchase them at its option subsequent to July 16, 1999. The repurchase price, expressed as a percentage of the principal amount of the notes, is shown below for 12-month periods beginning July 15:
Year Percentage Year Percentage ---- ---------- ---- ---------- 1999.................... 103.94% 2003.................... 101.69% 2000.................... 103.38% 2004.................... 101.13% 2001.................... 102.81% 2005.................... 100.56% 2002.................... 102.25% 2006.................... 100.00%
Our guaranty of these notes ranks equally with trade payables and is junior to our credit facilities and any future debt we may incur, unless it otherwise states. The notes offered by this prospectus are effectively junior to these notes. 29 U.S. FEDERAL TAX CONSIDERATIONS The following discussion summarizes the material U.S. federal tax considerations of the acquisition, ownership, conversion and disposition of the notes by beneficial owners of the notes and the ownership and disposition of conversion shares. Riordan & McKinzie, a professional law corporation, counsel to us, has rendered its opinion to us on these material tax considerations as set forth in this section. This discussion does not consider all aspects of U.S. federal income taxation that may be relevant to a prospective investor in light of that investor's personal circumstances. This discussion does not address the U.S. federal income tax consequences of ownership of the notes or conversion shares not held as capital assets within the meaning of Section 1221 of the current U.S. Internal Revenue Code, or the IRC, or the U.S. federal income tax consequences to investors subject to special treatment under the U.S. federal income tax laws, such as: . Dealers in securities or foreign currency; . Tax-exempt entities, financial institutions, insurance companies; . Persons that hold the notes or conversion shares as part of a straddle, hedge, conversion or synthetic security transaction; . Persons that have a functional currency other than the U.S. dollar; and . Investors in pass-through entities. Moreover, the effect of any applicable state, local or foreign tax laws is not discussed. This discussion is based upon the IRC, existing regulations under the IRC, and current administrative rulings and judicial decisions. All of the foregoing is subject to change, possibly on a retroactive basis, and that could affect the continuing validity of this discussion. We encourage prospective investors to consult their tax advisors concerning the application of U.S. federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdiction, to the acquisition, ownership, conversion and disposition of the notes and the ownership and disposition of the conversion shares. U.S. holders A "U.S. holder" means a beneficial owner of a note or conversion shares that is, for U.S. federal income tax purposes: . A citizen or resident of the United States as defined in Section 7701(b)(1) of the IRC; . A corporation or other entity taxable as a corporation organized under the laws of the United States or any of its political subdivisions; . An estate the income of which is subject to U.S. federal income tax regardless of its source; . A trust, with respect to which a court within the U.S. is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all its substantial decisions; or . A person whose worldwide income or gain is subject to U.S. federal income tax on a net income basis. A "non-U.S. holder" means a holder of a note or conversion shares that is not a U.S. holder. Conversion of the notes In general, no gain or loss will be recognized on a conversion of the notes into conversion shares except to the extent of cash paid in lieu of a fractional share of common stock, as discussed below under the heading "Disposition of notes and conversion shares." The adjusted basis of the conversion shares received upon conversion will equal the adjusted basis of the note converted, reduced by the portion of adjusted basis allocated to any fractional share of common stock exchanged for cash. The holding period of a U.S. holder in the conversion shares will include the period during which the converted notes were held. 30 Dividends on conversion shares The amount of any distribution by us in respect of conversion shares will be equal to the amount of cash and the fair market value, on the date of distribution, of any property distributed. Generally, distributions will be treated as a dividend, subject to tax as ordinary income, to the extent of our current and accumulated earnings and profits, then as a tax-free return of capital to the extent of the U.S. holder's adjusted tax basis in the conversion shares and thereafter as capital gain. Dividends paid to holders that are U.S. corporations may qualify for the dividends-received deduction. Adjustment of conversion price If at any time we make a distribution of property to our stockholders that would be taxable to those stockholders as a dividend for U.S. federal income tax purposes and, in accordance with the antidilution provisions of the notes, the conversion price of the notes is decreased, the amount of that decrease may be deemed to be the payment of a taxable dividend to holders of the notes. For example, a decrease in the conversion price in the event of distributions of our debt or assets generally will result in deemed dividend treatment to holders of the notes, but generally a decrease in the event of stock dividends or the distribution of rights to subscribe for our common stock will not. See the heading "You may convert your notes into shares of our common stock" in the "Description of Notes" section. Amortizable bond premium If a U.S. holder of a note acquires the note at a cost that is in excess of the amount payable at maturity, after reducing that cost by an amount equal to the value of the conversion option, the U.S. holder may elect under Section 171 of the IRC to amortize the excess cost, as an offset to interest income, on a constant interest rate basis over the term of the note. However, because the notes may be redeemed at our option at a price in excess of their principal amount, a U.S. holder may be required to amortize any bond premium based on the earlier call date and the call price payable at that time. If the U.S. holder makes an election to amortize bond premium, the tax basis of all the U.S. holder's notes will be reduced by the allowable bond premium amortization. The amortization election would apply to all debt instruments held or subsequently acquired by the electing purchaser and cannot be revoked without permission from the Internal Revenue Service. On conversion of a note into conversion shares, no additional amortization of any bond premium would be allowed, and any remaining premium would be added to the U.S. holder's tax basis in the common stock received. Market discount Investors acquiring notes after their original issuance should consider that the resale of those notes may be adversely affected by the market discount provisions of Sections 1276 through 1278 of the IRC. Except as described below, gain recognized on the disposition of a note that has accrued market discount will be treated as ordinary income, and not capital gain, to the extent of the accrued market discount. "Market discount" is defined generally as the excess of the principal amount of the note over the tax basis of the note in the hands of the U.S. holder immediately after its acquisition. Under a de minimis exception, there is no market discount if the excess of the principal amount of the obligation over the U.S. holder's tax basis in the obligation is less than 0.25% of the principal amount multiplied by the number of complete years after the acquisition date to the obligation's date of maturity. Unless the U.S. holder elects to accrue market discount on a constant yield basis, the accrued market discount generally would be the amount calculated by multiplying the market discount by a fraction, the numerator of which is the number of days the obligation has been held by the U.S. holder and the denominator of which is the number of days after the U.S. holder's acquisition of the obligation up to and including its maturity date. If a U.S. holder of a note acquired with market discount disposes of that note in any transaction other than a sale, exchange or involuntary conversion, the U.S. holder will be deemed to have realized an amount equal to 31 the fair market value of the note and will be required to recognize as ordinary income any accrued market discount. See the discussion below under the subheading "Disposition of notes and conversion shares" for the tax consequences of a sale or exchange. A partial principal payment on a note will be includable as ordinary income upon receipt to the extent of any applicable accrued market discount on that note. Although it is not free from doubt, any accrued market discount not previously taken into income prior to a conversion of a note into conversion shares should carry over to the conversion shares received on conversion and be treated as ordinary income upon a subsequent disposition of those conversion shares, to the extent of any gain recognized on that disposition. Unless the election described below is in effect, a U.S. holder of a note acquired at a market discount also may be required to defer the deduction of all or a portion of the interest on any debt incurred or maintained to purchase or carry the note until the maturity of the note or the earlier disposition of the note in a taxable transaction. A U.S. holder of a note acquired at a market discount may elect to include the market discount in income as it accrues, on either a straight-line basis or a constant yield basis. This election would apply to all market discount obligations acquired by the electing U.S. holder on or after the first day of the first year to which the election applies. The election may be revoked only with the consent of the Internal Revenue Service. If a U.S. holder of a note elects to include market discount in income currently, the rules discussed above regarding ordinary income recognition resulting from a sale and certain other disposition transactions and deferral of interest deductions would not apply. Disposition of notes and conversion shares Generally, upon the disposition of a note or conversion shares, including cash received in lieu of a fractional share of common stock, by sale, exchange or redemption, a U.S. holder will recognize capital gain or loss equal to the difference between: . The amount realized on the disposition, other than, in the case of a disposition of a note, amounts attributable to accrued but unpaid stated interest not previously included in income; and . The U.S. holder's adjusted tax basis in the note or conversion shares. A U.S. holder's adjusted tax basis in a note generally will equal the cost of the note to that holder, less any principal payments received by that holder and increased by any market discount previously included in income by that holder. Special rules may apply to redemptions of common stock which may result in dividend, rather than sale or exchange, treatment in respect of the proceeds received pursuant to that redemption. Net capital gain, i.e., capital gain in excess of capital loss, recognized by an individual upon a disposition of notes or conversion shares that have been held for more than 12 months generally will be subject to a maximum tax rate of 20% or, in the case of notes or conversion shares that have been held for 12 months or less, will be subject to tax at ordinary income tax rates. Non-U.S. holders Interest on the notes, dividends on conversion shares and gain on the sale, exchange or other disposition of the notes and conversion shares will be considered "U.S. trade or business income" if that interest, dividend or gain is: . Effectively connected with the conduct of a U.S. trade or business; or . In the case of a treaty resident, attributable to a U.S. permanent establishment, or to a fixed base, in the U.S. 32 Stated interest Generally, interest received by a non-U.S. holder of a note that is not U.S. trade or business income will not be subject to U.S. federal income or withholding tax if: . The non-U.S. holder does not actually or constructively own 10% or more of the total voting power of all our voting stock and is not a "controlled foreign corporation" with respect to which we are a "related person" within the meaning of the IRC; and . The non-U.S. holder, under penalties of perjury, certifies that the non- U.S. holder is not a U.S. person and the certificate provides the non- U.S. holder's name and address. Interest received on the notes that constitutes U.S. trade or business income will be subject to tax on a net income basis at regular U.S. federal income tax rates and, if the non-U.S. holder is a foreign corporation, it may be subject to a branch profits tax equal to 30%, or a lower rate if specified by an applicable income tax treaty, of its U.S. effectively connected earnings and profits that are actually or deemed to have been repatriated. The Treasury Department has issued final regulations relating to withholding, information reporting and backup withholding that unify current certification procedures and forms and clarify reliance standards. These final regulations generally will be effective with respect to payments made after December 31, 2000. Under these final regulations, a non-U.S. holder who is claiming the benefits of a tax treaty or exemption from withholding from U.S. trade or business income may be required to obtain a U.S. taxpayer identification number and to provide certain documentary evidence issued by foreign governmental authorities to prove residence in the foreign country. Moreover, certain special procedures are provided in these final regulations for payments through qualified intermediaries. Conversion of the notes In general, no U.S. federal income tax or withholding tax will be imposed on the conversion of the notes into conversion shares by a non-U.S. holder, except in the case of the receipt of cash in lieu of a fractional share of common stock as discussed below under the heading "Disposition of notes and conversion shares." The adjusted basis of the common stock received on conversion will equal the adjusted basis of the note converted, reduced by the portion of adjusted basis allocated to any fractional share of common stock exchanged for cash. Dividends on conversion shares Dividends paid, including dividends deemed to have been paid as described above under the heading "Adjustment of conversion price", to a non-U.S. holder of conversion shares will be subject to a U.S. withholding tax at a rate of 30%, or a lower rate if specified by an applicable income tax treaty, of the gross amount of the dividend, unless the dividends constitute U.S. trade or business income. Currently, for purposes of determining whether tax is to be withheld at the 30% rate or at a reduced treaty rate, we ordinarily will presume that dividends paid to an address in a foreign country are paid to a resident of such country, absent knowledge that such presumption is not warranted. Under the final regulations for withholding effective for payments after December 31, 2000, holders will be required to satisfy certain applicable certification requirements to claim treaty benefits. Except to the extent otherwise provided under an applicable treaty, dividends that constitute U.S. trade or business income are subject to U.S. federal income tax on a net income basis at regular U.S. federal income tax rates, and are not generally subject to withholding if the holder complies with certain certification and disclosure requirements. In the case of any dividends received by a foreign corporation that are effectively connected with the conduct by such corporation of a U.S. trade or business, such dividends may also be subject to the 30% branch profits tax as described above under the heading "Stated interest." 33 Disposition of notes and conversion shares Except as described below, and subject to the discussion concerning backup withholding, any gain realized by a non-U.S. holder on the sale, exchange or redemption of a note or conversion shares, including cash received in lieu of a fractional share, generally will not be subject to U.S. federal income or withholding tax, unless: . Such gain is U.S. trade or business income; or . The non-U.S. holder is an individual who holds the notes as a capital asset, is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements. Special rules may apply to redemptions of conversion shares which may result in dividend, rather than sale or exchange, treatment in respect of the proceeds received. Federal estate tax Notes or conversion shares held, or treated as held, by an individual who is a non-U.S. holder at the time of his or her death will not be subject to U.S. federal estate tax, provided that: . In the case of notes, the individual did not actually or constructively own 10% or more of the total voting power of all classes of voting stock; and . Income on the notes or conversion shares was not U.S. trade or business income. Information reporting and backup withholding We must report annually to the Internal Revenue Service and to each non-U.S. holder any interest and dividends that are subject to federal withholding tax, regardless of whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides. Backup withholding and information reporting generally will not apply to payments of principal or interest on the notes and dividends on the conversion shares to a non-U.S. holder, if the holder certifies as to its non-U.S. status under penalties of perjury or otherwise establishes an exemption, provided that neither we nor our paying agent has actual knowledge that the holder is a U.S. holder or that the conditions of any other exemption are not, in fact, satisfied. The payment of the proceeds from the disposition of notes or conversion shares to or through the U.S. office of any broker, U.S. or foreign, will be subject to information reporting and possible backup withholding unless the non-U.S. holder certifies as to its non-U.S. status under penalties of perjury or otherwise establishes an exemption, provided that the broker does not have actual knowledge that the holder is a U.S. holder or that the conditions of any other exemption are not, in fact, satisfied. The payment of proceeds from the disposition of notes or conversion shares to or through a non-U.S. office of a broker that is: . A U.S. person; . A "controlled foreign corporation" for U.S. federal income tax purposes; . A foreign person 50% or more of whose gross income from all sources for a specified three-year period is derived from activities that are effectively connected with the conduct of a U.S. trade or business; or . After December 31, 2000, a foreign partnership if either more than 50% of the income or capital interest of such partnership is owned by U.S. holders or such partnership has certain connections to the United States, will be subject to information reporting, unless the broker has documentary evidence in its files that the non-U.S. holder is a non-U.S. person and the broker has no actual knowledge to the contrary. 34 Before January 1, 2001, the payment of the proceeds from the disposition of notes or conversion shares to or through a non-U.S. office of a broker generally will not be subject to backup withholding. After December 31, 2000, such payment will be subject to backup withholding if information reporting is required. After December 31, 2000, payments through a non-U.S. intermediary satisfying certain requirements will not be subject to either backup withholding or information reporting. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder may be allowed as a refund or a credit against such non-U.S. holder's U.S. federal income tax liability, provided the required information is furnished to the Internal Revenue Service. 35 PLAN OF DISTRIBUTION This prospectus relates to the resale of $345 million of notes issued in a private placement on November 13, 1998 and the resale of 10,515,087 conversion shares, plus any additional conversion shares that may be issuable pursuant to the antidilution provisions of the notes. The registration statement, of which this prospectus is a part, does not cover the issuance of shares of common stock upon conversion of the notes into the conversion shares. The selling securityholders may sell or distribute the notes and the conversion shares directly to purchasers as principals or through one or more underwriters, brokers, dealers or agents from time to time in one or more transactions, which may involve crosses or block transactions: . On any exchange or in the over-the-counter market; . In transactions otherwise than in the over-the-counter market; or . Through the writing of options, whether such options are listed on an options exchange or otherwise, on, or in settlement of short sale of the notes or the conversion shares. The selling securityholders may also loan or pledge the notes or the conversion shares to broker-dealers that in turn may sell such securities. Any of these transactions may be effected at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at varying prices determined at the time of sale or at negotiated or fixed prices, in each case as determined by the selling securityholder or by agreement between the selling securityholder and underwriters, brokers, dealers or agents, or purchasers. If the selling securityholders sell the notes or the conversion shares to or through underwriters, brokers, dealers or agents, those underwriters, brokers, dealers or agents may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or commissions from purchasers of the notes or the conversion shares for whom they may act as agent. These discounts, concessions or commissions may be in excess of those customary in the types of transactions involved. The selling securityholders and any brokers, dealers or agents that participate in the distribution of the notes or the conversion shares may be considered underwriters, and any profit on the sale of the notes or the conversion shares by them and any discounts, concessions or commissions received by any underwriters, brokers, dealers or agents may be considered underwriting discounts and commissions under the Securities Act of 1933. To the extent required, the aggregate principal amount of notes and number of conversion shares, the names of the selling securityholders, the purchase price, the name of any agent, dealer or underwriter and any applicable commissions, discounts or other terms constituting compensation with respect to a particular offer will be set forth in an accompanying prospectus supplement. The aggregate proceeds to the selling securityholders from the sale of the notes or conversion shares will be the purchase price of such notes or conversion shares less any discounts and commissions. Our common stock is listed on the New York Stock Exchange, and the conversion shares have been authorized for listing on the New York Stock Exchange. There is no assurance that any trading market will develop for the notes. In order to comply with the securities laws of certain states, if applicable, the notes and the conversion shares will be sold in those jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the notes and the conversion shares may not be sold unless they have been registered or qualified for sale or exempted from registration or qualification. We will not receive any of the proceeds from the selling securityholders' sale or distribution of the notes and the conversion shares. We have agreed with the selling securityholders to indemnify each other against certain liabilities arising under the Securities Act of 1933. We have agreed to pay all expenses related to the 36 selling securityholders' offer and sale of the notes and the conversion shares to the public, other than selling commissions and fees. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains statements that are forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "believe" and similar language. These statements involve known and unknown risks, including risks resulting from economic and market conditions, the regulatory environment in which we operate, competitive activities and other business conditions, and are subject to uncertainties and assumptions set forth elsewhere in this prospectus. Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update these statements. MARKET DATA Market data used throughout this prospectus, including information relating to our relative position in the dialysis industry, is based on the good-faith estimate of our management based upon their review of internal surveys, independent industry publications and other publicly available information. Although we believe that these sources are reliable, the accuracy and completeness of this information is not guaranteed and has not been independently verified. INCORPORATION BY REFERENCE The SEC allows us to "incorporate by reference" into this prospectus the documents we file with them, which means that we can disclose important information to you by referring you to these documents. The information that we incorporate by reference into this prospectus is considered to be part of this prospectus, and information that we file later with the SEC automatically updates and supersedes any information in this prospectus. We incorporate by reference into this prospectus the documents listed below: . Our annual report on Form 10-K for the year ended December 31, 1998 and Amendments No. 1 and No. 2 to the annual report on Form 10-K/A; . Our quarterly report on Form 10-Q for the quarter ended March 31, 1999 and Amendments No. 1 and No. 2 to the quarterly report on Form 10-Q/A; . Our quarterly report on Form 10-Q for the quarter ended June 30, 1999 and Amendment No. 1 to the quarterly report on Form 10-Q/A; . Our quarterly report on Form 10-Q for the quarter ended September 30, 1999 and Amendment No. 1 to the quarterly report on Form 10-Q/A; and . All documents subsequently filed by us pursuant to sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the termination of this offering. We will provide without charge to each person, including any prospective investor to whom this prospectus has been delivered, upon written or oral request, a copy of any and all of the documents referred to above that are or may be incorporated by reference into this prospectus, other than exhibits, unless these exhibits are specifically incorporated by reference into this prospectus. Requests should be directed to Total Renal Care Holdings, Inc., attention Barry C. Cosgrove, Suite 800, 21250 Hawthorne Boulevard, Torrance, California 90503-5517, telephone number (310) 792-2600. 37 LEGAL MATTERS Barry C. Cosgrove, our General Counsel, has passed upon certain legal matters with respect to the legality of the notes. Mr. Cosgrove holds stock and options to purchase stock granted under our employee stock plans that in the aggregate represent less than 1% of our common stock. EXPERTS The financial statements for the years ended December 31, 1996, 1997 and 1998 incorporated in this prospectus by reference to our Annual Report on Form 10- K/A (Amendment No. 2) have been so incorporated in reliance on the report, which contains explanatory paragraphs relating to the restatement of the financial statements and noncompliance with financial covenants of credit facilities, of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. WHERE TO LEARN ABOUT US We are subject to the informational requirements of the Securities Exchange Act of 1934, and we file reports, proxy statements and other information with the SEC. You may inspect and copy these reports, proxy statements and other information at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 or on the SEC's Web Site located at http://www.sec.gov. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also inspect these reports, proxy statements and other information at the office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. 38 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- January 28, 2000 [LOGO OF TOTAL RENAL CARE HOLDINGS, INC.] Total Renal Care Holdings, Inc. $345,000,000 Principal Amount 7% Convertible Subordinated Notes due 2009 10,515,087 Shares of Common Stock ----------------------------------------------- PROSPECTUS ----------------------------------------------- - -------------------------------------------------------------------------------- We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or our solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein or our affairs have not changed since the date hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----