- 21 -
1992, at an annual rate of $6.25 per share or 12.5 percent. The
Reorganization Agreement further required HealthTrust to pay PIK
dividends in class B preferred stock after September 30, 1992,
if, pursuant to the terms of HealthTrust's loan agreements,
HealthTrust could not pay cash dividends. (The Original
Agreement had provided that the payment of PIK dividends on the
class B preferred stock would be optional.)
The Reorganization Agreement required HealthTrust to redeem
10 percent of the then outstanding Preferred Stock in each of
years 21 through year 30 following the Acquisition at the stated
liquidation value plus accrued but unpaid dividends. HealthTrust
could elect to redeem the Preferred Stock prior to that time,
subject to paying a declining redemption premium in excess of the
stated liquidation value which did not apply after year 10.
The Common Stock Warrants
In furtherance of the reorganization, Drexel suggested that
HealthTrust sell Common Stock Warrants to investors as an
inducement to them to acquire HealthTrust subordinated
securities. Subsequently, HCA Management agreed that HCAII would
receive Common Stock Warrants as part of its equity interest in
HealthTrust. Ultimately, HealthTrust issued 19,551,724 Common
Stock Warrants as part of the reorganization. HCAII acquired
17,741,379 Common Stock Warrants and institutional investors
procured the remaining 1,810,345.
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