<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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HEALTHCOR HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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<TABLE>
<C> <C> <C>
DELAWARE 75-2294072
(State or Other Jurisdiction 8090 (I.R.S. Employer
of (Primary Standard Industrial Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
8150 NORTH CENTRAL EXPRESSWAY, SUITE M-2000
DALLAS, TEXAS 75206
(214) 692-4663
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
S. WAYNE BAZZLE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
8150 NORTH CENTRAL EXPRESSWAY, SUITE M-2000
DALLAS, TEXAS 75206
(214) 692-4663
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
<TABLE>
<C> <C>
J. KENNETH MENGES, JR., P.C. STEPHEN L. COHEN
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. GENERAL COUNCIL AND SECRETARY
1700 PACIFIC AVENUE, SUITE 4100 8150 NORTH CENTRAL EXPRESSWAY, SUITE M-2000
DALLAS, TEXAS 75201-4675 DALLAS, TEXAS 75206
(214) 969-2800 (214) 692-4663
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the registration statement becomes effective.
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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11% Senior Notes Due 2004..... $80,000,000 100% $80,000,000 $23,600
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</TABLE>
(1) The registration fee has been computed pursuant to Rule 457(f)(2) under the
Securities Act of 1933, as amended (the "Securities Act"), based on the
stated principal amount of each Outstanding Note (as defined) which may be
received by the Registrant in the exchange transaction in which the Exchange
Notes (as defined) will be offered.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 13, 1998
PRELIMINARY PROSPECTUS
HEALTHCOR HOLDINGS, INC.
OFFER TO EXCHANGE
11% SENIOR NOTES DUE 2004 [HEALTHCOR LOGO]
($80,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
11% SENIOR NOTES DUE 2004,
($80,000,000 PRINCIPAL AMOUNT)
---------------------
The Exchange Offer will expire at 5:00 p.m., E.S.T., on , 1998,
unless extended.
HealthCor Holdings, Inc., a Delaware corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter
of Transmittal"), to exchange up to an aggregate principal amount of $80,000,000
of its outstanding 11% Senior Notes due 2004 (the "Outstanding Notes") for an
equal principal amount of its 11% Senior Notes due 2004 in integral multiples of
$1,000 (the "Exchange Notes" and, together with the Outstanding Notes, the
"Notes"). The Exchange Notes will be general unsecured obligations of the
Company and are substantially identical (including principal amount, interest
rate, maturity and redemption rights) to the Outstanding Notes for which they
may be exchanged pursuant to this Exchange Offer, except for certain transfer
restrictions and registration rights relating to the Outstanding Notes. The
Outstanding Notes have been, and the Exchange Notes will be, issued under an
Indenture dated as of December 1, 1997, as amended by the First Supplemental
Indenture dated as of December 2, 1997 (the "Indenture"), among the Company,
certain of its subsidiaries and Norwest Bank Minnesota, National Association, as
trustee (the "Trustee"). See "Description of the Exchange Notes." There will be
no proceeds to the Company from the Exchange Offer; however, pursuant to a
Registration Rights Agreement dated as of December 1, 1997 (the "Registration
Rights Agreement") among the Company and the Initial Purchasers (as defined) of
the Outstanding Notes, the Company will bear certain offering expenses.
The Company will accept for exchange any and all validly tendered
Outstanding Notes on or prior to 5:00 p.m., E.S.T., on , 1998,
unless extended (the "Expiration Date"). Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., E.S.T., on the Expiration Date;
otherwise such tenders are irrevocable. Norwest Bank Minnesota, National
Association is acting as Exchange Agent (the "Exchange Agent") in connection
with the Exchange Offer. The minimum period of time that the Exchange Offer will
remain open is 30 days from the date the Registration Statement is declared
effective. The Exchange Offer is not conditioned upon any minimum principal
amount of Outstanding Notes being tendered for exchange, but is otherwise
subject to certain customary conditions.
(Cover text continued on next page)
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN RISKS
TO BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND IN EVALUATING AN
INVESTMENT IN THE EXCHANGE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1998
<PAGE> 3
(Continued from Cover Page)
Interest on the Exchange Notes will accrue at a rate equal to 11% per annum
and will be payable semiannually in arrears on June 1 and December 1 of each
year commencing June 1, 1998. Interest on the Exchange Notes will accrue from
the most recent date to which interest has been paid on the Outstanding Notes
or, if no interest has been paid, from the date of original issuance of the
Outstanding Notes.
The Outstanding Notes in an aggregate principal amount of $80,000,000 were
sold by the Company as of December 1, 1997 (the "Initial Offering"), to Bear,
Stearns & Co. Inc. and Chase Securities Inc. (the "Initial Purchasers") pursuant
to a Purchase Agreement among the parties dated November 24, 1997 (the "Purchase
Agreement") in a transaction not registered under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon the exemption provided in
Section 4(2) of the Securities Act. The Initial Purchasers subsequently placed
the Outstanding Notes with qualified institutional buyers in reliance upon Rule
144A under the Securities Act. Accordingly, the Outstanding Notes may not be
re-offered, resold or otherwise transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. The Exchange Notes are being offered
hereunder in order to satisfy the obligations of the Company under the
Registration Rights Agreement. See "The Exchange Offer."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties (including Exxon Capital Holdings Corporation (available April 13,
1989), Morgan Stanley & Co., Inc. (available June 5, 1991), Mary Kay Cosmetics,
Inc. (available June 5, 1991) and Sherman & Sterling (available July 2, 1993)),
the Company believes that Exchange Notes issued pursuant to this Exchange Offer
may be offered for resale, resold and otherwise transferred by a holder who is
not an affiliate of the Company without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the Exchange Notes in its ordinary course of business and is not
participating in and has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. Persons wishing to exchange Outstanding Notes in the
Exchange Offer must represent to the Company that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1998, all dealers effecting transactions in the Exchange Notes
may be required to deliver a prospectus. See "Plan of Distribution."
The Company does not intend to list the Exchange Notes on any national
securities exchange or to seek the admission thereof to trading on the Nasdaq
Stock Market, Inc. National Market. The Initial Purchasers have advised the
Company that they intend to make a market in the Exchange Notes, and it is
expected that the Exchange Notes will be eligible for trading in the Private
Offering, Resales and Trading through Automated Linkages ("PORTAL") Market of
the Nasdaq Stock Market, Inc.; however, the Initial Purchasers are not obligated
to make a market in the Exchange Notes and any market-making may be discontinued
at any time without notice. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Notes or as to the
liquidity of or the trading market for the Exchange Notes.
Any Outstanding Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that any Outstanding Notes of other holders
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Outstanding Notes could be adversely affected. Following consummation
of
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<PAGE> 4
(Continued from Cover Page)
the Exchange Offer, the holders of untendered Outstanding Notes will continue to
be subject to the existing restrictions upon transfer thereof.
The Company expects that the Exchange Notes issued pursuant to this
Exchange Offer initially will be issued in the form of a Global Exchange Note
(as defined herein), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., its nominee. Beneficial interests in the Global Exchange Note representing
the Exchange Notes will be shown on, and transfers thereof to qualified
institutional buyers will be effected through, records maintained by the
Depositary and its participants. After the initial issuance of the Global
Exchange Note, Exchange Notes in certificated form will be issued in exchange
for the Global Exchange Note on the terms set forth in the Indenture. See
"Description of the Exchange Notes -- Book-Entry, Delivery and Form."
---------------------
No dealer, salesperson or other person has been authorized to give
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the Exchange Notes offered hereby, nor does it constitute an offer to
sell or the solicitation of an offer to buy any of the Exchange Notes to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any date subsequent to the
date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; the Chicago Regional Office, Suite 1400, 500 West Madison Street,
Citicorp Center, Chicago, Illinois 60661; and the New York Regional Office,
Suite 1300, 7 World Trade Center, New York, New York 10048. Copies of such
material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site on the Internet that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of this
site on the Internet is http://www.sec.gov. The Company's Common Stock is traded
on the Nasdaq National Market. The Company's reports, proxy statements and other
information concerning the Company can be inspected and copied at the offices of
the Nasdaq National Market, 9513 Key West Avenue, Rockville, Maryland 20850.
The Company will furnish periodic reports to the Trustee, which will make
them available upon request to the holders of the Notes.
In addition, the Company has agreed that for so long as any of the
Outstanding Notes are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, they will make available to
any prospective purchaser of the Outstanding Notes or beneficial owner of the
Outstanding Notes in connection with any sale thereof the information required
by Rule 144A(d)(4)(i) under the Securities Act.
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<PAGE> 5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING WITHOUT LIMITATION CERTAIN STATEMENTS UNDER "PROSPECTUS
SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS," MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY
STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION IN
CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND
UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
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PROSPECTUS SUMMARY
The Prospectus Summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
included elsewhere in this Prospectus. Unless the context otherwise requires,
and except as used in " -- The Exchange Offer," " -- Summary of Terms of the
Exchange Notes" and "Description of the Exchange Notes," all references in this
Prospectus to the "Company" and "HealthCor" include HealthCor Holdings, Inc.,
its predecessor and its operating subsidiaries.
THE COMPANY
HealthCor is one of the largest fully integrated providers of comprehensive
home health care services based in the southwestern and central United States,
providing home nursing, respiratory therapy/home medical equipment and infusion
therapy. The Company has successfully implemented a regional growth strategy,
expanding from 12 offices in three states at its inception in 1984 to 96 offices
in nine states at September 30, 1997. For the twelve months ended September 30,
1997, the Company had net revenues of $137.9 million and Adjusted EBITDA (as
defined) of $19.2 million.
The Company has diversified its business mix from 98% home nursing in 1990
to 55% home nursing for the nine months ended September 30, 1997. This shift
reflects the addition and growth of higher margin respiratory therapy/home
medical equipment and infusion therapy. Although higher margin respiratory
therapy/home medical equipment and infusion therapy accounted for approximately
41% of the Company's net revenues for the nine months ended September 30, 1997,
these businesses generated approximately 79% of Adjusted EBITDA. The Company
expects that it will continue to shift its business mix towards respiratory
therapy/home medical equipment and infusion therapy. Home nursing, however, will
continue to represent an important part of HealthCor's business mix because
managed care organizations and other referral sources often will make
arrangements for other home health care services after first referring home
nursing cases to a provider.
The Company believes its ability to offer a full range of integrated home
nursing, respiratory therapy/ home medical equipment and infusion therapy in
almost all of its markets creates an important competitive advantage in
obtaining patient referrals. Managed care organizations and other referral
sources generally favor home health care providers that offer integrated health
care services, because "one-stop shop" providers like the Company provide
superior coordination of care and reduce the administrative and service quality
complications of contracting with multiple providers. In the last nine months,
the Company has entered into relationships with several managed care
organizations with approximately 1.5 million total enrollees. As an integrated
provider, the Company rarely engages subcontractors, which the Company believes
permits it to exercise greater control over the quality of service and to
improve patient care.
The Company is also a leader in developing and implementing financial and
clinical management information systems for providing home health care. Upon the
complete implementation of its proprietary medical information system network
("Medisyn(TM)") expected to occur in 1998, the Company believes that it will be
able to achieve additional cost savings, increase productivity and capture
outcomes data that will provide significant advantages in obtaining managed care
business and adapting to regulatory and reimbursement changes.
Home health care is among the fastest growing segments of the health care
industry with estimated annual expenditures of $36.1 billion in 1995, up from an
estimated $12.9 billion in 1990, representing a compounded annual growth rate of
approximately 23%. The underlying growth factors in the home health care
industry include: (i) the cost effective nature of home health care; (ii) an
increasing number of patients due to growth in the elderly population; (iii)
technological advances that expand the range of home health care procedures; and
(iv) patient preference for treatment in the home. The home health care industry
is highly fragmented with more than 18,500 providers delivering home health care
services in the United States, most of which use unsophisticated information
technology systems. As a fully integrated provider and a leader in developing
and implementing information technology systems, the Company believes that it is
well positioned to capitalize on future growth and consolidation in the
industry.
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BUSINESS STRATEGY
HealthCor's business objective is to enhance its position as one of the
leading providers of comprehensive home health care services in the southwestern
and central United States. Elements of the Company's strategy include:
Provide One-Stop Shop Home Health Care Services. HealthCor provides payors,
physicians and patients with fully integrated one-stop shop home health care
services in almost all of its markets. The integration of comprehensive home
health care services enhances the Company's appeal to managed care organizations
and other referral sources that increasingly prefer single-source providers of
home health care. The Company believes that full integration of services enables
it to provide highly coordinated patient care and to increase revenues and
profitability by providing multiple services to an individual patient referral.
Focus on Managed Care Relationships. The Company has intensified its
managed care marketing efforts in order to take advantage of the increased
market penetration of managed care organizations in the home health care market
and the federal government's increasing preference for Medicare beneficiaries to
enroll in managed care plans. HealthCor is the sole or principal provider for a
number of large managed care plans, and the Company believes that its broad
product offering, quality of service, regional focus and advanced information
systems contribute to the Company's competitive advantage.
Target Referrals from Hospitals and Hospital Affiliated Sources. The
Company has implemented a major marketing and sales initiative that targets
physicians who previously referred cases predominantly to hospital-based home
health care organizations. Many of these physicians have financial and operating
relationships with the parent hospitals of such organizations. The Company
believes that recent government scrutiny of these relationships and accompanying
media attention have provided the Company with the opportunity to increase the
number of referrals from those physicians.
Enhance Profitability and Productivity Through Information Technology. The
Company seeks to enhance its profitability and productivity through the
development and use of innovative management information technology that
collects and integrates demographic, financial and clinical information. The
Company is developing and implementing a proprietary financial and clinical
management information system, trademarked Medisyn(TM), which is expected to be
substantially completed in May 1998. The Company believes that Medisyn(TM) will
improve profitability by efficiently servicing increased volumes of managed care
referrals, increase productivity gains, reduce costs and provide outcomes data
to payors in an environment increasingly influenced by managed care
organizations and reimbursement changes.
Make Selective Acquisitions to Increase Density in Existing Markets and to
Enter New Markets. The Company selectively seeks high-quality local and
strategic acquisitions that expand the range of services in its existing markets
and that enable the Company to expand its service area, increasing its appeal to
managed care organizations. Since January 1995, the Company has acquired 25 home
health care companies, adding 38 offices. The Company believes that due to the
fragmentation of the home health care industry, a substantial number of
acquisition opportunities are available.
SERVICES AND PRODUCTS
The Company provides a comprehensive array of services and products that
are essential to the proper implementation of the physician's plan of care in
the home. These products and services are classified into three groups: Home
Nursing, Respiratory Therapy/Home Medical Equipment and Infusion Therapy.
Home Nursing. HealthCor provides a wide range of nursing services to
individuals with acute illness, long-term chronic health conditions, permanent
disabilities, terminal illness or post-procedural needs. Patients are typically
referred to the Company by primary care or specialty physicians and managed care
case managers. After reviewing the patient's medical records and treatment plan,
a nurse, therapist or home health aide, where appropriate, provides care to the
patient in the home. The plan of care may require a few visits over a short
period of time or many visits over several years.
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Respiratory Therapy/Home Medical Equipment. The Company provides a wide
variety of home respiratory, monitoring and medical equipment. Respiratory
therapists provide care to the patient according to the physician-directed plan
of care and educate the patient and the family or other care giver regarding
treatment requirements, use of equipment and self-care. The Company rents, sells
and services respiratory equipment for patient use in the home and supplies
patients with aerosol medications for use in respiratory therapy treatments. In
addition, the Company leases and sells convalescent equipment such as hospital
beds, wheelchairs, and patient lifts, as well as medical and surgical supplies
such as stethoscopes, orthopedic supplies, urinary catheters, and syringes. The
Company is able to increase revenues by providing home medical equipment and
supplies to its patients who are also receiving nursing, respiratory therapy or
infusion therapy.
Home Infusion Therapy. The Company offers comprehensive home infusion
therapies. Home infusion therapy involves the administration of nutrients,
antibiotics and other medications intravenously (into the vein), subcutaneously
(under the skin), intramuscularly (into the muscle), intrathecally or epidurally
(via spinal routes), or through feeding tubes into the digestive tract. Infusion
therapy often begins during hospitalization of a patient and continues in the
home. New patients are instructed in the administration of infusion therapy and
related services by a registered nurse who provides the patient's first home
treatment and continuing supervision of care.
FINANCIAL AND CLINICAL MANAGEMENT INFORMATION SYSTEMS
The Company is implementing a proprietary financial and clinical management
information system trademarked Medisyn(TM), which is comprised of several
financial and clinical components integrated through a central interface engine.
Medisyn(TM) is designed to integrate all aspects of the Company's operations by
providing centralized information management for each patient by linking
clinical services to its financial systems. The Company believes that
Medisyn(TM) will enable it to service increased volumes of managed care
referrals, reduce costs and result in more efficient collection of receivables.
The Company also believes Medisyn(TM) will provide competitive advantages by
generating data that will enhance the Company's ability to price and manage the
Company's services and products in a managed care environment and by measuring
more accurately the quality and cost of care that is delivered in the home. The
Company believes that it is the only home health care provider implementing this
technology, and has filed a patent application with respect to Medisyn(TM) with
the United States Patent Office.
The principal components of Medisyn(TM) are:
- A customer information management system ("CIMS") through which the
Company coordinates all services for patients and generates a unified
database for clinical, case management and billing information. CIMS was
first implemented by the Company in February 1997 and currently services
approximately 75% of the Company's managed care business through a
central call center covering the greater Dallas-Fort Worth, Houston, East
Texas and Oklahoma markets. Rollout to substantially all of the Company's
remaining markets is expected to be completed in 1998.
- Hand-held clinical system point of care computers ("PtCT Units")
currently used by substantially all of the Company's nurses and home
health aides. The use of the PtCT Units allows the Company to quickly and
efficiently collect and analyze clinical, payroll and billing information
by capturing such information at the patient's bedside. The nurses and
home health aides electronically transmit this information directly to
the system, thereby updating the Company's records with minimal delays.
- An integrated suite of financial services software including general
ledger, cost accounting, accounts payable, materials
management/purchasing, payroll and human resources elements (the "Lawson
System"). The most significant applications of this software became
operational during 1997 and have improved the Company's ability to
analyze each element of its business to improve productivity and
operating efficiencies.
- The Innovative Managed Care System ("IMACS") is a contract management and
billing system that will enable the Company to capture the essential
elements of payor relationships (including relation-ships with managed
care organizations, other private payors, Medicaid and Medicare) to
assess pricing,
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<PAGE> 9
eligibility, utilization and other information necessary to assure
accurate billing and to enhance contract profitability. In addition,
IMACS will allow the Company to more effectively manage payor contract
terms and to provide payors with a consolidated bill for multiple
services. The most significant applications of IMACS have been
successfully developed on schedule, with full implementation to be
completed in May 1998. The Company has a four year proprietary right to
IMACS for licensing to non-hospital based home health care providers.
RECENT DEVELOPMENTS
Regulatory Changes. During 1997, the home health care industry experienced
several significant regulatory and reimbursement changes. In February 1997, the
Health Care Financing Administration ("HCFA") implemented mileage limitations
restricting the distance between a nursing agency's principal office and its
branches, with such rules becoming effective with respect to the Company on
January 1, 1997. Texas, where the Company has significant operations,
implemented even more restrictive mileage limitation rules for branch offices.
During the first six months of 1997, the Company was subject to Medicare cost
limitations for home nursing that were lower than the Company's operating
expenses for that period, resulting in a $2.8 million revenue adjustment. The
Company has responded by implementing a series of cost-saving initiatives
resulting in approximately $9.3 million in annualized savings. The cost savings
included realizing operating efficiencies available as a result of the partial
implementation of Medisyn(TM), and reducing head-count by reorganizing the
Company's branch structure and corporate office operations. The Company believes
that it will need to achieve additional cost savings in order to operate within
Medicare nursing cost limitations for 1998. See "Risk Factors -- Medicare
Reimbursement Reforms."
Congress has also recently adopted a per-beneficiary limit on reimbursement
for nursing services based upon historical cost, and the 1997 Federal Budget
contains other reimbursement changes that will reduce the level of reimbursement
available to the Company. For example, reimbursement for Medicare nursing
services has been reduced approximately 18.0% for the Company in 1998. In
addition, reimbursement rights for Medicare home oxygen services, which
represent approximately 5.6% of the Company's annualized revenues, will be
reduced by 25.0% beginning January 1, 1998, with an additional 5.0% reduction to
be effective January 1, 1999. The Company intends to respond to such changes in
a variety of ways, including further reducing costs and making additional
adjustments in its branch office structure. See "Risk Factors -- Medicare
Reimbursement Reforms."
Accounts Receivable Management. The Company's results for the three months
ended June 30, 1997, were adversely affected by a special provision for doubtful
accounts of $2.7 million. The special provision for doubtful accounts resulted
from the Company's continuing evaluation of certain accounts receivable from
managed care organizations recorded prior to the implementation of CIMS. The
Company believes that the rollout of CIMS to remaining offices and the complete
implementation of Medisyn(TM) will result in more efficient collection of
receivables. See "Risk Factors -- Dependence on Reimbursement from Third-Party
Payors."
Bank Credit Facility. The Company is party to a Second Amended and Restated
Credit Agreement, dated as of December 1, 1997 (the "New Credit Facility"),
which provides for an aggregate of $20.0 million of borrowings. No borrowings
under the New Credit Facility were outstanding on December 31, 1997. See
"Description of the New Credit Facility."
Managed Care Relationships. The Company is the sole or principal provider
for a number of managed care plans and intends to compete vigorously for
additional significant managed care business in the future. These relationships
are all fee-for-service and are consistent with the Company's strategy to price
managed care contracts profitably in order to provide quality service. A
description of certain recent contracts is as follows:
- In May 1997, the Company became the exclusive provider of respiratory
therapy/home medical equipment to a large, multi-state managed care
organization's approximately 220,000 members in greater Denver, Colorado
in need of such services and equipment.
8
<PAGE> 10
- In July 1997, the Company became the exclusive provider for a 60,000
member health plan in Texas.
- In August 1997, the Company began receiving referrals as one of two
preferred providers (and the only one which is fully integrated) for a
managed care plan which has approximately 800,000 members in Texas and
Oklahoma.
- In August 1997, the Company began receiving referrals as a preferred
provider for a preferred provider organization ("PPO") which manages the
health care needs for approximately 350,000 members in the Company's
service area.
- In August 1997, the Company became a preferred provider for a 150,000
member PPO in Oklahoma.
The Company's principal executive offices are located at 8150 North Central
Expressway, Suite M-2000, Dallas, Texas 75206, and the Company's telephone
number is (214) 692-4663.
THE EXCHANGE OFFER
THE OUTSTANDING NOTES...... The Outstanding Notes were sold by the Company as
of December 1, 1997, in the Initial Offering, to
the Initial Purchasers pursuant to the Purchase
Agreement. The Initial Purchasers subsequently
resold the Outstanding Notes to "Qualified
Institutional Buyers" as such term is defined in
Rule 144A under the Securities Act ("QIBs").
REGISTRATION
REQUIREMENTS............... Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into the
Registration Rights Agreement, which grants the
holders of the Outstanding Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such exchange and registration
rights, which terminate upon the consummation of
the Exchange Offer. If applicable law or applicable
interpretations of the staff of the Commission do
not permit the Company to effect the Exchange
Offer, the Company has agreed to file a shelf
registration (the "Shelf Registration Statement")
covering resales of the Outstanding Notes. See "The
Exchange Offer -- Resale of Exchange Notes" and
"The Exchange Offer -- Shelf Registration
Statement."
THE EXCHANGE OFFER......... The Company is offering to exchange $1,000
principal amount of the Exchange Notes for each
$1,000 principal amount of Outstanding Notes. As of
the date hereof, $80.0 million aggregate principal
amount of Outstanding Notes are outstanding. The
Company will issue the Exchange Notes on
, 1998, unless the Exchange Offer is extended
(the "Exchange Date"). See "Risk
Factors -- Exchange Offer Procedures; Consequences
of Failure to Exchange."
Based on an interpretation of the staff of the
Commission set forth in no-action letters issued to
third parities, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Outstanding Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than any
such holder which is an "affiliate" of the Company
within the meaning of rule 405 under the Securities
Act) without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business
and that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes.
9
<PAGE> 11
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in Exxon Capital
Holdings Corporation (available April 13, 1989) or
similar no-action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with the resale
transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the
Company.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for
Outstanding Notes, where such Outstanding Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of
Exchange Notes. The Letter of Transmittal for the
Exchange Offer states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes
received in exchange for Outstanding Notes where
such Outstanding Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. The Company
has agreed to make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale for a period of up to 180 days
from the consummation of the Exchange Offer. See
"Plan of Distribution."
EXPIRATION DATE............ 5:00 p.m., E.S.T., on , 1998, unless
extended.
INTEREST ON THE EXCHANGE
NOTES.................... Interest on the Exchange Notes will accrue at a
rate equal to 11% per annum and will be payable
semi-annually in arrears on June 1 and December 1
of each year, commencing June 1, 1998. Interest on
the Exchange Notes will accrue from the most recent
date to which interest has been paid on the
Outstanding Notes or, if no interest has been paid,
from the date of original issuance of the
Outstanding Notes.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES........ Each holder of Outstanding Notes wishing to accept
the Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Outstanding Notes and
any other required documentation to the Exchange
Agent at the address set forth herein. By executing
the Letter of Transmittal, each holder will
represent to the Company that, among other things,
the holder or person receiving such Exchange Notes,
whether or not such person is the holder, is
acquiring the Exchange Notes in the ordinary course
of business and that neither the holder nor any
such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes. In lieu of
physical delivery of the certificates representing
Outstanding Notes, tendering holders may transfer
Outstanding
10
<PAGE> 12
Notes pursuant to the procedure for book-entry
transfer as set forth under "The Exchange
Offer -- Procedures for Tendering."
Each Participating Dealer which acquired
Outstanding Notes as a result of market-making or
other trading activities must acknowledge that it
will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of
Distribution."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ Any beneficial owner whose Outstanding Notes are
registered in the name of a broker-dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on such
owner's own behalf, such owner must prior to
completing and executing the Letter of Transmittal
and delivering its Outstanding Notes, either make
appropriate arrangements to register ownership of
the Outstanding Notes in such owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of record ownership
may take considerable time.
GUARANTEED DELIVERY
PROCEDURES............... Holders of Outstanding Notes who wish to tender
their Outstanding Notes and whose Outstanding Notes
are not immediately available or who cannot deliver
their Outstanding Notes, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with
the procedures for book-entry transfer) prior to
the Expiration Date must tender their Outstanding
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.......... Tenders may be withdrawn at any time prior to 5:00
p.m., E.S.T., on the Expiration Date pursuant to
the procedures described under "The Exchange
Offer -- Withdrawal of Tenders."
ACCEPTANCE OF OUTSTANDING
NOTES
AND DELIVERY OF EXCHANGE
NOTES.................... Subject to certain conditions, the Company will
accept for exchange any and all Outstanding Notes
that are properly tendered in the Exchange Offer
prior to 5:00 p.m., E.S.T., on the Expiration Date.
The Exchange Notes issued pursuant to the Exchange
Offer will be delivered on the Exchange Date. See
"The Exchange Offer -- Terms of the Exchange
Offer."
FEDERAL INCOME TAX
CONSEQUENCES............. The exchange pursuant to the Exchange Offer should
not be a taxable event for United States federal
income tax purposes. See "Certain Federal Income
Tax Consequences."
EFFECT ON HOLDERS OF
OUTSTANDING NOTES........ As a result of the making of this Exchange Offer,
the Company will have fulfilled one of its
obligations under the Registration Rights
Agreement, and, with certain exceptions noted
below, holders of Outstanding Notes who do not
tender their Outstanding Notes will not have any
further registration rights under the Registration
Rights Agreement or otherwise.
11
<PAGE> 13
Such holders will continue to hold the untendered
Outstanding Notes and will be entitled to all the
rights and subject to all the limitations
applicable thereto under the Indenture, except to
the extent such rights or limitations, by their
terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
All untendered Outstanding Notes will continue to
be subject to certain restrictions on transfer.
Accordingly, if any Outstanding Notes are tendered
and accepted in the Exchange Offer, the trading
market of the untendered Outstanding Notes could be
adversely affected. See "Risk Factors -- Exchange
Offer Procedures" and "Risk Factors -- Lack of
Public Market for the Exchange Notes."
EXCHANGE AGENT............. Norwest Bank Minnesota, National Association.
SUMMARY OF TERMS OF THE EXCHANGE NOTES
ISSUER..................... HealthCor Holdings, Inc.
SECURITIES OFFERED......... $80,000,000 in aggregate principal amount of 11%
Senior Notes due 2004.
MATURITY................... December 1, 2004.
INTEREST................... Interest on the Exchange Notes will accrue at a
rate equal to 11% per annum and will be payable
semi-annually in arrears on June 1 and December 1
of each year, commencing June 1, 1998. Interest on
the Exchange Notes will accrue from the most recent
date to which interest has been paid on the
Outstanding Notes or, if no interest has been paid,
from the date of original issuance of the
Outstanding Notes.
GUARANTEES................. The Exchange Notes will be fully and
unconditionally guaranteed on a senior, unsecured
and joint and several basis by all of the Company's
present and future Subsidiaries (as defined). As of
September 30, 1997, after giving effect to the
Initial Offering and the application of the
estimated net proceeds therefrom, the Company's
Subsidiaries would have had $9.5 million principal
amount of secured Indebtedness (as defined)
outstanding in the form of Capital Lease
Obligations (as defined) and $3.1 million in other
Indebtedness outstanding, including $600,000 of
letters of credit outstanding, but not including
the Guarantees (as defined).
RANKING.................... The Exchange Notes will be general unsecured
obligations of the Company ranking senior in right
of payment to all existing and future Subordinated
Indebtedness (as defined) and pari passu in right
of payment with all other Indebtedness and
liabilities (including trade payables) of the
Company. The Exchange Notes will rank pari passu
with the Company's Outstanding Notes not otherwise
exchanged for Exchange Notes pursuant to this
Exchange Offer. The Indenture pursuant to which the
Exchange Notes will be issued permits the Company
and its Subsidiaries to incur additional
Indebtedness, including Senior Indebtedness (as
defined) and secured Indebtedness, subject to
certain limitations. As of September 30, 1997,
after giving effect to the Initial Offering and the
application of the estimated net proceeds
therefrom, the Company would have had no secured or
other Indebtedness outstanding other than the
Notes. See "Capitalization," "Description of the
Exchange Notes" and "Description of the New Credit
Facility."
12
<PAGE> 14
OPTIONAL REDEMPTION........ Except as set forth below, the Exchange Notes will
not be redeemable at the option of the Company
prior to December 1, 2001. Thereafter, the Exchange
Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, at
the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated Damages
(as defined), if any, thereon to the redemption
date. In addition, at any time prior to December 1,
2000, the Company may redeem up to an aggregate of
$25.0 million in principal amount of Notes at a
redemption price equal to 111% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
redemption date with the net cash proceeds of one
or more Public Equity Offerings (as defined),
provided that at least $55.0 million in principal
amount of Notes remains outstanding immediately
following each such redemption.
CHANGE IN CONTROL.......... In the event of a Change of Control (as defined),
the Company will be required to make an offer to
each holder of Exchange Notes to repurchase all or
any part of such holder's Exchange Notes at a
repurchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
repurchase date. See "Risk Factors -- Potential
Failure to Make Payment Upon Change of Control" and
"Description of the Exchange Notes."
COVENANTS.................. The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Subsidiaries to incur additional
Indebtedness, pay dividends, repurchase Equity
Interests (as defined) or make other Restricted
Payments (as defined), create Liens (as defined),
enter into transactions with Affiliates (as
defined), sell assets or enter into certain mergers
and consolidations. See "Description of the
Exchange Notes."
RISK FACTORS
For a discussion of certain factors that should be considered in evaluating
whether to exchange Outstanding Notes for the Exchange Notes, see "Risk
Factors."
13
<PAGE> 15
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated statements of income data of
the Company for each of the years ended December 31, 1994, 1995 and 1996 have
been derived from the Company's audited consolidated financial statements. The
summary historical consolidated statements of income and balance sheet data of
the Company for the nine months ended September 30, 1996 and 1997 have been
derived from the Company's unaudited condensed consolidated financial
statements. The Company's unaudited condensed consolidated financial statements
include all adjustments, consisting of normal recurring accruals, that the
Company considers necessary for a fair presentation of the financial position
and the results of operations for those periods. Operating results for the nine
months ended September 30, 1997 are not necessarily indicative of the results
for the entire year ending December 31, 1997. The summary historical and pro
forma financial data set forth below should be read in conjunction with
"Selected Consolidated Historical Financial Data" and the notes thereto, with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with HealthCor's Consolidated Financial Statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED(1)
----------------------------
NINE MONTHS NINE
ENDED YEAR MONTHS
YEARS ENDED DECEMBER 31, SEPTEMBER 30, ENDED ENDED
---------------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1996 1997 1996 1997
------- ------- -------- ------- -------- ------------ -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues................. $57,151 $81,557 $106,785 $77,476 $108,583(2) $155,858 $116,311
Direct expenses.............. 30,337 41,392 48,314 35,095 48,982 72,870 53,664
General and administrative... 21,280 30,663 41,418 30,387 46,049 61,611 48,401
Provision for doubtful
accounts................... 1,115 1,489 3,580 2,287 6,738(3) 3,740 6,774
Income from operations....... 3,630 6,773 10,894 7,534 3,198 14,205 3,681
Net income per common
share...................... $ .31 $ .55 $ .66 $ .49 $ (.02) $ .36 $ (.25)
Weighted average common
shares outstanding......... 6,490 6,546 8,040 7,324 10,043 8,040 10,043
OTHER FINANCIAL DATA:
EBITDA(4).................... $ 5,070 $ 9,072 $ 15,668 $11,149 $ 9,227 19,832 $ 9,885
Adjusted EBITDA(5)........... 5,070 9,072 15,668 11,149 14,727 19,832 15,385
Depreciation and
amortization............... 1,440 2,299 4,774 3,615 6,029 5,627 6,204
Capital expenditures......... 866 7,180 7,867 5,369 4,744 -- --
Ratio of Adjusted EBITDA to
interest expense........... 2.1x 2.1x
STATISTICAL DATA:
Home health care offices (at
period end)................ 50 67 96 84 96
States of operation (at
period end)................ 6 8 9 9 9
Number of acquisitions....... 3 12 9 3 4
Sources of net revenues:
Home nursing............... 79.2% 74.2% 56.9% 59.4% 54.6%
Respiratory therapy/home
medical equipment........ 16.5 19.8 27.1 26.5 27.8
Infusion therapy........... 4.3 6.0 14.9 14.1 13.4
Other...................... -- -- 1.1 -- 4.2
------- ------- -------- ------- --------
Total............... 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======== ======= ========
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED(6)
-------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ -- $ 26,225
Working capital (deficit)................................... (19,444) 57,606
Property and equipment...................................... 29,042 29,042
Total assets................................................ 137,953 167,128
Total debt, including capital leases........................ 59,116 91,928
Stockholders' equity........................................ 54,549 54,549
</TABLE>
- ---------------
(1) Adjusted to give effect to acquisitions, the issuance of the Outstanding
Notes and the application of the estimated net proceeds therefrom. See
"Capitalization" and "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
(2) Includes a $2.8 million revenue adjustment relating to Medicare nursing cost
limitations. See "Prospectus Summary -- Recent Developments."
(3) Includes a $2.7 million special provision for doubtful accounts. See
"Prospectus Summary -- Recent Developments."
(4) As defined in this Prospectus, EBITDA represents income before interest and
amortization of debt costs, federal and state income taxes, and depreciation
and amortization. EBITDA is generally considered to provide information
regarding a company's ability to service and/or incur debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
from operations, or other consolidated income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(5) As defined in this Prospectus, Adjusted EBITDA for the nine months ended
September 30, 1997 represents EBITDA, plus a $2.8 million net revenue
adjustment relating to Medicare nursing cost limitations and a $2.7 million
special provision for doubtful accounts, both of which were recorded by the
Company in the three month period ended June 30, 1997.
(6) Adjusted to give effect to the issuance of the Outstanding Notes and the
application of the estimated net proceeds therefrom. See "Capitalization."
15
<PAGE> 17
RISK FACTORS
Holders of the Outstanding Notes should carefully review the information
set forth below, in addition to the other information in this Prospectus, before
deciding to tender their Outstanding Notes in the Exchange Offer.
EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for Outstanding Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
such Outstanding Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the
Outstanding Notes desiring to tender such Outstanding Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. The
Company is under no duty to give notification of defects or irregularities with
respect to the tenders of Outstanding Notes for exchange. Outstanding Notes that
are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof. Upon consummation of the Exchange Offer, the
registration rights under the Registration Rights Agreement will terminate. In
addition, any holder of Outstanding Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for the Outstanding
Notes, where such Outstanding Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." TO THE EXTENT THAT SOME OF THE OUTSTANDING
NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE OFFER, THE TRADING MARKET FOR
UNTENDERED AND TENDERED BUT UNACCEPTED OUTSTANDING NOTES COULD BE ADVERSELY
AFFECTED.
SUBSTANTIAL LEVERAGE
Subsequent to the Initial Offering, the Company had substantial
indebtedness and increased debt service obligations compared to prior years. At
September 30, 1997, after giving effect to the issuance of the Outstanding Notes
and the application of the net proceeds therefrom, the Company had approximately
$91.9 million of consolidated indebtedness as compared to the Company's
stockholders' equity of $54.5 million. In addition, as of September 30, 1997,
after giving effect to the issuance of the Exchange Notes and the application of
the net proceeds therefrom, the Company had a debt-to-equity ratio of 1.7 to 1.
There can be no assurance that the Company will generate sufficient cash flow to
service the Exchange Notes. If the Company is unable to service the Notes and to
meet its operating expenses, it will be required to examine alternative means of
repayment that could include restructuring or refinancing its indebtedness.
There can be no assurance that any of these strategies could be effected on
satisfactory terms. The Indenture permits the Company to incur additional
indebtedness under certain conditions, and the Company expects that it will
incur additional indebtedness during the term of the Notes, including, without
limitation, pursuant to the New Credit Facility. The Company's ability to make
payments with respect to the Notes and to satisfy its other debt obligations
will depend on its future operating performance, which will be affected by
governmental regulations, prevailing economic conditions, financial factors, and
other factors, certain of which are beyond the Company's control. See
"Capitalization" and "Description of the New Credit Facility."
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including: (i) the Company's
ability to obtain additional financing in the future for operating expenses,
acquisitions or general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flows from operations may be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available for operations; (iii) certain of the Company's indebtedness,
including the New Credit Facility, contain financial and other restrictive
covenants, including those restricting the incurrence of additional
indebtedness, the creation of liens, the payment of dividends, sales of assets
and minimum net worth requirements; and (iv) the Company's leverage may make the
Company vulnerable to
16
<PAGE> 18
changes in the industry, including, among other things, government regulations
and changing economic conditions.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture governing the terms of the Exchange Notes contains certain
covenants limiting, subject to certain exceptions, the incurrence of additional
indebtedness, the payment of dividends, the redemption of capital stock, the
making of certain investments, the issuance of capital stock of subsidiaries,
the creation of liens and other restrictions affecting the Company's
subsidiaries, the issuance of guarantees, transactions with affiliates, asset
sales and certain mergers and consolidations. A breach of any of these covenants
could result in an event of default under the Indenture. In addition, the New
Credit Facility and the instruments governing the Company's other indebtedness
contain other more restrictive covenants and require the Company to satisfy
certain financial tests. The Company's ability to comply with such covenants and
to satisfy such financial tests may be affected by events beyond its control. A
breach of any of these covenants could result in an event of default under the
New Credit Facility. In the event of a default under the New Credit Facility,
the lenders thereunder could elect to declare all amounts borrowed, together
with accrued interest, to be immediately due and payable, and the lenders under
the New Credit Facility could terminate all commitments thereunder. In addition,
a default under the New Credit Facility or the instruments governing the
Company's other indebtedness could constitute a cross-default under the
Indenture and any instruments governing the Company's other indebtedness, and a
default under the Indenture could constitute a cross-default under the New
Credit Facility and any instruments governing the Company's other indebtedness.
In the event of a default under the New Credit Facility or other Senior
Indebtedness of the Company, the subordination provisions of the Indenture may
restrict payments with respect to the Exchange Notes. See "Description of the
Exchange Notes -- Certain Covenants" and "Description of the New Credit
Facility."
HOLDING COMPANY STRUCTURE
The Company is a holding company and substantially all of its operations
are conducted through its subsidiaries. After repaying certain existing
indebtedness, including all outstanding amounts under a prior credit facility,
the Company contributed most of the net proceeds that it received from the
issuance of the Outstanding Notes to its operating subsidiaries. The Company's
cash flow and, consequently, its ability to service its indebtedness, including
the Exchange Notes, are dependent on its ability to gain access to the cash flow
of its subsidiaries (whether through loans, dividends, distributions or
otherwise) and would be subject to any legal, contractual or other restrictions
that could hinder or prevent the Company from doing so. Each subsidiary is a
separate and distinct legal entity from the Company and has no obligation,
contingent or otherwise, to pay any amounts due in respect of the Exchange Notes
or to make any amounts available for the payment thereof. The holders of any
indebtedness of the Company's subsidiaries will be entitled to payment thereof
from the assets of such subsidiaries prior to the holders of any general,
unsecured obligations of the Company, including the Exchange Notes. As of
September 30, 1997, after giving effect to the issuance of the Outstanding Notes
and the use of the estimated net proceeds therefrom, the Company's subsidiaries
had $9.5 million of Senior Indebtedness outstanding relating to capital lease
obligations and $3.1 million of other Indebtedness, including $600,000 of
letters of credit outstanding.
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS
In 1996, the percentages of the Company's net revenues derived from
Medicare, Medicaid and other third-party payors were approximately 68.5%, 4.4%
and 27.1%, respectively. The net revenues and profitability of the Company are
affected by the continuing efforts of all payors to contain or reduce the costs
of health care by, among other things, reducing reimbursement rates, narrowing
the scope of covered services, increasing case management review of services and
negotiating reduced contract pricing. In addition, the home health care industry
is characterized by long collection cycles for accounts receivable due to the
complex and time consuming requirements for obtaining reimbursement from private
and governmental third-party payors. Furthermore, reimbursement from government
payors is subject to audit and retroactive adjustment. Any changes in
reimbursement levels under Medicare, Medicaid or third-party payor programs and
any changes in
17
<PAGE> 19
applicable government regulations could have a material adverse effect on the
Company's business, financial condition, cash flows or results of operations.
Changes in the mix of the Company's patients among Medicare, Medicaid and
third-party payor categories could have a material adverse effect on the
Company's business, financial condition, cash flows or results of operations. In
addition, patients, including Medicare and Medicaid beneficiaries, increasingly
are participating in managed care plans. Managed care organizations, in turn,
are increasingly becoming involved in monitoring and determining the appropriate
health care settings for their enrollees based primarily on cost and quality of
care. The Company recorded a special provision for doubtful accounts of $2.7
million in the quarter ended June 30, 1997, because the Company's continuing
evaluation of accounts receivable payable by managed care organizations resulted
in the conclusion that a special provision was appropriate to account for the
failure of managed care organizations to pay the full amount of such bills.
Managed care organizations in particular are increasingly challenging the
billing of home health care providers and limiting reimbursements to home health
care companies. This is an important trend in the home health care industry, and
there can be no assurance that this trend will not continue or in the future
will not have a material adverse effect on the Company. Furthermore, there can
be no assurance that the Company will be able to maintain its current payor or
revenue mix. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Regulation."
MEDICARE REIMBURSEMENT REFORMS
The Company is subject to changes in federal, state and local regulations
which can have a significant effect on operating methods, costs and
reimbursement amounts provided by governmental and other third-party payors. The
federal government is continuing to review and assess alternative health care
delivery systems and payment methodologies. The federal government has recently
implemented, and is considering future additional, reductions in planned
Medicare spending, a number of which directly affect the home health care
industry. In part as a result of these reforms, during the first six months of
1997, the Company had Medicare cost limitations for home nursing that were lower
than the Company's operating expenses for that period, resulting in a revenue
adjustment of $2.8 million. Congress also recently enacted a provision that
establishes a per-beneficiary limit on reimbursement for nursing services based
upon historical cost. In addition, the 1997 Federal Budget contains other
provisions that would reduce Medicare reimbursements to acute care hospitals for
some Medicare patients who are discharged from the hospital after a very short
inpatient stay to a home health care agency's care. This provision could have
the effect of reducing the utilization of home health services by giving
hospitals the incentive to retain some Medicare patients longer. Other recent
amendments reduce Medicare reimbursements for oxygen and oxygen equipment,
freeze certain payment levels for durable medical equipment and
parenteral/enteral nutrition, supplies and equipment, and impose more stringent
home health care limits. For example, reimbursement for Medicare nursing
services has been reduced approximately 18.0% for the Company in 1998. In
addition, reimbursement rates for Medicare home oxygen services, which represent
approximately 5.6% of the Company's annualized revenues, will be reduced by
25.0% beginning January 1, 1998, with an additional 5.0% reduction to be
effective January 1, 1999. Further, the Department of Health and Human Services
("DHHS") is required to develop and implement a Medicare prospective payment
system for home health services beginning October 1, 1999, to replace the
current Medicare reimbursement methodology based on the lower of allowable
reimbursable costs or actual charges. Although the impact of this change on the
Company's results of operations cannot be predicted at this time, unless the
Company is able to reduce its operating expenses proportionately to any
reduction in reimbursement rates or decrease the percentage of Medicare
contracts in its business mix, these changes would adversely affect the Company.
Based upon initiatives to reduce Medicare costs and possible further cost
containment or other initiatives in the future, the Company expects the
reimbursements received from the Medicare program to be at continued risk of
substantial reduction in the future. These changes in Medicare reimbursements
for home health care will reduce reimbursements available to the Company in 1998
and could have a material adverse effect on the Company's business, financial
condition, cash flows or results of operations. The Company is also subject to
audit of the reimbursements it receives under the Medicare program. Any
significant audit adjustment could have a material adverse effect on the
Company's business, financial condition, cash flows or results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Regulation."
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DEPENDENCE ON REFERRAL SOURCES
The growth and profitability of the Company depend in part on its ability
to establish and maintain close working relationships with referral sources,
including managed care organizations, payors, hospitals, physicians and other
health care professionals. There can be no assurance that the Company will be
able to successfully maintain significant existing referral sources and develop
new referral sources, or that certain of its referral sources, such as managed
care organizations and hospitals, will not become providers of home health care
services. Historically, independent home health care companies have encountered
significant competition from hospital-based home health care organizations whose
parent hospitals have financial and operating relationships with referring
physicians. There can be no assurance that these physicians will refer cases to
independent home health care companies or, if these physicians do refer cases to
independent home health care companies, that the Company will be able to obtain
referrals from these sources. The loss of existing referral sources or the
failure to develop important new referral sources (such as managed care
organizations) could have a material adverse effect on the Company's business,
financial condition, cash flows or results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview."
EFFECT OF GOVERNMENT REGULATIONS
The Company's business is subject to extensive and increasing regulation by
federal, state and local governments, including the DHHS, HCFA, the Office of
the Inspector General, the Food and Drug Administration, the Department of
Labor, the Drug Enforcement Agency and the Occupational Safety and Health
Administration, as well as state departments of health and other local
regulatory agencies. The government recently has devoted substantial attention
to this industry and may continue to do so in the future, which could have a
material adverse effect on the Company. Federal laws governing the Company's
activities include regulations concerning the repackaging and dispensing of
drugs, Medicare certification of home health agencies, Medicare coverage and
reimbursement and various health care anti-fraud and abuse policies. The
facilities operated by the Company must comply with all applicable laws,
regulations and licensing standards. In addition, many of the Company's
employees must maintain certain licenses in order to provide some of the
services offered by the Company. There can be no assurance that federal, state
or local governments will not change existing standards or impose additional
standards or that the Company will meet, or continue to meet, existing or future
standards relating to all or a portion of the Company's activities.
Additionally, there can be no assurance that businesses acquired by the Company
would be in compliance with all applicable laws, regulations and licenses when
acquired. Changes in existing standards, the imposition of additional standards
or the inability of the Company to meet such standards could have a material
adverse effect on the Company's business, financial condition, cash flows or
results of operations. See "Business -- Regulation."
OPERATION RESTORE TRUST
In May 1995, the federal government instituted Operation Restore Trust, a
health care fraud and abuse initiative focusing on nursing homes, home health
care agencies and durable medical equipment companies located in the five states
with the largest Medicare populations. Texas, where the Company has significant
business volume, was one of the original targeted states. The purpose of this
initiative is to identify fraudulent and abusive practices such as billing for
services not provided, providing unnecessary services and making prohibited
referral payments to health care professionals. Operation Restore Trust has been
responsible for significant fines, penalties and settlements. Operation Restore
Trust was recently expanded to cover twelve additional states for the next two
years. The program was also expanded to include reviews of psychiatric
hospitals, certain independent laboratories and partial hospitalization
benefits. Further, there are plans eventually to apply the program's
investigation techniques in all fifty states and throughout the Medicare and
Medicaid programs. One of the results of the program has been increased auditing
and inspection of the records of health care providers and stricter
interpretations of Medicare regulations governing reimbursement and other
issues. Specifically, the government plans to double the number of comprehensive
home health agency audits it performs each year (from 900 to 1800) and also to
increase the number of claims reviewed by 25.0% (from 200,000 to 250,000). The
Company cannot predict the effect of Operation Restore Trust on the Company or
its results of operations. See "Business -- Regulation."
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MANAGEMENT INFORMATION SYSTEMS
Servicing a high volume of referrals from managed care organizations and
other payors requires the integration of complex and technical financial and
clinical information. Medisyn(TM), the Company's management information system,
is not yet fully implemented, and there can be no assurance that the Company
will successfully implement the remaining components of Medisyn(TM), or that the
Company will not experience unanticipated delays and expenses in such
implementation and integration. Successful implementation of Medisyn(TM) is an
important part of the Company's business strategy, and failure to successfully
implement the remaining components of Medisyn(TM), or to achieve expected cost
savings, improved productivity and more effective collection of receivables,
could have a material adverse effect on the Company's business, financial
condition, cash flows or results of operations. The Company's management
information systems existing prior to the implementation of Medisyn(TM) had
slowed the Company's response to regulatory and reimbursement changes, including
the revenue adjustment and the special provision for doubtful accounts; and the
conversion of such systems contributed to a delay in the recognition of certain
direct expenses discussed elsewhere in this Prospectus. See "-- Dependence on
Reimbursement by Third-Party Payors;" "-- Medicare Reimbursement Reforms;" and
"Business -- Financial and Clinical Management Information Systems." There can
be no assurance that the implementation of Medisyn(TM) will enable the Company
to successfully respond to such changes in the future. It is also impossible to
predict the effect of future regulatory changes on the ability of the Company's
management information systems to serve the Company's needs in an efficient and
profitable manner. Any malfunction or increase in expenses in connection with
the Company's management information systems could have a material adverse
effect on the Company's business, financial condition, cash flows or results of
operations. See "Business -- Financial and Clinical Management Information
Systems" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
RISK OF ACQUISITIONS AND EXPANSION INTO NEW MARKETS
The Company competes for acquisition opportunities with other providers,
some of which have greater financial resources than the Company. There can be no
assurance that the Company will be able to successfully acquire other companies,
that these companies, once acquired, will be integrated successfully into the
Company's operations or that any acquisition will not have a material adverse
effect upon the Company's operating and financial results, especially in the
fiscal quarters immediately following such transactions. Acquisitions involve
numerous short-term and long-term risks, including loss of referral sources,
diversion of management's attention, failure to retain key personnel, loss of
net revenues of the acquired company, incompatible information systems, the
possibility of the acquired company becoming subject to regulatory sanctions,
potential undisclosed liabilities and the continuing value of acquired
intangible assets. In addition, the Company may be required to comply with laws
and regulations of states that differ from those in which the Company currently
operates, and may face competitors with greater knowledge of such local markets.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Business
Strategy."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the services of S. Wayne Bazzle, the
Company's Chairman of the Board and Chief Executive Officer, and Cheryl C.
Bazzle, the Company's President and Chief Operating Officer, as well as its
other senior management and its staff of health care professionals. There can be
no assurance that the Company will be able to retain such personnel. See
"Management -- Executive Officers and Directors."
COMPETITION
The home health care industry is highly fragmented, with significant
competition from multiple providers in most markets. The Company faces intense
competition for managed care contracts, patients, employees and acquisitions. In
recent years, independent home health care providers, including the Company,
have encountered significant competition from hospital-based home health care
organizations which have entered the home health care business. The Company has
experienced a decline in referrals from physicians with
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financial and operating relationships with the parent hospitals of such
organizations. There can be no assurance that such decline will not continue or
that the Company's strategy of targeting such referrals will be successful. In
addition, many of the Company's current and potential competitors are larger and
have significantly greater financial and marketing resources than those of the
Company. There can be no assurance that such competition will not limit the
Company's ability to maintain or to increase its market share and will not
adversely affect the Company's business. See "-- Dependence on Referral Sources"
and "Business -- Competition."
LIABILITY AND ADEQUACY OF INSURANCE
In recent years, physicians, hospitals and other participants in the health
care industry have been subjected to an increasing number of lawsuits alleging
malpractice, product liability or negligence, many of which involve large claims
and significant defense costs. The Company may be subject to such suits. The
Company currently maintains liability insurance intended to cover such claims.
While the Company has been able to obtain liability insurance in the past, such
insurance varies in cost and may not be available in the future on acceptable
terms, if at all. A successful claim against the Company in excess of the
Company's insurance coverage could have a material adverse effect upon the
Company's financial condition and results of operations. See
"Business -- Insurance."
CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors and their affiliates
beneficially own 53.4% of the outstanding shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"). As a result, these stockholders,
acting together, are able to control the Company and matters requiring approval
by the stockholders of the Company, including the election of directors. The
voting power of these stockholders under certain circumstances could have the
effect of delaying or preventing a change in control of the Company. See
"Management" and "Security Ownership."
FRAUDULENT CONVEYANCE; UNENFORCEABILITY OF CERTAIN CORPORATE GUARANTEES
If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, or the Company as a
debtor-in-possession, were to determine under relevant federal or state
fraudulent conveyance statutes that the Company did not receive fair
consideration or reasonably equivalent value for incurring indebtedness,
including the Notes, and that, at the time of such incurrence, the Company (i)
was insolvent, (ii) was rendered insolvent by reason of such incurrence or
grant, (iii) was engaged in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital or (iv)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, then such court, subject to applicable statutes
of limitation, could void the Company's obligations under the Exchange Notes,
subordinate the Exchange Notes to other indebtedness of the Company or take
other action detrimental to the holders of the Exchange Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value or the fair salable value of all of that company's
property or if the present fair salable value of that company's assets is less
than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and matured. Moreover, regardless of
solvency, a court could void an incurrence of indebtedness, including the
Exchange Notes, if it determined that such transaction was made with the intent
to hinder, delay or defraud creditors. In addition, a court could subordinate
indebtedness, including the Exchange Notes, to the claims of all existing and
future creditors on similar grounds.
The Company's obligations under the Exchange Notes will be guaranteed by
the Guarantors, and the Guarantees also may be subject to review under various
laws for the protection of creditors, including federal and state fraudulent
conveyance and fraudulent transfer laws, if a bankruptcy case or a lawsuit
(including in circumstances where bankruptcy is not involved) is commenced by or
on behalf of any creditor of a Guarantor
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or a representative of any such creditors. In such a case, the analysis set
forth above would generally apply, except that the Guarantees could also be
subject to the claim that, since the Guarantees were incurred for the benefit of
the Company (and only indirectly for the benefit of the Guarantors), the
obligations of the Guarantors thereunder were incurred for less than reasonably
equivalent value or fair consideration. A court could void a Guarantor's
obligation under its Guarantee, subordinate the Guarantee to other indebtedness
of a Guarantor, direct that holders of the Exchange Notes return any amounts
paid under a Guarantee to the relevant Guarantor or to a fund for the benefit of
its creditors, or take other action detrimental to the holders of the Exchange
Notes.
In addition, the enforceability of a guarantee by a subsidiary of
indebtedness of its corporate parent may be unclear or limited under the laws of
certain jurisdictions under which existing or future Guarantors may be
organized. Although substantially all of the existing Guarantors are organized
under the laws of jurisdictions under which no such limitations exist for
wholly-owned subsidiaries, the Company may form additional subsidiaries under
the laws of jurisdictions where such limitations do exist. If a Guarantee is
held to be invalid or unenforceable as a result of any such limitation, then any
right of the Company or any other Guarantor to receive assets of the Guarantor
whose Guarantee is so limited upon the latter's liquidation or reorganization
(and the consequent right of the holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of the affected
Guarantor's creditors, except to the extent that the Company or any other
Guarantor is itself recognized as a creditor of such affected Guarantor, in
which case the claims of the Company or such other Guarantor would still be
effectively subordinated to any security interest in the assets of such affected
Guarantor.
POTENTIAL FAILURE TO MAKE PAYMENT UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase all or any part of the Notes outstanding at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the repurchase date. There can be no assurance
that the Company would have sufficient resources to repurchase the Notes upon
the occurrence of a Change of Control. The failure to repurchase all of the
Notes tendered to the Company would constitute an Event of Default under the
Indenture. Furthermore, the repurchase of the Notes by the Company upon a Change
of Control might result in a default on the part of the Company in respect of
the New Credit Facility or other future indebtedness of the Company, as a result
of the financial effect of such repurchase on the Company or otherwise. See
"Description of the Exchange Notes" and "Description of the New Credit
Facility."
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Outstanding Notes are currently owned by a relatively small number of
beneficial owners. The Outstanding Notes have not been registered under the
Securities Act and are subject to significant restrictions on resale. The
Exchange Notes are a new issue of securities for which there is currently no
active trading market. The Company does not intend to apply for a listing or
quotation of the Outstanding Notes or the Exchange Notes on any securities
exchange or stock market. The Initial Purchasers have informed the Company that
they currently intend to make a market in the Exchange Notes. However, the
Initial Purchasers are not obligated to do so, and any such market making may be
discontinued at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Exchange Notes. Accordingly, there can
be no assurance as to the development or liquidity of any market for the
Exchange Notes. The Notes sold to QIBs are expected to be eligible for trading
by qualified buyers in the PORTAL Market. Future trading prices of the Exchange
Notes will depend upon many factors, including, among others, prevailing
interest rates, the market for similar securities and other factors including
general economic conditions and the financial condition of the Company.
The Exchange Offer will not be conditioned upon any minimum or maximum
aggregate principal amount of Outstanding Notes being tendered for exchange. No
assurance can be given as to the liquidity of the trading market for the
Exchange Notes, or, in the case of non-tendering holders of the Outstanding
Notes, the trading market for the Outstanding Notes following the Exchange
Offer.
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<PAGE> 24
To the extent that all or most of the holders of the Outstanding Notes
tender such Notes, the liquidity of the Exchange Notes should be increased as a
result of the larger size of the issue. However, there can be no assurance that
any or all holders of the Outstanding Notes will accept the Exchange Offer. To
the extent that fewer of the holders of the Outstanding Notes accept the
Exchange Offer, the liquidity of the Exchange Notes could be decreased. In
addition, wide acceptance of the Exchange Offer will affect and could decrease
the liquidity of the Outstanding Notes held by non-tendering holders.
The liquidity of, and trading market for, the Outstanding Notes or the
Exchange Notes also may be adversely affected by general declines in the market
for similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects for,
the Company.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on December 1, 1997, to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently placed the Outstanding Notes with QIBs in reliance on Rule 144A
under the Securities Act. As a condition of the purchase of the Outstanding
Notes by the Initial Purchasers, the Company entered into the Registration
Rights Agreement with the Initial Purchasers, which requires, among other
things, that the Company file with the Commission a registration statement under
the Securities Act with respect to an offer by the Company to the holders of the
Outstanding Notes to issue and deliver to such holders, in exchange for
Outstanding Notes, a like principal amount of Exchange Notes. The Company is
required to use its best efforts to cause the registration statement relating to
the Exchange Offer (the "Registration Statement") to be declared effective by
the Commission under the Securities Act and commence the Exchange Offer. The
Exchange Notes are to be issued without a restrictive legend, and based on
interpretations by the staff of the Commission, the Company believes that the
Exchange Notes may be reoffered and resold by a holder that is not an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that the holder is acquiring the Exchange Notes
in its ordinary course of business and is not participating in and has no
arrangement or understanding with any person to participate in the distribution
of the Exchange Notes. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. See "-- Resale of Exchange Notes."
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
The term "Holder" with respect to the Exchange Offer means any person in
whose name the Outstanding Notes are registered on the books of the Company or
any other person who has obtained a properly completed bond power from the
registered holder.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all
Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m., E.S.T.,
on the Expiration Date. On the Exchange Date, the Company will issue $1,000
principal amount of Exchange Notes in exchange for $1,000 principal amount of
Outstanding Notes accepted in the Exchange Offer. Holders may tender some or all
of their Outstanding Notes pursuant to the Exchange Offer. However, Outstanding
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Outstanding Notes except that (i) the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (ii) the holders of the Exchange Notes will not be entitled
to
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<PAGE> 25
certain rights under the Registration Rights Agreement. The Exchange Notes will
evidence the same debt as the Outstanding Notes and will be entitled the
benefits of the Indenture.
As of the date of this Prospectus, $80,000,000 aggregate principal amount
of the Outstanding Notes was outstanding and registered in the name of Cede &
Co., as nominee for the Depositary. The Company has fixed the close of business
of , 1998, as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Outstanding Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, including Rule 14e-1
thereunder.
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
Holders for the purpose of receiving the Exchange Notes from the Company.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering Holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "-- Fees and Expenses."
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue at a rate of 11% per annum and
will be payable semi-annually in arrears on June l and December l of each year,
commencing June 1, 1998. Interest on the Exchange Notes will accrue from the
most recent date to which interest has been paid on the Outstanding Notes or, if
no interest has been paid, from the date of original issuance of the Outstanding
Notes.
PROCEDURES FOR TENDERING
Only a Holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. To tender in the Exchange Offer, a Holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Outstanding Notes and any other required documents, to the Exchange Agent
prior to 5:00 p.m., E.S.T., on the Expiration Date. The Company is not asking
any Holder for a proxy, and no Holder is requested to send the Company a proxy.
To be tendered effectively, the Outstanding Notes, Letter of Transmittal and
other required documents must be received by the Exchange Agent at the address
set forth below under "-- Exchange Agent" prior to 5:00 p.m., E.S.T., on the
Expiration Date. Delivery of the Outstanding Notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of such
book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the
Company the representations set forth below in the second paragraph under the
heading "-- Resale of Exchange Notes."
The tender by a Holder and the acceptance thereof by the Company will
constitute agreement between such Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
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ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Outstanding Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. In the event that signatures on a Letter of Transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantee must be by a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by a properly completed bond power, signed
by such registered holder as such registered holder's name appears on such
Outstanding Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Exchange Notes at the Depository Trust Company (the "Book-Entry Transfer
Facility") for the purpose of facilitating the Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of the
Outstanding Notes by causing such Book-Entry Transfer Facility to transfer such
Outstanding Notes into the Exchange Agent's account with respect to the
Outstanding Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Outstanding Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at its address set forth below on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures; provided,
however, that a participant in the Book-Entry Transfer Facility's book-entry
system may, in accordance with the Book-Entry Transfer Facility's Automated
Tender Offer Program procedures and in lieu of physical delivery to the Exchange
Agent of a Letter of Transmittal, electronically acknowledge its receipt of, and
agreement to be bound by, the terms of the Letter of Transmittal. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities
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or conditions of tender as to particular Outstanding Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Outstanding Notes must be cured within such time as the Company shall
determine. Although the Company intends to notify Holders of defects or
irregularities with respect to tenders of Outstanding Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Outstanding Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Outstanding Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any other required documents to
the Exchange Agent or (iii) who cannot complete the procedures for book-entry
transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Outstanding Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within five Nasdaq Stock Market trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Outstanding Notes (or a confirmation of
book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility) and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility) and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within five Nasdaq Stock Market trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., E.S.T., on the Expiration Date.
To withdraw a tender of Outstanding Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., E.S.T., on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Outstanding Notes to be withdrawn (the "Depositor"),
(ii) identify the Outstanding Notes to be withdrawn (including the certificate
number(s) and principal amount of such Outstanding Notes, or, in the
26
<PAGE> 28
case of Outstanding Notes transferred by book-entry transfer, the name and
number of the account at the Book-Entry Transfer Facility to be credited), (iii)
be signed by the Holder in the same manner as the original signature on the
Letter of Transmittal by which such Outstanding Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Outstanding Notes register
the transfer of such Outstanding Notes into the name of the person withdrawing
the tender, (iv) specify the name in which any such Outstanding Notes are to be
registered, if different from that of the Depositor and (v) if applicable
because the Outstanding Notes have been tendered pursuant to book-entry
procedures, specify the name and number of the participant's account at the
Book-Entry Transfer Facility to be credited, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Outstanding Notes so withdrawn are validly retendered. Any
Outstanding Notes which have been tendered but which are not accepted for
exchange, will be returned to the Holder thereof without cost to such Holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the Expiration Date.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Delivery:
Norwest Bank Minnesota, Norwest Bank Minnesota,
National Association National Association
P.O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 6th and Marquette
Attention: Corporate Trust Operations Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Operations
By Hand Delivery: By Facsimile:
Norwest Bank Minnesota, (612) 667-4927
National Association Confirm by Telephone:
Northstar East 12th Floor (612) 667-9764
608 2nd Avenue
Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Operations
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation is being made by mail; however,
additional solicitation may be made by telegraph, telephone, facsimile or in
person by officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or others soliciting
acceptances of the Exchange Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and registration expenses,
including fees and expenses of the Trustee, filing fees, blue sky fees and
printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Outstanding Notes pursuant to the Exchange Offer. If, however,
certificates representing the Exchange Notes or the Outstanding Notes for the
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be
27
<PAGE> 29
issued in the name of, any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of the Outstanding Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
any other person) will be payable by the tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, which is face value, as reflected in the Company's accounting
records on the Exchange Date. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer with the intention to participate, or for the purpose of participating, in
a distribution of the Exchange Notes may not rely on the position of the staff
of the Commission enunciated in Exxon Capital Holdings Corporation and Morgan
Stanley & Co., Incorporated, or similar no-action letters, but rather must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. In addition, any such
resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K of the Securities Act. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Outstanding Notes, where such
Outstanding Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"Plan of Distribution."
By tendering in the Exchange Offer, each Holder will represent to the
Company that, among other things, (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is a Holder,
(ii) neither the Holder nor any such other person is engaged in or intends to
engage in, or has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and (iii) the Holder and such other
person acknowledge that if they participate in the Exchange Offer for the
purpose of distributing the Exchange Notes (a) they must, in the absence of an
exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes and cannot rely on the no-action letters referenced above and (b) failure
to comply with such requirements in such instance could result in such Holder
incurring liability under the Securities Act for which such Holder is not
indemnified by the Company. Further, by tendering in the Exchange Offer, each
Holder that may be deemed an "affiliate" (as defined under Rule 405 of the
Securities Act) of the Company will represent to the Company that such Holder
understands and acknowledges that the Exchange Notes may not be offered for
resale, resold or otherwise transferred by that Holder without registration
under the Securities Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the Commission with respect to
resales of the Exchange Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act.
28
<PAGE> 30
SHELF REGISTRATION STATEMENT
If the Company is not permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by any applicable law or applicable
interpretation of the Commission or the staff of the Commission, the Company has
agreed to file with the Commission and use its best efforts to have declared
effective and keep continuously effective for up to two years a registration
statement that would allow resales of Outstanding Notes owned by such holders.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Outstanding Notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take.
The Company may in the future seek to acquire untendered Outstanding Notes
in open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company, however, has no present plans to acquire any
Outstanding Notes that are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any untendered Outstanding Notes.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement
with respect to the Outstanding Notes. The Company will not receive any cash
proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes contemplated in this Prospectus,
the Company will receive Outstanding Notes in like principal amount, the form
and terms of which are substantially similar to the form and terms of the
Exchange Notes, except as otherwise described herein. The Outstanding Notes
surrendered in exchange for Exchange Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the Exchange Notes will not result
in any increase or decrease in the indebtedness of the Company.
29
<PAGE> 31
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth selected consolidated historical financial
data which has been derived from the consolidated financial statements of the
Company. The selected consolidated financial data for the nine months ended
December 31, 1992 and the years ended December 31, 1993, 1994, 1995 and 1996 has
been derived from the audited consolidated financial statements of the Company.
The selected consolidated financial data for the nine months ended September 30,
1996 and 1997 is unaudited. The following selected financial data is qualified
in its entirety and should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Prospectus. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS
NINE MONTHS ENDED
ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, -------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------------ ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues.......................... $34,301 $60,097 $57,151 $81,557 $106,785 $77,476 $108,583(1)
Direct expenses....................... 18,987 33,302 30,337 41,392 48,314 35,095 48,982
------- ------- ------- ------- -------- ------- --------
Gross profit.......................... 15,314 26,795 26,814 40,165 58,471 42,381 59,601
Other costs and expenses:
General and administrative............ 11,664 21,493 21,280 30,663 41,418 30,387 46,049
Depreciation and amortization......... 514 895 789 1,240 2,579 2,173 3,616
Provision for doubtful accounts....... 1,020 1,318 1,115 1,489 3,580 2,287 6,738(2)
------- ------- ------- ------- -------- ------- --------
Total costs........................... 13,198 23,706 23,184 33,392 47,577 34,847 56,403
------- ------- ------- ------- -------- ------- --------
Income from operations................ 2,116 3,089 3,630 6,773 10,894 7,534 3,198
Interest expense, net................. 244 427 244 987 2,144 1,663 3,215
------- ------- ------- ------- -------- ------- --------
Income (loss) before income taxes..... 1,872 2,662 3,386 5,786 8,750 5,871 (17)
Provision for income taxes............ 523 1,129 1,359 2,202 3,418 2,262 218
------- ------- ------- ------- -------- ------- --------
Net income (loss)..................... $ 1,349 $ 1,533 $ 2,027 $ 3,584 $ 5,332 $ 3,609 $ (235)
Net income per common share........... $ .23 $ .24 $ .31 $ .55 $ .66 $ .49 $ (.02)
Weighted average common shares
outstanding......................... 5,787 6,403 6,490 6,546 8,040 7,324 10,043
======= ======= ======= ======= ======== ======= ========
OTHER FINANCIAL DATA:
EBITDA(3)............................. $ 2,630 $ 4,270 $ 5,070 $ 9,072 $ 15,668 $11,149 $ 9,227
Adjusted EBITDA(4).................... 2,630 4,270 5,070 9,072 15,668 11,149 14,727
Depreciation and amortization......... 514 1,181 1,440 2,299 4,774 3,615 6,029
Capital expenditures.................. 1,246 1,957 866 7,180 7,867 5,369 4,744
Ratio of Adjusted EBITDA to interest
expense............................. 10.8x 10.0x 20.8x 9.2x 7.3x 6.7x 4.6x
Ratio of earnings to fixed
charges(5).......................... 5.2x 4.3x 5.7x 4.3x 3.8x 3.7x 1.0x
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
---- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 1,491 $ 506 $ 3,775 $ 1,628 $ -- $ 1,007 $ --
Working capital (deficit).................. 1,923 1,292 1,296 (1,737) 5,773 11,155 (19,444)
Property and equipment, net................ 2,756 3,866 3,880 11,054 22,288 19,049 29,042
Total assets............................... 19,444 22,251 24,504 52,573 100,303 84,799 137,953
Total debt, including capital leases....... 2,014 1,678 4,374 19,584 24,432 15,465 59,116
Stockholders' equity....................... 2,837 5,046 7,074 12,062 54,555 53,118 54,549
</TABLE>
- ---------------
(1) Includes a $2.8 million revenue adjustment relating to Medicare nursing cost
limitations. See "Prospectus Summary -- Recent Developments."
(2) Includes a $2.7 million special provision for doubtful accounts. See
"Prospectus Summary -- Recent Developments."
30
<PAGE> 32
(3) As defined in this Prospectus, EBITDA represents income before interest and
amortization of debt costs, federal and state income taxes, and depreciation
and amortization. EBITDA is generally considered to provide information
regarding a company's ability to service and/or incur debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
from operations, or consolidated income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(4) As defined in this Prospectus, Adjusted EBITDA for the nine months ended
September 30, 1997 represents EBITDA, plus a $2.8 million net revenue
adjustment relating to Medicare nursing cost limitations and a $2.7 million
special provision for doubtful accounts, both of which were recorded by the
Company in the three month period ended June 30, 1997.
(5) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before extraordinary item and federal and state income
taxes, plus fixed charges. Fixed charges consist of interest and
amortization of debt costs plus that portion of rental payments on operating
leases deemed representative of the interest factor.
31
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated statements of
income for the year ended December 31, 1996, and the nine-month period ended
September 30, 1997, reflect (i) the acquisitions by the Company in 1996 and 1997
(the "Recent Acquisitions") using the purchase method of accounting and (ii) the
receipt and application of the net proceeds (after deducting offering related
expenses) from the issuance of $80.0 million in Senior Notes due 2004. The
unaudited pro forma condensed consolidated statements of income do not purport
to represent the Company's results of operations had the transactions occurred
in January 1, 1996, or to project the Company's results of operations for any
future periods.
The following unaudited pro forma condensed consolidated balance sheet as
of September 30, 1997, reflects (i) the Recent Acquisitions by the Company in
1997 using the purchase method of accounting, and (ii) the receipt and
application of the net proceeds (after deducting offering related expenses) from
the issuance of $80.0 million in Senior Notes due 2004, as if such transactions
had occurred as of September 30, 1997.
The Company usually implements significant changes to the operations of the
entities that it acquires to enhance profitability. The expected benefits and
cost reductions anticipated by the Company have not been reflected in the
accompanying unaudited pro forma condensed consolidated financial statements.
Accordingly, these pro forma condensed consolidated financial statements are not
necessarily indicative of the operating results that would have been achieved
had the Recent Acquisitions occurred at the beginning of each period presented.
The pro forma adjustments are based upon available information. These
adjustments are directly attributable to the transactions referenced above, and
are expected to have a continuing impact on the Company's business, results of
operations, and financial condition. The following unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
historical consolidated financial statements of the Company, which are included
elsewhere in this Prospectus.
32
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL RECENT PRO FORMA
HEALTHCOR ACQUISITIONS ADJUSTMENTS OFFERING AS ADJUSTED
---------- ------------ ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues.................... $106,785 $49,073(A) $ -- $ -- $155,858
Direct expenses................. 48,314 24,556(A) -- -- 72,870
-------- ------- ------- ------- --------
Gross profit.................... 58,471 24,517 -- -- 82,988
Other costs and expenses:
General and administrative
........................... 41,418 20,518(A) (325)(B) -- 61,611
Depreciation and
amortization............... 2,579 286(A) 567(C) -- 3,432
Provision for doubtful
accounts................... 3,580 160(A) -- -- 3,740
-------- ------- ------- ------- --------
Total costs and
expenses............ 47,577 20,964 242 -- 68,783
-------- ------- ------- ------- --------
Income from operations.......... 10,894 3,553 (242) -- 14,205
Interest expense, net........... 2,144 117(A) 2,171(D) 5,032(E) 9,464
-------- ------- ------- ------- --------
Income (loss) before income
taxes......................... 8,750 3,436 (2,413) (5,032) 4,741
Provision for income taxes...... 3,418 1,374(F) (965)(F) (2,013)(F) 1,814
-------- ------- ------- ------- --------
Net income (loss)............... $ 5,332 $ 2,062 $(1,448) $(3,019) $ 2,927
======== ======= ======= ======= ========
Net income per common share..... $ 0.66 $ 0.36
======== ========
Weighted average common shares
outstanding................... 8,040 8,040
======== ========
OTHER DATA:
EBITDA(G)....................... $ 15,668 $ 19,833
======== ========
Ratio of EBITDA to interest
expense....................... 2.1x
========
</TABLE>
The accompanying notes are an integral part of the
Unaudited Pro Forma Condensed Consolidated Financial Statements
33
<PAGE> 35
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL RECENT PRO FORMA
HEALTHCOR ACQUISITIONS ADJUSTMENTS OFFERING AS ADJUSTED
---------- ------------ ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues..................... $108,583 $7,728(A) $ -- $ -- $116,311
Direct expenses.................. 48,982 4,682(A) -- -- 53,664
-------- ------ ------ -------- --------
Gross profit..................... 59,601 3,046 -- -- 62,647
Other costs and expenses:
General and administrative..... 46,049 2,347(A) 5(B) -- 48,401
Depreciation and
amortization................ 3,616 48(A) 127(C) -- 3,791
Provision for doubtful
accounts.................... 6,738 36(A) -- -- 6,774
-------- ------ ------ -------- --------
Total costs and
expenses............. 56,403 2,431 132 -- 58,966
-------- ------ ------ -------- --------
Income from operations........... 3,198 615 (132) -- 3,681
Interest, net.................... 3,215 10(A) 383(D) 3,835(E) 7,443
-------- ------ ------ -------- --------
Income (loss) before income
taxes.......................... (17) 605 (515) (3,835) (3,762)
Provision for income taxes....... 218 242(F) (206)(F) (1,534)(F) (1,280)
-------- ------ ------ -------- --------
Net income (loss)................ $ (235) $ 363 $ (309) $ (2,301) $ (2,482)
======== ====== ====== ======== ========
Net loss per common share........ $ (0.02) $ (0.25)
======== ========
Weighted average common shares
outstanding.................... 10,043 10,043
======== ========
Other data:
Adjusted EBITDA(G)............. $ 14,727 $ 15,385
======== ========
Ratio of Adjusted EBITDA to
interest expense............ 2.1x
========
</TABLE>
The accompanying notes are an integral part of the
Unaudited Pro Forma Condensed Consolidated Financial Statements
34
<PAGE> 36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
HEALTHCOR ADJUSTMENTS(H) OFFERING(I) AS ADJUSTED
---------- -------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Assets:
Cash....................................... $ -- $ 3,500 $ 22,725 $ 26,225
Accounts receivable, net of allowance for
doubtful accounts....................... 43,103 -- -- 43,103
Income tax receivable...................... 1,628 -- -- 1,628
Supplies inventory......................... 4,014 -- -- 4,014
Prepaid expenses and other................. 1,226 -- -- 1,226
Deferred income taxes...................... 2,644 -- -- 2,644
-------- ------- -------- --------
Total current assets....................... 52,615 3,500 22,725 78,840
Property and equipment, net................ 29,042 -- -- 29,042
Excess of cost of acquired businesses over
fair values of net assets acquired...... 54,271 -- -- 54,271
Other assets............................... 2,025 -- 2,950 4,975
-------- ------- -------- --------
Total assets....................... $137,953 $ 3,500 $ 25,675 $167,128
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses...... $ 11,584 $ -- $ (3,637)(J) $ 7,947
Accrued payroll and related expenses....... 6,349 -- -- 6,349
Line of credit payable..................... 24,885 4,500 (29,385) --
Current portion of long-term debt and
capital lease obligations............... 29,241 (1,000) (21,303) 6,938
Income taxes payable....................... -- -- -- --
-------- ------- -------- --------
Total current liabilities.................. 72,059 3,500 (54,325) 21,234
Deferred income taxes and other............ 6,355 -- -- 6,355
Long-term debt and capital lease
obligations............................. 4,990 -- 80,000 84,990
-------- ------- -------- --------
Total liabilities.................. 83,404 3,500 25,675 112,579
Commitments and contingencies
Stockholders' equity:
Common stock............................... 101 -- -- 101
Additional paid-in capital................. 39,791 -- -- 39,791
Retained earnings.......................... 14,657 -- -- 14,657
-------- ------- -------- --------
Total stockholders' equity............ 54,549 -- -- 54,549
Total liabilities and stockholders'
equity........................... $137,953 $ 3,500 $ 25,675 $167,128
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the
Unaudited Pro Forma Condensed Consolidated Financial Statements
35
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A) Reflects the historical net revenues, direct expenses, general and
administrative expense, depreciation and amortization expense, provision for
doubtful accounts, interest expense, net, and provision for income taxes
recorded up to the date of purchase for the Recent Acquisitions on a
consolidated basis.
(B) Represents the adjustment to general and administrative expense which would
have been realized had the acquisition been completed at the beginning of
the period.
(C) Represents incremental amortization of the excess purchase price over the
net assets acquired as a result of the Recent Acquisitions. Goodwill is
being amortized over a 40-year period and is based on $20.5 million and
$13.4 million of goodwill related to acquisitions during 1996 and 1997,
respectively.
(D) Reflects the additional interest expense that would have been incurred had
the debt issued, assumed, or incurred to finance the Recent Acquisitions
been outstanding from the beginning of the period to the dates of
acquisition and interest. The calculation is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
To record incremental interest on $21.4 million and
$13.1 million of bank financing related to
acquisitions taking place during 1996 and 1997,
respectively (8.4% and 8.5% effective interest
rate)............................................ $2,010 $357
To record incremental interest on $3.3 million and
$1.5 million of seller financing related to
acquisitions taking place during 1996 and 1997,
respectively (7.8% and 8.1% effective interest
rate)............................................ 278 36
Other.............................................. (117) (10)
------ ----
Incremental interest expense related to
acquisitions..................................... $2,171 $383
====== ====
</TABLE>
(E) Reflects an adjustment to increase interest expense relating to the
assumption of $80.0 million in Senior Notes and amortization of debt
issuance costs of $3.0 million (representing interest expense of $421,430
and $316,070 for the 12 month period ended December 31, 1996 and the nine
month period ended September 30, 1997, respectively), net of decreases in
interest expense relating to the use of proceeds of the Initial Offering
and interest income earned on excess cash received.
(F) Represents an adjustment to reflect income tax expense at an assumed
effective tax rate of 40%.
(G) EBITDA represents income before interest and amortization of debt costs,
federal and state income taxes, and depreciation and amortization. EBITDA is
generally considered to provide information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operations, or other
consolidated income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity. Adjusted EBITDA for the nine months ended September 30, 1997
represents EBITDA, plus a $2.8 million net revenue adjustment relating to
the Medicare nursing cost limitations and a $2.7 million special provision
for doubtful accounts, both of which were recorded by the Company in the
three month period ended June 30, 1997.
(H) Adjustments for this column represent transactions occurring after September
30, 1997, including the incurrence of $4.5 million of indebtedness under the
revolving credit portion of the Company's prior credit facility, and
payments of $1.0 million on the term portion of such credit facility.
(I) Adjustments for the Initial Offering include the issuance of $80.0 million
of Outstanding Notes and the retirement of approximately $29.4 million of
indebtedness outstanding under the Company's prior revolving credit
facility and $21.3 million of indebtedness outstanding under the Company's
prior term facility.
(J) Reflects an adjustment to reduce the cash deficit in accounts payable
balance at September 30, 1997.
36
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is one of the largest fully integrated providers of
comprehensive home health care services based in the southwestern and central
United States, providing home nursing, respiratory therapy/home medical
equipment and infusion therapy. The Company has successfully implemented a
regional growth strategy, expanding from 12 offices in three states at its
inception in 1984 to 96 offices in nine states at September 30, 1997. For the
twelve months ended September 30, 1997, the Company had net revenues of $137.9
million and Adjusted EBITDA of $19.2 million. Adjusted EBITDA for the nine
months ended September 30, 1997 represents income before interest and
amortization of debt costs, federal and state income taxes, and depreciation and
amortization, plus a $2.8 million revenue adjustment relating to Medicare
nursing cost limitations and a $2.7 million special provision for doubtful
accounts, both of which were recorded by the Company in the three month period
ended June 30, 1997.
The Company has diversified its business mix from 98% home nursing in 1990
to 55% home nursing for the nine months ended September 30, 1997. This shift
reflects the addition and growth of higher margin respiratory therapy/home
medical equipment and infusion therapy. Although higher margin respiratory
therapy/home medical equipment and infusion therapy accounted for approximately
41% of the Company's net revenues for the nine months ended September 30, 1997,
these businesses generated approximately 79% of Adjusted EBITDA. The Company
expects that it will continue to shift its business mix towards respiratory
therapy/home medical equipment and infusion therapy. Home nursing, however, will
continue to represent an important part of HealthCor's business mix because
managed care organizations and other referral sources often will make
arrangements for other home health services after first referring home nursing
cases to a provider.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1994 1995 1996 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Nursing....................................... 79.2% 74.2% 56.9% 54.6%
Respiratory therapy/home medical equipment.... 16.5 19.8 27.1 27.8
Infusion therapy.............................. 4 .3 6.0 14.9 13.4
Other......................................... -- -- 1.1 4.2
----- ----- ----- -----
Total............................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
As the Company has pursued its fully-integrated provider strategy, the
Company's revenue mix has shifted from predominately home nursing to higher
margin respiratory therapy/home medical equipment and infusion therapy. The
Company is paid for its services and products primarily by Medicare, Medicaid
and private payors, including managed care organizations, insurance companies
and other third-party payors. The following table represents the Company's payor
mix:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1994 1995 1996 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Medicare Part A (cost-based).................. 69.5% 67.2% 50.1% 47.2%
Medicare Part B (charge-based)................ 13.7 13.8 18.4 10.4
Medicaid...................................... 1.1 1.3 4.4 9.2
Third-party payors and others................. 15.7 17.7 27.1 33.2
----- ----- ----- -----
Total............................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Medicare reimburses the Company for both Part A and Part B services.
Medicare Part A reimburses the Company on a "cost basis" based on the lower of
the Company's allowable cost as defined by Medicare
37
<PAGE> 39
regulations, not to exceed annual cost limits, or the Company's actual charges.
Allowable cost is the actual cost directly related to providing home nursing,
plus an overhead allocation. A cost report evidencing the fiscal year allowable
costs, visit data, charges and other financial information is filed annually and
subject to audit. Medicare Part B is paid on a fixed fee-for-service basis
similar to third-party payors, such as managed care organizations.
RESULTS OF OPERATIONS
The following table sets forth certain items included in the Company's
consolidated statements of income as a percentage of net revenues:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Direct expenses............................ 53.1 50.8 45.2 45.3 45.1
----- ----- ----- ----- -----
Gross profit............................... 46.9 49.2 54.8 54.7 54.9
Other costs and expenses:
General and administration............... 37.2 37.6 38.8 39.2 42.4
Depreciation and amortization............ 1.4 1.5 2.4 2.8 3.3
Provision for doubtful accounts.......... 2.0 1.8 3.4 2.9 6.2
----- ----- ----- ----- -----
Total operating expenses......... 40.6 40.9 44.6 44.9 51.9
----- ----- ----- ----- -----
Income from operations..................... 6.3 8.3 10.2 9.8 3.0
Interest, Net Proceeds Payment Date........ 0.4 1.2 2.0 2.1 2.9
----- ----- ----- ----- -----
Income before income taxes................. 5.9 7.1 8.2 7.7 0.1
Provision for income taxes................. 2.4 2.7 3.2 2.9 0.2
----- ----- ----- ----- -----
Net income (loss).......................... 3.5% 4.4% 5.0% 4.8% (0.1)%
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net Revenues. Net revenues increased to $108.6 million for the nine months
ended September 30, 1997, from $77.5 million for the same period in 1996, an
increase of $31.1 million, or 40.1%. This increase is primarily the result of
additional revenues from acquisitions and from internal growth in respiratory
therapy, infusion therapy and commercial nursing revenues, partially offset by a
revenue adjustment of $2.8 million relating to Medicare nursing cost limitations
and by a decrease in Medicare nursing revenues from certain offices. See
"Prospectus Summary -- Recent Developments -- Regulatory Changes."
Direct Expenses. Direct expenses increased to $49.0 million for the nine
months ended September 30, 1997, from $35.1 million for the same period in 1996,
an increase of $13.9 million, or 39.6%. This increase is the result of the
direct expenses associated with the operations of companies acquired during 1996
and 1997. As a percentage of net revenues, direct expenses declined to 45.1% for
the nine months ended September 30, 1997, from 45.3% for the comparable period
in 1996, primarily as a result of lower direct costs incurred by the Company for
pharmaceutical and nursing supplies and improved pricing for respiratory sales
and rental equipment. Direct expenses include all costs directly related to the
production of net revenues, including salary and employee benefit costs, rental
equipment depreciation, medical supplies, and product purchase costs.
General and Administrative. General and administrative expenses increased
to $46.0 million for the nine months ended September 30, 1997, from $30.4
million for the same period in 1996, an increase of $15.6 million, or 51.5%.
This increase is primarily the result of additional field office expenses
associated with the operations of companies acquired during 1996 and 1997, and
increased central office costs. As a percentage of net revenues, general and
administrative expenses increased to 42.4% for the nine months ended September
30, 1997, from 39.2% for the same period in 1996, primarily as a result of
increased implementation costs of Medisyn(TM).
38
<PAGE> 40
Depreciation and Amortization. Depreciation and amortization expense
increased to $3.6 million for the nine months ended September 30, 1997, from
$2.2 million for the same period in 1996, an increase of $1.4 million, or 66.4%.
This increase is primarily due to the amortization of goodwill incurred in
connection with acquisitions and depreciation of capital expenditures relating
to increased purchases of home medical equipment to service increased business
and the development and implementation of Medisyn(TM).
Provision for Doubtful Accounts. The provision for doubtful accounts
increased to $6.7 million for the nine months ended September 30, 1997, from
$2.3 million for the same period in 1996, an increase of $4.4 million, or
195.0%. This increase is the result of increased revenues and the special
provision for doubtful accounts of $2.7 million for the three months ended June
30, 1997. This additional provision for doubtful accounts resulted from the
Company's continuing evaluation of certain accounts receivable from managed care
organizations recorded prior to the implementation of CIMS. The Company believes
that the rollout of CIMS to remaining offices and the complete implementation of
Medisyn(TM) will result in more efficient collection of receivables.
Interest, Net. Interest, net increased to $3.2 million for the nine months
ended September 30, 1997, from $1.7 million for the same period in 1996, an
increase of $1.5 million, or 93.3%. This increase resulted from interest costs
associated with additional indebtedness incurred in connection with
acquisitions, increased working capital borrowings, and interest on equipment
leases to service additional home medical equipment business and leases
associated with the implementation and development of Medisyn(TM).
Provision for Income Taxes. The provision for income taxes decreased to
$0.2 million for the nine months ended September 30, 1997, from $2.2 million for
the same period in 1996, a decrease of $2.0 million, or 90.4%. This decrease is
a result of the decrease in income before taxes in the nine months ended
September 30, 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Revenues. Net revenues increased to $106.8 million in 1996 from $81.6
million in 1995, an increase of $25.2 million, or 30.9%. This increase is
primarily the result of additional revenues from acquisitions and from internal
growth in respiratory therapy, infusion therapy and managed care nursing
revenues, partially offset by a decrease in Medicare nursing revenues from
certain offices.
Direct Expenses. Direct expenses increased to $48.3 million for 1996 from
$41.4 million in 1995, an increase of $6.9 million, or 16.7%. This increase is
primarily the result of the direct expenses associated with the operations of
companies acquired during 1996 and 1995. As a percentage of net revenues, direct
expenses declined to 45.2% in 1996 from 50.8% in 1995 primarily as a result of a
shift in the Company's business mix to a higher percentage of respiratory
therapy/home medical equipment and infusion therapy, which have lower direct
expenses than home nursing.
General and Administrative. General and administrative expenses increased
to $41.4 million for 1996 from $30.7 million in 1995, an increase of $10.8
million, or 35.1%. This increase was primarily the result of additional field
office expenses associated with the operations of acquired companies and
increased central office costs. General and administrative expenses increased as
a percentage of net revenues to 38.8% in 1996 from 37.6% in 1995, primarily as a
result of increased development costs of Medisyn(TM).
Depreciation and Amortization. Depreciation and amortization expense
increased to $2.6 million for 1996 from $1.2 million in 1995, an increase of
$1.4 million, or 108.0%. This increase was primarily due to the amortization of
goodwill associated with acquisitions and depreciation of capital expenditures
relating to Medisyn(TM).
Provision for Doubtful Accounts. The provision for doubtful accounts
increased to $3.6 million in 1996 from $1.5 million for 1995, an increase of
$2.1 million, or 140.5%. This increase was primarily a result of revenue growth
and a shift in the Company's business mix to respiratory therapy/home medical
equipment and infusion therapy businesses, which historically carry a higher
provision for doubtful accounts.
39
<PAGE> 41
Interest, Net. Interest, net increased to $2.1 million for 1996 from $1.0
million in 1995, or 117.2%. This increase resulted from interest costs
associated with indebtedness incurred in connection with acquisitions, increased
working capital borrowings to finance additional managed care business, interest
on equipment leases to service additional home medical equipment business and
leases associated with the implementation and development of Medisyn(TM), and
higher borrowing costs.
Provision for Income Taxes. The provision for income taxes increased to
$3.4 million for 1996 from $2.2 million in 1995, an increase of $1.2 million, or
55.2%. This increase is a result of the growth of income before taxes and an
increase in the Company's effective income tax rate to 39.0% in 1996 from 38.0%
in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Revenues. Net revenues increased to $81.6 million in 1995 from $57.1
million in 1994, an increase of $24.4 million, or 42.7%. This increase is
primarily the result of additional revenues from acquisitions and from internal
growth in respiratory therapy/home medical equipment, infusion therapy and
managed care nursing revenues, partially offset by a decrease in Medicare
nursing revenues from certain offices.
Direct Expenses. Direct expenses increased to $41.4 million in 1995 from
$30.3 million in 1994, an increase of $11.1 million, or 36.4%. This increase is
the result of the direct expenses associated with the operations of companies
acquired during 1995. As a percentage of net revenues, direct expenses declined
to 50.8% in 1995 from 53.1% in 1994, primarily as a result of a shift in the
Company's business mix to a higher percentage of respiratory therapy/medical
equipment and infusion therapy, which have lower direct expenses than nursing.
General and Administrative. General and administrative expenses increased
to $30.7 million in 1995 from $21.3 million in 1994, an increase of $9.4
million, or 44.1%. This increase was primarily the result of additional field
office expenses associated with the operations of acquired companies and
increased central office costs. General and administrative expense as a
percentage of net revenues increased to 37.6% in 1995 from 37.2% in 1994. This
increase was primarily the result of increased development costs of Medisyn(TM).
Depreciation and Amortization. Depreciation and amortization expense
increased to $1.2 million in 1995 from $0.8 million in 1994, an increase of $0.4
million, or 57.1%. This increase was primarily due to the amortization of
goodwill associated with acquisitions and depreciation of capital expenditures
associated with the development and implementation of Medisyn(TM).
Provision for Doubtful Accounts. Provision for doubtful accounts increased
to $1.5 million in 1995 from $1.1 million in 1994, an increase of $0.4 million,
or 33.4%. This increase is primarily a result of revenue growth and a shift in
the Company's business mix to respiratory therapy/home medical equipment and
infusion therapy, which historically carry a higher provision for doubtful
accounts.
Interest, Net. Interest, net increased to $1.0 million in 1995 from $0.2
million in 1994, an increase of $0.8 million, or 305.1%. This increase resulted
from interest costs associated with additional indebtedness incurred in
connection with acquisitions, increased working capital borrowings, and interest
on leases associated with equipment and the development and implementation of
Medisyn(TM).
Provision for Income Taxes. Provision for income taxes increased to $2.2
million in 1995 from $1.4 million in 1994, an increase of $0.8 million or 62.0%,
as a result of an increase in income before taxes.
SELECTED QUARTERLY CONSOLIDATED OPERATING RESULTS
The following table sets forth certain unaudited quarterly consolidated
operating results for 1995, 1996 and the first nine months of 1997. The Company
believes this unaudited information has been prepared on the same basis as the
annual financial statements and includes all adjustments necessary for a fair
presentation of the information for the quarters presented when read in
conjunction with the consolidated financial statements and related notes
included elsewhere in this Prospectus. The operating results for any quarter are
not
40
<PAGE> 42
necessarily indicative of results for any subsequent quarter. The Company's
results of operations are not significantly affected by seasonality factors.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS -- UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues......... $17,553 $18,368 $21,577 $24,059 $24,254 $25,968 $27,254 $29,309 $33,765
Income (loss) from
operations......... 1,260 1,229 1,854 2,430 2,134 2,520 2,880 3,360 3,675
Income (loss) before
income taxes....... 1,141 1,096 1,538 2,011 1,648 1,868 2,355 2,880 3,014
Net income (loss).... $ 703 $ 677 $ 958 $ 1,246 $ 971 $ 1,175 $ 1,462 $ 1,723 $ 1,808
<CAPTION>
THREE MONTHS ENDED
--------------------
JUNE 30, SEPT. 30,
1997 1997
-------- ---------
<S> <C> <C>
Net revenues......... $34,314 $40,504
Income (loss) from
operations......... (4,069) 3,592
Income (loss) before
income taxes....... (5,185) 2,154
Net income (loss).... $(3,336) $ 1,293
</TABLE>
For the effect and nature of certain adjustments reflected in the three
months ended June 30, 1997, see "-- Nine Months Ended September 30, 1997
Compared to Nine Months Ended September 30, 1996 -- Net Revenues" and "-- Nine
Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996 -- Provision for Doubtful Accounts."
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements will be for debt service, for
additional working capital to fund growth of the Company's managed care business
and for acquisitions. The Company believes that the proceeds from the Initial
Offering and borrowings under the New Credit Facility will be sufficient to meet
Company's capital needs for the foreseeable future.
At September 30, 1997, the Company had a working capital deficit of $(19.5)
million as compared to working capital of $5.8 million as of December 31, 1996.
This decrease is primarily a result of the classification of a portion of the
Company's long-term debt as current liabilities pursuant to the Company not
being in compliance with certain provisions of its prior bank credit facility.
During 1996 and the nine months ended September 30, 1997, the Company had
capital expenditures of $7.9 million and $4.7 million, respectively. Capital
expenditures for the fourth quarter of fiscal 1997 were anticipated to be
approximately $1.3 million, the majority of which was used to continue the
development and implementation of Medisyn(TM). The Company estimates that it
will have aggregate capital expenditures in 1998 of approximately $5.0 million.
Days of Sales Outstanding ("DSO") were 97.5 as of September 30, 1997,
compared to 82.0 at December 31, 1996. The increase in DSO from December 31,
1996 to September 30, 1997 is attributable primarily to an overall increase in
net revenue from respiratory therapy/home medical equipment and infusion
therapy, which historically have higher DSO, delays by third parties in paying
for respiratory therapy/home medical equipment and infusion therapy, and a
slowdown in reimbursement from governmental payors. The Company believes the
implementation of CIMS will result in more efficient collection of receivables
and reduce DSO.
Net cash provided by operating activities decreased from $0.4 million for
the nine months ended September 30, 1996, to $(8.8) million for the nine months
ended September 30, 1997. This decrease is primarily attributable to an increase
in accounts receivable and a reduction in accounts payable and accrued expenses.
Net cash used in investing activities decreased from $22.8 million for the nine
months ended September 30, 1996 to $18.2 million for the comparable period in
1997 as the Company increased its focus on managed care business and completed
fewer acquisitions. Payments under capital leases increased to $1.5 million for
the nine months ended September 30, 1997 compared to $0.2 million for the
comparable period in 1996, primarily as a result of increased expenditures on
medical equipment used to service managed care business and increased
expenditures relating to the implementation of Medisyn(TM).
As of September 30, 1997, the Company had outstanding $24.9 million under
its prior revolving credit facility and $22.3 million under its prior term
facility. The Company repaid the amounts with proceeds from the Initial Offering
and contemporaneously entered into the New Credit Facility. See "Description of
the New Credit Facility."
41
<PAGE> 43
BUSINESS
THE COMPANY
The Company is one of the largest fully integrated providers of
comprehensive home health care services based in the southwestern and central
United States, providing home nursing, respiratory therapy/home medical
equipment and infusion therapy. The Company has successfully implemented a
regional growth strategy, expanding from 12 offices in three states at its
inception in 1984 to 96 offices in nine states at September 30, 1997. For the
twelve months ended September 30, 1997, the Company had net revenues of $137.9
million and Adjusted EBITDA of $19.2 million.
The Company has diversified its business mix from 98% home nursing in 1990
to 55% home nursing for the nine months ended September 30, 1997. This shift
reflects the addition and growth of higher margin respiratory therapy/home
medical equipment and infusion therapy. Although higher margin respiratory
therapy/home medical equipment and infusion therapy accounted for approximately
41% of the Company's net revenues for the nine months ended September 30, 1997,
these businesses generated approximately 79% of Adjusted EBITDA. The Company
expects that it will continue to shift its business mix towards respiratory
therapy/home medical equipment and infusion therapy. Home nursing, however, will
continue to represent an important part of HealthCor's business mix because
managed care organizations and other referral sources often will make
arrangements for other home health care services after first referring home
nursing cases to a provider.
The Company believes its ability to offer a full range of integrated home
nursing, respiratory therapy/ home medical equipment and infusion therapy in
almost all of its markets creates an important competitive advantage in
obtaining patient referrals. Managed care organizations and other referral
sources generally favor home health care providers that offer integrated health
care services, because "one-stop shop" providers like the Company provide
superior coordination of care and reduce the administrative and service quality
complications of contracting with multiple providers. In the last nine months,
the Company has entered into relationships with several managed care
organizations with approximately 1.5 million total enrollees. As an integrated
provider, the Company rarely engages subcontractors, which the Company believes
permits it to exercise greater control over quality of service and to improve
patient care.
The Company is also a leader in developing and implementing financial and
clinical management information systems for providing home health care. Upon the
complete implementation of its proprietary medical information system network
trademarked Medisyn(TM), expected to occur in 1998, the Company believes that it
will be able to achieve additional cost savings, increase productivity and
capture outcomes data that will provide significant advantages in obtaining
managed care business and adapting to regulatory and reimbursement changes.
INDUSTRY OVERVIEW
Home health care is among the fastest growing segments of the health care
industry with estimated annual expenditures of $36.1 billion in 1995, up from an
estimated $12.9 billion in 1990, representing a compounded annual growth rate of
approximately 23%. The underlying growth factors in the home health care
industry include: (i) the cost-effective nature of home health care; (ii) an
increasing number of patients due to growth in the elderly population; (iii)
technological advances that expand the range of home health care procedures; and
(iv) patient preference for treatment in the home.
The home health care industry is highly fragmented with more than 18,500
providers delivering home health care services in the United States, most of
which use unsophisticated information technology systems. Many of these
companies are local providers that offer a limited scope of services in a
defined geographical area and lack the capital necessary to substantially expand
their operations. Managed care organizations and cost containment initiatives by
payors have driven the growth of home health care by emphasizing lower cost
alternatives to hospitals and skilled nursing facilities. These organizations
and payors seek coordinated, consistent quality home health care across broad
geographic areas in order to serve their patients more effectively. As a fully
integrated provider and a leader in developing and implementing information
technology
42
<PAGE> 44
systems, the Company believes that it is well positioned to capitalize on future
growth and consolidation in the industry.
BUSINESS STRATEGY
HealthCor's business objective is to enhance its position as one of the
leading providers of comprehensive home health care services in the southwestern
and central United States. Elements of the Company's strategy include:
Provide One-Stop Shop Home Health Care Services. HealthCor provides payors,
physicians and patients with fully integrated one-stop shop home health care
services in almost all of its markets. The integration of comprehensive home
health care services enhances the Company's appeal to managed care organizations
and other referral sources that increasingly prefer single-source providers of
home health care. The Company believes that full integration of services enables
it to provide highly coordinated patient care and to increase revenues and
profitability by providing multiple services to an individual patient referral.
Focus on Managed Care Relationships. The Company has intensified its
managed care marketing efforts in order to take advantage of the increased
market penetration of managed care organizations in the home health care market
and the federal government's increasing preference for Medicare beneficiaries to
enroll in managed care plans. HealthCor is the sole or principal provider for a
number of large managed care plans, and the Company believes that its broad
product offering, quality of service, regional focus and advanced information
systems contribute to the Company's competitive advantage.
Target Referrals from Hospitals and Hospital Affiliated Sources. The
Company has implemented a major marketing and sales initiative that targets
physicians who previously referred cases predominantly to hospital-based home
health care organizations. Many of these physicians have financial and operating
relationships with the parent hospitals of such organizations. The Company
believes that recent government scrutiny of these relationships and accompanying
media attention have provided the Company with the opportunity to increase the
number of referrals from those physicians. See "Risk Factors -- Dependence on
Referral Sources."
Enhance Profitability and Productivity Through Information Technology. The
Company seeks to enhance its profitability and productivity through the
development and use of innovative management information technology that
collects and integrates demographic, financial and clinical information. The
Company is developing and implementing a proprietary financial and clinical
management information system, Medisyn(TM), which is expected to be
substantially completed in May 1998. The Company believes that Medisyn(TM) will
improve profitability by efficiently servicing increased volumes of managed care
referrals, increase productivity gains, reduce costs and provide outcomes data
to payors in an environment increasingly influenced by managed care
organizations and reimbursement changes.
Make Selective Acquisitions to Increase Density in Existing Markets and to
Enter New Markets. The Company selectively seeks high-quality local and
strategic acquisitions that expand the range of services in its existing markets
and that enable the Company to expand its service area, increasing its appeal to
managed care organizations. Since January 1995, the Company has acquired 25 home
health care companies, adding 38 offices. The Company believes that due to the
fragmentation of the home health care industry, a substantial number of
acquisition opportunities are available. See "Risk Factors -- Risk of
Acquisitions and Expansion into New Markets."
43
<PAGE> 45
MANAGED CARE RELATIONSHIPS
The Company is the sole or principal provider for a number of managed care
plans and intends to compete vigorously for additional significant managed care
business in the future. These relationships are all fee-for-service and are
consistent with the Company's strategy to price managed care contracts
profitably in order to provide quality service. A description of certain recent
contracts is as follows:
- In May 1997, the Company became the exclusive provider of respiratory
therapy/home medical equipment to a large, multi-state managed care
organization's approximately 220,000 members in greater Denver, Colorado
in need of such services and equipment.
- In July 1997, the Company became the exclusive provider for a 60,000
member health plan in Texas.
- In August 1997, the Company began receiving referrals as one of two
preferred providers (and the only one which is fully integrated) for a
managed care plan which has approximately 800,000 members in Texas and
Oklahoma.
- In August 1997, the Company began receiving referrals as a preferred
provider for a PPO which manages the health care needs for approximately
350,000 members in the Company's service area.
- In August 1997, the Company became a preferred provider for a 150,000
member PPO in Oklahoma.
Servicing new managed care business can require significant capital
expenditures and can generate significant revenues. For example, in the case of
the Colorado contract referred to above, the Company had almost no existing
infrastructure in Colorado and made capital expenditures in excess of $4.0
million to achieve full implementation. Within two and one-half months of the
contract becoming effective, the Company had successfully transitioned
approximately 1,500 patients and continues to receive additional referrals. The
Company intends to use a portion of the proceeds of the Initial Offering for
capital expenditures related to the new contracts discussed above. See "Risk
Factors -- Dependence on Reimbursement by Third-Party Payors."
SERVICES AND PRODUCTS
Home Nursing. The Company provides a wide range of nursing services to
individuals with acute illness, long-term chronic health conditions, permanent
disabilities, terminal illness or post-procedural needs. Patients are typically
referred to the Company by primary care or specialty physicians and managed care
case managers. After reviewing the patient's medical records and treatment plan
(which are displayed on PtCT Units), a nurse, therapist or home health aide,
where appropriate, provides care to the patient in the home. The plan of care
may require a few visits over a short period of time or many visits over several
years. The Company provides the following home nursing services:
General nursing care is the periodic assessment of the appropriateness
of home health care, the performance of clinical procedures, and
instruction of the patient and the family or other care giver regarding
proper treatments. Such care is provided by registered nurses or licensed
practical nurses. Patients receiving such care typically include stabilized
postoperative patients, patients who are acutely ill but who do not require
hospitalization, and patients who are chronically or terminally ill.
Specialty nursing care is the provision of specialized nursing
services such as geriatric, pediatric or neonatal nursing. Such care is
provided by nurses with the appropriate experience or certification in such
specialty. Specialty nursing care also involves the instruction of the
patient and the family or other care giver in the self-administration of
certain procedures, such as wound care and infection control, emergency
procedures and the proper handling and usage of medication, medical
supplies and equipment.
Therapy services consist of rehabilitation therapies such as physical,
occupational and speech therapy to patients recovering from strokes, trauma
or certain surgeries, services for high risk pregnancies, postpartum care,
AIDS therapy, various medical social services, and case management services
to insurance companies and self-insured employers.
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Home health aide care is the provision of personal care services and
assistance with activities of daily living such as personal hygiene and
meal preparation. The Company's home health aides must pass certain
competency tests and are supervised by a registered nurse.
Primary home health care is provided by the Company through state
administered programs that pay for unskilled homemaker services to the
elderly or the disabled, as ordered by a physician. A registered nurse
makes the initial assessment and assigns a homemaker to provide
housekeeping, shopping and limited personal care.
Respiratory Therapy/Home Medical Equipment. The Company provides a wide
variety of home respiratory, monitoring and medical equipment. Respiratory
therapists provide care to the patient according to the physician-directed plan
of care and educate the patient and the family or other care giver regarding
treatment requirements, use of equipment and self-care. The Company rents, sells
and services respiratory equipment for patient use in the home and supplies
patients with aerosol medications for use in respiratory therapy treatments. The
Company's principal respiratory services include:
Oxygen systems that assist patients with breathing. The Company
provides three types of oxygen systems: (i) oxygen concentrators, which are
stationary units that filter ordinary air in order to provide a continuous
flow of oxygen and are generally the most cost effective supply of oxygen
for patients who require a continuous flow of supplemental oxygen; (ii)
liquid oxygen systems, which are containers used for patients who require a
continuous high flow of supplemental oxygen; and (iii) high pressure oxygen
cylinders, which provide an ambulatory patient with the ability to obtain
supplemental oxygen outside of the home.
Nebulizers that deliver aerosol medications that are inhaled directly
by the patients. Nebulizers are used to treat patients with asthma, chronic
obstructive pulmonary disease, cystic fibrosis and neurologically related
respiratory problems, and patients with AIDS.
Home ventilators that mechanically sustain a patient's respiratory
function in cases of severe respiratory failure.
Continuous positive airway pressure therapy that forces air through
respiratory passage-ways during sleep. This treatment is provided to adults
with sleep apnea, a condition in which a patient's normal breathing
patterns are disturbed during sleep. Monitoring services are usually
provided with this therapy.
The Company also leases and sells convalescent equipment, in connection
with the provision of its other services to patients in the home. Such equipment
includes hospital beds, wheelchairs, walkers, and patient lifts as well as
medical and surgical supplies such as stethoscopes, orthopedic supplies, urinary
catheters, syringes, and needles. The Company is able to increase revenues by
providing home medical equipment and supplies to its patients who are also
receiving nursing, respiratory therapy or infusion therapy.
The Company also provides monitoring services to assist physicians with
diagnoses. The Company's principal monitoring services currently comprise a
small portion of the Company's business but have experienced significant growth
in recent years. Monitoring services include:
Cardiac monitoring for the detection of arrhythmias, a condition that
is responsible for an estimated 500,000 deaths each year in the United
States. The Company provides cardiac loop event recorders which are
monitored electronically and are efficient and cost-effective arrhythmia
detection devices.
Uterine monitoring which detects, records and sends uterine activity
information to a prenatal monitoring center. Such monitoring is designed to
alert health care professionals of pre-term labor in high-risk pregnancies.
Apnea monitors provided to certain high risk newborn infants warn
parents of apnea episodes as a preventative measure against sudden infant
death syndrome.
Home Infusion Therapy. The Company offers comprehensive home infusion
therapies. Home infusion therapy involves the administration of nutrients,
antibiotics and other medications intravenously (into the
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vein), subcutaneously (under the skin), intramuscularly (into the muscle),
intrathecally or epidurally (via spinal routes), or through feeding tubes into
the digestive tract. Infusion therapy often begins during hospitalization of a
patient and continues in the home. New patients are instructed in the
administration of infusion therapy and related services by a registered nurse
who provides the patient's first home treatment and continuing supervision of
care. The Company's principal infusion therapies follow:
Antibiotic therapy is the infusion of antibiotic medications into a
patient's bloodstream to treat a variety of infections and diseases.
Enteral nutrition is the infusion of essential nutrients through a
feeding tube, and is necessary for patients who are unable to orally ingest
adequate nutrients.
Total Parenteral Nutrition is the infusion of a nutrient solution to
restore and/or maintain electrolyte balance and nutritional function.
Pain management is provided to patients experiencing acute pain as a
result of traumatic injury, surgical procedures or other medical disorders.
The Company provides a comprehensive approach to pain management that
includes a thorough knowledge of available agents, routes of administration
and appropriate dosage levels as directed.
Chemotherapy is provided in the home or in other locations and allows
patients with cancer an alternative to frequent and expensive hospital
stays.
Pentamidine is an agent used specifically in the treatment of patients
with AIDS who have experienced one or more episodes of pneumocystis carinii
pneumonia.
FINANCIAL AND CLINICAL MANAGEMENT INFORMATION SYSTEMS
The Company is implementing a proprietary financial and clinical management
information system trademarked Medisyn(TM), which is comprised of several
financial and clinical components integrated through a central interface engine.
Medisyn(TM) is designed to integrate all aspects of the Company's operations by
providing centralized information management for each patient by linking
clinical services to its financial systems. The Company believes that
Medisyn(TM) will enable it to service increased volumes of managed care
referrals, reduce costs and result in more efficient collection of receivables.
The Company also believes Medisyn(TM) will provide competitive advantages by
generating data that will enhance the Company's ability to price and manage the
Company's services and products in a managed care environment and by measuring
more accurately the quality and cost of care that is delivered in the home. The
Company believes that it is the only home health care provider implementing this
technology, and has filed a patent application with respect to Medisyn(TM) with
the United States Patent Office.
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A diagram of the organization of Medisyn(TM) follows:
MEDICAL INFORMATION SYSTEM NETWORK -- MEDISYN(TM)
[CHART]
Medisyn(TM) consists of the following four principal components, which
interface with the others through a central interface engine: (i) a proprietary,
customer information management system ("CIMS"); (ii) hand-held clinical system
point of care computers ("PtCT Units"); (iii) an integrated financial services
system (the "Lawson System"); and (iv) a contract management and billing system
(the "Innovative Managed Care System" or "IMACS"). Medisyn(TM) processes
referrals through CIMS, which captures patient information, creates a patient
profile and interfaces with the appropriate billing system(s) to create a
billing record. CIMS also assures that the requested services are authorized by
the payor. If the referral includes nursing services, the visit and clinical
information will be recorded at the patient's home in a PtCT Unit and
transmitted via modem to a central data base to be included in the patient
profile. After services have been provided, the IMACS system applies the
contract terms of the payor and generates a customized invoice, and through an
interface provides this information to the Company's financial systems,
including cash posting and the general ledger. A description of each principal
component follows.
CIMS. CIMS coordinates all services for patients by assigning each patient
a single identification number and developing for each patient a readily
accessible comprehensive patient profile comprised of demographic, clinical,
case management and billing information. By integrating customer information
management for all of the Company's services, the Company is able to more
effectively service increased volumes of referrals from managed care payors.
CIMS enables the Company to record demographic data, obtain payor verification,
payor authorizations and diagnosis, all of which will enable the Company to more
efficiently service managed care and other payor relationships.
CIMS was implemented in February 1997 and currently services approximately
75% of the Company's managed care business through a central call center
covering the greater Dallas-Fort Worth, Houston, East Texas and Oklahoma
markets, each of which is characterized by a high degree of managed care market
penetration. Rollout to substantially all of the Company's remaining markets is
expected to be completed in 1998.
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PtCT Units. The Company's nurses and home health aides are equipped with
PtCT Units, which are hand-held clinical system point of care computers. The
PtCT Units allow each of the Company's nurses to have an electronic patient
chart in hand and to transmit directly to the Company's system via modem
clinical, payroll and billing information. Once the clinical data has been
recorded, the system enables the Company to develop clinical assessments of
patients via computer generated documentation. Same-day reporting capabilities
reduce paperwork and transcription errors, which has increased certain nurse
productivity. The system also expedites the processing of payroll data,
accelerates the transfer of information to attending physicians, and improves
the consistency and completeness of the assessments generated.
Integrated Financial Services System. The Company has substantially
implemented the Lawson System, which is an integrated suite of financial
services software, including a general ledger, cost accounting, accounts
payable, materials management/purchasing, payroll and human resource elements.
The conversion of the Company's financial system to the Lawson System in early
1997 delayed the Company's recognition of certain estimated purchases of
respiratory therapy/home medical equipment and infusion therapy equipment and
supplies until the second quarter of 1997. The general ledger, accounts payable
and payroll systems are fully operational and have improved the Company's
ability to analyze each element of its business to improve productivity and
operating efficiencies. The remaining applications of the Lawson System will
become operational over the next several quarters. See "Risk
Factors -- Management Information Systems."
IMACS. IMACS, the Company's contract management and billing system, will
enable the Company to capture the essential elements of payor relationships
(including relationships with managed care organizations, other private payors,
Medicaid and Medicare), to assess pricing, eligibility, utilization and other
information necessary to assure accurate billing and to enhance contract
profitability. In addition, IMACS will allow the Company to more effectively
manage payor contract terms and to provide payors with a consolidated bill for
multiple services. The most significant applications of IMACS have been
successfully developed on schedule, with full implementation to be completed in
May 1998. The Company has a four year proprietary right to IMACS for licensing
to non-hospital based home health care providers.
MARKETING
The Company's marketing efforts are based on a sales force of more than 50
persons, which is divided into two specialized groups: (i) national account
managers and (ii) field-based provider relations specialists. The national
account managers are responsible for developing additional managed care business
and for managing existing relationships. The field-based provider relations
specialists cover a specific geographic region and focus on referral sources
which include physicians, hospital discharge planners, social workers, and
community service organizations. In addition, at the local market level the
Company's employees, including office management, support the sales forces by
maintaining relationships with referral sources in order to provide them with
knowledge of the services provided by the Company.
The Company believes that its ability to provide a full range of services
to clients in all of its markets is a significant advantage in developing
relationships with managed care organizations. In addition, the Company works
with managed care organizations to meet their specialized demands for services,
pricing, billing and other matters.
QUALITY ASSURANCE
The Company believes that the quality of services is critical to its
ability to obtain referrals and increase revenues and profitability. To assure
the delivery of high-quality patient care, and to assure the overall quality of
service, the Company has a quality improvement program designed to integrate and
assess the quality improvement activities and processes across all services. The
cornerstone to this quality improvement program is the HealthCor Survey Tool,
which is designed to routinely measure compliance with Medicare conditions of
participation, federal and state regulations, Joint Commission on Accreditation
of Health Organizations ("JCAHO") standards, and HealthCor's standards of care
and practice. The survey process includes review of clinical and billing
documentation, interviews of clinical personnel and observations of home visits
performed by Company staff. Other quality assurance initiatives include
measuring customer satisfaction, reporting
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adverse medical incidents, monitoring risk management, and ensuring a safe and
appropriate working environment.
The Company is accredited by JCAHO in a majority of its offices and
believes that this accreditation is generally preferred by managed care and
other third-party payors. The Company believes that it is JCAHO certified in all
markets where such certification is important to third-party payors.
HUMAN RESOURCE MANAGEMENT
The Company continuously recruits, screens, trains and offers benefits and
other programs in an effort to attract and retain its personnel. The Company
also recruits through Quest Personnel Resources, its personnel placement
division, reducing certain recruiting fees and expenses. Recruiting is conducted
primarily through advertising, personnel agencies, direct contact with community
groups and the use of bonuses. The Company has implemented a computerized
interviewing software system to assist in screening and hiring of potential
employees.
The Company operates regional learning centers to provide orientation and
training to new employees and continuing education for existing employees. The
Company routinely develops and distributes quality improvement in-service
materials, manuals, and forms to its nurses and has implemented an internal
system of employee recognition and rewards. In addition, skilled nurses are
initially assigned to a nurse preceptor until the Company believes that these
new nurses have acquired a sufficient degree of home health care knowledge and
experience. The Company also has implemented an infusion therapy verification
program for skilled nurses. The Company is recognized as a provider of
continuing education units by the Texas Nursing Association, which is accredited
by the American Nursing Credentialing Center.
The retention of qualified employees is a high priority for the Company. As
of September 30, 1997, the Company employed over 2,500 individuals. Management
believes that the Company's employee relations are good. None of the Company's
employees are represented by a labor union or other collective bargaining
organization.
PROPERTIES AND OFFICES
The Company currently leases all of its office space and has approximately
100 real property leases. The Company's executive headquarters (approximately
57,400 square feet) are located in Dallas, Texas and are leased for an original
term of ten years, expiring November 2006.
INSURANCE
The Company maintains professional liability insurance covering the
negligent acts and omissions of its home health care personnel while rendering
services. This policy provides coverage of $5.0 million in the aggregate or $5.0
million per occurrence for each policy year. The Company believes that the
insurance which it maintains, in relation to the size of its business, is
customary in the home health care industry; however, there can be no assurance
that any such insurance will be adequate to cover the Company's liabilities. The
Company maintains product liability insurance on all of the medical equipment,
supplies and pharmaceuticals that it sells, leases or provides to its home
health care patients. This insurance provides coverage of $2.0 million in the
aggregate or $1.0 million per occurrence for each policy year. The Company also
maintains umbrella coverage in excess of its general liability insurance which
provides $4.0 million in the aggregate or $4.0 million per occurrence for each
policy year.
LITIGATION
There are no material legal proceedings to which the Company or any of its
subsidiaries is subject.
COMPETITION
The home health care industry is highly fragmented with more than 18,500
providers, with significant competition from multiple providers in most markets.
The Company faces intense competition for managed
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care contracts, patients, employees and acquisitions. In recent years,
independent home health care providers, including the Company, have encountered
significant competition from hospital-based home health care organizations which
have entered the home health care business. The Company has experienced a
decline in referrals from physicians with financial and operating relationships
with the parent hospitals of such organizations. In addition, many of the
Company's current and potential competitors are larger and have significantly
greater financial and marketing resources than those of the Company.
REGULATION
The Company's business is subject to extensive and increasing regulation by
federal, state and local government. Federal agencies which regulate aspects of
the Company's business include the DHHS, HCFA, the Office of the Inspector
General, the Food and Drug Administration, the Department of Labor, the Drug
Enforcement Agency, and the Occupational Safety and Health Administration. In
most states, home health care providers are regulated by the state department of
health and board of pharmacy. See "Risk Factors -- Effect of Government
Regulations."
The Company is subject to federal laws regulating the repackaging and
dispensing of drugs and regulating interstate motor-carrier transportation and
state laws regulating pharmacies, nursing services and certain types of home
health agency activities. Under state laws, the Company's offices must be
licensed prior to commencing business and must renew their licenses
periodically. In addition, certain of the Company's employees are subject to
state laws and regulations governing the professional practice of respiratory
therapy, pharmacy and nursing. Failure to comply with regulatory laws could
expose the Company to criminal and civil penalties, and jeopardize the licensure
of one or more of its home health care agencies, or their participation in the
Medicare, Medicaid and other reimbursement programs. See "Risk Factors -- Effect
of Government Regulations."
As a provider of services under the Medicare and Medicaid programs, the
Company is subject to the various "anti-fraud and abuse" laws, including the
federal health care programs anti-kickback statute. This law prohibits any
offer, payment, solicitation or receipt of any form of remuneration to induce
the referral of business reimbursable under a federal health care program or in
return for the purchase, lease, order, arranging for, or recommendation of items
or services covered by any such program. Federal health care programs are any
health care plans or programs that are funded by the United States (other than
certain federal employee health insurance benefits) and certain state health
care programs that receive federal funds under various programs, such as
Medicaid. A related law forbids the offer or transfer of any item or service for
less than fair market value, or certain waivers of copayment obligations, to a
beneficiary of Medicare or a state health care programs that is likely to
influence the beneficiary's selection of health care providers. Violations of
the anti-fraud and abuse laws can result in the imposition of substantial civil
and criminal penalties and, potentially, exclusion from furnishing services
under any federal health care programs. In addition, the states in which the
Company operates generally have laws that prohibit certain direct or indirect
payments or fee-splitting arrangements between health care providers where they
are designed to obtain the referral of patients to a particular provider. See
"Risk Factors -- Operation Restore Trust."
Congress adopted legislation in 1989, known as the "Stark" Law, that
generally prohibits a physician ordering clinical laboratory services for a
Medicare beneficiary where the entity providing that service has a financial
relationship (including direct or indirect ownership or compensation
relationships) with the physician (or a member of his immediate family), and
prohibits such entity from billing for or receiving reimbursement for such
services, unless a specified exemption is available. Additional legislation
became effective as of January 1, 1993 known as "Stark II," that extends the
Stark Law prohibitions to services under state Medicaid programs, and beyond
clinical laboratory services to all "designated health services," including home
health services, durable medical equipment and supplies, outpatient prescription
drugs, and parenteral and enteral nutrients, equipment, and supplies. Violations
of the Stark Law may also trigger civil monetary penalties and program
exclusion. Pursuant to Stark II, physicians who are compensated by the Company
are prohibited from making referrals to the Company, and the Company will be
prohibited from seeking reimbursement for services rendered to such patients
unless an exception applies. Several of the states in
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which the Company conducts business have also enacted statutes similar in scope
and purpose to the federal fraud and abuse laws and the Stark Laws.
Various federal and state laws impose criminal and civil penalties for
making false claims for Medicare, Medicaid or other health care reimbursements.
The Company believes that it bills for its services under such programs
accurately. However, the rules governing coverage of, and reimbursements for,
the Company's services are complex. There can be no assurance that these rules
will be interpreted in a manner consistent with the Company's billing practices.
See "Risk Factors -- Operation Restore Trust."
In May 1995, the federal government instituted Operation Restore Trust, a
health care fraud and abuse initiative focusing on nursing homes, home health
care agencies and durable medical equipment companies located in the five states
with the largest Medicare populations. Texas, the Company's corporate base, was
one of the original targeted states. The purpose of this initiative is to
identify fraudulent and abusive practices such as billing for services not
provided, providing unnecessary services and making prohibited referral payments
to health care professionals. Operation Restore Trust has been responsible for
significant fines, penalties and settlements. Operation Restore Trust was
recently expanded to cover twelve additional states for the next two years. The
program was also expanded to include reviews of psychiatric hospitals, certain
independent laboratories and partial hospitalization benefits. Further, there
are plans eventually to apply the program's investigation techniques in all
fifty states and throughout the Medicare and Medicaid programs. One of the
results of the program has been increased auditing and inspection of the records
of health care providers and stricter interpretations of Medicare regulations
governing reimbursement and other issues. Specifically, the government plans to
double the number of comprehensive home health agency audits it performs each
year (from 900 to 1800) and also to increase the number of claims reviewed by
25.0% (from 200,000 to 250,000). In general, the application of these anti-fraud
and abuse laws is evolving. See "Risk Factors -- Operation Restore Trust."
During 1997, the home health care industry experienced several significant
regulatory and reimbursement changes. In February 1997, HCFA implemented mileage
limitations restricting the distance between a nursing agency's principal office
and its branches, with such rules being implemented with respect to the Company
on January 1, 1997. Texas, where the Company has significant operations,
implemented even more restrictive mileage limitation rules for branch offices.
During the first six months of 1997, the Company was subject to Medicare cost
limitations for home nursing that were lower than the Company's operating
expenses for that period. The Company has responded by implementing a series of
cost-saving initiatives resulting in approximately $9.3 million in annualized
savings, which included realizing operating efficiencies available as a result
of the partial implementation of Medisyn(TM), and reducing head-count by
reorganizing its branch structure and corporate operations. See "Risk
Factors -- Medicare Reimbursement Reforms" and "Risk Factors -- Dependence on
Reimbursement by Third-Party Payors."
Recent amendments affecting Medicare also require: (i) the imposition of
more stringent limits on reimbursable home health care costs; (ii) the
establishment of a prospective payment system for home health care services to
be implemented in late 1999; (iii) the separation of home health care services
into two distinct benefits under Medicare Part A and Medicare Part B; (iv) the
establishment of per-beneficiary benefit limitations based upon historical cost;
(v) requiring billing by location of service rather than by location of the home
health care agency's headquarters; and (vi) the establishment of guidelines for
the frequency and duration of reimbursable home health visits. Such provisions
may adversely affect reimbursement for Medicare home health services over the
next several years. For example, reimbursement rates for Medicare home oxygen
services, which represent approximately 5.6% of the Company's revenues, will be
reduced by 25.0% beginning January 1, 1998, with an additional 5.0% reduction to
be effective January 1, 1999. Based upon such initiatives and possible further
cost containment or other initiatives in the future, the Company expects the
reimbursements received from the Medicare program to be at continued risk of
substantial reductions in the future. See "Risk Factors -- Medicare
Reimbursement Reforms."
Recent DHHS rulemaking proposals affecting the home health care industry
include: (i) a rule which would revise Medicare's Conditions of Participation
that home health agencies must meet in order to participate in the Medicare
program, and require that all home health care agencies conduct background
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investigation of their employees; and (ii) a rule that would require home health
care agencies to use standard measurements of the quality and outcomes of
patient care. DHHS is expected to publish final rules in these areas. The
Company believes that it has the capacity to comply with changes in such rules.
See "Risk Factors -- Medicare Reimbursement Reforms."
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the directors,
executive officers and certain other key personnel of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
S. Wayne Bazzle................. 62 Chairman of the Board and Chief Executive Officer
Cheryl C. Bazzle................ 50 President, Chief Operating Officer and Director
Joel H. Williams................ 42 Vice President and Chief Financial Officer
Frank Barker.................... 55 Vice President and Chief Information Officer
Judith A. Kremers............... 56 Senior Vice President
Mary E. Barton.................. 48 Senior Vice President -- Field Operations
M. Sue Collins.................. 53 Vice President -- Regulatory Affairs
Philip C. Dowling............... 45 Vice President -- Field Operations
Deryl Jay....................... 41 Vice President -- Field Operations
Michael J. Foster............... 44 Director
Robert B. Crates................ 34 Director
Jane R. Finley, Ph.D............ 50 Director
</TABLE>
Set forth below are descriptions of the backgrounds and principal
occupations of each of the Company's executive officers, directors and certain
other key personnel.
S. Wayne Bazzle has served as the Chairman of the Board and Chief Executive
Officer of the Company since the Company's incorporation in October 1989. In
addition, Mr. Bazzle served as President of the Company from October 1989 to
October 1991 when Cheryl C. Bazzle was elected President. From October 1985 to
October 1989, Mr. Bazzle served as Chairman of the Board and Chief Executive
Officer of HealthCor, Inc., a predecessor of the Company. From September 1983 to
September 1985, Mr. Bazzle served as a consultant to a home health care company.
Mr. Bazzle was President and Chief Executive Officer of Drum Financial
Corporation, a publicly traded insurance and financial services corporation from
1976 to 1981. Prior thereto, Mr. Bazzle was employed with the Bank of Virginia,
where he served as President and Chief Administrative Officer from 1973 to 1976.
Mr. Bazzle is married to Cheryl C. Bazzle.
Cheryl C. Bazzle has served as President, Chief Operating Officer and
Director since 1991. From 1989 to 1991, Mrs. Bazzle served as Senior Vice
President of the Company. From December 1987 to October 1989, Mrs. Bazzle served
in various capacities for HealthCor, Inc., a predecessor and a subsidiary of the
Company, including as Senior Vice President, Chief Operating Officer and
President. From September 1985 to December 1987, Mrs. Bazzle served in various
capacities for a home health care company. From September 1981 to October 1985,
Mrs. Bazzle operated an equipment leasing company which she founded and which no
longer operates. Mrs. Bazzle is married to S. Wayne Bazzle.
Joel H. Williams has served as Vice President and Chief Financial Officer
since September 1997. Mr. Williams joined the Company in 1995 to direct
acquisition strategy, and in December 1996 was named Vice President with
additional responsibilities for corporate planning. From 1992 to 1995 he was
Chief Financial Officer for Barton Creek Health Care, an Austin-based home
health care provider, and from 1985 to 1992 served as Director of Financial
Analysis and Controller of Franklin Federal Bancorp, a $2.0 billion financial
institution based in Austin. Mr. Williams has also held positions as Director of
Planning and Planning Manager for several financial institutions, including
InterFirst Corporation (now NationsBank) in
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Houston and Dallas. Mr. Williams holds a B.B.A. with highest honors from the
University of Texas at Austin and a M.B.A. with honors from the University of
Houston.
Frank Barker serves as Vice President and Chief Information Officer. Mr.
Barker joined the Company in September 1996 as Vice President, Information
Technology. Prior to joining HealthCor, he was Vice President, Client Services
for Antrim Corporation, a Division of Compucare, a major laboratory/financial
information systems vendor. Mr. Barker has over 20 years of increasingly
responsible experience in the installation, maintenance, support and development
of a variety of computer systems, application software and network technology.
Judith A. Kremers serves as Senior Vice President. Ms. Kremers, whose
health care experience spans more than 30 years, has been employed by HealthCor
and its predecessor since inception. She served as Senior Vice President of
field operations from 1990 to 1995. From 1995 to 1997, she was responsible for
the planning and execution of the re-engineering and execution of HealthCor's
processes and information systems and the Information Services Department. Prior
to joining HealthCor's predecessor in 1984, she worked from 1968 to 1983 at
Adventist Hospital of Simi Valley, California where her responsibilities
included supervision of all nursing services. She is an honors graduate of the
St. Alexis School of Nursing in Bismarck, North Dakota.
Mary E. Barton serves as Senior Vice President of field operations. Ms.
Barton joined HealthCor in 1990 as a Director for the Oklahoma City office and
was named Vice President of Field Operations in 1993. Ms. Barton's 28 years of
health care experience include five years in the Navy Nurse Corps. and 14 years
at Baxter Healthcare in the Hyland Therapeutics Division, including nine years
as Regional Manager. She is an honors graduate of the Union Hospital School of
Nursing in Fall River, Massachusetts.
M. Sue Collins serves as the Company's Vice President of Regulatory
Affairs. Ms. Collins joined the Company in 1989 in connection with the Company's
acquisition of a home nursing business she owned and operated. Ms. Collins has
over 19 years of experience in the home health care industry, including service
as an Assistant Professor of Nursing at Wichita State University. She received a
B.S.N. from Kansas State University and a Masters of Nursing from Emory
University.
Philip C. Dowling has served as Vice President of field operations since
March 1997. From 1994 to 1997, Mr. Dowling served as Regional Vice President for
Vitas Healthcare Corporation, a for profit hospice provider. From 1991 to 1994,
he served in various capacities, including area sales manager and branch
manager, for Caremark Inc., a provider of home infusion therapy services. Mr.
Dowling also was employed by Baxter International, Inc. in several positions
over a 10 year period, including Vice President for operations in the
Philippines, Director of Manufacturing in Spain and managerial positions in
Puerto Rico and Israel. He holds a B.S. in Microbiology from the University of
Nebraska.
Deryl Jay serves as Vice President of field operations. Mr. Jay joined
HealthCor in July 1995 in connection with HealthCor's acquisition of two home
respiratory/medical equipment companies he owned and managed. Mr. Jay has more
than 20 years of health care experience, 14 of which have been as managing owner
of several health care companies. He also has held several positions during his
five year tenure with American Medical International (now Tenet Healthcare,
Inc.), including area manager. Mr. Jay is on the Advisory Board for the School
of Respiratory Therapy for South Plains College in Lubbock, Texas. He holds a
degree in Respiratory Therapy from Texas Tech University.
Michael J. Foster has served as a Director of the Company since October
1991. Since 1989, Mr. Foster has been employed by RFE Management Corp., an
investment manager of several private equity investment funds, and a general
partner of RFE Associates IV, L.P. the general partner of RFE IV. Prior thereto,
Mr. Foster was a partner with the law firm of O'Sullivan Graev & Karabell. Mr.
Foster has previously served as a director of Community Health Systems, Inc. and
ReLife, Inc.
Robert B. Crates has served as a Director of the Company since June 1992.
Since December 1995, Mr. Crates has been a principal of Crates Thompson Capital,
Inc., an investment company engaged in direct investments. From May 1988 to
November 1995, Mr. Crates served as a Vice President of Luther King Capital
Management, an investment advisory firm. In that capacity, Mr. Crates,
individually and as President
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<PAGE> 55
of RBC Investment Corp., served as the general partner of LKCM Venture Partners
I, Ltd., a stockholder of the Company which is affiliated with Luther King
Capital Management. From October 1994 to January 1995, Mr. Crates served as
Interim Chairman and Chief Executive Officer of Eddie Haggar Limited, Inc., a
company in which LKCM Venture Partners I, Ltd. had an investment and which filed
for bankruptcy in 1995.
Jane R. Finley, Ph.D. has served on the Board of Directors since October
1996. Since 1992, Dr. Finley has been an Assistant Professor and Coordinator of
the Accounting Program at Belmont University in Nashville, Tennessee. Dr. Finley
was a Partner in the Consulting Practice of Deloitte & Touche from 1983 to 1992,
and with KPMG Peat Marwick as Manager in the Information Systems practice from
1980 to 1983.
Mr. Julian Banton resigned from the Board of Directors effective January 9,
1998. Mr. Banton's resignation was related to the assumption of additional
responsibilities with respect to his position with South Trust Bank of Alabama.
ORGANIZATION OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors currently has two standing committees: the Audit
Committee and the Compensation Committee. The Audit Committee, which currently
consists of Ms. Finley and Mr. Foster, will confer periodically with
representatives of the Company's independent auditors to review the general
scope of the annual audit, including consideration of the Company's accounting
practices and procedures and system of internal accounting controls, and reports
to the Board of Directors with respect thereto. The Compensation Committee meets
periodically to review and make recommendations with respect to the annual
compensation of the Company's executive officers.
COMPENSATION OF DIRECTORS
Each director of the Company who is not an officer, employee or affiliate
of the Company receives a $1,000 fee for each meeting of the Board of Directors
attended by such director and a $500 per month retainer. In addition, directors
of the Company are reimbursed for their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the Board of
Directors or committees thereof. Mr. Foster currently serves as a general
partner of RFE Associates IV, L.P., the general partner of RFE Investment
Partners IV, L.P. and receives no compensation for serving as a director of the
Company.
In October 1996, the Company granted Dr. Finley options to purchase 5,000
shares of Common Stock at $11.50 per share vesting over a five-year period and
exercisable through October 2006. In addition, during 1997 the Company paid Dr.
Finley a fee of $52,450 in connection with consulting services provided to the
Company by Dr. Finley.
LIMITATION ON DIRECTORS' LIABILITY
The Company's Amended and Restated Certificate of Incorporation provides
that no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability: (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (iv) for any transaction from which the director derived an
improper personal benefit. The effect of these provisions is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above.
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<PAGE> 56
COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
The following table sets forth the compensation paid by the Company to the
Chief Executive Officer and the two next most highly compensated executive
officers (collectively, the "Named Executive Officers") for services rendered in
all capacities during fiscal 1997, 1996 and 1995(7).
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------ OTHER
---------------------------- STOCK ANNUAL ALL OTHER
YEAR SALARY BONUS(1) OPTIONS COMPENSATION(2) COMPENSATION(3)
---- -------- -------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
S. Wayne Bazzle.................. 1997 286,710 -- -- 2,250 12,050
Chairman of the Board 1996 $275,000 $96,250 -- $ 2,250 $12,060
and Chief Executive 1995 $240,000 $72,000 -- $ 2,250 $12,060
Officer
Cheryl C. Bazzle................. 1997 233,829 -- -- 2,250 6,591
President and Chief 1996 $225,000 $78,750 -- $ 2,250 $ 6,591
Operating Officer 1995 $200,000 $60,000 -- $ 2,250 $ 6,591
Joel H. Williams................. 1997 106,000(4) -- 10,000 -- --
Vice President and Chief 1996 $100,000 $20,000 -- -- --
Financial Officer 1995 $ 60,459(5) -- 3,750 $17,000 --
</TABLE>
- ---------------
(1) The Company's executive officers are entitled to receive bonuses depending
on the Company's achievement of certain performance criteria. Amounts
represent bonuses accrued for each year's performance, but paid in the
subsequent year. As of the date of this Prospectus, bonuses, if any, for
1997 have not been awarded.
(2) Represents the Company's contribution to its 401(k) Plan made on behalf of
the Named Executive Officers, except with respect to Mr. Williams for whom
it represents a relocation bonus.
(3) Amounts represent automobile allowances and expenses.
(4) Mr. Williams' current annual base salary is $125,000.
(5) Partial year amount. Mr. Williams joined the Company in April 1995.
(6) Susan L. Belske resigned as the Company's Chief Financial Officer on
September 4, 1997. Ms. Belske's total compensation for 1995 and 1996 was
$135,000 and $160,000, respectively.
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<PAGE> 57
The following table sets forth, as of December 31, 1997, the number of
stock options and the value of unexercised stock options held by the Named
Executive Officers. The Company granted 10,000 stock options exercisable at
$5.00 per share to Joel H. Williams in 1997. As of December 31, 1997, there had
been no stock options exercised by any Named Executive Officer.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
S. Wayne Bazzle............................ -- -- -- --
Chairman of the Board and Chief Executive
Officer
Cheryl C. Bazzle........................... -- -- -- --
President and Chief Operating Officer
Joel H. Williams........................... 2,500 11,250 -- --
Vice President and Chief Financial
Officer
</TABLE>
- ---------------
(1) Based on the last sale price of $3.88 on December 31, 1997, as reported on
the Nasdaq National Market.
BONUS PLAN
The executive officers and certain other members of corporate management
are eligible to receive cash bonuses in addition to their base salaries. The
bonus plan for executive officers and corporate management is based upon
individual performance and the Company's financial results for the fiscal year.
Total bonuses paid to Named Executive Officers for fiscal 1996 were
approximately $200,000. Certain other corporate officers, corporate office
management personnel and field managers are eligible to receive bonuses based on
individual performance goals and Company performance. The executive officers'
bonus plan is reviewed and approved by the Compensation Committee of the
Company's Board of Directors. All other bonuses are reviewed and approved by the
executive officers.
STOCK OPTION PLANS
1996 Incentive Plan. The Company may grant officers, directors and key
employees awards with respect to shares of Common Stock under the HealthCor
Holdings, Inc. 1996 Long-Term Incentive Plan (the "1996 Incentive Plan"). The
awards under the 1996 Incentive Plan include: (i) incentive stock options
qualified as such under U.S. federal tax laws, (ii) stock options that do not
qualify as incentive stock options, (iii) SARs and (iv) restricted stock awards.
The 1996 Incentive Plan authorizes the issuance of 237,500 shares of Common
Stock pursuant to the exercise of non-transferable options granted to
participating employees. On September 16, 1997, the exercise prices of
substantially all of the options granted under the 1996 Incentive Plan were
reduced to $5.00 per share.
The 1996 Incentive Plan is administered by the Board or a committee of the
Board (the "Committee") who determines the exercise price of each option granted
under the 1996 Incentive Plan. However, the exercise price for an incentive
stock option must not be less than the fair market value of the Common Stock on
the date of grant. Stock options may be exercised as the Committee determines
but not later than ten years from the date of grant in the case of incentive
stock options. At the discretion of the Committee, holders may use shares of
Common Stock to pay the exercise price, including shares issuable upon exercise
of the option.
An SAR may be awarded in connection with or separate from a stock option.
An SAR is the right to receive an amount in cash or stock equal to the fair
market value of a share of the Common Stock on the date of exercise less the
exercise price specified in the agreement governing the SAR (for SARs not
granted in connection with a stock option) or the exercise price of the related
stock option (for SARs granted in connection with a stock option). An SAR
granted in connection with a stock option will require the holder,
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<PAGE> 58
upon exercise, to surrender the related stock option or portion thereof relating
to the number of shares for which the SAR is exercised. The surrendered stock
option, or portion thereof, will then cease to be exercisable. Such an SAR is
exercisable or transferable only to the extent that the related stock option is
exercisable or transferable. An SAR granted independently of a stock option will
be exercisable as the Committee determines. The Committee may limit the amount
payable upon exercise of any SAR and such amounts may be paid in cash or stock.
A restricted stock award is a grant of shares of Common Stock that is
nontransferable or subject to risk of forfeiture until specific conditions are
met. The restrictions will lapse in accordance with a schedule or other
conditions as the Committee determines. During the restriction period, the
holder of a restricted stock award may, in the Committee's discretion, have
certain rights as a stockholder, including the right to vote the stock subject
to the award or to receive dividends thereon. Restricted stock may also be
issued upon exercise or settlement of options or SARs.
An award under the 1996 Incentive Plan may have change of control features
as the Committee determines. Such change of control features may provide that
upon the change of control of the Company: (i) the holder of a stock option will
be granted a corresponding SAR, (ii) all outstanding SARs and options will
become immediately and fully vested and exercisable in full and (iii) the
restriction period on any restricted stock award will be accelerated and the
restrictions will expire. Outstanding options under the 1996 Incentive Plan have
the provision described in the preceding clause (ii). A "change in control" of
the Company means: (i) a person other than the Company, certain affiliated
companies or benefit plans, or a company a majority of which is owned directly
or indirectly by the stockholders of the Company becomes the beneficial owner of
50% or more of the voting power of the Company's outstanding voting securities;
(ii) a majority of the Board of Directors is not comprised of the members of the
Board of Directors at a specified date in June 1996, and persons whose elections
as directors were approved by those directors of their approved successors;
(iii) the Company merges or consolidates with another corporation or entity
(whether the Company or the other entity is the survivor), or the Company and
the holders of the voting securities of such other corporation or entity (or the
stockholders of the Company and such other corporation or entity) participate in
a securities exchange, other than a merger, consolidation or securities exchange
in which the Company's voting securities are converted into or continue to
represent securities having the majority of voting power in the surviving
company; or (iv) the Company liquidates or sells all or substantially all of its
assets, except sales to an entity having substantially the same ownership as the
Company.
If a restructuring of the Company occurs that does not constitute a change
in control of the Company, the Committee may: (i) accelerate in whole or in part
the time of vesting and exercisability of any outstanding stock options and
SARs, in order to permit those stock options and SARs to be exercisable before,
upon, or after the completion of the restructuring; (ii) grant each option
holder corresponding SARs; (iii) accelerate in whole or in part the expiration
of some or all of the restrictions on any restricted stock award; (iv) if the
restructuring involves a transaction in which the Company is not the surviving
entity, cause the surviving entity to assume in whole or in part any one or more
of the outstanding awards under the 1996 Incentive Plan upon such terms and
provisions as the Committee deems desirable; or (v) redeem in whole or in part
any one or more of the outstanding awards (whether or not then exercisable) in
consideration of a cash payment, adjusted for withholding obligations. A
restructuring generally is any merger of the Company or the direct or indirect
transfer of all or substantially all of the Company's assets (whether by sale,
merger, consolidation, liquidation, or otherwise) in one transaction or a series
of transactions.
The options granted in 1996 under the 1996 Incentive Plan to executive
officers automatically vest upon a change in control, termination of their
employment with the Company by the Company without cause or termination of their
employment with the Company by the officer for good reason.
1989 Stock Option Plan. The Company's 1989 Stock Option Plan (the "1989
Stock Option Plan"), which was approved by the Board of Directors in October
1989 and subsequently amended in June 1996, provides for the issuance of
Incentive and Non-Qualified Stock Options to purchase up to 387,500 shares of
Common Stock of the Company. Non-Qualified Stock Options may be granted to
full-time employees (including executive officers and directors other than Mr.
and Ms. Bazzle) of the Company or to part-time
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<PAGE> 59
employees or persons performing services for the Company. Incentive Stock
Options may only be granted to full-time employees of the Company. Unexercised
options under the 1989 Stock Option Plan are subject to adjustment if the
outstanding shares of Common Stock of the Company are increased or decreased or
changed into or exchanged for a different number or kind of shares of stock or
other securities or other securities of the Company or of another corporation
through a stock split, combination, reorganization, merger, consolidation or
similar transaction. On September 16, 1997, the exercise price of substantially
all of the options granted under the 1989 Stock Option Plan were reduced to
$5.00 per share.
The 1989 Stock Option Plan is administered by the Board or the Committee
which (i) selects the employees, officers or directors who are to be granted
options, (ii) establishes the number of shares of Common Stock subject to the
options, (iii) determines the exercise prices and (iv) establishes the terms,
restrictions and/or conditions applicable to the options. The exercise price for
an Incentive Stock Option must not be less than the fair market value of the
Common Stock on the date of grant. Options granted under the 1989 Stock Option
Plan vest over a three year period beginning on the date of the grant, with
one-third of the options vesting and becoming exercisable on each anniversary of
the grant. All options will vest automatically upon the occurrence of a change
in control triggering event, which includes a consolidation or merger of the
Company with or into any other entity or a sale or other transfer of
substantially all of the property and assets of the Company. Options are not
transferable except by the laws of devise and descent, and during an optionee's
lifetime may only be exercised by the optionee.
EMPLOYEE STOCK OWNERSHIP PLAN
The Board of Directors adopted an Employee Stock Ownership Plan ("ESOP"),
effective as of April 1, 1990, for eligible employees. The ESOP is an employee
stock ownership plan that is intended to satisfy the applicable qualification
requirements set forth in the Internal Revenue Code of 1986, as amended. The
ESOP is designed to invest primarily in shares of the Company's Common Stock.
The Company intends to terminate the ESOP in early 1998.
Contributions of Common Stock and cash by the Company, when declared at the
discretion of the Board, are allocated to the accounts of participants based on
the ratio each participant's compensation for the year bears to all
participants' compensation for that year. Participants are not vested in any
amounts allocated to them until they have completed at least 1,000 hours of
service per year for one year. After five such years, a participant is 100%
vested in such amounts. Generally, a participant also will be fully vested upon
attaining age 65 or in the event of total and permanent disability, death or
termination of the ESOP.
Shares of Common Stock, together with any other ESOP assets, are held by a
trustee appointed by the Company. Under the ESOP, each participant has a right
to direct the trustee as to the manner in which shares of Common Stock allocated
to his or her account, as well as a portion of the shares of Common Stock held
by the trustee pending allocation to participant accounts, are to be voted at
each meeting of the Company's stockholders. Allocated shares for which no timely
instructions are received will be voted by the trustee proportionally in the
manner as the shares for which voting instructions were received.
Upon termination of employment, a participant is entitled to the amounts
which have been allocated to his or her account and which have become vested. If
a participant dies before receiving vested benefits from the ESOP, then ESOP
assets held for the participant will be distributed to the participant's
beneficiary. Under the ESOP, participants and beneficiaries will receive ESOP
distributions in the form of Common Stock and cash in lieu of any fractional
shares.
401(K) PLAN
The Company sponsors a defined contribution plan (the "401(k) Plan")
pursuant to which all employees at least 21 years of age are eligible to
participate. Participants in the 401(k) Plan may contribute up to 15% of his or
her pre-tax total compensation with the Company matching 25% of the
participant's contributions, up to 6% of the participant's compensation.
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<PAGE> 60
CHANGE OF CONTROL AGREEMENTS
The Company is a party to Change of Control Agreements with Joel H.
Williams and certain other officers of the Company and its subsidiaries, but not
with the Chief Executive Officer or President of the Company. The Change of
Control Agreements will provide for payment of one year's salary upon certain
circumstances following a Change of Control (as defined therein).
SECURITY OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock of as of September 30, 1997,
for: (i) each person known by the Company to own beneficially more than 5% of
the outstanding shares of the Company's Common Stock; (ii) each executive
officer and director of the Company; and (iii) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER PERCENT OF CLASS
--------- ----------------
<S> <C> <C>
S. Wayne Bazzle(1) and Cheryl C. Bazzle(1)................ 2,609,270 26.0
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
RFE Investment Partners IV, L.P........................... 2,158,528 21.5
36 Grove Street
New Canaan, Connecticut 06840
HealthCor Holdings, Inc. Employee Stock Ownership Plan and
Trust................................................... 565,719 5.6
Joel H. Williams(2)....................................... 14,190 *
Robert B. Crates(3)....................................... 16,662 *
Jane B. Finley............................................ 1,190 *
Michael J. Foster(4)...................................... 2,158,528 21.5
All directors and officers as a group (6 persons)......... 4,798,010 47.8
</TABLE>
- ---------------
* Less than 1%
(1) Of such shares, 1,175,000 shares are owned by S. Wayne Bazzle, 1,175,000
shares are owned by Cheryl C. Bazzle and 247,000 shares are owned by the
John Bradley Trust (the "Trust"). S. Wayne Bazzle and Cheryl C. Bazzle serve
as trustees of the Trust. Each of Mr. and Ms. Bazzle disclaim beneficial
ownership of the shares owned by the other and the Trust. Includes 12,270
shares beneficially owned through the Company's ESOP.
(2) Represents 13,750 shares issuable upon exercise of stock options and 440
shares beneficially owned through the Company's ESOP.
(3) 8,331 of such shares are owned by Mr. Crates individually and 8,331 of such
shares are owned by RBC Investment Corp., a corporation of which Mr. Crates
is the sole director and officer and a shareholder.
(4) Michael J. Foster disclaims beneficial ownership of the shares held of
record by RFE Investment Partners, IV, L.P. except to the extent of his
partnership interest in RFE Investment Partners IV, L.P.
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<PAGE> 61
DESCRIPTION OF THE NEW CREDIT FACILITY
Contemporaneously with the closing of the Initial Offering, the Company
entered into the New Credit Facility with Texas Commerce Bank National
Association (the "Agent"), as issuing bank and agent, and each of the lending
institutions which is or may become a signatory thereto. The existing and, if
requested by the Agent, future subsidiaries of the Company guarantee the
indebtedness of the Company under the New Credit Facility. The following is a
summary does not purport to be a complete description of the New Credit Facility
or various documents entered into in connection with the New Credit Facility and
is subject to the detailed provisions of, and qualified in its entirety by
reference to, the New Credit Facility and such related documents.
General. The New Credit Facility consists of a three-year revolving credit
facility providing up to $20.0 million of availability. The New Credit Facility
is available in multiple drawings from time to time subject to certain
conditions and limitations, and amounts borrowed and repaid may be reborrowed
until the third anniversary of the closing date (the "Final Maturity Date").
Advances under the New Credit Facility will be used to finance the working
capital and general corporate requirements of the Company and its subsidiaries,
excluding the financing of asset or stock acquisitions.
Interest Rates; Fees. Amounts outstanding under the New Credit Facility
will bear interest at a rate based on LIBOR plus a specified margin ranging from
1.25% to 2.75% or, at the option of the Company, at a rate based on the prime
rate plus a specified margin ranging from 0% to 0.75%.
The Company will pay a commitment fee on the unused portion of the New
Credit Facility which will be payable quarterly in arrears. The amount of the
commitment fee will range from 0.25% to 0.375% per annum of the daily average
unused commitment amount.
Collateral. All amounts owing under the New Credit Facility are secured by
security interests in substantially all of the assets of the Company and its
subsidiaries.
Covenants. The Company and its existing subsidiaries are subject to certain
affirmative and negative covenants contained in the New Credit Facility,
including without limitation covenants that restrict, subject to specified
exceptions: (i) the incurrence of additional indebtedness and other obligations
and the granting of additional liens; (ii) mergers, acquisitions, investments
and acquisitions and dispositions of assets; (iii) the incurrence of capitalized
lease obligations; (iv) dividends; (v) prepayments or repurchase of other
indebtedness and amendments to certain agreements governing indebtedness,
including the Indenture and the Notes; (vi) engaging in transactions with
affiliates and formation of subsidiaries; (vii) the use of proceeds; (viii)
changes of lines of business; and (ix) other customary covenants. There are also
covenants relating to compliance with ERISA and environmental and other laws,
acquisitions, payment of taxes, maintenance of corporate existence and rights,
maintenance of insurance and financial reporting. Certain of these covenants are
more restrictive than those set forth in the Indenture. In addition, the New
Credit Facility requires the Company to maintain compliance with certain
specified financial covenants, including covenants relating to minimum net
worth, minimum interest coverage ratio, debt to total capitalization ratio and
maximum debt to EBITDAA (as defined in the New Credit Facility) ratio.
Events of Default. The New Credit Facility includes customary events of
default, including, without limitation, payment defaults, breach of
representations, warranties or covenants, bankruptcy of the Company or any
subsidiary, a change of control or change of management of the Company or any
subsidiary, certain changes of ownership of the Company by management, the
invalidity of guaranties or security documents under the New Credit Facility and
cross-default to other indebtedness of the Company and its subsidiaries. The
occurrence of any of such events of default could result in acceleration of the
Company's obligations under the New Credit Facility and foreclosure on the
collateral securing such obligations, which could have a material adverse effect
on holders of the Exchange Notes.
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<PAGE> 62
DESCRIPTION OF THE EXCHANGE NOTES
The Outstanding Notes were, and the Exchange Notes will be, issued pursuant
to the Indenture dated as of December 1, 1997 between the Company, the
Guarantors and the Trustee. The terms of the Exchange Notes are identical in all
material respects to the Outstanding Notes, except the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer.
The terms of the Exchange Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), as in effect from time to time.
The Exchange Notes are subject to all such terms, and holders of the Exchange
Notes are referred to the Indenture and the Trust Indenture Act for a statement
of them. The following is a summary of certain terms and provisions of the
Indenture and the Notes. This summary does not purport to be a complete
description of the Indenture or the Exchange Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Exchange Notes and the Indenture (including the definitions contained therein).
For purposes of this section of the Prospectus, the term "the Company" means
HealthCor Holdings, Inc. Definitions relating to certain capitalized terms are
set forth under "Certain Definitions" and throughout this description.
Capitalized terms that are used but not otherwise defined herein have the
meanings assigned to them in the Indenture and such definitions are incorporated
herein by reference.
GENERAL
The Exchange Notes will be general unsecured obligations of the Company
ranking senior in right of payment to all existing and future Subordinated
Indebtedness and pari passu in right of payment with all other Indebtedness and
liabilities (including trade payables) of the Company. The Exchange Notes will
rank pari passu with the Company's Outstanding Notes not otherwise exchanged for
Exchange Notes pursuant to this Exchange Offer. The Notes will be effectively
subordinated to all present or future secured Indebtedness of the Company to the
extent of the value of the assets securing such Indebtedness. As of September
30, 1997, on a pro forma basis after giving effect to the issuance and sale of
the Outstanding Notes and the use of the net proceeds therefrom, the Company
would have had no secured or other Indebtedness outstanding.
The Company is a holding company and has no material assets or operations
other than its investment in its subsidiaries. The Notes will be fully and
unconditionally guaranteed on a senior unsecured and joint and several basis
(the "Guarantees") by the Company's present and future domestic Subsidiaries
(collectively, the "Guarantors"). The term "Subsidiaries" does not include
Unrestricted Subsidiaries and under certain circumstances the Company will be
permitted to designate certain of its subsidiaries as Unrestricted Subsidiaries;
however, as of the date hereof there are no Unrestricted Subsidiaries. The
Guarantees will rank senior in right of payment to all existing and future
Subordinated Indebtedness of the Guarantors and pari passu in right of payment
with all other Indebtedness and liabilities (including trade payables) of the
Guarantors. The Guarantees will be effectively subordinated to all secured
Indebtedness of the Guarantors to the extent of the value of the assets securing
such Indebtedness. As of September 30, 1997, on a pro forma basis after giving
effect to the issuance and sale of the Outstanding Notes and the use of the net
proceeds therefrom, the Guarantors would have had $9.5 million principal amount
of secured Indebtedness outstanding in the form of Capital Lease Obligations and
$3.1 million in other Indebtedness outstanding, including $600,000 of letters of
credit outstanding.
Any right of the Company or a Guarantor to receive assets of any of the
Company's subsidiaries that is not a Guarantor upon the latter's liquidation or
reorganization (and the consequent right of the holders of the Notes to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors, except to the extent that the Company or a
Guarantor is itself recognized as a creditor of such subsidiary, in which case
the claims of the Company or such Guarantor would still be effectively
subordinated to any security interest in the assets of such subsidiary.
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<PAGE> 63
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited in aggregate principal amount to $80.0
million and will mature on December 1, 2004. The Exchange Notes will bear
interest at a rate of 11% per annum from the date of original issuance until
maturity. Interest is payable semi-annually in arrears on June 1 and December 1
of each year, commencing on June 1, 1998, to holders of record of the Exchange
Notes at the close of business on the immediately preceding May 15 and November
15, respectively (whether or not a business day). Interest on the Exchange Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year consisting of twelve 30-day months. The
Exchange Notes will be issued in denominations of $1,000 and any integral
multiple of $1,000.
Principal of, premium, if any, interest and Liquidated Damages, if any, on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to the holders of the
Notes at their respective addresses set forth in the register of holders of
Notes; provided that all payments with respect to Notes, the holders of which
have given wire transfer instructions to the paying agent on or prior to the
relevant record date will be required to be made by wire transfer of immediately
available funds to the accounts specified by such holders. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose.
GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally and unconditionally guaranteed by the Guarantors. See, however, "Risk
Factors -- Fraudulent Conveyance; Unenforceability of Certain Corporate
Guarantees." Each Guarantor that makes a payment or distribution under a
Guarantee will be entitled to a contribution from each other Guarantor in a pro
rata amount based on the Adjusted Net Assets of each Guarantor.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another Person
whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee in respect of the Notes, the
Indenture and such Guarantor's Guarantee and (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Guarantor to a third party or an
Unrestricted Subsidiary in a transaction that does not violate any of the
covenants in the Indenture (including the covenant described under the caption
"-- Repurchase at the Option of Holders -- Asset Sales"), by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Guarantor, or the designation of such Guarantor as an Unrestricted
Subsidiary in accordance with the Indenture, then (i) in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Guarantor, or in the event of such designation,
such Guarantor will be released from and relieved of any obligations under its
Guarantee, or (ii) in the event of a sale or other disposition of all of the
assets of such Guarantor, the Person acquiring such assets will not be required
to assume the obligations of such Guarantor under its Guarantee.
Any Guarantor that is designated an Unrestricted Subsidiary in accordance
with the terms of the Indenture shall be released from and relieved of its
obligations under its Guarantee and any Unrestricted Subsidiary that ceases to
be an Unrestricted Subsidiary will be required to execute a Guarantee in
accordance with the terms of the Indenture.
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OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to December 1, 2001. Thereafter, the Notes will be
redeemable at any time, and from time to time, at the option of the Company, in
whole or in part, at the following redemption prices (expressed as a percentage
of principal amount), together, in each case, with accrued and unpaid interest
and Liquidated Damages, if any, to the redemption date, if redeemed during the
twelvemonth period beginning on December 1 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001...................................................... 106.50%
2002...................................................... 103.25%
2003...................................................... 100.00%
</TABLE>
Notwithstanding the foregoing, at any time prior to December 1, 2000, the
Company may redeem up to an aggregate of $25 million in principal amount of
Notes at a redemption price equal to 111% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date with the net cash proceeds of one or more Public Equity
Offerings, provided that at least $55 million in principal amount of Notes
remains outstanding immediately following each such redemption and that any such
redemption occurs within 90 days following the closing of any such Public Equity
Offering.
In the event of redemption of fewer than all of the Notes, the Trustee
shall select pro rata, by lot or in such other manner as it shall deem fair and
equitable, the Notes to be redeemed. No Notes of $1,000 or less shall be
redeemed in part. Subject to the limitations described herein, the Notes will be
redeemable in whole or in part upon not less than 30 nor more than 60 days'
prior written notice, mailed by first class mail to a holder's last address as
it shall appear on the register maintained by the Registrar of the Notes.
Notices of redemption may not be conditional. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note, in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. After any
redemption date, unless the Company shall default in the payment of the
redemption price, interest will cease to accrue on the Notes or portions thereof
called for redemption.
MANDATORY REDEMPTION
Except as set forth under "-- Repurchase at the Option of Holders," the
Company is not obligated to make any mandatory redemption of or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control Offer
Within 30 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") all or any portion (equal to $1,000 or
an integral multiple of $1,000) of the outstanding Notes at a cash purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Change of Control
Payment Date (as hereinafter defined) (such applicable purchase price being
hereinafter referred to as the "Change of Control Purchase Price") in accordance
with the procedures set forth in this covenant.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each
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holder of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice describing the transactions constituting a
Change of Control and stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, subject
to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days and no later than
60 days from the date such notice is mailed (the "Change of Control Payment
Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the fifth
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing its election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(8) any other reasonable procedures that a holder must follow to
accept a Change of Control Offer or effect withdrawal of such acceptance;
and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof or beneficial
interests under a Global Note tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent money sufficient to pay the purchase price of
all Notes or portions thereof or beneficial interests so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly (1) mail to each holder of Notes so
accepted and (2) cause to be credited to the respective accounts of the holders
under a Global Note of beneficial interests so accepted payment in an amount
equal to the Change of Control Purchase Price for such Notes, and the Company
shall execute and issue, and the Trustee shall promptly authenticate and mail to
such holder, a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered and shall issue a new Global Note equal in principal
amount to any unpurchased portion of beneficial interest so surrendered or shall
reflect on such Global Note or a schedule thereto such change in beneficial
interest; provided, however, that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change or Control Offer in the
manner, at the times and otherwise in compliance with the
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<PAGE> 66
requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
Asset Sales
The Company will not, and will not permit any of its Subsidiaries to,
consummate an Asset Sale unless (i) the Company or such Subsidiary, as the case
may be, receives consideration at the time of such sale or other disposition at
least equal to the fair market value thereof (as reasonably determined for Asset
Sales in excess of $1 million in good faith by its Board of Directors); (ii) not
less than 75% of the consideration received by the Company or the Subsidiary, as
the case may be, from such Asset Sale is in the form of cash or Temporary Cash
Investments; provided that the amount of (a) any liabilities (as shown on the
Company's or a Subsidiary's most recent balance sheet) of the Company or a
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any Guarantee thereof) that are assumed by
the transferee of any such assets or an Affiliate thereof pursuant to a
customary novation agreement that releases the Company or such Subsidiary from
further liability and (b) any securities, notes or other obligations received by
the Company or a Subsidiary from such transferee or an Affiliate thereof that
are converted by the Company or a Subsidiary into cash prior to the Reinvestment
Date (to the extent of the cash received) shall be deemed to be cash for
purposes of this provision; and (iii) the Asset Sale Proceeds received by the
Company or such Subsidiary are applied, to the extent the Company elects, (A) to
repay and permanently reduce outstanding Senior Indebtedness under the New
Credit Facility, other secured Senior Indebtedness or any other Senior
Indebtedness that has a maturity date earlier than the maturity of the Notes and
to permanently reduce the commitments in respect thereof, provided, however,
that such repayment and commitment reduction occurs prior to the Reinvestment
Date or (B) to an investment in assets (including Equity Interests or other
securities purchased in connection with the acquisition of Equity Interests or
property of another Person) used or useful in the Company's business; provided,
however, that such investment occurs or the Company or a Subsidiary enters into
contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 270th day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date") (and
notifies the Trustee of the same in writing) and Asset Sale Proceeds
contractually committed are so applied within 360 days following the receipt of
such Asset Sale Proceeds or (C) as Excess Proceeds as set forth below. Pending
the final application of any such Asset Sale Proceeds, the Company may
temporarily reduce Senior Indebtedness or otherwise invest such Asset Sale
Proceeds in any manner that is not prohibited by the Indenture. Any Asset Sale
Proceeds that are not applied as permitted by clause (iii)(A) or (iii)(B) of the
preceding sentence shall constitute "Excess Proceeds." If at any time from and
after the Issue Date the aggregate amount of Excess Proceeds exceeds $5 million,
the Company shall offer (an "Excess Proceeds Offer") to purchase from all
holders of Notes, pursuant to procedures set forth in the Indenture and if the
Company is required to do so under the terms of any other Senior Indebtedness,
to purchase from the holders of such other Senior Indebtedness the maximum
principal amount of Notes and principal of such other Senior Indebtedness that
may be purchased with such Excess Proceeds at a purchase price in cash equal to
100% of the principal amount thereof plus accrued interest, and Liquidated
Damages, if any, to the date of the purchase. To the extent that the purchase
price of Notes and principal of such other Senior Indebtedness tendered pursuant
to such Excess Proceeds Offer is less than the amount of Excess Proceeds, the
Company may use such portion of the Excess Proceeds that is not used to purchase
Notes or such other Senior Indebtedness so tendered for general corporate
purposes not inconsistent with the Notes or the Indenture. If the aggregate
purchase price of Notes and principal of such other Senior Indebtedness tendered
pursuant to such Excess Proceeds Offer is more than the amount of the Excess
Proceeds, the Notes and principal of such other Senior Indebtedness
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tendered will be repurchased on a basis pro rata to the amount tendered or by
such other method as the Trustee shall deem fair and appropriate. Upon the
completion of any Excess Proceeds Offer and the closing of any repurchase of
Notes and principal of such other Senior Indebtedness tendered pursuant to such
Excess Proceeds Offer, the amount of Excess Proceeds shall be deemed to be zero.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders of the Notes describing the transactions giving rise to the Excess
Proceeds Offer and stating, among other things: (1) that such holders have the
right to require the Company to apply the Excess Proceeds to repurchase such
Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase; (2) the purchase date, which shall be no earlier than 30 days and not
later than 60 days from the date such notice is mailed; (3) the instructions,
reasonably determined by the Company, that each holder of Notes must follow in
order to have such Notes repurchased; and (4) the calculations used in
determining the amount of Excess Proceeds to be applied to the repurchase of
such Notes.
The Company or any of its Subsidiaries may engage in transactions in which
assets are transferred in exchange for one or more like-kind assets; provided
that if the fair market value of the assets to be transferred by the Company or
such Subsidiary, plus the fair market value of any other consideration paid or
credited by the Company or such Subsidiary exceeds $1 million, such transaction
shall require approval of the Board of Directors of the Company; provided that
no such transaction shall be permitted if the Consolidated Fixed Charge Coverage
Ratio of the Company would be reduced after giving effect to such transaction.
In addition, each such transaction shall be valued at an amount equal to all
consideration received by the Company or such Subsidiary in such transaction,
other than the like-kind assets received pursuant to such exchange ("Other
Consideration"), for purposes of determining whether an Asset Sale has occurred.
If the Other Consideration is of an amount and character such that such
transaction constitutes an Asset Sale, then the first paragraph of this "Asset
Sales" covenant shall be applicable to any Asset Sale Proceeds of such Other
Consideration.
General
The Indenture requires that if any Indebtedness under the New Credit
Facility is outstanding at the time of the occurrence of a Change of Control or
at the time the Company is required to make an Excess Proceeds Offer, and the
New Credit Facility shall prohibit the Company from fully complying with its
obligations to make and consummate a Change in Control Offer or an Excess
Proceeds Offer, prior to the mailing of the notice to holders described in the
preceding paragraphs, but in any event within 30 days following any Change of
Control or Reinvestment Date, the Company shall (i) repay in full all
obligations and terminate all commitments under the New Credit Facility or offer
to repay in full all obligations and terminate all commitments under the New
Credit Facility or (ii) obtain the requisite consent under the New Credit
Facility to permit the making of, and the repurchase of the Notes pursuant to,
the Change of Control Offer or the Excess Proceeds Offer. The time by which the
Company is requested to commence and consummate a Change of Control Offer or an
Excess Proceeds Offer shall be deferred until the Company has taken the actions
requested by this paragraph. The Company's failure to comply with the covenant
described in the first sentence of this paragraph constitutes an Event of
Default. As a result of the foregoing, a holder of the Notes may not be able to
compel the Company to purchase the Notes unless the Company is able at the time
to refinance the Indebtedness under the New Credit Facility or obtain requisite
consents thereunder.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Subordinated Indebtedness or (ii) Preferred
Equity Interests, and the Company or such Subsidiary is required to make a
Change of Control Offer or an Excess Proceeds Offer or to make a distribution
with respect to such Subordinated Indebtedness or Preferred Equity Interests in
the event of a change of control or sale of assets, the Company and such
Subsidiary shall not consummate any such offer or distribution with respect to
such Subordinated Indebtedness or Preferred Equity Interests until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes, or until such time as the Company has paid the Excess Proceeds to
Holders of the Notes that have accepted the Excess Proceeds Offer and shall
otherwise have consummated the Excess Proceeds Offer,
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as the case may be, and (B) the Company will not issue Subordinated Indebtedness
or Preferred Equity Interests with change of control provisions or asset sales
provisions requiring the payment of such Subordinated Indebtedness or Preferred
Equity Interests prior to the payment in full to the holders of Notes that have
accepted the Company's Change of Control Offer following a Change in Control
Offer or payment of the Excess Proceeds to holders of Notes that have accepted
the Excess Proceeds Offer, as the case may be.
The Company will comply with any applicable requirements of Rule 14e-1 as
then in effect with respect to any Change in Control Offer or Excess Proceeds
Offer and the purchase of any Notes thereunder. The Company's ability to
purchase the Notes will be limited by the Company's then available financial
resources and, if such financial resources are insufficient, its ability to
arrange financing to effect such purchases. There can be no assurance that the
Company will have sufficient funds to repurchase the Notes upon a Change of
Control or Asset Sale or that the Company will be able to arrange financing for
such purpose.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Restricted Payments
The Company and the Guarantors will not, and will not permit any of their
Subsidiaries to, directly or indirectly, make, any Restricted Payment unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the covenant set forth under "Limitation
on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
through and including the date of such Restricted Payment (the "Base
Period") does not exceed the sum of (1) 50% of the Company's Consolidated
Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) from the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment, (2) 100%
of the aggregate net cash proceeds received by the Company from the issue
or sale, during the Base Period, of Equity Interests (other than
Disqualified Equity Interests or Equity Interests of the Company issued to
any Subsidiary of the Company) of the Company or any Indebtedness or other
securities of the Company convertible into or exercisable or exchangeable
for Equity Interests (other than Disqualified Equity Interests) of the
Company which have been so converted or exercised or exchanged, as the case
may be, (3) if any Restricted Investment that was made after the Closing
Date is sold for cash, the net cash proceeds from such sale to the extent
received by the Company or any Restricted Subsidiary, minus the initial
amount of such Restricted Investment and (4) in the event an Unrestricted
Subsidiary is redesignated as a Restricted Subsidiary, an amount equal to
the lesser of (i) the net book value of such Investments at the time of
such designation, (ii) the fair market value of such Investments at the
time of such designation and (iii) the original fair market value of such
Investments at the time they were made. For purposes of determining under
this clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its fair market value at the time expended.
The provisions of this covenant shall not prohibit (i) the agreement or
commitment to make any payment or distribution permitted under the Indenture or
the payment or distribution so agreed or committed to be made as long as such
payment or distribution is made on the date of such agreement or commitment or
within 60 days thereof, provided, however, that on the date of such agreement or
commitment such payment would comply with the foregoing provisions, it being
understood that the agreement or commitment to make such payment or distribution
shall constitute Permitted Indebtedness, (ii) the purchase, redemption or other
acquisition or retirement of any Equity Interests or the making of any principal
payment on, or the purchase,
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defeasance, repurchase, redemption or other acquisition or retirement of
Subordinated Indebtedness by conversion into, or by or in exchange for, Equity
Interests (other than Disqualified Equity Interests), or out of, the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other Equity Interests of the Company (other than Disqualified
Equity Interests), (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or retirement
of Subordinated Indebtedness in exchange for, by conversion into, or out of the
net cash proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (including Disqualified Equity Interests) (other than any
Indebtedness owed to a Subsidiary) of the Company or a Subsidiary that (1) is
contractually subordinated in right of payment to the Notes to at least the same
extent as, and (2) has a final maturity date later than the final maturity date
of, and has a weighted average life to maturity at least equal to the weighted
average life to maturity of, the Subordinated Indebtedness being paid,
purchased, defeased, repurchased, redeemed or otherwise acquired or retired,
(iv) the purchase, redemption or other acquisition or retirement of any
Disqualified Equity Interests by conversion into, or by exchange for, shares of
Disqualified Equity Interests, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Disqualified Equity Interests and (v) the purchase, redemption or other
acquisition or retirement for value of any Equity Interests held by any current
or past member of the Company's (or any of its Subsidiaries') management or
board of directors (or the estate, heirs or legatees of any such individual)
pursuant to any management equity subscription agreement, stock option agreement
or other similar agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$500,000 in any twelve-month period; provided, however, that in the case of the
immediately preceding clauses (ii), (iii), (iv) and (v), no Default or Event of
Default shall have occurred and be continuing at the time of such Restricted
Payment or would occur as a result thereof.
The Indenture provides that in determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date for purposes of
subparagraph (c) above, amounts expended pursuant to clauses (i), (ii) and (v)
of the immediately preceding paragraph shall be included, but without
duplication, in such calculation, and amounts expended pursuant to clauses (iii)
and (iv) thereof shall be excluded.
The Indenture provides that for purposes of calculating the net cash
proceeds received by the Company from the issuance or sale of its Equity
Interests either upon the conversion of, or exchange for, Indebtedness of the
Company or any Subsidiary, such amount will be deemed to be an amount equal to
the difference of (a) the sum of (i) the principal amount or accreted value
(whichever is less) of such Indebtedness on the date of such conversion or
exchange and (ii) the additional cash consideration, if any, received by the
Company upon such conversion or exchange, less any payment on account of
fractional shares, minus (b) all expenses incurred in connection with such
issuance or sale. In addition, for purposes of calculating the net cash proceeds
received by the Company from the issuance or sale of its Equity Interests upon
the exercise of any options or warrants of the Company, such amount will be
deemed to be an amount equal to the difference of (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b) all
expenses incurred in connection with such issuance or sale.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements, and, where required, that
no Default or Event of Default exists and is continuing and no Default or Event
of Default will occur immediately after giving effect to such Restricted
Payment.
Limitation on Subsidiaries and Unrestricted Subsidiaries
The Indenture provides that the Company may by written notice to the
Trustee designate any Subsidiary (including a newly acquired or a newly formed
Subsidiary) to be an Unrestricted Subsidiary, provided, however, that (i) no
Default or Event of Default shall have occurred and be continuing or would arise
therefrom and (ii) such designation is at that time permitted under the covenant
described under "Limitation on Restricted Payments." For purposes of the
covenant described under "Limitation on Restricted Payments" above, (i) an
"Investment" shall be deemed to have been made at the time any Subsidiary is
designated as an
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Unrestricted Subsidiary in an amount (proportionate to the Company's percentage
Common Equity Interest in such Subsidiary) equal to the greatest of (a) the net
book value of such Investments at the time of such designation, (b) the fair
market value of such Investments at the time of such designation and (c) the
original fair market value of such Investments at the time they were made; (ii)
at any date the aggregate of all Restricted Payments made as Investments since
the Issue Date shall exclude and be reduced by an amount (proportionate to the
Company's percentage Common Equity Interest in such Subsidiary) equal to the net
worth of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Subsidiary, not to exceed, in the case of any such
redesignation of an Unrestricted Subsidiary as a Subsidiary, the amount of
Investments previously made by the Company and its Subsidiaries in such
Unrestricted Subsidiary (in each case (i) and (ii) "net worth" to be calculated
based upon the fair market value of the assets of such Subsidiary as of any such
date of designation); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
The Indenture provides that notwithstanding the foregoing, the Board of
Directors of the Company may not designate a Subsidiary of the Company to be an
Unrestricted Subsidiary unless such Subsidiary: (a) has no Indebtedness other
than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement
or understanding with the Company or any Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are no less
favorable to the Company or such Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of the Company; (c) is a Person
with respect to which neither the Company nor any of its Subsidiaries has any
direct or indirect obligation (1) to subscribe for additional Equity Interests
or (2) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results; (d) does not
guarantee or otherwise directly or indirectly provide credit support for any
Indebtedness of the Company or any of its Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Subsidiaries and has at least one executive officer
that is not a director or executive officer of the Company or any of its
Subsidiaries.
If, at any time, any Unrestricted Subsidiary would fail to meet the
definition of an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Person shall be deemed to be incurred by a Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "-- Limitation on Additional
Indebtedness," the Company shall be in default of such covenant).
Limitation on Additional Indebtedness
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, incur (as
defined) any Indebtedness (including Acquired Indebtedness) other than Permitted
Indebtedness, provided, however, that the Company and the Guarantors may incur
Indebtedness (including Acquired Indebtedness) if (a) after giving effect on a
pro forma basis to the incurrence of such Indebtedness and to the extent set
forth in the definition of Consolidated Fixed Charge Coverage Ratio the receipt
and application of the proceeds thereof, the Company's Consolidated Fixed Charge
Coverage Ratio would be greater than (i) 2.00 if such Indebtedness is to be
incurred on or before December 1, 1999; and (ii) 2.25 if such Indebtedness is to
be incurred after December 1, 1999; and (b) no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness. Notwithstanding any other provision of this
covenant, a guarantee of Indebtedness will not constitute a separate incurrence
of Indebtedness, if the Indebtedness being guaranteed was incurred in compliance
with the terms of the Indenture.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in the definition thereof or is
otherwise entitled to be incurred pursuant to the first paragraph of this
covenant, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred as so classified.
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Limitation on Liens
The Company will not, and will not permit any of its Subsidiaries to,
create, assume, incur or otherwise cause or suffer to exist or become effective
any Liens of any kind (other than Permitted Liens) upon any property or asset of
the Company or any Subsidiary of the Company whether owned on the Issue Date, or
acquired after the Issue Date or on any shares of stock or debt of any
Subsidiary, now owned or hereafter acquired, or on any income or profits
therefrom, or assign or otherwise convey any right to receive income or profits
thereon unless (i) if such Lien secures Senior Indebtedness, the Notes or such
Guarantee are secured on an equal and ratable basis with the obligation so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Subordinated Indebtedness, such Lien shall be
subordinated to a Lien granted to the Holders on the same collateral as that
securing such Lien to the same extent as such Subordinated Indebtedness is
subordinated to the Notes or such Guarantee.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of the
Company (including entities in which the Company or any Subsidiary thereof owns
a minority interest) (each such transaction, an "Affiliate Transaction") or
extend, renew, waive or otherwise modify the terms of any Affiliate Transaction
entered into prior to the Issue Date unless (i) such Affiliate Transaction is
solely between or among the Company and its Wholly-Owned Subsidiaries; (ii) such
Affiliate Transaction is solely between or among Wholly-Owned Subsidiaries of
the Company; or (iii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Subsidiary, as the case may be, and the terms
of such Affiliate Transaction are at least as favorable as the terms which could
be obtained by the Company or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a value in
excess of $1.0 million in any one year which is not permitted under clause (i)
or (ii) above, the Company or such Subsidiary, as the case may be, must obtain a
resolution of its Board of Directors certifying that such Affiliate Transaction
complies with clause (iii) above. In transactions with a value in excess of $5.0
million which are not permitted under clause (i) or (ii) above, the Company or
such Subsidiary, as the case may be, must obtain a written opinion as to the
fairness of such a transaction, from a financial point of view, from an
Independent Financial Advisor.
The foregoing provisions will not apply to (i) any transaction with any
current or former officer, director or employee of the Company (in his or her
capacity as such) (or the estate, heirs or legatees of any such individual)
entered into in the ordinary course of business, including entering into
employment agreements, indemnification agreements and compensation and employee
benefit plans, (ii) Restricted Payments to the extent not prohibited by the
covenant described under "-- Limitation on Restricted Payments" and other
transactions specifically excluded from the definition of "Restricted Payments"
by reason of exceptions set forth in such definition and (iii) issuances of
Equity Interests of the Company.
Limitation on Issuances and Sales of Equity Interests of Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests of any Subsidiary to any Person other than the Company or a
Wholly-Owned Subsidiary (except directors' qualifying shares or shares required
to be held by foreign nationals, in each case to the extent mandated by
applicable law), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests of such Subsidiary and (b) the net
cash proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the "-- Asset Sales" covenant, and (ii) will not
permit any Subsidiary to issue any of its Equity Interests (except directors'
qualifying shares or shares required to be held by foreign nationals, in each
case to the extent mandated by applicable law) to any Person other than to the
Company or a Wholly-Owned Subsidiary.
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Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any of its Subsidiaries to (a) pay dividends or make any other distributions
in cash or otherwise to the Company or any Subsidiary on its Equity Interests,
(b) pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans
or advances to the Company or any Subsidiary thereof, (d) transfer any of its
properties or assets to the Company or any Subsidiary thereof (other than
customary restrictions on transfer of property subject to a Permitted Lien under
the term of the agreements creating such Permitted Lien (other than a Lien on
cash not constituting proceeds of non-cash property subject to a Permitted Lien)
which would not materially adversely affect the Company's ability to satisfy its
obligations under the Notes), or (e) guarantee the Notes, except, in each case,
for such encumbrances or restrictions existing under or contemplated by or by
reason of (i) the Notes or the Indenture; (ii) any restrictions existing under
or contemplated by agreements evidencing the New Credit Facility as in effect as
of the Issue Date, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more restrictive
with respect to such dividend and other payment restrictions affecting
Subsidiaries than those contained in the New Credit Facility as in effect on the
Issue Date; (iii) any restrictions with respect to a Subsidiary of the Company
that was not a Subsidiary of the Company on the Issue Date, which are in
existence at the time such Person becomes a Subsidiary of the Company (but not
created in connection with or contemplation of such Person becoming a Subsidiary
of the Company and which encumbrance or restriction is not applicable to any
Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired); (iv) any agreement that governs
Refinancing Indebtedness, provided, however, that the terms and conditions of
any such restrictions are not materially less favorable in the aggregate to the
holders of the Notes than those under or pursuant to the agreement evidencing
the Indebtedness being refinanced or replaced; (v) customary non-assignment
provisions in any contract or licensing agreement entered into by the Company or
any Subsidiary of the Company in the ordinary course of business or in any lease
governing any leasehold interest of the Company or a Subsidiary; (vi) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (d) above on the property
so acquired; (vii) restrictions existing by reason of or under Indebtedness
existing on the Issue Date; (viii) any restrictions existing under any agreement
entered into with respect to the sale or disposition of all or substantially all
the Equity Interests or assets of a Subsidiary provided that the disposition or
sale is governed by the restrictions described under "Repurchase at the Option
of Holders"; or (ix) restrictions contained in agreements governing other
Indebtedness permitted to be incurred in accordance with the Indenture provided
that the restrictions are not materially more restrictive in the aggregate than
the restrictions contained in the Indenture.
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any of its Subsidiaries to, enter
into any Sale and Lease-Back Transaction unless (i) the consideration received
in such Sale and Lease-Back Transaction is at least equal to the fair market
value of the property sold, (ii) immediately prior to and after giving effect to
the Attributable Indebtedness in respect of such Sale and Lease-Back
Transaction, the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the covenant described
under "Limitation on Additional Indebtedness" and (iii) the net cash proceeds
received by the Company or its Subsidiaries from the Sale and Lease-Back
Transaction are applied in accordance with the provisions described above under
"Repurchase at the Option of Holders -- Asset Sales."
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless
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such consideration is offered to be paid or agreed to be paid to all holders of
the Notes which so consent, waive or agree to amend within any time period set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Additional Guarantees
The Indenture provides that if the Company or any of its Subsidiaries
organized under the laws of the United States or any state thereof (a "domestic
Subsidiary") shall acquire or create another domestic Subsidiary after the Issue
Date, then such newly acquired or created domestic Subsidiary will be required
to execute a Guarantee and deliver an opinion of counsel, in accordance with the
terms of the Indenture.
Line of Business
The Company will not, and will not permit any of its Subsidiaries to,
engage as a material part of its business in any business other than the
business conducted by the Company and its Subsidiaries as of the Issue Date or
any other business determined by the Company's Board of Directors, in good
faith, to be reasonably related to the foregoing.
Limitation on Status as Investment Company
The Indenture prohibits the Company and its Subsidiaries from being
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation as an investment company.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, assign,
lease, convey, transfer or otherwise dispose of (a "transfer") all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless:
(i) the Company shall be the continuing Person, or the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or to
which the properties and assets of the Company are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company under the
Notes and the Indenture, and the obligations under the Indenture shall remain in
full force and effect; (ii) immediately before and immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; and (iii) except in the case of a merger or consolidation of
the Company with or into a Wholly-Owned Subsidiary of the Company, the Company
or the Person formed by or surviving any such consolidation or merger (if other
than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (a) immediately after
giving effect to such transaction on a pro forma basis could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
covenant set forth under "Limitation on Additional Indebtedness" and (b)
immediately thereafter shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes when such principal or premium becomes due and payable;
(ii) default for 30 days in the payment of any interest on or
Liquidated Damages, if any, with respect to the Notes after such interest
or Liquidated Damages becomes due and payable;
(iii) the failure of the Company or its Subsidiaries to comply with
any purchase or payment obligations set forth in "-- Repurchase at the
Option of Holders" or "-- Certain Covenants -- Limitation on Restricted
Payments" or "-- Merger, Consolidation or Sale of Assets";
(iv) default by the Company or its subsidiaries in the observance or
performance of any other provision in the Notes or the Indenture for 30
days after written notice from the Trustee or the holders of not less than
25% in aggregate principal amount of the Notes then outstanding;
(v) default under any agreement, mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries), whether such Indebtedness or guarantee now exists or
is created after the Issue Date, which default (a) is caused by a failure
to pay principal of or premium, if any, or interest on such Indebtedness at
final maturity (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more;
(vi) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5.0 million (which are not paid or
covered by third party insurance by financially sound insurers that have
not disclaimed or threatened to disclaim coverage) shall be rendered
against the Company or any Subsidiary thereof, and shall not be discharged
for any period of 60 consecutive days during which a stay of enforcement
shall not be in effect;
(vii) any Guarantee of a Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor that is a
Significant Subsidiary shall deny or disaffirm its obligations under its
Guarantee; and
(viii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Subsidiary of the Company.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes or that resulted from the failure of the Company to
comply with the provisions of "-- Repurchase at the Option of Holders") if the
Trustee considers it to be in the best interest of the holders of the Notes to
do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest and Liquidated
Damages to the date of acceleration, provided, however, that after such
acceleration but before a judgment or decree based on such acceleration is
obtained by the Trustee, the holders of a majority in aggregate principal amount
of outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than nonpayment of accelerated
principal, premium, interest and Liquidated Damages, have been cured or waived
as provided in the Indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization shall occur, the principal,
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premium and interest amount with respect to all of the Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture. In the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of a Payment Default on or the acceleration of any
Indebtedness described in clause (v) in the first paragraph above, the
declaration of acceleration of the Notes shall be automatically rescinded and
annulled if such Payment Default is waived or cured or the holders of such
Indebtedness described in such clause (v) have rescinded the declaration of
acceleration in respect of such Indebtedness, as appropriate, within 30 days
from the date of such declaration and if (i) the rescission and annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (ii) all existing Events of Default, except
non-payment of principal, interest or premium on the Notes that became due
solely because of the acceleration of the Notes, have been cured or waived.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice (if a continuing Event of
Default) and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as a trustee,
and unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted on such Note
on or after the respective due dates expressed in such Note.
In the case of any Event of Default occurring solely by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
STOCKHOLDERS
As more fully set forth in the Indenture, no director, officer, employee,
incorporator, stockholder, partner, affiliate, or beneficiary, as such, past,
present or future, of the Company or any Subsidiary or any successor corporation
(other than the Company and its Subsidiaries in their capacity as stockholders),
as such, shall have any liability for any obligations of the Company or such
Subsidiary under the Notes, any Guarantee thereof, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (a) to defease and
be discharged (and discharge the obligations of the Guarantors under the
Guarantees) from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of the Outstanding Notes,
to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain
an office or agency in respect of the Notes and to hold monies for payment in
trust) ("defeasance") or (b) to be released from its and its Subsidiaries'
obligations with respect to the Notes under certain covenants contained in the
Indenture and described above under "Covenants" ("covenant defeasance"), upon
the deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money and/or U.S. Government Obligations which through the payment
of principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the
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principal of, premium, if any, and interest on the Notes, on the scheduled due
dates therefor or on a selected date of redemption in accordance with the terms
of the Indenture. Such a trust may only be established if, among other things,
the Company has delivered to the Trustee an Opinion of Counsel (as specified in
the Indenture) describing either a private ruling concerning the Notes or a
published ruling of the Internal Revenue Service, to the effect that holders of
the Notes or persons in their positions will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount and in
the same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
MODIFICATION OF INDENTURE
From time to time, the Company, the Guarantors and the Trustee may, without
the consent of holders of the Notes, modify, amend, waive or supplement the
provisions of the Indenture or the Notes for certain specified purposes,
including providing for uncertificated Notes in addition to certificated Notes,
and curing any ambiguity, defect or inconsistency, or making any other change
that, in each case, does not adversely affect the rights of any holder. The
Indenture contains provisions permitting the Company, the Guarantors and the
Trustee, with the consent of holders of at least a majority in principal amount
of the outstanding Notes, to modify, amend, waive or supplement the Indenture,
the Notes or Guarantees, except that no such modification shall, without the
consent of each holder affected thereby, (i) reduce the amount of Notes whose
holders must consent to an amendment, supplement, or waiver to the Indenture or
the Notes, (ii) reduce the rate of or change the time for payment of interest on
any Note, (iii) reduce the principal of or premium or Liquidated Damages on or
change the stated maturity of any Note, (iv) make any Note payable in money
other than that stated in the Note or change the place of payment to outside of
the United States, (v) change the amount or time of any payment required by the
Notes or reduce the premium payable upon any redemption of Notes or change the
time before which no such redemption may be made, (vi) waive a default on the
payment of the principal of, interest, premium or Liquidated Damages on, or
redemption payment with respect to any Note (except a rescission of acceleration
of the Notes by holders of at least a majority in aggregate principal amount of
the Notes and a waiver of the payment default that resulted from such
acceleration), (vii) subordinate in right of payment, or otherwise subordinate
the Notes or any Guarantee to any other Indebtedness or obligation of the
Company or the Guarantors, (viii) amend, alter, change or modify the obligation
of the Company to make and consummate a Change of Control Offer in the event of
a Change of Control or make and consummate an Excess Proceeds Offer or waive any
Default in the performance of any such offers or modify any of the provisions or
definitions with respect to any such offers, (ix) except pursuant to the
Indenture, release any Guarantor from its obligations under its Guarantee, or
change any Guarantee in a manner that adversely affects holders of the Notes or
(x) take any other action otherwise prohibited by the Indenture to be taken
without the consent of each holder affected thereby.
REPORTS TO HOLDERS
So long as any of the Notes are outstanding, whether or not the Company is
required to be subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will furnish the information required thereby to the Commission, the
holders of the Notes and to the Trustee. The Indenture provides that even if the
Company is entitled under the Exchange Act not to furnish such information to
the Commission or to the holders of the Notes, it will nonetheless continue to
furnish such information to the Commission, the holders of the Notes and the
Trustee and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and its
Subsidiaries will agree that, for so long as any Notes remain outstanding, they
will furnish to the holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 90 days after the end
of the Company's fiscal year and on or before 45 days after the end of each of
the first, second and third fiscal quarters in each year an
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Officers' Certificate stating whether or not the signers know of any Default or
Event of Default that has occurred. If they do, the certificate will describe
the Default or Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture initially will be the Registrar and Paying
Agent with regard to the Notes. The Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties as
are specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption. Also,
the Registrar is not required to transfer or exchange any Note for a period of
15 days before selection of the Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes initially will be issued in the form of one Global
Exchange Note (the "Global Exchange Note"). The Global Exchange Note will be
deposited on the Exchange Date with the Depositary and registered in the name of
Cede & Co., as nominee of the Depositary (the "Global Exchange Note Holder").
Except as set forth below, the Global Exchange Note may be transferred, in whole
and not in part, only to another nominee of the Depositary or to a successor of
the Depositary or its nominee.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company that was created to hold securities for its
participating organizations (collectively, the "Participants" or the
"Depositary's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that, pursuant to procedures established by the
Depositary, (i) upon deposit of the Global Exchange Note, the Depositary will
credit on its internal system the principal amounts of the Exchange Notes of the
individual beneficial interests represented by such Global Exchange Note to the
respective accounts of exchanging holders who have accounts with the Depositary
and (ii) ownership of such interest in the Global Exchange Note will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's Indirect
Participants. Prospective purchasers are advised that the laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Exchange Notes
evidenced by the Global Exchange Note will be limited to such extent.
So long as the Global Exchange Note Holder is the registered owner of any
Exchange Notes, the Global Exchange Note Holder will be considered the sole
holder under the Indenture of any Exchange Notes evidenced by the Global
Exchange Note. Beneficial owners of Exchange Notes evidenced by the Global
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Exchange Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Exchange Notes.
Payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on any Exchange Notes registered in the name of the
Global Exchange Note Holder on the applicable record date will be payable by the
Trustee to or at the direction of the Global Exchange Note Holder in its
capacity as the registered holder under the Indenture. Under the terms of the
Indenture, the Company and the Trustee may treat the persons in whose names
Exchange Notes, including the Global Exchange Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Exchange Notes. The Company
believes, however, that it is currently the policy of the Depositary to
immediately credit the accounts of the relevant Participants with such payments,
in amounts proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Exchange Notes will be governed by standing instructions
and customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in
the Global Exchange Note may, upon request to the Trustee, exchange such
beneficial interest for Exchange Notes in the form of Certificated Securities.
Upon any such issuance, the Trustee is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such person or
persons (or the nominee of any thereof). In addition, if (i) the Company
notifies the Trustee in writing that the Depositary is no longer willing or able
to act as a depositary and the Company is unable to locate a qualified successor
within 90 days or (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Exchange Notes in the form of
Certificated Securities under the Indenture, then, upon surrender by the Global
Exchange Note Holder of the Global Exchange Notes, Exchange Notes in such form
will be issued to each person that the Global Note Exchange Holder and the
Depositary identify as being the beneficial owner of the related Exchange Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Exchange Note Holder or the Depositary in identifying the beneficial
owners of Exchange Notes and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the Global Note
Exchange Holder or the Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Exchange Note (including principal, premium, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Exchange Holder. With respect to
Certificated Securities, the Company will make all payments of principal,
premium, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address.
The Exchange Notes represented by the Global Exchange Notes are expected to
be eligible to trade in the PORTAL market and to trade in the Depositary's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such Exchange Notes will, therefore, be required by the Depositary
to be settled in immediately available funds. The Company expects the secondary
trading in the Certificated Securities will also be settled in immediately
available funds.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Registration Rights
Agreement in connection with the issuance of the Outstanding Notes. Pursuant to
the Registration Rights Agreement, the Company agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to the Exchange Notes. If (i) the Company
is not required to file the Exchange Offer Registration Statement or permitted
to consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any holder of Transfer Restricted
Securities notifies the Company prior to the 20th day following consummation of
the Exchange Offer that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (b) that it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (c) that it is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Notes by the holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company will use its best efforts to cause
the applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note until (i) the date on which such Note has been
exchanged by a person other than a broker-dealer for an Exchange Note in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of a Note for an Exchange Note, the date on which such Exchange Note is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 45
days after the Issue Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 90 days after the Issue Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue, on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, Exchange Notes in exchange for all
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement, the Company will use its best efforts to file
the Shelf Registration Statement with the Commission on or prior to 30 days
after such filing obligation arises and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 90 days after such
obligation arises. If (a) the Company fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (d) the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each holder of Notes, with respect to the first 90-day
period immediately following the occurrence of the first Registration Default,
in an amount equal to one-half of one percentage point (0.5%) per annum of the
principal amount of Notes held by such holder. The amount of the Liquidated
Damages will increase by an additional one-half of one percent (0.5%) per annum
for each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of one and one-half percent (1.5%) per annum. All
accrued Liquidated Damages will be paid by the Company on each interest payment
date to the Global Note Holder by wire transfer of immediately available funds
or by federal funds check and to holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. The filing of a
Registration Statement after
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the date specified for such filing, the declaration of effectiveness of a
Registration Statement after the Effectiveness Target Date or the consummation
of the Exchange Offer at any time, as appropriate, shall constitute a cure of
the related Registration Default. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to the
Company as described elsewhere in this Prospectus and in the Registration Rights
Agreement in order to participate in the Exchange Offer and, with respect to the
Shelf Registration Statement, if any, will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary or assumed in connection with an Asset
Acquisition from such Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
(including, without limitation, any guarantees of Indebtedness)), but excluding
liabilities under the Guarantee, of such Guarantor at such date and (y) the
present fair salable value of the assets of such Guarantor exceeds the total
amount of its debts (after giving effect to all other fixed and contingent
liabilities (including, without limitation, any guarantees of Indebtedness) and
after giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under the Guarantee), excluding
Indebtedness in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any Person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such Person or (c) the acquisition by the Company or any Subsidiary of
the Company of any division or line of business of any Person (other than a
Subsidiary of the Company).
"Asset Sale" means the direct or indirect sale, transfer, issuance,
conveyance, lease (other than operating leases entered into in the ordinary
course of business pursuant to ordinary business terms), assignment or other
disposition (including, without limitation, by eminent domain, condemnation or
similar governmental proceeding) and any merger or consolidation of any
Subsidiary of the Company with or into another Person (other than the Company or
any Wholly-Owned Subsidiary of the Company) whereby such Subsidiary shall cease
to be a Wholly-Owned Subsidiary (each, a "disposition" or "issuance") involving
in any consecutive twelve month period property or assets with a fair market
value in excess of $1,000,000 of (a) any Equity Interest in any Subsidiary, (b)
real property owned by the Company or any Subsidiary thereof, or a division,
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line of business or comparable business segment of the Company or any Subsidiary
thereof or (c) other property, assets or rights (including, without limitation
leasehold rights) of the Company or any Subsidiary thereof, provided, however,
that, except as noted in the last sentence of this paragraph, Asset Sales shall
not include (i) dispositions or issuances to the Company or to a Subsidiary
thereof or to any other Person if after giving effect to such disposition or
issuance such other Person becomes a Wholly-Owned Subsidiary of the Company,
(ii) transactions involving the Company which are subject to and effected in
compliance with "Merger, Consolidation or Sale of Assets" above, (iii)
dispositions of services and products in the ordinary course of business, (iv) a
disposition that is an Investment or a Restricted Payment not prohibited by the
"Limitation on Restricted Payments" covenant, (v) a disposition that complies
with the covenant described under "-- Repurchase at the Option of
Holders -- Change of Control Offer," (vi) exchanges of assets that comply with
the requirements described in the final paragraph under "-- Repurchase at the
Option of Holders -- Asset Sales," (vii) a designation of a Subsidiary as an
Unrestricted Subsidiary if permitted under the Indenture, (viii) the grant in
the ordinary course of business of any license, (ix) the disposition of any
Temporary Cash Investment (x) any disposition of defaulted receivables for
collection, (xi) the grant of any Lien securing Indebtedness permitted under the
Indenture and (xii) the disposition of assets received in settlement of
obligations (including, without limitation, under any bankruptcy or similar
proceeding) owing to the Company or any Subsidiary, which obligations were
incurred in the ordinary course of business. Notwithstanding any provision of
the Indenture to the contrary, the expiration or non-renewal of any lease of
property at the normal expiration date thereof shall not constitute an Asset
Sale. For purposes of the definition of Consolidated Fixed Charge Coverage
Ratio, transactions referred to in clauses (iv), (v), (vi) or (vii) shall be
included as Asset Sales.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Subsidiary thereof from such Asset Sale after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting, legal, accounting,
title and other fees, costs and expenses related to such Asset Sale, (c)
provision for minority interest holders in any Subsidiary or in any asset
subject to such Asset Sale as a result of such Asset Sale, (d) payments made to
retire Indebtedness secured by the assets subject to such Asset Sale or
otherwise required to be paid and (e) deduction of appropriate amounts to be
provided by the Company or a Subsidiary thereof as a reserve, in accordance with
GAAP, against any liabilities associated with the assets disposed of in such
Asset Sale and retained by the Company or a Subsidiary thereof after such Asset
Sale including, without limitation, pension and other post employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets disposed of in such Asset
Sale and (ii) any securities, notes or other obligations received by the Company
or any Subsidiary thereof from such Asset Sale upon the liquidation or
conversion of such securities, notes or other obligations into cash prior to the
Reinvestment Date.
"Attributable Indebtedness" when used with respect to any Sale and
Lease-Back Transaction means, as at the time of determination, the present value
(discounted at a rate equivalent to the interest rate implicit in the lease,
compounded on a semi-annual basis) of the total obligations of the lessee for
rental payments (after excluding all amounts required to be paid on account of
maintenance and repairs, insurance, taxes, utilities and other similar expenses
payable by the lessee pursuant to the terms of the lease) during the remaining
term of the lease included in any such Sale and Lease-Back Transaction or until
the earliest date on which the lessee may terminate such lease without penalty
or upon payment of a penalty (in which case the rental payments shall include
such penalty).
"Board of Directors" means, as to any Person, the board of directors or any
duly authorized committee thereof of such Person or, if such Person is a
partnership (or other non-corporate Person), of the managing general partner or
partners (or Persons serving an analogous function) of such Person.
"Capital Lease Obligations" means Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Indebtedness shall be
the capitalized amount of such obligations determined in accordance with GAAP.
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"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act); (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company; (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than an Excluded Person, is or becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is currently exercisable or is exercisable only upon the occurrence
of a subsequent condition), directly or indirectly, of more than 35% of the
Common Equity Interest of the Company (measured by voting power rather than
number of shares or equivalent units); or (iv) the first day on which less than
a majority of the members of the Board of Directors of the Company are
Continuing Directors.
"Common Equity Interest" of any Person means all Equity Interests of such
Person that are generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits, (iii) consolidated interest
expense whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (iv) depreciation and
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) in each case, on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization of, a Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval (that has not been obtained) pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.
"Consolidated Fixed Charge Coverage Ratio" means with respect to any
Person, the ratio of the aggregate amount of Consolidated Cash Flow of such
Person for the four full fiscal quarters immediately preceding the date of the
transaction (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period") to the aggregate amount
of Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated Cash Flow" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence of any Indebtedness of
such Person or any of its Subsidiaries (and the application of the net proceeds
thereof) during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebtedness giving rise to
the need to make such calculation (and the application of the net proceeds
thereof), as if such incurrence (and application) occurred on the first day of
the Four Quarter Period (it being understood that with respect to Indebtedness
incurred under a revolving facility used primarily to finance working capital,
the average daily principal amount outstanding during the Reference Period shall
be deemed to be the amount incurred during
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the Reference Period), and (b) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness) occurring during
the Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Four Quarter Period. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining this "Consolidated Fixed Charge
Coverage Ratio," (i) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; and (ii) if interest on indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period. In calculating the Consolidated
Fiscal Charge Coverage Ratio and giving pro forma effect to the incurrence of
Indebtedness during a Reference Period, pro forma effect shall be given to use
of proceeds thereof to permanently repay or retire Indebtedness. If such Person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, for purposes of determining the "Consolidated Fixed Charge
Coverage Ratio," effect shall be given to the incurrence of such guaranteed
Indebtedness as if such Person or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period of (i) the
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period, (iii) any interest expense
on Indebtedness of another Person that is guaranteed by such Person or one of
its Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv) the
product of (a) all dividend payments, whether or not in cash, on any series of
Disqualified Equity Interests of such Person or any of its Subsidiaries, other
than dividend payments on Disqualified Equity Interests payable solely in Equity
Interests of the Company, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly-Owned Subsidiary thereof, (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) any non-cash compensation expense in connection with
the issuance of employee stock options shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholders' equity of such Person less the amount of such
stockholders' equity attributable to Disqualified Equity Interests of such
Person and its Subsidiaries, as determined in accordance with GAAP, less (i) all
write-ups (other than write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of
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such business) subsequent to the Issue Date in the book value of any asset owned
by such Person or a consolidated Subsidiary of such Person, (ii) all investments
as of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries and (iii) all unamortized debt discount and expense and unamortized
deferred charges as of such date, in each case determined in accordance with
GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Equity Interests" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days following the
maturity date of the Notes, for cash or securities constituting Indebtedness;
provided, however, that Preferred Equity Interests of the Company or any
Subsidiary thereof that are issued with the benefit of provisions requiring a
change of control offer or asset sale proceeds offer to be made for such
Preferred Equity Interest in the event of a change of control or sale of assets
of the Company or such Subsidiary, which provisions have substantially the same
effect as the provisions of the Indenture described under "Change of Control" or
"Asset Sales" shall not be deemed to be Disqualified Equity Interests solely by
virtue of such provisions.
"Equity Interests" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interests in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into or exchangeable for any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Person" means C. Wayne Bazzle and Cheryl C. Bazzle and any
Related Party of either of them.
"Existing Credit Facility" means that certain Credit Agreement, dated as of
October 31, 1996, as amended prior to the Issue Date, among the Company, Texas
Commerce Bank National Association, and the other parties thereto.
"fair market value" or "fair value" means, with respect to any assets or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a fully informed, willing
and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction, all as reasonably determined by a majority of the
Board of Directors acting in good faith, such determination to be evidenced by a
board resolution delivered to the Trustee. No such determination need be
supported by an appraisal or expert opinion.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States on the Issue Date.
"Hedging Obligations" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates, currency exchange rates or commodity prices.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become, directly or indirectly, liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of "incurrence," "incurred," "incurrable," and "incurring" shall
have meanings correlative to the foregoing), provided, however, that a change in
GAAP that results in an obligation of such Person that exists
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at such time becoming Indebtedness shall not be deemed an incurrence of such
Indebtedness and provided, further that accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness. Any
Indebtedness or Equity Interests of a Person existing at the time such Person
becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be incurred by such Person at the time it becomes
a Subsidiary. Indebtedness consisting of reimbursement obligations in respect of
a letter of credit will be deemed to be incurred when the letter of credit is
issued or renewed.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other liabilities arising in the ordinary course
of business) and shall also include, to the extent not otherwise included (i)
any Capital Lease Obligations, (ii) obligations of Persons other than such
Person secured by a Lien to which the property or assets owned or held by such
Person is subject, whether or not the obligation or obligations secured thereby
shall have been incurred or assumed by such Person, (iii) all Indebtedness of
others of the types described in the other clauses of this definition (including
all dividends of other Persons) the payment of which is guaranteed, directly or
indirectly, by such Person or that is otherwise its legal liability or which
such Person has agreed to purchase or repurchase or in respect of which such
Person has agreed contingently to supply or advance funds (whether or not such
items would appear upon the balance sheet of the guarantor), (iv) all
obligations for the reimbursement of any obligation or on any letter of credit,
banker's acceptance or similar credit transaction, (v) Disqualified Equity
Interests, (vi) Hedging Obligations of any such Person and (vii) Attributable
Indebtedness. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided,
however, that (i) the amount outstanding at any time of any Indebtedness issued
with original issue discount, including the Notes, if applicable, is the
principal amount of such Indebtedness less the remaining unamortized portion of
the original issue discount of such Indebtedness at such time as determined in
conformity with GAAP, and (ii) Indebtedness shall not include any liability for
federal, state, local or other taxes. Notwithstanding any other provision of the
foregoing definition, any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business shall not
be deemed to be "Indebtedness" for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Independent Financial Advisor" means an accounting, appraisal, investment
banking or consulting firm of nationally recognized standing that is, in the
good faith judgment of the Board of Directors of the Company, qualified to
perform the task for which such firm has been engaged.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business (including accounts receivable arising in the ordinary course of
business and acquired as a part of the assets acquired by the Company or a
Subsidiary in connection with an acquisition of assets which is otherwise
permitted by the terms of the Indenture)), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any stock, bonds,
notes, debentures, partnership or joint venture interests or other securities
of, the acquisition, by purchase or otherwise, of all or substantially all of
the business or stock or other evidence of beneficial ownership of, any Person,
the guarantee or assumption of the Indebtedness of any other Person (except for
an assumption of Indebtedness for which the assuming Person receives
consideration with a fair market value at least equal to the principal amount of
the Indebtedness assumed), the designation of a Subsidiary as an Unrestricted
Subsidiary or the making of any investment in any Person and all other items
that would be classified as investments on a balance sheet of such Person
prepared in accordance with GAAP. Investments shall exclude (i) extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices, (ii) endorsements of negotiable instruments for
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collection or deposit in the ordinary course of business, (iii) commission,
travel, payroll and similar advances to directors, officers and employees made
in the ordinary course of business and (iv) workers' compensation, utility,
lease and similar deposits and prepaid expenses in the ordinary course of
business.
"Issue Date" means the closing date for the sale and original issuance of
the Notes to the Initial Purchasers.
"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capital Lease Obligation, conditional sales, or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP and before any
reduction in respect of dividends on Preferred Equity Interests, excluding,
however, (i) any gain (but not loss, except the loss to be incurred in the
fourth quarter of 1997 relating to the extinguishment of the Existing Credit
Facility), together with any related provision for taxes on such gain (but not
loss, except as specifically permitted above), realized in connection with (a)
any Asset Sale or (b) the disposition of any securities by such Person or any of
its Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (or loss
incurred prior to the Issue Date, but not loss incurred after the Issue Date),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss, except to the extent referred to above).
"Net Investments" means the excess of (i) the aggregate of all Investments
made by the Company or a Subsidiary thereof on or after the Issue Date (in the
case of an Investment made other than in cash, the amount shall be the fair
market value of such Investment at the time made as determined in good faith by
the Board of Directors of the Company) over (ii) the sum of (a) the aggregate
amount returned in cash on such Investments (in the case of a noncash return on
such Investments, the amount thereof shall be the fair market value of such
noncash consideration at the time of receipt thereof as determined in good faith
by the Board of Directors of the Company) whether through interest payments,
principal payments, dividends or other distributions and (b) the net cash
proceeds received by the Company or such Subsidiary from the disposition of all
or any portion of such Investments (other than to a Subsidiary of the Company),
provided, however, that with respect to all Investments made in Unrestricted
Subsidiaries the sum of clauses (a) and (b) above with respect to such
Investments shall not exceed the aggregate amount of all Investments made in all
Unrestricted Subsidiaries.
"New Credit Facility" means that certain Second Amended and Restated Credit
Agreement, dated as of December 1, 1997, among the Company, the banks parties
thereto and Texas Commerce Bank National Association, as agent, including any
related notes, guarantees (by subsidiaries of the Company or otherwise),
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, restated, modified, renewed, refunded,
replaced or refinanced (in each case, in whole or in part, and without
limitation as to amount, terms, conditions, covenants and other provisions),
with the same or other agents and lenders, in whole or in part, from time to
time and any agreement (and related documents) governing Indebtedness incurred
to refinance or refund borrowings and commitments then outstanding or permitted
to be outstanding under such credit facility or a successor New Credit Facility,
whether by the same or other agent lender or group of lenders.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the Company
nor any of its Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise) or (c)
constitutes the lender; (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or any of its Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its
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stated maturity; and (iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of the Company or
any of its Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer or assistant Treasurer of such
Person (or, in the case of a Person that is a partnership (or other
non-corporate Person), of a general partner (or analogous individuals) of such
Person in such capacity) that shall comply with applicable provisions of the
Indenture.
"Permitted Indebtedness" means:
(i) Indebtedness (plus interest, premium, fees and other obligations
associated therewith) of the Company or any Subsidiary thereof arising
under or in connection with the New Credit Facility of up to $20.0 million;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) Hedging Obligations;
(iv) Additional Indebtedness of the Company or any Guarantor (which
may be Indebtedness under the New Credit Facility) in an aggregate
principal amount outstanding at any time not to exceed $3.0 million;
(v) Indebtedness of a Wholly-Owned Subsidiary issued to and held by
the Company or a Wholly-Owned Subsidiary or Indebtedness of the Company to
a Wholly-Owned Subsidiary in respect of intercompany advances or
transactions;
(vi) Indebtedness outstanding on the Issue Date after giving effect to
the application of the proceeds of this Offering (including repayment of
all obligations under the Existing Credit Agreement);
(vii) Refinancing Indebtedness;
(viii) Indebtedness constituting an agreement or commitment to pay a
dividend that has been declared or otherwise to make a payment or
distribution as described in clause (i) of the second paragraph of the
covenant entitled "Limitation on Restricted Payments";
(ix) Capital Lease Obligations and Purchase Money Indebtedness in a
combined aggregate principal amount not to exceed $3.0 million at any time
outstanding; and
(x) Indebtedness in connection with one or more letters of credit,
guarantees, bid, surety or performance bonds or other reimbursement
obligations or banker's acceptances, in each case issued in the ordinary
course of business and not in connection with the borrowing of money or the
obtaining of advances or credit.
"Permitted Investments" means, for any Person, Investments made on or after
the Issue Date consisting of:
(i) Temporary Cash Investments;
(ii) (A) Investments in the Company or a Wholly-Owned Subsidiary of
the Company, (B) Investments in any Person, if (1) as a result of such
Investment (y) such Person or a Subsidiary of such Person becomes a
Wholly-Owned Subsidiary of the Company or (z) such Person or a Subsidiary
of such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Wholly-Owned Subsidiary thereof and (2) after giving
effect to such Investment the Company is in compliance with the covenant
described under "Line of Business" above and (C) Net Investments in any
Persons, provided, however, that the aggregate
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amount of all such Net Investments made pursuant to this clause (C) shall
not exceed $2.0 million at any one time outstanding;
(iii) Investments represented by accounts receivable created or
acquired in the ordinary course of business;
(iv) Advances to employees, officers and directors in the ordinary
course of business not to exceed an aggregate of $500,000 outstanding at
any one time;
(v) Investments under or pursuant to Hedging Obligations;
(vi) An Investment that is made by the Company or a Subsidiary thereof
in the form of any Equity Interests, Indebtedness or other assets received
as partial consideration for the consummation of a transaction that is
otherwise permitted under the covenant described under "Limitation of
Certain Asset Sales";
(vii) Investments in the Notes otherwise permitted under the
Indenture;
(viii) Investments existing on the Issue Date;
(ix) any Investment acquired solely in exchange for, by conversion of,
or out of the net cash proceeds of, the issuance of Equity Interests (other
than Disqualified Equity Interests) of the Company;
(x) stocks, obligations or other securities received in settlement of
debts (including, without limitation, under any bankruptcy or other similar
proceeding) owing to the Company or any of its Subsidiaries as a result of
foreclosure, perfection, enforcement or settlement of any Indebtedness or
Liens in favor of the Company or a Subsidiary; and
(xi) guarantees not prohibited by the "Limitation of Indebtedness"
covenant.
"Permitted Liens" means, without duplication, (i) Liens existing on the
Issue Date, (ii) Liens in favor of the Company or any Subsidiary thereof, (iii)
Liens on the Equity Interests or property of a Person existing at the time such
Person becomes a Subsidiary of, or is acquired by, merged into or consolidated
with the Company or any Subsidiary thereof, or such property is acquired by the
Company or a Subsidiary, provided, however, that such Liens (a) were not created
in connection with or in anticipation of such acquisition, merger or
consolidation or such Person becoming a Subsidiary and (b) are not applicable to
any other property of the Company or any of the other Subsidiaries of the
Company, (iv) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor, (v) landlords', carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business (whether contractual, statutory or
constitutional in nature) and with respect to amounts which are not yet
delinquent or are being contested in good faith by appropriate proceedings, (vi)
pledges or deposits made in the ordinary course of business in connection with
(a) leases, performance bonds and similar obligations, (b) workers'
compensation, unemployment insurance and other social security legislation, or
(c) securing the performance of surety bonds and appeal bonds required (1) in
the ordinary course of business or in connection with the enforcement of rights
or claims of the Company or a Subsidiary thereof or (2) in connection with
judgments that do not give rise to an Event of Default, (vii) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar encumbrances which, in the aggregate, do not materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Company or any Subsidiary in connection
therewith, (viii) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under the Indenture, provided, however, that (a) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including commissions, sales
and excise taxes, installation and delivery charges and other direct costs of,
and other direct expenses paid or charged in connection with, such purchase or
construction and such financing) of such Property, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such costs, and
(c) such Lien does not extend to or cover any Property other than such item of
Property and any improvements on such item, (ix) Liens securing the New Credit
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Facility (x) Liens securing Capital Lease Obligations permitted to be incurred
under the Indenture, provided, however, that such Lien does not extend to any
property other than that subject to the underlying lease, (xi) Liens pursuant to
leases and subleases of real property which do not interfere with the ordinary
conduct of the business of the Company or any of its Subsidiaries and which are
made on customary and usual terms applicable to similar properties and do not
extend to any property of the Company or a Subsidiary other than the personal
property located on such real property, (xii) Liens securing reimbursement
obligations under commercial letters of credit, but only in or upon the goods
the purchase of which were financed by such letters of credit, (xiii) Liens
arising under the Indenture in favor of the Trustee for its own benefit or for
the benefit of the holders, (xiv) Liens resulting from the deposit of funds or
government securities in trust for the purpose of decreasing or defeasing
Indebtedness of the Company and its Subsidiaries so long as such deposit of
funds or government securities and such decreasing or defeasing of Indebtedness
are permitted under the "Restricted Payments" covenant, (xv) Liens constituting
licenses not otherwise prohibited under the terms of the Indenture, (xvi)
setoff, chargeback and other rights of depository and collecting banks and other
regulated financial institutions with respect to money or instruments of the
Company or its Subsidiaries on deposit with or in the possession of such
institutions, (xvii) any interest or title of a lessor in the property subject
to any Capital Lease Obligation permitted under the Indenture or operating
lease, (xviii) Liens on Equity Interests of Unrestricted Subsidiaries, (xix)
judgment or attachment Liens not giving rise to an Event of Default, (xx) Liens
in connection with Sale and Leaseback Transactions otherwise permitted under the
Indenture, and (xxi) Liens securing Refinancing Indebtedness, provided, however,
that such Liens extend only to the assets (plus improvements thereon and
additions thereto) securing the Indebtedness being extended, refinancing,
renewed or replaced, and such Indebtedness was previously secured by such assets
and provided, further, the terms of such Liens taken as a whole are no less
favorable to the holders of the Notes than the Liens being extended, refinanced,
renewed or replaced.
"Person" means any individual, corporation, partnership, limited liability
company or partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"Preferred Equity Interest" means any Equity Interest of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of any other Equity Interest issued by such Person.
"Property" or "property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Public Equity Offering" means, with respect to any Person, a public
offering by such Person of some or all of its Common Equity Interests other than
Disqualified Equity Interests (however designated and whether voting or
nonvoting) and any and all rights, warrants or options to acquire such Equity
Interests.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii) fees and
expenses of such Person incurred in connection therewith. The acquisition of a
business or substantially all the assets of a business shall not be considered
to be in the ordinary course.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
renews or replaces ("refinances") any Indebtedness of the Company or its
Subsidiaries outstanding on the Issue Date or other Indebtedness permitted to be
incurred by the Company or its Subsidiaries pursuant to the terms of the
Indenture, whether involving the same or any other lender or creditor or group
of lenders or creditors, but only to the extent that (i) the Refinancing
Indebtedness is subordinated to the Notes or the Guarantees, as applicable, to
at least the same extent as the Indebtedness being refinanced, if at all, (ii)
the Refinancing Indebtedness is scheduled to mature either (a) no earlier than
the Indebtedness being refinanced, or (b) after the maturity date of the Notes,
(iii) except where such Refinancing Indebtedness is Attributable Indebtedness,
has a weighted average life to maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the weighted average
life to maturity of the Indebtedness being refinanced, (iv) except
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where such Refinancing Indebtedness is Attributable Indebtedness, such
Refinancing Indebtedness is in an aggregate principal amount that is less than
or equal to the aggregate principal or accreted amount (in the case of any
Indebtedness issued with original issue discount, as such) then outstanding
under the Indebtedness being refinanced plus the amount of all fees and expenses
(including premiums and penalties) associated with such refinancing) and (v)
such Refinancing Indebtedness is incurred by the same Person that initially
incurred the Indebtedness being refinanced, except that the Company or a
Guarantor may incur Refinancing Indebtedness to refinance Indebtedness of the
Company or any Wholly-Owned Subsidiary of the Company.
"Related Party" with respect to an Excluded Person means (i) any
Wholly-Owned Subsidiary, or spouse or immediate family member of such Excluded
Person or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially holding a
controlling interest of which consist of such Excluded Person and/or such other
Persons referred to in the immediately preceding clause (i).
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Equity Interests
of the Company or any Subsidiary thereof (including, without limitation, any
payment in connection with any merger or consolidation including the Company) or
any payment made to the direct or indirect holders (in their capacities as such)
of Equity Interests of the Company or any Subsidiary or Affiliate thereof (other
than (a) dividends or distributions payable solely in Equity Interests of the
Company (other than Disqualified Equity Interests) or in options, warrants or
other rights to purchase Equity Interests of the Company (other than
Disqualified Equity Interests) or (b) dividends or distributions payable to the
Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Subsidiary or Affiliate thereof (other than Equity
Interests owned by the Company or a Wholly-Owned Subsidiary, excluding
Disqualified Equity Interests), (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Subordinated Indebtedness (except, if no
Default or Event of Default is continuing or would result therefrom, any such
payment, purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value made (a) out of Excess Proceeds available for general
corporate purposes if (1) such payment or other action is required by the
indenture or other agreement or instrument pursuant to which such Subordinated
Indebtedness was issued and (2) the Company has purchased all Notes and other
Senior Indebtedness properly tendered pursuant to an Asset Sale Offer required
under "-- Repurchase at the Option of Holders -- Asset Sales" or (b) upon the
occurrence of a Change of Control if (1) such payment or other action is
required by the indenture or other agreement or instrument pursuant to which
such Subordinated Indebtedness was issued and (2) the Company has purchased all
Notes and other Senior Indebtedness properly tendered pursuant to the Change of
Control Offer resulting from such Change of Control), or (iv) the making of any
Investment other than a Permitted Investment. For purposes of determining the
amount expended for Restricted Payments, cash distributed or invested shall be
valued at the face amount thereof and property other than cash shall be valued
at its fair market value.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which (i) property has been or is to be
sold, conveyed or transferred by the Company or such Subsidiary to such Person
in contemplation of such leasing and (ii) constitutes an Asset Sale permitted
under "-- Repurchase at the Option of Holders -- Asset Sales."
"Senior Indebtedness" means Indebtedness of any Person which is not
Subordinated Indebtedness.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X promulgated by the Commission.
"Subordinated Indebtedness" means Indebtedness of the Company or any
Guarantor which is expressly subordinated in right of payment to the Notes or a
Guarantee, as the case may be.
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"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Equity Interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes. Notwithstanding the foregoing, an Unrestricted
Subsidiary shall not be deemed a Subsidiary of the Company other than for
purposes of the definition of Unrestricted Subsidiary, unless the Company shall
have designated such Unrestricted Subsidiary as a "Subsidiary" by written notice
to the Trustee. An Unrestricted Subsidiary may be designated as a Subsidiary at
any time by the Company by written notice to the Trustee, provided, however,
that (i) no Default or Event of Default shall have occurred and be continuing or
would arise therefrom and (ii) if such Unrestricted Subsidiary is an obligor of
any Indebtedness, any such designation shall be deemed to be an incurrence as of
the date of such designation by the Company of such Indebtedness and immediately
after giving effect to such designation, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "Limitation on Additional Indebtedness."
"Temporary Cash Investments" means (i) United States dollars, (ii) any
evidence of Indebtedness issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof (provided
the full faith and credit of the United States government is behind such
obligation) having maturities of not more than 12 months from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of 12 months or less from the date of acquisition, demand deposits,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank that is a member of the
Federal Reserve System and having capital and surplus in excess of $500.0
million, or whose short-term debt has the highest rating obtainable from Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"),
(iv) any money market deposit account issued or offered by a domestic commercial
bank that is a member of the Federal Reserve System and having capital and
surplus in excess of $500.0 million, or whose short-term debt has the highest
rating obtainable from Moody's or S&P, (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above, (vi) commercial paper having
the highest rating obtainable from Moody's or S&P, and in each case maturing
within 270 days after the date of acquisition and (vii) investments in money
market funds having assets in excess of $500.0 million, substantially all of
which consist of investments of the types described in (i) through (vi) above.
"Unrestricted Subsidiary" means, any Subsidiary of the Company which shall
have been designated as an Unrestricted Subsidiary in accordance with the
Indenture. An Unrestricted Subsidiary may be designated as a Subsidiary at a
later date in the manner provided in the definition of "Subsidiary" above.
"Wholly-Owned Subsidiary" means any Subsidiary, all of the outstanding
Equity Interests (except directors' qualifying shares or shares required to be
held by foreign nationals, in each case to the extent mandated by applicable
law) of which are owned, directly or indirectly, by the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences resulting from the acquisition, ownership and disposition of the
Exchange Notes which may be relevant to a holder or prospective purchaser of one
or more of such Exchange Notes. The following summary is of a general nature
only and is not intended to be, and should not be construed to be, legal or tax
advice to any prospective investor and no representation with respect to the tax
consequences of any particular investor is made. Accordingly, prospective
investors should consult with their own tax advisors for advice with respect to
the income tax consequences to them having regard to their own particular
circumstances, including any consequences of an
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investment in the Exchange Notes arising under state, provincial or local tax
laws or tax laws of jurisdictions outside the United States.
IN ADDITION, PERSONS CONSIDERING THE ACQUISITION OF THE EXCHANGE NOTES
SHOULD CONSULT THEIR OWN 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 THEIR PARTICULAR SITUATIONS AND THE POSSIBLE EFFECT OF CHANGES
IN U.S. FEDERAL OR OTHER TAX LAWS.
The legal conclusions expressed in this summary are based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations ("Regulations"), judicial authority and
administrative rulings and practice, all as in effect as of the date of this
Prospectus, and all of which are subject to change, either prospectively or
retroactively. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no rulings from the Service have
been or will be sought with respect to any matter involving the tax aspects of
the purchase, ownership or exchange or other disposition of the Notes.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders.
This summary deals only with persons who will hold the Exchange Notes as
capital assets within the meaning of Section 1221 of the Code, and does not
address tax considerations applicable to investors who may be subject to special
tax rules, such as financial institutions, tax-exempt organizations, foreign
corporations, foreign individuals, insurance companies, dealers in securities or
currencies, persons who hold Exchange Notes as a hedge or as a position in a
"straddle" for tax purposes, and persons who have a "functional currency" other
than the U.S. dollar.
In addition, the description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.
U.S. HOLDERS
The following discussion is limited to the United States federal income tax
consequences relevant to a holder of the Notes that is a U.S. Holder. The term
"U.S. Holder" refers to a person that is classified for U.S. federal tax
purposes as a United States person. For this purpose, a United States person
includes (i) a resident (within the meaning of Section 7701(b) of the Code) or
current or former citizen of the United States, (ii) a corporation, limited
liability company, partnership or other business entity created or organized in
the United States or under the laws of the United States or of any state or
political subdivision thereof (iii) an estate or trust whose income is
includable in gross income for U.S. federal income tax purposes regardless of
its source or (iv) a person whose worldwide income or gain is otherwise subject
to U.S. federal income taxation on a net basis.
The Exchange Offer. Pursuant to recently finalized Regulations, the
exchange of Outstanding Notes for Exchange Notes pursuant to the Exchange Offer
should not constitute a significant modification of the terms of the Outstanding
Notes and, accordingly, such exchange should be treated as a "non-event" for
federal income tax purposes. Therefore, such exchange should have no federal
income tax consequences to U.S. Holders of Outstanding Notes who exchange such
notes for Exchange Notes, the holding period of an Exchange Note should include
the holding period of the Outstanding Note for which it was exchanged, the basis
of an Exchange Note should be the same as the basis of the Outstanding Note for
which it was exchanged, and each U.S. Holder of Exchange Notes should continue
to be required to include interest on the Outstanding Notes in its gross income
in accordance with its method of accounting for federal income tax purposes.
Payment of Interest. Interest on a Note generally will be includable in the
income of a U.S. Holder as ordinary income at the time such interest is received
or accrued, in accordance with such U.S. Holder's method of accounting for
United States federal income tax purposes.
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<PAGE> 93
The Company is obligated to pay additional interest amounts in the event of
a Registration Default (as defined). Under the Regulations, certain contingent
payments on debt instruments must be accrued into gross income by a holder
(regardless of such holder's method of accounting). However, any payment subject
to a remote or incidental contingency (i.e., there is a remote likelihood that
the contingency will occur or the potential amount of the contingent payment is
insignificant relative to the total expected amount of remaining payments) is
not treated as a contingent payment and is ignored until payment, if any, is
actually made. The Company intends to take the position that the additional
interest payments resulting from a Registration Default are subject to a remote
or incidental contingency. Accordingly, a U.S. Holder of a Note should report
any additional interest payments resulting from a Registration Default as
ordinary income in accordance with such holder's method of accounting for United
States federal income tax purposes.
Original Issue Discount. If the Notes are not issued at a discount or are
deemed to be issued with no discount because such discount is de minimis, a U.S.
Holder will include in income as ordinary interest income the gross amount of
interest paid or payable in respect of the Notes as provided above in
"-- Payment of Interest." An original issue discount ("OID") will be considered
de minimis and, thus, will be treated as zero discount if the OID is less than
one-fourth ( 1/4) of one percent of the stated redemption price at maturity,
multiplied by the number of complete years to maturity. The Company expects that
the Notes will not have OID.
Market Discount. If a U.S. Holder purchases a Note for less than the stated
redemption price at maturity (the sum of all payments on the Note other than
qualified stated interest), the difference is considered "market discount,"
unless such difference is de minimis. A discount will be considered de minimis
if it is less than one-fourth ( 1/4) of one percent of the Note Issue Price
multiplied by the number of complete years to maturity (after the holder
acquires the Note). Under the market discount rules, any gain realized by the
U.S. Holder on a taxable disposition of a Note having "market discount," as well
as on any partial principal payment made with respect to such Note, will be
treated as ordinary income to the extent of the then "accrued market discount"
of the Note. An overview of the rules concerning the calculation of "accrued
market discount" is set forth in the paragraph immediately below. In addition, a
U.S. Holder of such Note may be required to defer the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry a Note.
Any market discount will accrue ratably from the date of acquisition to the
maturity date of the Note, unless the U.S. Holder elects, irrevocably, to accrue
market discount on a constant interest rate method. The constant interest rate
method generally accrues interest at times and in amounts equivalent to the
result which would have occurred had the market discount been original issue
discount computed from the U.S. Holder's acquisition of the Note through the
maturity date. The election to accrue market discount on a constant interest
rate method is irrevocable but may be made separately as to each Note held by
the U.S. Holder. Accrual of market discount will not cause the accrued amounts
to be included currently in a U.S. Holder's taxable income, in the absence of a
disposition of, or principal payment on, the Note. However, a U.S. Holder of a
Note may elect to include market discount in income currently as it accrues on
either a ratable or constant interest rate method. In such event, interest
expense relating to the acquisition of a Note which would otherwise be deferred
would be currently deductible to the extent otherwise permitted by the Code. The
election to include market discount in income currently, once made, applies to
all market discount obligations acquired by such holder on or after the first
day of the first taxable year to which the election applies, and may not be
revoked without the consent of the Service. Accrued market discount which is
included in a U.S. Holder's gross income will increase the adjusted tax basis of
the Note in the hands of the U.S. Holder.
Amortizable Bond Premium. If a subsequent U.S. Holder acquires a Note for
an amount which is greater than the amount payment at maturity, such holder will
be considered to have purchased such Note with "amortizable bond premium" equal
to the amount of such excess. The U.S. Holder may elect to amortize the premium,
using a constant yield method employing six-month compounding, over the period
from the acquisition date to the maturity date of the Note. The "amount payable
at maturity" will be determined as of an earlier call date, using the call price
payable on such earlier date, if the combination of such earlier date and call
price will produce a smaller amortizable bond premium than would result from
using the scheduled maturity date and its amount payable. If an earlier call
date is used and the Note is not called, the Note will be
92
<PAGE> 94
treated as having matured on such earlier call date and then as having been
reissued on such date for the amount so payable. Amortized amounts may be offset
only against interest payments due under the Note and will reduce the U.S.
Holder's adjusted tax basis in the Note to the extent so used.
Once made, an election to amortize and offset interest on bonds, such as
the Notes, will apply to all bonds in respect of which the election was made
that were owned by the taxpayer on the first day of the taxable year to which
the election relates and to all bonds of such class or classes subsequently
acquired by such taxpayer. Such election may only be revoked with the consent of
the Service. If a U.S. Holder of a Note does not elect to amortize the premium,
the premium will decrease the gain or increase the loss which would otherwise be
recognized upon disposition of the Note.
Sale, Exchange or Retirement of Notes. Upon the sale, exchange, redemption,
retirement, or other disposition of a Note, other than the exchange of a Note
for an Exchange Note (see "-- The Registered Exchange Offer" above), a U.S.
Holder of a Note generally will recognize gain or loss in an amount equal to the
difference between the amount of cash and the fair market value of any property
received on the sale, exchange or retirement of the Note (other than in respect
of accrued and unpaid interest on the Note, which such amounts are treated as
ordinary interest income) and such U.S. Holder's adjusted tax basis in the Note.
If a U.S. Holder holds the Note as a capital asset, such gain or loss will be
capital gain or loss, except to the extent of any accrued market discount (see
"-- Market Discount" above), and will be long-term capital gain or loss if the
Note has a holding period of more than one year at the time of sale, exchange or
retirement (and may be subject to lower tax rates applicable to capital gains
depending on the U.S. Holder's status and the length of the holding period of
the Note).
Backup Withholding and Information Reporting. In general, information
reporting requirements will apply to interest payments on the Notes made to U.S.
Holders other than certain exempt recipients (such as corporations) and to
proceeds realized by such U.S. Holders on dispositions of Notes. A 31% backup
withholding tax will apply to such amounts if the U.S. Holder (i) fails to
furnish its social security or other taxpayer identification number ("TIN")
within a reasonable time after request therefor, (ii) furnishes an incorrect
TIN, (iii) fails to report properly interest or dividend income, or (iv) fails,
under certain circumstances, to provide a certified statement, signed under
penalty of perjury, that the TIN provided is its correct number and that it is
not subject to backup withholding. Any amount withheld from a payment to a U.S.
Holder under the backup withholding rules is allowable as a refund or as a
credit against such U.S. Holder's federal income tax liability, provided that
the required information is furnished to the Service. U.S. Holders of Notes
should consult their tax advisors as to their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption.
NON-U.S. HOLDERS
This Section summarizes certain U.S. federal tax consequences of the
ownership and disposition of Notes by "Non-U.S. Holders." The term "Non-U.S.
Holder" refers to a person that is not classified for U.S. federal tax purposes
as a "United States person," as defined in "-- U.S. Holders" above.
Interest on Notes. In general, a Non-U.S. Holder will not be subject to
U.S. federal income tax or regular withholding tax with respect to stated
interest received or accrued on the Notes so long as (a) such interest is not
effectively connected with the conduct of a trade or business within the United
States, (b) the Non-U.S. Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote, (c) the Non-U.S. Holder is not controlled by a foreign
corporation that is related to the Company actually or constructively through
stock ownership, and (d) either (i) the beneficial owner of the Note certifies
to the Company or its agent, under penalties of perjury, that it is not a U.S.
Holder and provides its name and address on U.S. Treasury Form W-8 (or on a
suitable substitute form) or (ii) the Note is held by a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") on behalf of such Non-U.S. Holder and such financial institution
certifies under penalties of perjury that such a Form W-8 (or suitable
substitute form) has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof.
93
<PAGE> 95
If interest received on the Notes by a Non-U.S. Holder is effectively
connected to the conduct by such Non-U.S. Holder of a trade or business within
the United States, such interest will be subject to U.S. federal income tax on a
net basis at the rates applicable to U.S. persons generally (and, with respect
to corporate holders under certain circumstances, may also be subject to a 30%
branch profits tax). If payments are subject to U.S. federal income tax on a net
basis in accordance with the rules described in the preceding sentence, such
payments will not be subject to U.S. withholding tax so long as the Non-U.S.
Holder provides the Company or their paying agent with a properly executed Form
4224.
Non-U.S. Holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax, or other rules different from
those described above.
Gain on Disposition of Notes. Non-U.S. Holders generally will not be
subject to U.S. federal income taxation on gain recognized on a disposition of
Notes so long as (i) the gain is not effectively connected with the conduct by
the Non-U.S. Holder of a trade or business within the United States and (ii) in
the case of a Non-U.S. Holder who is an individual, either such Non-U.S. Holder
is not present in the United States for 183 days or more in the taxable year of
disposition or such Non-U.S. Holder does not have a "tax home" (within the
meaning of section 911(d)(3) of the Code) in the United States.
U.S. Information Reporting Requirements and Backup Withholding. Generally,
payments of interest, OID, premium or principal on the Notes to Non-U.S. Holders
will not be subject to information reporting or backup withholding if the
Non-U.S. Holder complies with the certification requirements set forth in clause
(d) under "-- Interest on Notes" above.
Non-U.S. Holders will not be subject to information reporting or backup
withholding with respect to the payment of proceeds from the disposition of
Notes, effected by, to or through the foreign office of a broker; provided,
however, that if the broker is a U.S. person or a U.S.-related person,
information reporting (but not backup withholding) would apply unless the broker
has documentary evidence in its records as to the Non-U.S. Holder's foreign
status (and has not actual knowledge to the contrary), or the Non-U.S. Holder
certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption. Non-U.S. Holders will be subject to information
reporting and back withholding at a rate of 31% with respect to the payment of
proceeds from the disposition of Notes effected by, to or through the U.S.
office of a broker, unless the Non-U.S. Holder certifies as to its Non-U.S.
Holder status under penalty of perjury or otherwise establishes an exemption.
The Service has proposed Regulations that, if issued as final Regulations,
would require Non-U.S. Holders to provide additional information in order to
establish an exemption from, or reduce the rate of, withholding tax or backup
withholding tax and, in particular, would require certain Non-U.S. Holders, and
foreign partners of partnerships that are Non-U.S. Holders, to provide certain
information and comply with certain certification requirements not required
under existing law, including requirements that the Non-U.S. Holder furnish its
name, address and taxpayer identification number. Such proposed Regulations are
proposed to be effective generally for payments made after December 31, 1997. It
is not possible to predict whether, or in what form, the proposed Regulations
ultimately will be adopted.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. federal income tax. Rather, amounts withheld under the backup
withholding rules from a payments to a Non-U.S. Holder will be allowed as a
credit against such Non-U.S. Holder's U.S. federal income tax liability and any
amounts withheld in excess of such Non-U.S. Holder's U.S. federal income tax
liability would be refunded, provided that the required information is furnished
to the Service.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Outstanding Notes where such Outstanding Notes were acquired as a result of
market-making activities or other trading activities. The
94
<PAGE> 96
Company has agreed that, for a period of 180 days after the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with such resale. In addition, until
, 1998, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a Prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Notes (including any broker-
dealers) against certain liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Akin, Gump,
Strauss, Hauer & Feld, L.L.P., Dallas, Texas.
EXPERTS
The audited consolidated financial statements of HealthCor Holdings, Inc.
and its subsidiaries, included in this Prospectus, to the extent and for the
periods indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
95
<PAGE> 97
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1995, and 1996...................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994, 1995, and 1996.......... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995,
and 1996............................................... F-6
Notes to Consolidated Financial Statements................ F-7
Schedule: Valuation and Qualifying Accounts............... F-19
Unaudited Condensed Consolidated Balance Sheets as of
September 30, 1997..................................... F-20
Unaudited Condensed Consolidated Statements of Income for
the Three Months Ended September 30, 1996 and 1997 and
Nine Months Ended September 30, 1996 and 1997.......... F-21
Unaudited Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1996 and
1997................................................... F-22
Notes to Unaudited Condensed Consolidated Financial
Statements............................................. F-23
</TABLE>
F-1
<PAGE> 98
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors,
HealthCor Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of HealthCor
Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1996, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HealthCor
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
March 11, 1997
F-2
<PAGE> 99
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,627,940 $ --
Accounts receivable, net of allowance for doubtful
accounts of $2,056,000 and $5,101,000 in 1995 and 1996,
respectively........................................... 11,465,655 26,843,981
Federal income tax refund receivable...................... -- 833,538
Supplies inventory........................................ 1,709,355 3,219,815
Prepaid expenses and other................................ 1,456,958 2,040,698
Deferred income taxes..................................... 2,003,328 1,837,173
----------- ------------
Total current assets.............................. 18,263,236 34,775,205
Property and equipment, net of accumulated depreciation of
$7,946,627 and $15,163,931 in 1995 and 1996,
respectively.............................................. 11,054,255 22,287,540
Excess of cost of acquired businesses over fair values of
net assets acquired, net of accumulated amortization of
$1,186,000 and $2,037,800 in 1995 and 1996,
respectively.............................................. 23,220,167 40,838,391
Other assets................................................ 35,290 2,401,862
----------- ------------
Total assets...................................... $52,572,948 $100,302,998
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued ESOP contribution................................. $ 1,477,915 $ --
Accrued payroll and related expenses...................... 4,836,735 7,020,813
Accounts payable and accrued expenses..................... 5,054,465 6,755,011
Line of credit payable.................................... 2,475,000 8,950,000
Current portion of long-term debt......................... 3,981,563 3,582,096
Current portion of capital lease obligations.............. 862,505 2,369,300
Income taxes payable...................................... 1,311,920 324,309
----------- ------------
Total current liabilities......................... 20,000,103 29,001,529
Deferred income taxes and other............................. 2,905,809 7,216,476
Long-term debt.............................................. 10,668,632 7,114,778
Capital lease obligations................................... 1,596,604 2,415,667
----------- ------------
Total liabilities................................. 35,171,148 45,748,450
Commitments and contingencies
Redeemable Convertible Preferred Stock, $.01 par value,
10,000,000 shares authorized
Series A Preferred Stock, 2,000,000 shares issued and
outstanding in 1995, none in 1996...................... 20,000 --
Series B Preferred Stock, 1,071,438 shares issued and
outstanding in 1995, none in 1996...................... 10,714 --
Additional paid-in capital on Series A and B Preferred
Stocks................................................. 5,309,100 --
Stockholders' equity:
Common stock, $.01 par value, 40,000,000 shares
authorized; 3,062,803 and 10,015,967 shares issued and
outstanding in 1995 and 1996, respectively............. 30,628 100,159
Additional paid-in capital................................ 2,471,129 39,562,152
Retained earnings......................................... 9,560,229 14,892,237
----------- ------------
Total stockholders' equity........................ 12,061,986 54,554,548
----------- ------------
Total liabilities and stockholders' equity........ $52,572,948 $100,302,998
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 100
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Net revenues....................................... $57,151,154 $81,557,284 $106,785,152
Direct expenses.................................... 30,336,777 41,392,250 48,313,631
----------- ----------- ------------
Gross profit....................................... 26,814,377 40,165,034 58,471,521
Other costs and expenses:
General and administrative....................... 21,279,888 30,663,552 41,417,970
Depreciation and amortization.................... 789,222 1,239,728 2,578,751
Provision for doubtful accounts.................. 1,115,705 1,488,885 3,580,394
----------- ----------- ------------
Total costs and expenses................. 23,184,815 33,392,165 47,577,115
----------- ----------- ------------
Income from operations............................. 3,629,562 6,772,869 10,894,406
Other income (expense):
Interest income.................................. 61,345 162,283 44,454
Interest expense................................. (304,953) (1,149,260) (2,188,466)
----------- ----------- ------------
Total other income and expense........... (243,608) (986,977) (2,144,012)
----------- ----------- ------------
Income before income taxes......................... 3,385,954 5,785,892 8,750,394
Provision for income taxes......................... 1,359,398 2,202,367 3,418,386
----------- ----------- ------------
Net income......................................... $ 2,026,556 $ 3,583,525 $ 5,332,008
=========== =========== ============
Net income per common share........................ $ .31 $ .55 $ .66
=========== =========== ============
Weighted average common shares outstanding......... 6,489,563 6,545,615 8,040,250
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 101
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993......... 2,712,500 $ 27,125 $ 1,068,234 $ 3,950,148 $ 5,045,507
Conversion of Series B preferred
stock to common stock......... 223,220 2,232 -- -- 2,232
Net income....................... -- -- -- 2,026,556 2,026,556
---------- -------- ----------- ----------- -----------
Balance, December 31, 1994......... 2,935,720 29,357 1,068,234 5,976,704 7,074,295
Issuance of common stock
to ESOP....................... 125,000 1,250 1,398,750 -- 1,400,000
Issuance of common stock......... 2,083 21 4,145 -- 4,166
Net income....................... -- -- -- 3,583,525 3,583,525
---------- -------- ----------- ----------- -----------
Balance, December 31, 1995......... 3,062,803 30,628 2,471,129 9,560,229 12,061,986
Exercise of common stock
warrants...................... 150,000 1,500 298,500 -- 300,000
Conversion of Series A and B
preferred stock to common
stock......................... 3,339,297 33,393 5,306,421 -- 5,339,814
Issuance of common stock in
initial public offering,
net........................... 3,300,000 33,000 29,835,101 -- 29,868,101
Issuance of common stock
to ESOP....................... 130,000 1,300 1,466,200 -- 1,467,500
Exercise of stock options........ 33,867 338 78,229 -- 78,567
Tax benefit from early
dispositions of option
stock......................... -- -- 106,572 -- 106,572
Net income....................... -- -- -- 5,332,008 5,332,008
---------- -------- ----------- ----------- -----------
Balance, December 31, 1996......... 10,015,967 $100,159 $39,562,152 $14,892,237 $54,554,548
========== ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 102
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 2,026,556 $ 3,583,525 $ 5,332,008
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 1,439,751 2,299,357 4,773,892
Loss on disposition of fixed assets.......... 14,299 61,784 69,855
Changes in operating assets and liabilities,
net of acquired businesses:
Accounts receivable, net................... 3,306,421 (4,790,507) (13,099,993)
Supplies inventory......................... 80,685 109,842 (755,657)
Prepaid expenses and other assets.......... (228,140) (688,745) (1,295,126)
Deferred income taxes...................... 309,994 (821,616) 1,124,060
Accrued ESOP contribution.................. 1,497,242 (23,376) (60,079)
Third-party payor settlement............... (1,745,349) 42,116 (322,566)
Accounts payable and accrued expenses...... (18,696) 3,258,275 3,330,133
Income taxes payable/receivable............ (422,957) 919,447 (1,821,149)
Deferred revenue........................... -- 2,092,767 3,281,537
------------ ------------ -----------
Net cash provided by operating
activities............................ 6,259,806 6,042,869 556,915
------------ ------------ -----------
Cash flows from investing activities:
Payments for business acquisitions, net of cash
acquired..................................... (2,745,689) (17,458,780) (21,032,649)
Additions to property and equipment............. (866,001) (7,179,800) (7,866,845)
------------ ------------ -----------
Net cash used in investing activities... (3,611,690) (24,638,580) (28,899,494)
------------ ------------ -----------
Cash flows from financing activities:
Proceeds from issuance of debt, net............. 3,287,698 47,385,571 65,896,628
Payments on debt and capital lease
obligations.................................. (1,603,333) (32,340,934) (69,535,229)
Issuance of common stock, net................... -- 1,404,166 30,353,240
Payments on loans from related parties.......... (1,063,854) -- --
------------ ------------ -----------
Net cash provided by financing
activities............................ 620,511 16,448,803 26,714,639
------------ ------------ -----------
Net increase (decrease) in cash and cash
equivalents..................................... 3,268,627 (2,146,908) (1,627,940)
Cash and cash equivalents, beginning of period.... 506,221 3,774,848 1,627,940
------------ ------------ -----------
Cash and cash equivalents, end of period.......... $ 3,774,848 $ 1,627,940 $ --
============ ============ ===========
Supplemental disclosure of cash flow information:
Debt issued in acquisitions..................... $ 857,241 $ 1,567,321 $ 3,266,068
Liabilities and debt assumed in acquisitions.... 217,441 566,340 635,753
Issuance of capital lease obligations........... 172,000 2,530,000 3,530,474
Issuance of common stock to employee stock
option plan.................................. -- 1,400,000 1,467,500
Interest paid................................... 315,000 828,000 2,025,000
Income taxes paid............................... 1,481,000 1,826,000 4,055,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 103
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995, AND 1996
1. GENERAL:
Organization
HealthCor Holdings, Inc., a Delaware corporation, and subsidiaries (the
"Company") commenced operations in October 1989 and provide home healthcare
services to patients including nursing, respiratory therapy, infusion therapy,
and medical equipment. The Company has operations in Arizona, Colorado, Kansas,
Missouri, Oklahoma, Texas, New Mexico, Louisiana and Arkansas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Presentation
The consolidated financial statements of the Company include the accounts
of HealthCor Holdings, Inc. and its wholly owned subsidiaries, HealthCor, Inc.
(HealthCor), HealthCor Oxygen & Medical Equipment, Inc. (HOME), HealthCor
Pharmacy, Inc., Physicians Home Health Network, Inc., HealthCor Rehabilitation
Services, Inc., HealthCor Personnel Services, Inc., and HealthCor Foundation.
All significant intercompany transactions and accounts have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Supplies Inventory
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist primarily of medical supplies sold directly to patients for
use in their homes.
Property and Equipment
Property and equipment are stated at cost or fair market value at the
acquisition date (see Note 4). The cost of equipment held under capital leases
is equal to the lower of the net present value of the minimum lease commitments
or the fair value of the leased property at the inception of the lease (see Note
8). Property and equipment is depreciated using the straight-line method over
the following useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Furniture and equipment..................................... 5-10
Transportation equipment.................................... 5
Leasehold improvements (life of the lease).................. 3-10
Medical equipment........................................... 5
Computer equipment.......................................... 3-5
Software development costs.................................. 10
</TABLE>
F-7
<PAGE> 104
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Excess of Costs of Acquired Businesses Over the Fair Values of Assets Acquired
The value of excess cost of acquired businesses over the fair values of
assets acquired (goodwill) is recorded at the dates of acquisition. Goodwill is
being amortized on a straight-line basis over a 40-year period in accordance
with the provisions of APB No. 17.
The Company reviews the carrying value of goodwill at least annually on a
market-by-market basis to determine if facts and circumstances exist which would
suggest that goodwill may be impaired or that the amortization period needs to
be modified. Among the factors the Company considers in making the evaluation
are changes in the Company's market position, reputation, profitability and
geographic penetration. If indicators are present which may indicate impairment
is probable, the Company will prepare a projection of the undiscounted cash
flows of the specific market and determine if goodwill is recoverable based on
these undiscounted cash flows. If impairment is indicated, then an adjustment
will be made to reduce the carrying amount of the goodwill to its fair value.
Similar reviews are made of other long-lived assets. No such adjustments were
required at December 31, 1995 or 1996.
Income Taxes
Deferred income taxes are provided for temporary differences between the
financial statement and income tax basis of assets and liabilities in accordance
with SFAS No. 109 "Accounting for Income Taxes."
Net Income Per Common Share
Net income per common share (both primary and fully diluted) has been
computed by dividing net income by the weighted average number of common and
common equivalent shares outstanding each year. The Company has treated the
redeemable convertible preferred stocks as common shares outstanding for all
periods presented.
The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), "Accounting for Stock-Based Compensation," effective January
1, 1996. SFAS No. 123 allows companies adopting the pronouncement to either
change the actual accounting methods for stock-based compensation in the
financial statements or to disclose certain pro forma results of operations as
if the pronouncement had been adopted in the financial statements. The Company
will continue to account for its stock options granted under the provisions of
Accounting Principles Board Opinion No. 25 ("APB No. 25") and has disclosed the
pro forma information required by SFAS No. 123 in Note 12.
Net Revenues and Estimated Settlements with Third-Party Payors
Revenues are recognized on the date services and related products are
provided to patients and are recorded at estimated net realizable amounts from
patients, third-party payors, and others for services rendered. For the years
ended December 31, 1994, 1995, and 1996, approximately 70%, 67% and 50% of net
patient service revenues were derived under federal third-party reimbursement
programs which are based on cost reimbursement and case payment principles.
These revenues are subject to audit and retroactive adjustment by the respective
third-party fiscal intermediary. In the opinion of management, retroactive
adjustments, if any, will not be material to the financial position or results
of operations of the Company. Settlements based on third-party reimbursement
program audits are recorded in the year they become known.
Certain capital expenditures relating to the implementation of a new
management information system have been appropriately expensed for third-party
reimbursement purposes resulting in deferred revenue of approximately $2,399,000
and $5,903,000 at December 31, 1995 and 1996, respectively. This deferred
revenue will be amortized over ten years, the expected useful life of the
management information system, using the straight-line method.
F-8
<PAGE> 105
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Direct expenses
Direct expenses include salaries, wages and related benefits, medical
supplies, equipment and related depreciation, and other direct costs of
delivering home medical services.
Reclassifications
Certain amounts for prior periods have been reclassified to conform to the
current year presentation.
3. ACCRUED PAYROLL AND RELATED EXPENSES:
Accrued payroll and related expenses consist of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Salaries.................................................... $2,391,660 $3,434,656
Workers' compensation....................................... 853,018 724,478
Other....................................................... 1,592,057 2,861,679
---------- ----------
$4,836,735 $7,020,813
========== ==========
</TABLE>
4. ACQUISITIONS:
1995 Acquisitions
On January 1, 1995, the Company acquired, in separate transactions, for
$3,675,000 in cash, $254,000 in deferred payments, and $400,000 in debt, the net
assets of Home Hospital Equipment, Inc. and Medi-Networks, Inc. Both are
respiratory therapy companies located in Texas, specializing in providing home
medical and respiratory equipment and supplies to patients.
On June 30, 1995, the Company acquired, in separate transactions, for
$1,870,000 in cash and $546,000 in debt, the net assets of McDuffie's Rentals,
Inc. and Southwest Professional Registry, Inc. Both respiratory therapy
companies are located in Texas, specializing in providing home respiratory
equipment and supplies.
On July 31, 1995, the Company acquired for $6,400,000 in cash and
$1,000,000 in debt, the net assets of RTA Homecare and Subsidiaries (RTA). RTA,
located in Arizona, is a respiratory therapy company specializing in providing
home medical and respiratory equipment, supplies, and pharmaceuticals to
patients.
On August 31, 1995, the Company acquired for $700,000 in cash and $100,000
in debt, the net assets of Colorado I.V. Associates, Inc./Specialized Nursing
Services, Inc. ("Colorado IV"). Colorado IV, located in Colorado, is a
pharmaceutical company specializing in providing home infusion therapy.
On September 30, 1995, in separate transactions, the Company acquired for
$597,000 in cash, the net assets of Newborn Nursing Services, Inc. ("Newborn
Nursing") and Charlie's Discount Drug, Inc. ("Charlie's"). Newborn Nursing,
located in Oklahoma, is a nursing company specializing in providing pediatric
nursing care services and the leasing and selling of medical equipment.
Charlie's, located in Oklahoma, is a respiratory company specializing in
providing home respiratory equipment and supplies.
On October 31, 1995, in separate transactions, the Company acquired for
$2,952,000 in cash and $450,000 in debt, the net assets of A.M. Medical/Discount
Medical Equipment Company ("A.M. Medical"), Cross Timbers Visiting Nurses, Inc.
("Cross Timbers"), Specialty Med-Equip, Inc. ("Specialty Med-Equip"), and
Superior Med-Equip, Inc. ("Superior Med-Equip"). A.M. Medical, Cross Timbers,
Specialty Med-Equip, and Superior Med-Equip are located in Texas. Cross Timbers
specializes in providing home nursing services. A.M. Medical, Specialty
Med-Equip, and Superior Med-Equip specialize in providing home respiratory
equipment and supplies.
F-9
<PAGE> 106
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 Acquisitions
On April 1, 1996, the Company acquired, for $800,000 in cash and $200,000
in debt, the net assets of All Medical, Inc., a company located in Wichita
Falls, Texas, engaged in selling and leasing medical equipment and supplies to
the home health care industry.
Effective May 1, 1996, the Company acquired, for $11,750,000 in cash and
$566,000 in debt, the net assets of I Care of Arkansas, Inc. and all of the
outstanding capital stock of I Care, Inc. (d/b/a I Care Health Services) and I
Care Home IV Affiliates, Inc. (collectively "I Care"), which provide infusion
therapy services and respiratory therapy equipment throughout Arkansas.
Effective September 1, 1996, the Company acquired, for $5,000,000 in cash
and $600,000 in debt, the net assets of Southern Medical Mart, Inc., a
respiratory therapy/medical equipment company with four locations in Louisiana.
Southern Medical Mart is engaged primarily in the sale and rental of medical
equipment.
The Company also completed the acquisition of six companies during the last
fiscal quarter of 1996 for $3,700,000 in cash and $1,900,000 in debt. Three of
the companies specialize in providing home nursing care services, two provide
respiratory therapy/medical equipment services and products, and one provides
personnel placement services. The companies are located in Oklahoma and Texas.
The 1995 and 1996 acquisitions have been accounted for using the purchase
method of accounting. Accordingly, the purchase price was allocated to the
assets acquired (including all identifiable intangible assets, if material) and
liabilities assumed based upon their estimated fair values at the dates of
acquisition in accordance with APB No. 16. The results of operations of the
acquired practices are included in the consolidated financial statements from
the respective dates of acquisition. None of the acquisition agreements contain
any significant earn-out provisions with the sellers.
The following is a summary of the net assets acquired and liabilities
assumed in connection with the foregoing acquisitions in 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS ACQUIRED:
Cash and cash equivalents............................... $ 679,274 $ 380,024
Accounts receivable, net................................ 2,906,494 3,294,833
Supplies inventory...................................... 1,093,074 754,803
Prepaid expenses and other.............................. 106,041 98,964
----------- -----------
Total current assets............................ 4,784,883 4,528,624
Property and equipment, net............................. 1,886,322 3,770,208
----------- -----------
Total assets.................................... 6,671,205 8,298,832
LIABILITIES ASSUMED:
Current liabilities..................................... 1,480,595 1,326,723
Other liabilities....................................... 311,903 706,978
----------- -----------
Total liabilities............................... 1,792,498 2,033,701
----------- -----------
NET ASSETS ACQUIRED....................................... 4,878,707 6,265,131
PURCHASE PRICE, INCLUDING ACQUISITION COSTS............... 18,197,366 24,678,741
----------- -----------
EXCESS COST OF BUSINESSES ACQUIRED........................ $13,318,659 $18,413,610
=========== ===========
</TABLE>
F-10
<PAGE> 107
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro Forma Information
The following unaudited pro forma information reflects the effects on the
consolidated statements of income assuming that significant acquisitions were
consummated as of January 1, 1995 and 1996. This information does not purport to
be indicative of the results that would have actually been obtained if the
acquisitions had occurred on such dates. Therefore, pro forma information cannot
be considered indicative of future operations. The unaudited pro forma
information for the years ended December 31, 1995 and 1996 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1995 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................ $128,672 $129,026
Net income.................................................. 4,537 5,737
Net income per common share................................. .69 .71
</TABLE>
5. BANK CREDIT FACILITY:
At December 31, 1995, the Company had a bank credit facility consisting of
a $5,000,000 revolving credit line and a $20,000,000 term loan for acquisitions
of which $2,475,000 and $14,230,000, respectively, were outstanding. On May 16,
1996, the Company replaced this bank credit facility with a $35,000,000 bank
credit facility consisting of a $10,000,000 revolving credit line and a
$25,000,000 term loan facility for financing acquisitions. All of the term loan
facility was used by May 31, 1996. On September 3, 1996, the Company amended the
May 16, 1996, bank credit facility to make available an additional $10,000,000
under the term loan facility.
On October 31, 1996, the Company amended and restated its bank credit
facility. The new agreement provides for an aggregate $75,000,000 bank credit
facility, consisting of a $15,000,000 revolving credit line and a $60,000,000
term loan for acquisitions. Use of the term loan facility is limited to
$52,500,000 at the Company's current stockholders' equity level, with the
remaining $7,500,000 available when the Company's stockholders' equity reaches
$57,300,000. The term loan facility is available for acquisitions until October
31, 1998, and is repayable in quarterly installments of principal and interest
using a five-year amortization period through October 31, 2001.
The revolving credit line contains certain financial covenants with respect
to maintenance of a maximum ratio of funded debt to adjusted earnings, a minimum
fixed charge coverage ratio, consolidated stockholders' equity of not less than
$53,550,000 (as adjusted), and a funded debt to total capitalization ratio of no
greater than 50%. There is also a limitation of $10,000,000 annually on capital
expenditures. The revolving credit line expires on October 31, 1999, and
provides for the quarterly payment to the bank of a .25% commitment fee
(escalating to .375% if the funded debt to adjusted earnings ratio exceeds 1.75
to 1) on the unused portion of the line. The Company was not in compliance with
the financial covenant regarding capital expenditures at December 31, 1996. This
covenant was waived by the lender at December 31, 1996.
Interest is payable quarterly at (a) the greater of the bank's prime rate
or the federal funds effective rate plus 1/2%, both rates adjustable in certain
circumstances, or (b) at the Eurodollar rate plus a specified adjustable margin
ranging from 1.25% to 2.75%. At December 31, 1996, the weighted average interest
rate on the revolving credit line outstanding was 8.25%. In addition to the
borrowings of $8,950,000 at December 31, 1996, the Company has committed
$465,000 of the line to a letter of credit issued in connection with the
Company's workers' compensation insurance coverage. In 1997, the letter of
credit will be increased to $617,000.
F-11
<PAGE> 108
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The term loan facility is used to finance the Company's acquisition program
and contains the same financial covenants, commitment fees, and interest rates
as for the revolving credit line. The outstanding balance of the term loan
facility at December 31, 1996, was $7,540,000, with repayment terms as discussed
in Note 6. At December 31, 1996, the weighted average interest rate on the term
loan facility outstanding was 6.9%.
Borrowings on both the revolving credit line and the term loan facility are
collateralized by substantially all operating assets of the Company. The Company
is currently negotiating with the banks to shift a portion of the available term
loan facility to the revolving credit line.
6. LONG-TERM DEBT:
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Notes payable to individuals in connection with
acquisitions; principal and interest payable monthly at
rates ranging from 7.5% to 8.0%, matures through October
1999, unsecured......................................... $ 1,661,066 $ 3,146,457
Acquisition term loan facility with a bank; principal and
interest payable quarterly at rates ranging from (a) the
greater of the bank's prime rate or the federal funds
effective rate plus 1/2% or (b) at the Eurodollar rate
plus 1.25% to 2.75% , matures through October 2001...... 12,973,144 7,540,000
Other..................................................... 15,985 10,417
----------- -----------
14,650,195 10,696,874
Less: current portion................................... (3,981,563) (3,582,096)
----------- -----------
$10,668,632 $ 7,114,778
=========== ===========
</TABLE>
Aggregate maturities of long-term obligations subsequent to December 31,
1996, are as follows:
<TABLE>
<S> <C>
1997.................................................... $ 3,582,096
1998.................................................... 2,006,861
1999.................................................... 1,796,493
2000.................................................... 1,467,212
2001.................................................... 1,844,212
-----------
10,696,874
Less -- Current portion................................. (3,582,096)
-----------
Total......................................... $ 7,114,778
===========
</TABLE>
F-12
<PAGE> 109
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- ------------
<S> <C> <C>
Furniture and equipment.................................. $ 2,691,563 $ 4,031,607
Transportation equipment................................. 689,953 1,247,255
Leasehold improvements................................... 301,295 854,462
Medical equipment........................................ 8,236,435 15,363,664
Computer equipment....................................... 4,274,718 9,034,231
Software development costs............................... 2,806,918 6,920,252
----------- ------------
19,000,882 37,451,471
Less -- Accumulated depreciation......................... (7,946,627) (15,163,931)
----------- ------------
Property and equipment, net.............................. $11,054,255 $ 22,287,540
=========== ============
</TABLE>
8. LEASE COMMITMENTS:
The Company leases office space, furniture, and equipment under
noncancelable operating lease agreements which expire on various dates to 2006
and contain renewal options for up to 5 years.
The Company leases various office equipment under capital lease
arrangements. The capitalized value of leases amounted to approximately
$4,217,000 and $7,600,000 at December 31, 1995 and 1996, respectively, and net
book value amounted to approximately $2,584,000 and $4,473,000 at December 31,
1995 and 1996, respectively. Future minimum lease payments at December 31, 1996,
under the capital leases and noncancelable operating leases with initial or
remaining terms of one year or more are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- -----------
<S> <C> <C>
1997........................................................ $2,984,273 $ 2,824,679
1998........................................................ 2,332,330 2,206,350
1999........................................................ 1,774,280 904,801
2000........................................................ 1,483,782 39,130
2001 and thereafter......................................... 1,274,532 73,731
---------- -----------
Total minimum payments...................................... $9,849,197 6,048,691
==========
Amount representing interest................................ (1,263,724)
-----------
Present value of minimum payments........................... 4,784,967
Current portion............................................. (2,369,300)
-----------
Total....................................................... $ 2,415,667
===========
</TABLE>
Rent expense under all operating leases was approximately $1,428,000,
$2,270,000, and $3,050,000 for the years ended December 31, 1994, 1995, and
1996, respectively.
F-13
<PAGE> 110
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES:
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal..................................... $1,017,755 $ 2,896,714 $2,571,912
State....................................... 138,553 329,962 326,233
---------- ----------- ----------
1,156,308 3,226,676 2,898,145
---------- ----------- ----------
Deferred:
Federal..................................... 193,317 (944,878) 468,175
State....................................... 9,773 (79,431) 52,066
---------- ----------- ----------
203,090 (1,024,309) 520,241
---------- ----------- ----------
Total............................... $1,359,398 $ 2,202,367 $3,418,386
========== =========== ==========
</TABLE>
The reconciliation of the provision for income taxes to the federal
statutory rate is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Income taxes at statutory rate................. $1,151,224 $1,967,204 $2,975,134
Amortization................................... 77,351 108,954 148,931
State taxes, net of federal tax effect......... 97,895 165,350 249,691
Tax credits utilized........................... -- (92,500)
Other.......................................... 32,928 53,359 44,630
---------- ---------- ----------
$1,359,398 $2,202,367 $3,418,386
========== ========== ==========
</TABLE>
Deferred tax assets and deferred tax liabilities consist of the following
items:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts.......................... $ 598,991 $ 424,590
Self-insurance and workers' compensation................. 542,254 567,034
Amounts due to third-party payor......................... 554,361 710,549
Accrued payroll and related expenses..................... 193,841 186,222
State income taxes....................................... 106,702 (92,039)
Other.................................................... 7,179 40,817
---------- -----------
Total............................................ 2,003,328 1,837,173
---------- -----------
Deferred tax liabilities:
Depreciation and amortization............................ (469,169) (884,101)
Deferred software cost, net of deferred revenue.......... -- (388,417)
Deferred compensation expense............................ -- (425,118)
Other.................................................... -- (54,874)
---------- -----------
Total............................................ (469,169) (1,752,510)
---------- -----------
Other tax liability........................................ (37,147) (89,663)
---------- -----------
Total net tax (liabilities) assets......................... $1,497,012 $ (5,000)
========== ===========
</TABLE>
F-14
<PAGE> 111
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In 1992, the Company sold 2,000,000 shares of its Series A preferred stock
($.01 par value) for $2,000,000, less issuance costs of $85,532 to an unrelated
entity. The shares were converted into 2,000,000 shares of the Company's common
stock coincident with the Company's initial public offering (IPO) on August 8,
1996.
In 1992, the Company issued 1,071,438 shares of its Series B preferred
stock ($.01 par value) for $3,000,025 to the Series A preferred stock investor
and an unrelated investor and 178,575 shares of its Series B preferred stock for
$500,010 to the Company's Employee Stock Ownership Plan (ESOP). The Company paid
$72,636 in costs associated with these two issuances. The Series B preferred
shares were convertible into 1,562,517 shares of the Company's common stock. The
conversion rate was subject to adjustment of up to 1.25 for one (312,503
additional shares) common share based on the Company's post issuance earnings
level. On November 28, 1994, the 178,575 Series B preferred shares held by the
ESOP were converted to 223,220 common shares. The remaining Series B preferred
shares were converted into 1,339,297 shares of common stock coincident with the
Company's IPO on August 8, 1996.
11. COMMON STOCK:
The Company completed an initial public offering (IPO) of 3,000,000 shares
of its common stock, $.01 par value, on August 8, 1996, and on September 11,
1996, the underwriters exercised their overallotment option to purchase an
additional 300,000 shares. The Company used the net proceeds from the IPO of
approximately $29,800,000 to repay outstanding indebtedness under its bank
credit facilities and for general corporate purposes. In addition, on July 26,
1996, the Company declared a 5 for 2 stock split in the form of a stock dividend
of its common stock. The accompanying consolidated financial statements give
retroactive effect to the stock split.
12. EMPLOYEE BENEFIT PLANS:
The Company has two qualified incentive stock option plans and has reserved
387,500 shares of the Company's common stock for issuance under the 1989 plan
and 237,500 shares under the 1996 plan. Options for 6,000 shares have been
granted under the 1996 stock option plan and 231,500 are available for future
grant. The Company accounts for its stock option plans in accordance with the
provisions of APB No. 25 and related interpretations, under which no
compensation cost is recognized for financial statement purposes. Had
compensation cost for stock options granted in 1995 and 1996 been determined
based on the fair value at the grant dates for options awarded consistent with
the provisions of SFAS No. 123, the Company's net income and net income per
common share for the years ended December 31, 1995 and 1996, would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Net income
As reported............................................... $3,583,525 $5,332,008
Pro forma................................................. $3,537,259 $5,206,173
Net income per common share
As reported............................................... $ .55 $ .66
Pro forma................................................. $ .54 $ .65
</TABLE>
Since the provisions of SFAS No. 123 have not been applied to options granted
prior to January 1, 1995, the resulting pro forma compensation cost is not
representative of the pro forma compensation expected to be presented in future
years.
F-15
<PAGE> 112
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options to purchase shares of the Company's common stock have been granted
to nonofficer and noninvestor directors and key employees. Options are granted
at fair market value at the dates of grant. Options granted become exercisable
at the rate of 1/3 per year, and expire 10 years after the date of grant.
Information on stock options is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------------------- ------------------------
WTD. AVG. WTD. AVG.
SHARES SHARES EX. PRICE SHARES EX. PRICE
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 148,750 301,375 $ 3.79 359,627 $ 4.68
Granted.................. 163,875 118,253 7.04 48,250 10.13
Exercised................ -- (2,083) 2.00 (33,867) 2.32
Forfeited................ (11,250) (57,918) 5.00 (17,084) 5.04
---------- ---------- ---------- ----------- ----------
Outstanding at end of
year................... 301,375 359,627 $ 4.68 356,926 $ 5.63
========== ========== ========== =========== ==========
Exercisable at end of
year................... 93,338 157,940 $ 2.70 198,884 $ 4.06
========== ========== ========== =========== ==========
Price range.............. $.80-$6.00 $.80-$7.04 $.80-$11.50
========== ========== ===========
Weighted-average fair
value of options
granted during the
year................... $ 2.96 $ 4.26
========== ===========
</TABLE>
The fair value of each option grant is estimated as of the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996, respectively: Risk-free interest
rates of 6.5%; expected dividend yield of zero; expected option lives until
exercise date of 6.5 years; and expected price volatility of 25%.
The following table summarizes information about stock options that are
exercisable at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF OPTIONS REMAINING WEIGHTED AVERAGE
OPTION GRANT DATE EXERCISABLE CONTRACTUAL LIFE EXERCISE PRICE
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
August 1990 through April 1993........ 83,800 4.8 Years $1.65
December 1993 through December 1995... 115,084 7.9 Years $5.82
-------
Total exercisable..................... 198,884 $4.06
=======
</TABLE>
On April 1, 1990, the Company established an Employee Stock Ownership Plan
(ESOP), which will award shares of the Company's common stock on a
noncontributory basis to eligible employees of the Company. Contributions of
common stock and cash by the Company, when declared at the discretion of the
Board of Directors, are allocated to the accounts of participants based on the
ratio each participant's compensation for the year bears to all participants'
compensation for that year. The Company contributed 125,000 and 130,000 common
shares in 1995 and 1996. Participants are not vested in any amounts allocated to
them until they have completed at least 1,000 hours of service per year for one
year. After five such years, a participant is 100% vested in such amounts.
Generally, a participant also will be fully vested upon attaining age 65 or in
the event of total and permanent disability, death or termination of the ESOP.
ESOP shares which are committed to be released are treated as outstanding for
earnings per share computations. Compensation expense for the ESOP was
approximately $1,500,000 for the years ended December 31, 1995 and 1994,
respectively. During 1996, the Board of Directors authorized no contribution to
the ESOP. At
F-16
<PAGE> 113
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996, the Company recorded approximately $1,100,000 related to
accumulated plan forfeitures as deferred compensation expense in the
accompanying consolidated balance sheets.
Effective April 1, 1991, the Company formed a deferred compensation plan
structured under Section 401(k) of the Internal Revenue Code. The plan covers
substantially all employees meeting certain minimum service requirements. Under
the plan, contributions are made by the employees and matched by the Company
subject to certain limitations. The Company's contribution to this plan was
approximately $101,000, $105,000, and $157,000 for the years ended December 31,
1994, 1995, and 1996, respectively.
13. COMMITMENTS AND CONTINGENCIES:
The Company, in the normal course of business, is party to various matters
of litigation. Management is of the opinion that the eventual outcome of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
The Company self-insures its employees and their dependents for injury and
hospitalization. The Company self-insures claims up to $75,000 per person, with
an insurance company covering claims in excess of this amount up to a maximum of
$1,000,000 per person. A liability is accrued for claims incurred but not yet
reported (IBNR) based on historical claims paid information as provided by the
respective insurance company. The IBNR liability at December 31, 1995 and 1996,
was approximately $522,000 and $468,000, respectively. The Company has paid
claims of approximately $1,375,000, $1,700,000, and $1,101,000 for the years
ended December 31, 1994, 1995, and 1996, respectively.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
On January 1, 1995, the Company adopted SFAS No. 107, "Disclosure About
Fair Value of Financial Instruments." Cash and cash equivalents, accounts
receivable, and accounts payable and accrued liabilities are reflected in the
consolidated financial statements at fair value because of the short-term
maturity of those instruments. In addition, the fair value of the Company's
long-term debt and capital lease obligations were determined to approximate its
carrying value since (i) a substantial amount of the December 31, 1996, long-
term debt and capital lease obligations were issued at fair market value during
1996, and (ii) certain long-term debt amounts are interest rate variable in
nature.
F-17
<PAGE> 114
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. CONSOLIDATED QUARTERLY DATA (UNAUDITED):
The following is a summary of the consolidated quarterly results of
operations of the Company for the years ended December 31, 1995 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995
Net revenues........................... $17,553 $18,368 $21,577 $24,059
Gross profit........................... 8,161 8,318 10,703 12,983
Income from operations................. 1,260 1,229 1,854 2,430
Income before income taxes ............ 1,141 1,096 1,538 2,011
Net income............................. 703 677 958 1,246
Net income per common share............ .11 .10 .15 .19
Weighted average common shares
outstanding......................... 6,489 6,612 6,503 6,548
1996
Net revenues........................... $24,254 $25,968 $27,254 $29,309
Gross profit........................... 12,734 14,273 15,374 16,090
Income from operations................. 2,134 2,520 2,880 3,360
Income before income taxes ............ 1,648 1,868 2,355 2,880
Net income............................. 971 1,175 1,462 1,723
Net income per common share............ .15 .18 .17 .17
Weighted average common shares
outstanding......................... 6,543 6,592 8,575 10,187
</TABLE>
During December 1996, the Company reduced depreciation expense by
approximately $530,000 related to depreciation of the new management information
system, which depreciation had been expensed in earlier quarters of 1996. The
original depreciation expense was based on estimates of when the new management
information system was expected to be placed in service. Upon evaluation of the
actual dates the system was placed in service, the following depreciation
amounts were eliminated: Periods ended March 31 -- $78,000; June 30 -- $183,000;
September 30 -- $269,000. Revenues previously amortized to income from deferred
revenue in approximately the same amounts were similarly reversed, and the net
credit to income during the fourth quarter of 1996 was minimal.
F-18
<PAGE> 115
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO FROM BALANCE
BEGINNING COSTS AND ACQUIRED AT END
CLASSIFICATION OF PERIOD EXPENSES COMPANIES DEDUCTIONS OF PERIOD
-------------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1994:
Allowance for Doubtful
Accounts...................... $1,814,000 $1,116,000 $ -- $(1,645,000)(b) $1,285,000
Accumulated Amortization of
Intangible Assets............. 472,000 245,000 -- -- 717,000
---------- ---------- ---------- ----------- ----------
Total Reserves and
Allowances............. $2,286,000 $1,361,000 $ -- $(1,645,000) $2,002,000
========== ========== ========== =========== ==========
December 31, 1995:
Allowance for Doubtful
Accounts...................... $1,285,000 $1,489,000 $ 624,000 $(1,342,000)(b) $2,056,000
Accumulated Amortization of
Intangible Assets............. 717,000 469,000 -- -- 1,186,000
---------- ---------- ---------- ----------- ----------
Total Reserves and
Allowances............. $2,002,000 $1,958,000 $ 624,000 $(1,342,000) $3,242,000
========== ========== ========== =========== ==========
December 31, 1996:
Allowance for Doubtful
Accounts...................... $2,056,000 $3,580,000 $2,753,000 $(3,288,000)(b) $5,101,000
Accumulated Amortization of
Intangible Assets............. 1,186,000 852,000 -- -- 2,038,000
---------- ---------- ---------- ----------- ----------
Total Reserves and
Allowances............. $3,242,000 $4,432,000 $2,753,000 $(3,288,000) $7,139,000
========== ========== ========== =========== ==========
</TABLE>
- ---------------
(a) This schedule should be read in conjunction with the Company's audited
consolidated financial statements and related notes thereto.
(b) Write-off of uncollectible receivables net of recoveries.
F-19
<PAGE> 116
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ -- $ --
Accounts receivable, net.................................. 26,843,981 43,103,092
Income tax refund receivable.............................. 833,538 1,627,725
Supplies inventory........................................ 3,219,815... 4,013,616
Prepaid expenses and other................................ 2,040,698 1,225,963
Deferred income taxes..................................... 1,837,173 2,644,329
------------ ------------
Total current assets.............................. 34,775,205 52,614,725
Property and equipment, net................................. 22,287,540 29,042,468
Excess of cost of acquired businesses over fair values of
net assets acquired, net.................................. 40,838,391 54,270,979
Other assets................................................ 2,401,862 2,025,148
------------ ------------
Total assets...................................... $100,302,998 $137,953,320
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 6,755,011 $ 11,584,284
Accrued payroll and related expenses...................... 7,020,813 6,348,914
Line of credit payable.................................... 8,950,000 24,885,000
Current portion of long-term debt......................... 3,582,096 23,480,229
Current portion of capital lease obligations.............. 2,369,300 5,761,059
Income taxes payable...................................... 324,309 --
------------ ------------
Total current liabilities......................... 29,001,529 72,059,486
Deferred income taxes and other............................. 7,216,476 6,355,130
Long-term debt.............................................. 7,114,778 1,284,100
Capital lease obligations................................... 2,415,667 3,706,141
------------ ------------
Total liabilities................................. 45,748,450 83,404,857
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 40,000,000 shares
authorized; 10,015,967 and 10,064,096 shares issued and
outstanding in 1996 and 1997, respectively............. 100,159 100,641
Additional paid-in capital................................ 39,562,152 39,790,766
Retained earnings......................................... 14,892,237 14,657,056
------------ ------------
Total stockholders' equity........................ 54,554,548 54,548,463
------------ ------------
Total liabilities and stockholders' equity........ $100,302,998 $137,953,320
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
F-20
<PAGE> 117
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
1996 1997 1996 1997
----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues............................... $27,253,682 $40,504,088 $77,476,115 $108,582,680
Direct expenses............................ 11,879,545 17,451,773 35,095,128 48,981,775
----------- ----------- ----------- ------------
Gross profit............................... 15,374,137 23,052,315 42,380,987 59,600,905
Other costs and expenses:
General and administrative............... 10,731,990 16,214,442 30,387,223 46,048,540
Depreciation and amortization............ 924,557 1,285,725 2,173,262 3,616,038
Provision for doubtful accounts.......... 837,125 1,960,557 2,286,502 6,738,472
----------- ----------- ----------- ------------
Total costs and expenses......... 12,493,672 19,460,724 34,846,987 56,403,050
----------- ----------- ----------- ------------
Income from operations..................... 2,880,465 3,591,591 7,534,000 3,197,855
Interest expense, net...................... 525,447 1,437,301 1,663,374 3,214,765
----------- ----------- ----------- ------------
Income (loss) before income taxes.......... 2,355,018 2,154,290 5,870,626 (16,910)
Provision for income taxes................. 892,632 861,716 2,261,543 218,271
----------- ----------- ----------- ------------
Net income (loss).......................... $ 1,462,386 $ 1,292,574 $ 3,609,083 $ (235,181)
=========== =========== =========== ============
Net income (loss) per common share......... $ .17 $ .13 $ .49 $ (.02)
=========== =========== =========== ============
Weighted average common shares
outstanding.............................. 8,575,019 10,159,210 7,324,030 10,042,957
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-21
<PAGE> 118
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 3,609,083 $ (235,181)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 3,615,382 6,029,171
Proceeds on disposition on assets...................... -- 31,427
Changes in operating assets and liabilities, net of
acquired businesses:
Accounts receivable, net............................. (8,341,820) (16,153,174)
Prepaid expenses and other assets.................... (726,219) 813,299
Deferred income taxes................................ 1,056,514 (721,598)
Accounts payable and accrued expenses................ 754,777 3,552,943
Income taxes payable/receivable...................... (1,589,148) (1,146,174)
Deferred revenue..................................... 2,057,545 (946,904)
------------ ------------
Net cash provided by (used in) operating
activities...................................... 436,114 (8,776,191)
------------ ------------
Cash flows from investing activities:
Payments for business acquisitions, net of cash
acquired............................................... (17,381,259) (13,433,786)
Additions to property and equipment....................... (5,369,007) (4,744,404)
------------ ------------
Net cash used in investing activities............. (22,750,266) (18,178,190)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of debt............................ 35,592,469 30,946,579
Payments on debt and capital lease obligations............ (44,539,027) (4,221,294)
Issuance of common stock.................................. 30,639,500 229,096
------------ ------------
Net cash provided by financing activities......... 21,692,942 26,954,381
------------ ------------
Net decrease in cash and cash equivalents................... (621,210) --
Cash and cash equivalents, beginning of period.............. 1,627,940 --
------------ ------------
Cash and cash equivalents, end of period.................... $ 1,006,730 $ --
============ ============
Supplemental disclosure of cash flow information:
Debt issued in acquisitions............................... $ 1,366,068 $ 1,450,000
Liabilities and debt assumed in acquisitions.............. 244,674 876,756
Issuance of capital lease obligations..................... 2,940,652 5,626,303
Issuance of common stock to employee stock option plan.... 1,467,500 --
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-22
<PAGE> 119
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
- --------------------------
The unaudited condensed consolidated financial statements include the
accounts of HealthCor Holdings, Inc. and subsidiaries (the "Company") for the
nine months ended September 30, 1996 and 1997. All significant intercompany
transactions have been eliminated. Direct expenses on the statements of
operations include all costs directly related to the production of net revenues,
such as salary and related benefit costs, depreciation of hand-held
point-of-care computers, billable medical supplies, product purchase costs, and
rental equipment depreciation. Depreciation costs not directly attributable to
the generation of net revenues are included in other costs and expenses. The
accompanying unaudited condensed consolidated financial statements and notes
should be read in conjunction with the Company's consolidated financial
statements and related notes for the year ended December 31, 1996 included in
this Offering Memorandum. Certain amounts in the statements of income have been
reclassified from earlier presentations.
2. ACQUISITIONS:
- ----------------
Effective January 1, 1997, the Company acquired Sterling Health Services,
Inc., a provider of home nursing services in Kansas City, Missouri.
Effective April 1, 1997, the Company acquired, for $900,000 in cash and
$100,000 in debt, the net assets of VNS Health Services, Inc. which provides
Medicare, Medicaid and private duty nursing services in Santa Fe and Espanola,
New Mexico.
Effective April 19, 1997, the Company acquired, for $8,500,000 in cash and
$1,000,000 in debt, all of the outstanding capital stock of CareNetwork, Inc.,
which provides nursing services in Little Rock, Ft. Smith, Lowell and Hot
Springs, Arkansas.
Effective June 1, 1997, the Company acquired, for $3,100,000 in cash and
$250,000 in debt, the net assets of American Medical Home Care, Inc. which sells
and leases home medical equipment, respiratory therapy services and
rehabilitation equipment in Tucson, Arizona.
During 1996, the Company acquired 8 home health care businesses and one
personnel placement company. The home health care businesses consisted of 27
offices in Texas, Oklahoma, Arkansas and Louisiana. The aggregate purchase price
for all companies included cash of approximately $21.4 million and notes payable
to sellers of approximately $3.3 million.
The cash amounts have been funded under the Company's bank acquisition
credit facility.
The 1996 and 1997 acquisitions have been accounted for using the purchase
method of accounting. Accordingly, the purchase price was allocated to the
assets acquired (including all identifiable intangible assets, if material) and
liabilities assumed based upon their estimated fair values at the dates of
acquisition in accordance with APB No. 16. The results of operations of the
acquired practices are included in the consolidated financial statements from
the respective dates of acquisition. None of the acquisition agreements contain
any significant earn-out provisions.
F-23
<PAGE> 120
HEALTHCOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma information reflects the effect on the
consolidated statements of income assuming that all significant acquisitions
during 1996 and 1997 were consummated as of January 1, 1996 and 1997. This
information does not purport to be indicative of the results that would have
actually been obtained if the acquisitions had occurred on such dates.
Therefore, pro forma information cannot be considered indicative of future
operations.
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1997
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net revenues............................................... $116,742 $116,311
Net income (loss).......................................... 4,467 (180)
Net income (loss) per common share......................... $ 0.61 $ (0.02)
Weighted average common shares outstanding................. 7,324 10,043
</TABLE>
During the nine months ended September 30, 1997, net revenues on a pro
forma basis are slightly lower as compared to the nine-month period ended
September 30, 1996, primarily as a result of a decline in cost-reimbursed
nursing business revenues offset by increases in respiratory therapy, infusion
therapy and commercial nursing revenues.
3. BANK CREDIT FACILITY:
- -------------------------
The Company is party to a bank credit agreement, dated as of October 31,
1996 (the "Existing Credit Facility") that provides for aggregate borrowings of
$75.0 million, originally consisting of a $15.0 million revolving credit line
and a $60.0 million term facility for acquisitions. The Existing Credit Facility
has been amended to increase the revolving credit line to $30.0 million and to
reduce the term facility to $45.0 million. The revolving credit line expires on
October 31, 1999, and the term facility expires on October 31, 1998, and is
repayable in quarterly installments of principal and interest through October
31, 2001. As of September 30, 1997, the Company had outstanding $24.9 million
under the revolving credit facility and $22.3 million under the term facility.
The Company is currently not in compliance with several of the financial
covenants contained in the Existing Credit Facility. The lenders have waived the
Company's existing defaults through December 1, 1997. The Company has classified
all the indebtedness under the Existing Credit Facility, together with certain
other indebtedness cross-defaulted with the Existing Credit Facility, as current
liabilities at September 30, 1997.
The Company has engaged Bear, Stearns & Co. Inc. and Chase Securities Inc.
to offer senior notes in the principal amount of $80.0 million to refinance
approximately $50.7 million of indebtedness outstanding under the Existing
Credit Facility. The Company has received commitments of $20.0 million for a new
revolving credit facility from lenders under the Existing Credit Facility.
4. EARNINGS (LOSS) PER SHARE:
- ---------------------------------
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128 entitled "Earnings Per Share"
which requires publicly held companies with potentially dilutive securities to
change their earnings per share computation for years ending after December 15,
1997, and show a basic earnings per share (based on the weighted average number
of common shares outstanding) and a diluted earnings per share (based on the
weighted average number of common shares outstanding plus the effect of all
dilutive securities, such as stock options and warrants). The new statement is
expected to result in a slightly favorable impact on earnings (loss) per share
for certain prior periods. The Company will adopt SFAS No. 128 in the fourth
quarter of 1997.
F-24
<PAGE> 121
======================================================
ALL TENDERED OUTSTANDING NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER
RELATED DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND
REQUESTS FOR ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS,
THE LETTER OF TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE
EXCHANGE AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
P.O. BOX 1517
MINNEAPOLIS, MINNESOTA 55480-1517
ATTENTION: CORPORATE TRUST OPERATIONS
BY OVERNIGHT DELIVERY:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
NORWEST CENTER
6TH AND MARQUETTE
MINNEAPOLIS, MINNESOTA 55479-0069
ATTENTION: CORPORATE TRUST OPERATIONS
BY HAND DELIVERY:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
NORTHSTAR EAST 12TH FLOOR
608 2ND AVENUE
MINNEAPOLIS, MINNESOTA 55479-0113
ATTENTION: CORPORATE TRUST OPERATIONS
BY FACSIMILE:
(612) 667-4927
CONFIRM BY TELEPHONE: (612) 667-9764
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY BY
HAND, OVERNIGHT DELIVERY, OR REGISTERED OR CERTIFIED MAIL.)
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL
NOR BOTH TOGETHER CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THE PROSPECTUS RELATES OR
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR THE LETTER OF TRANSMITTAL OR BOTH TOGETHER NOR
ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREIN OR THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
======================================================
======================================================
$80,000,000
[HEALTHCOR HOLDINGS, INC. LOGO]
HEALTHCOR HOLDINGS, INC.
11% SENIOR NOTES
DUE 2004
------------
PROSPECTUS
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Disclosure Regarding Forward-Looking
Statements.......................... 4
Prospectus Summary.................... 5
Risk Factors.......................... 16
The Exchange Offer.................... 23
Use of Proceeds....................... 29
Selected Consolidated Historical
Financial Data...................... 30
Unaudited Pro Forma Condensed
Consolidated Financial Statements... 32
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 37
Business.............................. 42
Management............................ 52
Security Ownership.................... 59
Description of the New Credit
Facility............................ 60
Description of the Exchange Notes..... 61
Certain Federal Income Tax
Consequences........................ 90
Plan of Distribution.................. 94
Legal Matters......................... 95
Experts............................... 95
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
SUBJECT TO COMPLETION
DATED , 1998
======================================================
<PAGE> 122
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eighth of the registrant's Amended and Restated Certificate of
Incorporation provides that the registrant shall indemnify its officers and
directors to the maximum extent allowed by the Delaware general Corporation Law.
Pursuant to Section 145 of the Delaware General Corporation Law, the registrant
generally has the power to indemnify its present and former directors and
officers against expenses and liabilities incurred by them in connection with
any suit to which they are, or are threatened to be made, a party by reason of
their serving in those positions so long as they acted in good faith and in a
manner they reasonable believed to be in, or not opposed to, the best interests
of the registrant, and with respect to any criminal action, so long as they had
no reasonable cause to believe their conduct was unlawful. With respect to suits
by or in the right of the registrant, however, indemnification is generally
limited to attorneys' fees and other expenses and is not available if the person
is adjudged to be liable to the registrant, unless the court determines that
indemnification is appropriate. The statute expressly provides that the power to
indemnify authorized thereby is not exclusive of any rights granted under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
The registrant also has purchased and maintains insurance for its directors and
officers. Additionally, Article Eighth of the Company's Amended and Restated
Certificate of Incorporation provides that, in the event that an officer or
director files suit against the registrant seeking indemnification of
liabilities or expenses incurred, the burden will be on the registrant to prove
that the indemnification would not be permitted under the Delaware General
Corporation Law.
The preceding discussion of the registrant's Amended and Restated
Certificate of Incorporation and Section 145 of the Delaware general Corporation
Law is not intended to be exhaustive and is qualified in its entirety by the
Amended and Restated Certificate of Incorporation and Section 145 of the
Delaware General Corporation Law.
The registrant has entered into indemnification agreements with the
registrant's directors and officers. Pursuant to such agreements, the registrant
will, to the extent permitted by applicable law, indemnify such persons against
all expenses, judgments, fines and penalties incurred in connection with the
defense or settlement of any actions brought against them by reason of the fact
that they were directors or officers of the registrant or assumed certain
responsibilities at the direction of the registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 -- Purchase Agreement dated November 24, 1997, by and among
the Company, the guarantors named on the signature pages
thereto, Bear, Stearns & Co. Inc. and Chase Securities
Inc.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to the Company's
Registration Statement on Form S-1 (File No. 333-5779),
as filed with the Commission on June 12, 1996).
3.2 -- Amended and Restated Bylaws of the Company (incorporated
by reference to the Company's Registration Statement on
Form S-1 (File No. 333-5779), as filed with the
Commission on June 12, 1996).
4.1 -- Specimen Stock Certificate of the Company (incorporated
by reference to the Company's Registration Statement on
Form S-1 (File No. 333-5779), as filed with the
Commission on June 12, 1996).
4.2 -- Indenture dated as of December 1, 1997, by and among the
Company, the Guarantors Signatories Thereto and Norwest
Bank Minnesota, National Association, as Trustee.
</TABLE>
II-1
<PAGE> 123
4.3 -- First Supplemental Indenture dated as of December 2, 1997
to Indenture dated as of December 1, 1997, by and among
the Company, the Guarantors Signatories Thereto and
Norwest Bank Minnesota, National Association, as Trustee.
4.4 -- Form of Global Note (included in Exhibit 4.2).
4.5 -- Registration Rights Agreement dated as of December 1,
1997, by and among Bear Stearns & Co. Inc., Chase
Securities Inc., the Company, and certain subsidiaries of
the Company, as Guarantors.
4.6 -- Second Amended and Restated Credit Agreement dated
December 1, 1997, by and among Texas Commerce Bank
National Association, as Agent and an Issuing Bank, the
Several Financial Institutions from time to time a party
thereto and the Company.
5.1* -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 -- Registration Rights Agreement, dated as of June 1, 1992
between the Company and certain stockholders of the
Company (incorporated by reference to the Company's
Registration Statement on Form S-1 (File No. 333-5779) as
filed with the Commission on June 12, 1996).
10.2 -- The Company Employee Stock Ownership Plan and Trust,
dated April 1, 1990, as amended (incorporated by
reference to the Company's Registration Statement on Form
S-1 (File No. 333-5779) as filed with the Commission on
June 12, 1996).
10.3 -- Form of HealthCor Holdings, Inc. 1996 Long-Term Incentive
Plan (incorporated by reference to the Company's
Registration Statement on Form S-1 (File No. 333-5779) as
filed with the Commission on June 12, 1996).
10.4 -- HealthCor Holdings, Inc. Employee Stock Ownership Plan
and Trust, dated April 1, 1990, as amended (incorporated
by reference to the Company's Registration Statement on
Form S-1 (File No. 333-5779) as filed with the Commission
on June 12, 1996).
10.5 -- Warrant Agreement between the Company and an individual
to purchase Common Stock of the Company, dated as of
November 1, 1994 (incorporated by reference to the
Company's Registration Statement on Form S-1 (File No.
333-5779) as filed with the Commission on June 12, 1996).
10.6 -- Form of Indemnification Agreement entered into between
the Company and its executive officers and directors
(incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 333-5779) as filed with
the Commission on June 12, 1996).
10.7 -- Stock Purchase Agreement, dated April 15, 1996, by and
between I Care Home I.V. Affiliates, Inc., I Care of
Arkansas, Inc., I Care, Inc. and the Company
(incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 333-5779) as filed with
the Commission on June 12, 1996).
10.8 -- Asset Purchase Agreement, dated as of September 1, 1996,
by and between HealthCor Oxygen and Medical Equipment,
Inc. and Southern Medical Mart, Inc. (incorporated by
reference to the Company's Current Report on Form 8-K, as
filed with the Commission on November 12, 1996).
10.9 -- Credit Agreement, dated as of October 31, 1996, by and
between HealthCor Holdings, Inc., HealthCor, Inc. and the
certain financial institutions named therein
(incorporated by reference to the Company's Annual Report
on Form 10-K, as filed with the Commission on March 31,
1997).
10.10 -- Form of Change of Control Agreement.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
21.1 -- List of Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP, independent public
accountants.
23.2* -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in signature pages to this
Registration Statement).
II-2
<PAGE> 124
25.1 -- Statement of Eligibility of Trustee on Form T-1 of
Norwest Bank Minnesota, National Association.
99.1 -- Form of Letter of Transmittal.
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 125
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on this 12th day of January, 1998.
HEALTHCOR HOLDINGS, INC.
By: /s/ S. WAYNE BAZZLE
----------------------------------
S. Wayne Bazzle,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature to the
registration statement appears below hereby appoints S. Wayne Bazzle and Cheryl
C. Bazzle, or either of them, as his attorney-in-fact with full power to act
alone, with full power of substitution or resubstitution, for him and in his
name, place and stead, in any and all capacities to sign on his behalf,
individually and in the capacities stated below, and to sign any and all
amendments and post-effective amendments to this registration statement, which
amendment or amendments may make such changes and additions as such
attorney-in-fact may deem necessary or appropriate and to file the same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or his or their substitutes, may lawfully do or cause
to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ S. WAYNE BAZZLE Chairman of the Board, Chief January 12, 1998
- ----------------------------------------------------- Executive Officer and
S. Wayne Bazzle Director (Principal and
Executive Officer)
/s/ CHERYL C. BAZZLE President, Chief Operating January 12, 1998
- ----------------------------------------------------- Officer and Director
Cheryl C. Bazzle
/s/ JOEL H. WILLIAMS Vice President and Chief January 12, 1998
- ----------------------------------------------------- Financial Officer (Principal
Joel H. Williams Financial and Accounting
Officer)
/s/ MICHAEL J. FOSTER Director January 12, 1998
- -----------------------------------------------------
Michael J. Foster
/s/ ROBERT B. CRATES Director January 12, 1998
- -----------------------------------------------------
Robert B. Crates
/s/ JANE R. FINLEY, PH.D. Director January 12, 1998
- -----------------------------------------------------
Jane R. Finley, Ph.D.
</TABLE>
II-4
<PAGE> 126
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
1.1 -- Purchase Agreement dated November 24, 1997, by and among
the Company, the guarantors named on the signature pages
thereto, Bear, Stearns & Co. Inc. and Chase Securities
Inc.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to the Company's
Registration Statement on Form S-1 (File No. 333-5779),
as filed with the Commission on June 12, 1996).
3.2 -- Amended and Restated Bylaws of the Company (incorporated
by reference to the Company's Registration Statement on
Form S-1 (File No. 333-5779), as filed with the
Commission on June 12, 1996).
4.1 -- Specimen Stock Certificate of the Company (incorporated
by reference to the Company's Registration Statement on
Form S-1 (File No. 333-5779), as filed with the
Commission on June 12, 1996).
4.2 -- Indenture dated as of December 1, 1997, by and among the
Company, the Guarantors Signatories Thereto and Norwest
Bank Minnesota, National Association, as Trustee.
4.3 -- First Supplemental Indenture dated as of December 2, 1997
to Indenture dated as of December 1, 1997, by and among
the Company, the Guarantors Signatories Thereto and
Norwest Bank Minnesota, National Association, as Trustee.
4.4 -- Form of Global Note (included in Exhibit 4.2).
4.5 -- Registration Rights Agreement dated as of December 1,
1997, by and among Bear Stearns & Co. Inc., Chase
Securities Inc., the Company, and certain subsidiaries of
the Company, as Guarantors.
4.6 -- Second Amended and Restated Credit Agreement dated
December 1, 1997, by and among Texas Commerce Bank
National Association, as Agent and an Issuing Bank, the
Several Financial Institutions from time to time a party
thereto and the Company.
5.1* -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 -- Registration Rights Agreement, dated as of June 1, 1992
between the Company and certain stockholders of the
Company (incorporated by reference to the Company's
Registration Statement on Form S-1 (File No. 333-5779) as
filed with the Commission on June 12, 1996).
10.2 -- The Company Employee Stock Ownership Plan and Trust,
dated April 1, 1990, as amended (incorporated by
reference to the Company's Registration Statement on Form
S-1 (File No. 333-5779) as filed with the Commission on
June 12, 1996).
10.3 -- Form of HealthCor Holdings, Inc. 1996 Long-Term Incentive
Plan (incorporated by reference to the Company's
Registration Statement on Form S-1 (File No. 333-5779) as
filed with the Commission on June 12, 1996).
10.4 -- HealthCor Holdings, Inc. Employee Stock Ownership Plan
and Trust, dated April 1, 1990, as amended (incorporated
by reference to the Company's Registration Statement on
Form S-1 (File No. 333-5779) as filed with the Commission
on June 12, 1996).
10.5 -- Warrant Agreement between the Company and an individual
to purchase Common Stock of the Company, dated as of
November 1, 1994 (incorporated by reference to the
Company's Registration Statement on Form S-1 (File No.
333-5779) as filed with the Commission on June 12, 1996).
10.6 -- Form of Indemnification Agreement entered into between
the Company and its executive officers and directors
(incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 333-5779) as filed with
the Commission on June 12, 1996).
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.7 -- Stock Purchase Agreement, dated April 15, 1996, by and
between I Care Home I.V. Affiliates, Inc., I Care of
Arkansas, Inc., I Care, Inc. and the Company
(incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 333-5779) as filed with
the Commission on June 12, 1996).
10.8 -- Asset Purchase Agreement, dated as of September 1, 1996,
by and between HealthCor Oxygen and Medical Equipment,
Inc. and Southern Medical Mart, Inc. (incorporated by
reference to the Company's Current Report on Form 8-K, as
filed with the Commission on November 12, 1996).
10.9 -- Credit Agreement, dated as of October 31, 1996, by and
between HealthCor Holdings, Inc., HealthCor, Inc. and the
certain financial institutions named therein
(incorporated by reference to the Company's Annual Report
on Form 10-K, as filed with the Commission on March 31,
1997).
10.10 -- Form of Change of Control Agreement.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
21.1 -- List of Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP, independent public
accountants.
23.2* -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in signature pages to this
Registration Statement).
25.1 -- Statement of Eligibility of Trustee on Form T-1 of
Norwest Bank Minnesota, National Association.
99.1 -- Form of Letter of Transmittal.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
EXECUTION COPY
HEALTHCOR HOLDINGS, INC.
AND
THE GUARANTORS NAMED ON THE SIGNATURE PAGES HERETO
$80,000,000
11% Senior Notes due 2004
Purchase Agreement
November 24, 1997
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
<PAGE> 2
HEALTHCOR HOLDINGS, INC.
$80,000,000
11% Senior Notes due 2004
PURCHASE AGREEMENT
November 24, 1997
New York, New York
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
HealthCor Holdings, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Bear, Stearns & Co. Inc. and Chase Securities Inc.
(together, the "Initial Purchasers") $80,000,000 in aggregate principal amount
of 11% Senior Notes due 2004 (the "Initial Securities"), subject to the terms
and conditions set forth herein. The Initial Securities will be issued pursuant
to an indenture (the "Indenture"), to be dated the Closing Date (as defined),
among the Company, the Guarantors (as defined) and Norwest Bank Minnesota, N.A.,
as trustee (the "Trustee"). The Securities (as defined) will be fully and
unconditionally guaranteed on a senior unsecured and joint and several basis
(the "Subsidiary Guarantees") by the Company's present and future domestic
Subsidiaries (collectively, the "Guarantors"). Capitalized terms used herein and
not otherwise defined shall have the meanings assigned to such terms in the
Indenture.
1. Issuance of Securities. The Company proposes, upon the terms and
subject to the conditions set forth herein, to issue and sell to the Initial
Purchasers an aggregate of $80,000,000 in principal amount of Initial
Securities. The Initial Securities and the Exchange Securities (as defined)
issuable in exchange therefor are collectively referred to herein as the
"Securities."
1
<PAGE> 3
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Act"), the Initial Securities (and all securities issued in
exchange therefor or in substitution thereof) shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (a) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS A NON-U.S. PERSON THAT IS OUTSIDE THE
UNITED STATES; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (a) TO THE COMPANY, (b) TO A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE),
(D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), (E) OUTSIDE THE UNITED STATES
TO A PERSON THAT IS NOT A "U.S. PERSON"AS DEFINED IN RULE 902 UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING
CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF SUCH HOLDER'S
PROPERTY OR THE PROPERTY OF SUCH ACCOUNT AT ALL TIMES BE WITHIN ITS
CONTROL AND TO COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY
JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THE
TRANSFER RESTRICTIONS SET FORTH IN THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF ANY CERTIFIED SECURITY, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE OF SUCH CERTIFIED SECURITY
RELATING TO THE
2
<PAGE> 4
MANNER OF SUCH TRANSFER AND SUBMIT SUCH CERTIFICATED SECURITY TO THE
MANNER OF SUCH TRANSFER AND SUBMIT SUCH CERTIFIED SECURITY TO THE
TRUSTEE. IF ANY PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FORM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR APPLICABLE SECURITIES LAWS OF ANY JURISDICTION. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS."
2. Offering. The Initial Securities will be offered and sold to the
Initial Purchasers pursuant to an exemption from the registration requirements
under the Act. The Company has prepared a preliminary offering memorandum, dated
November 10, 1997 (the "Preliminary Offering Memorandum"), and a final offering
memorandum, dated November 24, 1997 (the "Offering Memorandum"), relating to the
Company, the Initial Securities and the Subsidiary Guarantees.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers (the "Exempt Resales") of the Initial Securities on
the terms set forth in the Offering Memorandum, as amended or supplemented,
solely to (i) persons whom the Initial Purchasers reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under the Act ("QIBs")
and (ii) non-U.S. persons outside the United States in reliance upon Regulation
S ("Regulation S") under the Act (each, a "Reg S Investor"). The QIBs and Reg S
Investors are collectively referred to herein as the "Eligible Purchasers."
Holders (including subsequent transferees) of the Initial Securities
will have the registration rights set forth in the registration rights agreement
relating thereto (the "Registration Rights Agreement"), to be dated the Closing
Date, for so long as such Initial Securities constitute "Transfer Restricted
Securities" (as defined in the Registration Rights Agreement). Pursuant to the
Registration Rights Agreement, the Company and the Guarantors will agree to file
with the Securities and Exchange Commission (the "Commission"), under the
circumstances set forth therein, (i) a registration statement under the Act (the
"Exchange Offer Registration Statement") relating to the 11% Notes due 2004 (the
"Exchange Securities") identical in all material respects to the Initial
Securities (except that the Exchange Securities will not contain terms with
respect to transfer restrictions or Liquidated Damages) to be offered in
exchange for the Initial Securities (the "Exchange Offer") and (ii) under
certain circumstances, a shelf registration statement pursuant to Rule 415 under
the Act (the "Shelf
3
<PAGE> 5
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Initial Securities, and to use their best efforts to cause such
Registration Statements to be declared effective and to consummate the
Exchange Offer. This Agreement, the Securities, the Subsidiary Guarantees,
the Indenture, the Registration Rights Agreement and the New Credit Facility (as
defined in the Offering Memorandum) are hereinafter referred to collectively as
the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to
each Initial Purchaser, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company, the principal amount of Initial
Securities set forth opposite its name on Schedule I hereto. The purchase price
for the Initial Securities will be $970 per $1,000 principal amount of Initial
Securities.
(b) Delivery of the Initial Securities shall be made, against
payment of the purchase price therefor, at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, New York, New York or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m., New York City
time, on December 1, 1997 or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such delivery and
payment are herein called the "Closing Date."
(c) On the Closing Date, payment of the purchase price for the
Initial Securities shall be made to the Company by wire or book-entry transfer
of immediately available same-day funds to such account or accounts as the
Company shall specify prior to the Closing Date or by such other means as the
parties hereto shall agree prior to the Closing Date against delivery to the
Initial Purchasers of the certificates evidencing the Initial Securities. Upon
delivery, the Initial Securities shall be in global form, registered in such
names and in such denominations as the Initial Purchasers shall have requested
in writing not less than two full business days prior to the Closing Date. The
Company agrees to make copies of one or more global certificates evidencing the
Initial Securities available for inspection by the Initial Purchasers in New
York, New York at least 24 hours prior to the Closing Date.
4. Agreements of the Company and the Guarantors. The Company and the
Guarantors, jointly and severally, covenant and agree with the Initial
Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested
by the Initial Purchasers, confirm such advice in writing, (i) of the issuance
in any jurisdiction of any stop order suspending the qualification or exemption
from qualification of any Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority in any jurisdiction and (ii) of the
happening of any event that makes any statement of a material fact made in the
Preliminary Offering Memorandum or the Offering Memorandum untrue or that
requires the making of any
4
<PAGE> 6
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Company and the
Guarantors shall use commercially reasonable efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption of any
Securities under any securities or Blue Sky laws and, if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any Securities or Subsidiary
Guarantees of Securities under any securities or Blue Sky laws, the Company and
the Guarantors shall use commercially reasonable efforts to obtain the
withdrawal or lifting of such order at the earliest practicable time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as many
copies of the Preliminary Offering Memorandum and the Offering Memorandum,
including all documents incorporated therein by reference, and any amendments or
supplements thereto, as the Initial Purchasers may reasonably request. The
Company and the Guarantors consent to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum prior to the Closing Date unless the
Initial Purchasers shall previously have been advised thereof and shall not have
reasonably objected thereto within a reasonable time after being furnished a
copy thereof. The Company and the Guarantors shall promptly prepare, upon the
Initial Purchasers' reasonable request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that the Initial
Purchasers or the Company believe may be necessary or advisable in connection
with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resale, any event shall occur as a result of which, in the judgment of
the Company and the Guarantors based on the advice of counsel for the Company
and the Guarantors or the Initial Purchasers or counsel for the Initial
Purchasers, it becomes necessary or advisable to amend or supplement the
Preliminary Offering Memorandum or Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such Offering
Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum to comply
with applicable law, (i) to notify the Initial Purchasers and (ii) forthwith to
prepare an appropriate amendment or supplement to such Preliminary Offering
Memorandum or Offering Memorandum so that the statements therein as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Preliminary Offering Memorandum or
Offering Memorandum will comply with applicable law.
5
<PAGE> 7
(e) To cooperate with the Initial Purchasers and counsel for the
Initial Purchasers in connection with the qualification or registration of the
Initial Securities under the securities or Blue Sky laws of such jurisdictions
as the Initial Purchasers may reasonably request and to continue such
qualification in effect so long as required for the Exempt Resales; provided,
however, that none of the Company or the Guarantors shall be required in
connection therewith to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to service of
process in suits or taxation, in each case, other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction where it is not now so
subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is terminated,
to pay all costs, expenses, fees and taxes incident to the performance of the
obligations of the Company and the Guarantors hereunder, including in connection
with: (i) the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum and the Offering Memorandum (including, without limitation,
financial statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the preparation (including, without limitation,
duplication costs) and delivery of all agreements, correspondence and all other
documents prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery of the Securities and the
Subsidiary Guarantees to the Initial Purchasers, (iv) the qualification or
registration of the Securities and the Subsidiary Guarantees for offer and sale
under the securities or Blue Sky laws of the several states (including, without
limitation, the cost of printing and mailing a preliminary and final Blue Sky
Memorandum and the reasonable fees and disbursements of counsel for the Initial
Purchasers relating thereto), (v) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and all amendments and
supplements thereto, as may be requested for use in connection with Exempt
Resales, (vi) the preparation of certificates for the Securities and the
Subsidiary Guarantees (including, without limitation, printing and engraving
thereof), (vii) the fees, disbursements and expenses of the Company's and the
Guarantors' counsel and accountants, (viii) all fees and expenses (including
fees and expenses of counsel) of the Company in connection with the approval of
the Securities by DTC for "book-entry" transfer, (ix) rating the Securities by
rating agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel, (xi) the performance by the Company and the Guarantors of their other
obligations under this Agreement and the other Operative Documents and (xii)
"roadshow" travel and other expenses incurred in connection with the marketing
and sale of the Securities.
(g) To use the proceeds from the sale of the Initial Securities
in the manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of any Securities.
6
<PAGE> 8
(i) To do and perform all things required to be done and
performed under this Agreement by them prior to or after the Closing Date and to
use its best efforts to satisfy all conditions precedent within their reasonable
control to the delivery of the Initial Securities and the Subsidiary Guarantees.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Initial Securities in a manner that
would require the registration under the Act of the sale to the Initial
Purchasers or the Eligible Purchasers of the Initial Securities or to take any
other action that would result in the Exempt Resales not being exempt from
registration under the Act.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company and the Guarantors are not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder or beneficial owner of Initial
Securities in connection with any sale thereof and any prospective purchaser of
such Securities from such holder or beneficial owner, the information required
by Rule 144A(d)(4) under the Act.
(l) To file an Exchange Offer Registration Statement and to use
its best efforts to have the Exchange Offer Registration Statement declared
effective, in accordance with and subject to the terms set forth in the
Registration Rights Agreement, to permit registered Exchange Securities to be
offered in exchange for the Initial Securities and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(m) To comply in all material respects with all of their
agreements set forth in the Registration Rights Agreement and all agreements set
forth in the representation letters of the Company to DTC relating to the
approval of the Securities by DTC for "book-entry" transfer.
(n) To effect the inclusion of the Securities in PORTAL and to
obtain approval of the Initial Securities by DTC for "book-entry" transfer.
(o) During a period of two years following the Closing Date, to
deliver without charge to the Initial Purchasers, as they may reasonably
request, promptly upon their becoming available, copies of (i) all reports or
other publicly available information that the Company shall mail or otherwise
make available to its securityholders and (ii) all reports, financial statements
and proxy or information statements filed by the Company with the Commission or
any national securities exchange and such other publicly available information
concerning the Company or any of its subsidiaries, including without limitation,
press releases.
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<PAGE> 9
(p) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared in the ordinary course by the
Company and each Guarantor, copies of any unaudited interim financial statements
for any period subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(q) Not to take, directly or indirectly, and not to permit any of
the Company's subsidiaries to take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of the
Guarantors to facilitate the sale or resale of the Securities. Except as
permitted by the Act, none of the Company or the Guarantors will distribute any
(i) preliminary offering memorandum, including, without limitation, the
Preliminary Offering Memorandum, (ii) offering memorandum, including, without
limitation, the Offering Memorandum, or (iii) other offering material in
connection with the offering and sale of the Securities.
(r) For a period of 180 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file a registration statement for, or announce
any offer, sale, contract for sale of or other disposition of any debt
securities issued or guaranteed by the Company or any of its subsidiaries (other
than the Initial Securities or Exchange Securities; it being understood that,
for the purposes of this Section 4(s), the term debt securities does not include
indebtedness incurred pursuant to the New Credit Facility or indebtedness
incurred under any other term, revolving credit or bank facility provided by
banks or bank syndicates) without the prior written consent of the Initial
Purchasers.
(s) To use its best efforts to do and perform all things required
or necessary to be done and performed under this Agreement prior to the Closing
Date and to satisfy all conditions precedent to the delivery of the Initial
Securities and the Subsidiary Guarantees.
(t) To use their best efforts to cause Physicians Home Health
Network, Inc., a Missouri corporation, to redomesticate to either Delaware,
Texas or another jurisdiction reasonably acceptable to the Initial Purchasers
(including without limitation through merger with an existing Subsidiary), on or
prior to the Closing Date or as soon thereafter as reasonably practicable.
5. Representations and Warranties. (a) The Company and the Guarantors,
jointly and severally, represent and warrant to the Initial Purchasers that:
(i) The Preliminary Offering Memorandum as of its date does not, and
the Offering Memorandum as of its date and as of the Closing Date does not
and will not, and any supplement or amendment to them will not, contain any
untrue statement of a
8
<PAGE> 10
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained
in this paragraph shall not apply to statements in or omissions from
the Preliminary Offering Memorandum and the Offering Memorandum (or
any supplement or amendment thereto) made in reliance upon and in
conformity with information relating to either Initial Purchaser
furnished to the Company in writing by such Initial Purchaser
expressly for use therein. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of
the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(ii) (A) Any documents incorporated by reference in the Offering
Memorandum, when they became effective or were filed with the
Commission, as the case may be, did not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(B) any documents incorporated by reference in the Offering Memorandum
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Exchange Act; and (C) any further documents so filed and
incorporated by reference in the Offering Memorandum or any further
amendment or supplement hereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Exchange Act.
(iii) Each of the Company and the Guarantors (A) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, (B) has all
requisite corporate power and authority to carry on its business as it
is currently being conducted and as described in the Offering
Memorandum and to own, lease and operate its properties, and (C) is
duly qualified and in good standing as a foreign corporation,
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to (x) result, individually or in the
aggregate, in a material adverse effect on the properties, prospects,
business, results of operations or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (y) interfere
with or adversely affect the issuance of the Securities or the
issuance of the Subsidiary Guarantees pursuant hereto or (z) in any
manner draw into question the validity of this Agreement or any other
Operative Document (any of the events set forth in clauses (x), (y) or
(z), a "Material Adverse Effect").
(iv) The Company has no subsidiaries other than the Guarantors.
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<PAGE> 11
(v) All of the issued and outstanding shares of capital stock of
each subsidiary of the Company is owned by the Company, free and clear
of any security interest, claim, lien, limitation on voting rights or
encumbrance, except for any such security interest, claim, restriction
on transfer, lien, limitation on voting rights or encumbrance pursuant
to the Existing Credit Facility (which shall be terminated on the
Closing Date) and the New Credit Facility; and all such securities
have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or
similar rights.
(vi) Except as set forth in the Offering Memorandum, there are
not currently any outstanding subscriptions, rights, warrants, calls,
commitments of sale or options to acquire, or instruments convertible
into or exchangeable for, any capital stock or other equity interest
of the Company or any of its subsidiaries.
(vii) When the Initial Securities and the Subsidiary Guarantees
are issued and delivered pursuant to this Agreement, no Initial
Security or Subsidiary Guarantee will be of the same class (within the
meaning of Rule 144A under the Act) as securities of the Company or of
any of the Guarantors that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
(viii) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the
Securities and to issue and deliver the Subsidiary Guarantees as
provided herein and therein.
(ix) This Agreement has been duly and validly authorized,
executed and delivered by each of the Company and the Guarantors and
(assuming the due authorization, execution and delivery of this
Agreement by the Initial Purchasers) is the legal, valid and binding
agreement of each of the Company and the Guarantors, enforceable
against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity, regardless of
whether such enforcement is sought in a proceeding in equity or at
law.
(x) The Indenture has been duly and validly authorized by each of
the Company and the Guarantors and, when duly executed and delivered
by each of the Company and the Guarantors, will be the legal, valid
and binding obligation of each of the Company and the Guarantors,
enforceable against each of them in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles
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<PAGE> 12
of equity. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. The Offering Memorandum contains a summary of
the terms of the Indenture, which is accurate in all material
respects.
(xi) The Registration Rights Agreement has been duly and validly
authorized by each of the Company and the Guarantors and, when duly
executed and delivered by each of the Company and the Guarantors, will
be the legal, valid and binding obligation of each of the Company and
the Guarantors, enforceable against each of them in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
Offering Memorandum contains a summary of the terms of the
Registration Rights Agreement, which is accurate and complete in all
material respects.
(xii) The New Credit Facility has been duly and validly
authorized by each of the Company and its subsidiaries party thereto
and, when duly executed and delivered by each of the Company and such
subsidiaries, will be the legal, valid and binding obligation of each
of the Company and such subsidiaries, enforceable against each of them
in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity. The Offering Memorandum contains a summary of
the terms of the New Credit Facility, which is accurate and complete
in all material respects.
(xiii) The Initial Securities have been duly and validly
authorized by the Company for issuance and sale to the Initial
Purchasers pursuant to this Agreement and, when issued and
authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof
and thereof, will be the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their terms and
entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject
to general principles of equity. The Offering Memorandum contains a
summary of the terms of the Securities, which is accurate and complete
in all material respects.
(xiv) The Exchange Securities have been duly and validly
authorized for issuance by the Company and, when issued and
authenticated in accordance with the terms of the Exchange Offer and
the Indenture, will be the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their terms and
entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors
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<PAGE> 13
generally and subject to general principles of equity.
(xv) The Subsidiary Guarantees of the Initial Securities have
been duly and validly authorized by each of the Guarantors and, when
executed and delivered in accordance with the terms of the Indenture
and when the Initial Securities have been issued and authenticated in
accordance with the terms of the Indenture and delivered against
payment therefor in accordance with the terms hereof and thereof, will
be the legal, valid and binding obligations of each of the Guarantors,
enforceable against each of them in accordance with their terms and
entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject
to general principles of equity. The Offering Memorandum contains a
summary of the terms of the Subsidiary Guarantees, which is accurate
in all material respects.
(xvi) The Subsidiary Guarantees of the Exchange Securities have
been duly and validly authorized by each of the Guarantors and, when
executed and delivered in accordance with the terms of the Indenture
and when the Exchange Securities have been issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture,
will be the legal, valid and binding obligations of each of the
Guarantors, enforceable against each of them in accordance with their
terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
(xvii) The statistical and market-related data included in the
Offering Memorandum are based on or derived from sources which the
Company believes to be reliable and accurate in all material respects.
(xviii) Each of the Company and its subsidiaries is not and,
after giving effect to the Offering, will not be, (A) in violation of
its charter or bylaws, (B) in default in the performance of any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which it is a party or by which it is bound or to
which any of its properties is subject, which singly or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect, except as disclosed in the Offering Memorandum, or (C) in
violation of any local, state, federal or foreign law, statute,
ordinance, rule, regulation, requirement, judgment or court decree
(including, without limitation, environmental laws, statutes,
ordinances, rules, regulations, judgments or court decrees) applicable
to it or any of its subsidiaries or any of its or their assets or
properties (whether owned or leased), which singly or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect, except as disclosed in the Offering Memorandum. To the best
knowledge of the Company and the Guarantors after reasonable inquiry,
there exists no condition that, with notice, the passage of time or
both, would constitute a default under any such document or instrument
except for
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<PAGE> 14
any such default that could not, individually or in the aggregate
with other defaults, reasonably be expected to have a Material Adverse
Effect.
(xix) None of (A) the execution, delivery or performance by the
Company or any of the Guarantors of this Agreement or any of the other
Operative Documents to which it is a party and (B) the issuance and
sale of the Securities and the issuance of the Subsidiary Guarantees,
violates, conflicts with or constitutes a breach of any of the terms
or provisions of, or a default under (or an event that with notice or
the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance on
any properties of the Company or any of its subsidiaries, or an
acceleration of any indebtedness of the Company or any of its
subsidiaries pursuant to, (1) the charter or bylaws of the Company or
any of its subsidiaries, (2) any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which any of them
or their property is or may be bound, (3) any statute, rule or
regulation applicable to the Company or any of its subsidiaries or any
of their assets or properties or (4) any judgment, order or decree of
any court or governmental agency or authority having jurisdiction over
the Company or any of its subsidiaries or any of their assets or
properties, except in each case, in the case of clauses (2), (3) and
(4), for those violations, defaults, consents, impositions of liens or
acceleration that could not reasonably be expected to have a Material
Adverse Effect. Except as may be required under applicable state
securities or Blue Sky laws, and except for the filing of registration
statements under the Act, and any other requirements of the Act or
Exchange Act applicable in connection with the transactions
contemplated by the Registration Rights Agreement, and qualification
of the Indenture under the Trust Indenture Act in connection with the
Registration Rights Agreement, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of
or with, (A) any court or governmental agency, body or administrative
agency or (B) any other person is required for (1) the execution,
delivery and performance by the Company or any of the Guarantors of
this Agreement or any of the other Operative Documents to which it is
a party or (2) the issuance and sale of the Securities and the
issuance of the Subsidiary Guarantees and the transactions
contemplated hereby and thereby, except such as have been or will be
obtained and made on or prior to the Closing Date (or, in the case of
the Registration Rights Agreement, will be obtained and made under the
Act, the Trust Indenture Act, and state securities or Blue Sky laws
and regulations).
(xx) There is (A) no action, suit, investigation or proceeding
before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending or, to the best knowledge
of the Company and the Guarantors, after reasonable inquiry,
threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property
of the Company or any of its subsidiaries is or may be subject, (B) no
statute, rule, regulation or order that has been
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<PAGE> 15
enacted, adopted or issued by any governmental agency or, to the
knowledge of the Company, that has been proposed by any governmental
body and (C) no injunction, restraining order or order of any nature
by a federal or state court or foreign court of competent jurisdiction
to which the Company or any of its subsidiaries is or may be subject
or to which the business, assets or property of the Company or any of
its subsidiaries is or may be subject, that, in the case of clauses
(A), (B) and (C) above, is required to be disclosed in the Preliminary
Offering Memorandum and the Offering Memorandum and that is not so
disclosed or (2) could reasonably be expected to result in a Material
Adverse Effect.
(xxi) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental
agency that prevents or suspends the issuance or sale of the
Securities or the Subsidiary Guarantees or prevents or suspends the
use of the Offering Memorandum; no injunction, restraining order or
order of any nature by a federal or state court of competent
jurisdiction has been issued that prevents the issuance of the
Securities or the Subsidiary Guarantees or prevents or suspends the
sale of the Securities in any jurisdiction referred to in Section 4(e)
hereof; and every request of any securities authority or agency of any
jurisdiction for additional information has been complied with in all
material respects.
(xxii) The Company has delivered to the Initial Purchasers true
and correct copies of all documents and agreements related to the New
Credit Facility, including all amendments, alterations, modifications
or waivers thereto and all exhibits or schedules thereto.
(xxiii) There is (A) no unfair labor practice complaint pending
against the Company or any of its subsidiaries nor, to the best
knowledge of the Company and the Guarantors, after reasonable inquiry,
threatened against any of them, before the National Labor Relations
Board, any state or local labor relations board or any foreign labor
relations board, and no grievance or arbitration proceeding arising
out of or under any collective bargaining agreement is so pending
against the Company or any of its subsidiaries or, to the best
knowledge of the Company and the Guarantors, after reasonable inquiry,
threatened against any of them, (B) no strike, labor dispute, slowdown
or stoppage pending against the Company or any of its subsidiaries
nor, to the best knowledge of the Company and the Guarantors, after
reasonable inquiry, threatened against the Company or any of its
subsidiaries and (C) to the best knowledge of the Company and the
Guarantors, no union representation question existing with respect to
the employees of the Company or any of its subsidiaries, except for
those complaints, grievances, arbitration proceedings, strikes, labor
disputes slowdowns, stoppages or representation questions, as
applicable, that could not reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Company and the
Guarantors, no collective bargaining organizing activities are taking
place with respect to the Company or any of its subsidiaries. None of
the Company or any of its
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subsidiaries has violated (A) any federal, state or local law or
foreign law relating to discrimination in hiring, promotion or pay of
employees, (B) any applicable wage or hour laws or (C) any provision
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations thereunder, except in each
case for those violations that could not reasonably be expected to
have a Material Adverse Effect.
(xxiv) None of the Company or any of its subsidiaries has
violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws") which could reasonably be expected to have a
Material Adverse Effect.
(xxv) There is no alleged liability, or to the best knowledge of
the Company and the Guarantors, potential liability (including,
without limitation, alleged or potential liability or investigatory
costs, cleanup costs, governmental response costs, natural resource
damages, property damages, personal injuries or penalties) of the
Company or any of its subsidiaries arising out of, based on or
resulting from (a) the presence or release into the environment of
any Hazardous Material (as defined) at any location, whether or not
owned by the Company or such subsidiary, as the case may be, or (b)
any violation or alleged violation of any Environmental Law, which
alleged or potential liability is required to be disclosed in the
Offering Memorandum, other than as disclosed therein, or could not
reasonably be expected to have a Material Adverse Effect. The term
"Hazardous Material" means (i) any "hazardous substance" as defined
by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act, as amended,
(iii) any petroleum or petroleum product, (iv) any polychlorinated
biphenyl, and (v) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material, waste or substance regulated
under or within the meaning of any other law relating to protection
of human health or the environment or imposing liability or standards
of conduct concerning any such chemical material, waste or substance.
(xxvi) Except as disclosed in the Offering Memorandum, the
Company and its subsidiaries has such permits, licenses, franchises
and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate
their respective properties and to conduct their businesses except
where the failure to have such permits could not reasonably be
expected to result in a Material Adverse Effect; each of the Company
and its subsidiaries has fulfilled and performed all of its
obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other impairment of the
rights of the holder of any such permit, and, except as
15
<PAGE> 17
disclosed in the Offering Memorandum, except where the failure to
fulfill or perform its obligations or the occurrence of such event, as
applicable, could not reasonably be expected to have a Material
Adverse Effect.
(xxvii) Each of the Company and its subsidiaries has (A) good and
indefeasible title to all of the properties and assets material to the
business of the Company and its subsidiaries taken as a whole as owned
by it, free and clear of all liens, charges, encumbrances and
restrictions (except for Permitted Liens (as defined in the Indenture)
and taxes not yet payable), (B) peaceful and undisturbed possession
under all material leases to which any of them is a party as lessee
and each of which lease is valid and binding and no default exists
thereunder, except for defaults that could not reasonably be expected
to have a Material Adverse Effect, (C) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from,
and has made all declarations and filings with, all federal, state and
local authorities, all self-regulatory authorities and all courts and
other tribunals (each, an "Authorization") necessary to engage in the
business conducted by any of them in the manner described in the
Offering Memorandum, except where the failure to have such
Authorization could not reasonably be expected to have a Material
Adverse Effect and (D) no reason to believe that any governmental
body or agency is considering limiting, suspending or revoking any
such Authorization, except where such limitation, suspension or
revocation could not reasonably be expected to have a Material
Adverse Effect. All such Authorizations are valid and in full force
and effect and each of the Company and its subsidiaries is in
compliance in all respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto, except where
the failure to comply could not reasonably be expected to have a
Material Adverse Effect. All material leases to which the Company or
any of its subsidiaries is a party are valid and binding and no
default by the Company or such subsidiary, as the case may be, has
occurred and is continuing thereunder and, to the best knowledge of
the Company and the Guarantors, no material defaults by the landlord
are existing under any such lease, except as could not reasonably be
expected to have a Material Adverse Effect.
(xxviii) Each of the Company and its subsidiaries owns, possesses
or has the right on either an exclusive or non-exclusive basis to use
all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, software, systems or
procedures), trademarks, service marks and trade names, inventions,
computer programs, technical data and information (collectively, the
"Intellectual Property") presently employed by it in connection with
the businesses now operated by it or that are proposed to be operated
by it free and clear of and without violating any right, claimed
right, charge, encumbrance, pledge, security interest, restriction or
lien of any kind of any other person, except for any rights, claimed
rights, charges, encumbrances, pledges, security interests,
restrictions or liens that could not reasonably
16
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be expected to have a Material Adverse Effect, and none of the
Company or any of its subsidiaries has received any written notice of
infringement of or conflict with asserted rights of others with
respect to any of the foregoing. The use of the Intellectual Property
in connection with the business and operations of the Company or any
of its subsidiaries does not infringe on the rights of any person,
except as could not reasonably be expected to have a Material Adverse
Effect.
(xxix) All federal tax returns and other material tax returns
required to be filed by the Company or any of its subsidiaries in all
jurisdictions have been so filed. All taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due
or claimed to be due from such entities or that are due and payable
have been paid, other than those being contested in good faith and for
which adequate reserves have been provided or those currently payable
without penalty or interest. To the knowledge of the Company and the
Guarantors after reasonable inquiry, there are no proposed additional
tax assessments against the Company or any of its subsidiaries which
could reasonably be expected to, if the assessments were made, have a
Material Adverse Effect, or against the assets or property of the
Company or any of its subsidiaries, except those tax assessments for
which adequate reserves have been established.
(xxx) None of the Company or any of its subsidiaries is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
(xxxi) There are no holders of securities of the Company or any
of its subsidiaries who, by reason of the execution by the Company and
the Guarantors of this Agreement or any other Operative Document or
the consummation by the Company and the Guarantors of the transactions
contemplated hereby and thereby, have the right to request or demand
that the Company or any of its subsidiaries register under the Act or
analogous foreign laws and regulations securities held by them.
(xxxii) Each of the Company and its subsidiaries maintains a
system of internal accounting controls sufficient to provide
reasonable assurance that: (A) material transactions are executed in
accordance with management's general or specific authorizations; (B)
material transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (C)
access to material assets is permitted only in accordance with
management's general or specific authorization; (D) the recorded
accountability for material assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect thereto; and (E) material liabilities and accruals are
properly recognized.
(xxxiii) Each of the Company and its subsidiaries maintains, or
the Company
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maintains on behalf of each of its subsidiaries, insurance covering
its material properties, operations, personnel and businesses. To the
best of the Company's knowledge, such insurance insures against such
losses and risks as are adequate in accordance with industry practice
to protect the Company and its subsidiaries and their respective
businesses. None of the Company or any of its subsidiaries has
received notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will
have to be made in order to continue such insurance.
(xxxiv) None of the Company or any of its subsidiaries has (A)
taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of its
subsidiaries to facilitate the sale or resale of the Securities or (B)
since the date of the Preliminary Offering Memorandum (1) sold, bid
for, purchased or paid any person any compensation for soliciting
purchases of the Securities or (2) paid or agreed to pay to any person
any compensation for soliciting another to purchase any other
securities of the Company or any of its subsidiaries.
(xxxv) No registration under the Act of the Initial Securities is
required for the sale of the Initial Securities to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming
(A) that the Notes are sold to the Initial Purchasers, and initially
resold by the Initial Purchasers, in accordance with the terms of, and
in the manner contemplated by, the Purchase Agreement and the Final
Memorandum, (B) (1) that the purchasers who buy such Notes in the
initial resale thereof are QIBs or (2) that the offer or sale of the
Notes is made in an offshore transaction as defined in Regulation S,
(C) the accuracy of the Initial Purchasers' representations in Section
8 of the Purchase Agreement and those of the Company contained in the
Purchase Agreement regarding the absence of a general solicitation in
connection with the sale of such Notes to the Initial Purchasers and
the initial resale thereof, (D) the due performance by the Initial
Purchasers of the covenants and agreements set forth in the Purchase
Agreement, (E) the Initial Purchasers' compliance with the offering
and transfer procedures and restrictions described in the Final
Memorandum and (F) the accuracy of the representations and warranties
deemed to have been made in accordance with the Purchase Agreement and
the Final Memorandum by purchasers to whom the Initial Purchasers
initially resell the Notes.
(xxxvi) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Initial Securities to be
purchased by Eligible Purchasers will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975
of the Internal Revenue Code of 1986. The representation made by the
Company and the Guarantors in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by Eligible
Purchasers as set forth in the Offering Memorandum under the caption
"Notice to Investors."
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(xxxvii) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Act.
(xxxviii) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the
Trust Indenture Act.
(xxxix) None of the Company, the Guarantors or any of their
respective affiliates or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company and the
Guarantors make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with
respect to the Initial Securities or the Subsidiary Guarantees.
(xl) The Initial Securities offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(xli) The sale of the Initial Securities pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions
of the Act.
(xlii) The Company, the Guarantors and their respective
affiliates and all persons acting on their behalf (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering of the Initial Securities outside the United States and, in
connection therewith, the Preliminary Offering Memorandum and the
Offering Memorandum contains or will contain the disclosure required
by Rule 902(h).
(xliii) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing
Date, except as set forth in the Offering Memorandum, (A) none of the
Company or any of its subsidiaries has incurred any liabilities or
obligations, direct or contingent, which are material, individually or
in the aggregate, to the Company and its subsidiaries, taken as a
whole, nor entered into any transaction not in the ordinary course of
business, (B) there has not been any change or development which could
reasonably be expected to result in a Material Adverse Effect and (C)
there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
(xliv) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the issuance of
the Subsidiary Guarantees, the application of the proceeds from the
issuance and sale of the Securities and the consummation of the
transactions contemplated thereby as set forth in the Offering
19
<PAGE> 21
Memorandum, will violate Regulations G, T, U or X promulgated by the
Board of Governors of the Federal Reserve System or analogous foreign
laws and regulations.
(xlv) The accountants who have issued a report on the financial
statements included or to be included as part of the Offering
Memorandum are independent accountants as required by the Act. The
historical financial statements of the Company included in the
Preliminary Offering Memorandum and the Offering Memorandum, together
with related schedules and notes thereto, comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Act and will present fairly the
financial position and results of operations of the Company and its
subsidiaries, at the dates and for the periods indicated. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods presented except as indicated in the notes
thereto. The pro forma financial statements included in the Offering
Memorandum have been prepared on a basis consistent with such
historical statements of the Company, except for the pro forma
adjustments specified therein, and give effect to assumptions made on
a reasonable basis and present fairly in all material respects the
historical and proposed transactions contemplated by this Agreement
and the Operative Documents and comply as to form in all material
respects with the requirements applicable to pro forma financial
statements included in registration statements on Form S-1 under the
Act, except as expressly stated therein. The other financial and
statistical information and data included in the Offering Memorandum
derived from the historical and pro forma financial statements are
accurately presented in all material respects and prepared on a basis
consistent with the financial statements, historical and pro forma,
included in the Offering Memorandum and the books and records of the
Company and its subsidiaries.
(xlvi) In connection with the issuance of the Notes, none of the
Company or any of the Guarantors intends to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they
mature. After giving effect to the transactions contemplated by the
Offering Memorandum, the present fair market value of the assets of
each of the Company and the Guarantors exceeds the amount that will be
required to be paid on or in respect of its existing debts and other
liabilities (including contingent liabilities) when and as they become
absolute and matured. After giving effect to such transactions the
assets of each of the Company and the Guarantors do not constitute
unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Upon the issuance of the Securities, the
present fair saleable value of the assets of each of the Company and
the Guarantors will exceed the amount that will be required to be paid
on or in respect of its existing debts and other liabilities
(including contingent liabilities) as they become absolute and
matured. Upon the issuance of the Securities, the assets of each of
the Company and the Guarantors will not constitute unreasonably small
capital to carry out its business as now conducted, including the
capital needs of each of the Company and the Guarantors, taking into
account
20
<PAGE> 22
the projected capital requirements and capital availability.
(xlvii) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between or among the Company
and its subsidiaries and any other person that would reasonably be
expected to give rise to a valid claim against the Company or any of
its subsidiaries or the Initial Purchasers for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase
and sale of the Securities or the issuance of the Subsidiary
Guarantees.
(xlviii) There exist no conditions that would constitute a
default by the Company or any of its subsidiaries (or an event which
with notice or the lapse of time, or both, would constitute a default)
under any of the Operative Documents.
(xlix) Except as described in the Offering Memorandum there
exists no relationship, direct or indirect, between or among the
Company or any of its subsidiaries, on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company, any of its subsidiaries, on the other hand, of a kind
described in Item 404 of Regulation S-K, 17 CFR 229.404.
(l) Neither the Company nor any of its subsidiaries nor any
employee or agent of the Company or its subsidiaries has made any
payment of funds of the Company or any of its subsidiaries or received
or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character
required to be disclosed in the Offering Memorandum.
(li) The Company and each subsidiary that is participating in the
Medicare or Medicaid programs, upon consummation of the transactions
contemplated by this Agreement, has the requisite provider agreement,
provider number or other authorization to bill the Medicare program
and the Medicaid programs in the state or states in which it provides
services. There is no action threatened or pending which could
reasonably be expected to result in a revocation of any such provider
number or authorization or the exclusion of the Company or any of its
subsidiaries from the Medicare program or any state Medicaid program.
None of the Company or any of its subsidiaries is subject to
settlements or other adjustments by third party payors (including
Medicare and Medicaid) which could reasonably be expected to have a
Material Adverse Effect.
(lii) The statements regarding regulation of the Company and its
subsidiaries under the captions "Business -- Regulation," "Risk
Factors -- Dependence on Reimbursement by Third-Party Payors," "--
Medicare Reimbursement Reforms," "-- Effect of Government Regulations"
and "-- Operation Restore Trust" (collectively, the "Regulatory
Sections") in the Offering Memorandum are correct in all material
respects and fairly describe the applicability of regulations to the
operations of the Company and
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<PAGE> 23
its subsidiaries as described in the Offering Memorandum. The
statements regarding regulation of the Company and its subsidiaries in
the Regulatory Sections in the Offering Memorandum do not contain any
untrue statement of a material fact, or omit a material fact,
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(liii) Each certificate signed by any officer of the Company or
any of the Guarantors and delivered to the Initial Purchasers or
counsel for the Initial Purchasers pursuant to this Agreement shall be
deemed to be a representation and warranty by the Company or such
Guarantor, as the case may be, to the Initial Purchasers as to the
matters covered thereby.
The Company and the Guarantors acknowledge that the Initial
Purchasers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel for the Company and the
Guarantors and counsel for the Initial Purchasers, will rely upon the accuracy
and truth of the foregoing representations and hereby consent to such reliance.
(b) Each of the Initial Purchasers, severally but not jointly,
represents and warrants to the Company and the Guarantors that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order
to evaluate the merits and risks of an investment in the Initial
Securities.
(ii) Such Initial Purchaser (A) is not acquiring the Initial
Securities with a view to any distribution thereof that would violate
the Act or the securities laws of any state of the United States or
any other applicable jurisdiction and (B) will be reoffering and
reselling the Initial Securities only to QIBs in reliance on the
exemption from the registration requirements of the Act provided by
Rule 144A and non-U.S. persons in offers and sales that occur outside
the United States within the meaning of Regulation S under the Act.
(iii) No form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) has been or will be
used in the United States by such Initial Purchaser or any of its
representatives or affiliates in connection with the offer, sale and
resale of any of the Initial Securities.
(iv) Each of the Initial Purchasers agrees that, in connection
with the Exempt Resales, it will solicit offers to buy the Initial
Securities only from, and will offer to sell the Initial Securities
only to, Eligible Purchasers. Each of the Initial Purchasers further
agrees that it will offer to sell the Initial Securities only to and
will solicit offers to buy only from (1) Eligible Purchasers that
acknowledge and agree (A) that such Initial
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<PAGE> 24
Securities will not have been registered under the Act and that agree
to offer, sell, pledge or transfer such Initial Securities only
(x)(I) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a
transaction meeting the requirements of Rule 144A, (II) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the
requirements of Rule 904 under the Act, (III) in a transaction meeting
the requirements of Rule 144 under the Act, (IV) to an institutional
Accredited Investor (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Act) that, prior to such transfer, furnishes the Trustee a
signed letter containing certain representations and agreements
relating to the restrictions on transfer of such Initial Securities
(the form of which letter can be obtained from the Trustee) or (V) in
accordance with another exemption from the registration requirements
of the Act (and based upon an opinion of counsel if the Company so
requests), (y) to the Company or any of its subsidiaries, (z) pursuant
to an effective registration statement under the Act and, in each
case, in accordance with any applicable securities laws of any state
of the United States or any other applicable jurisdiction and (B) that
the holder will, and each subsequent holder is required to, notify any
purchaser of the security evidenced thereby of the resale restrictions
set forth in (A) above.
(v) Such Initial Purchaser agrees that it has offered the Initial
Securities and will offer and sell the Initial Securities (A) as part
of its distribution at any time and (B) otherwise until 40 days after
the later of the commencement of the offering of the Initial
Securities pursuant hereto and the Closing Date, only in accordance
with Rule 903 of Regulation S or another exemption from the
registration requirements of the Act. Such Initial Purchaser agrees
that, during such 40-day restricted period, it will not cause any
advertisement with respect to the Initial Securities (including any
"tombstone advertisement") to be published in any newspaper or
periodical or posted in any public place and will not issue any
circular relating to the Initial Securities, except such
advertisements as are permitted by and include the statements required
by Regulation S.
(vi) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Initial Securities sold pursuant
hereto in reliance on Regulation S (A) as part of its distribution at
any time and (B) otherwise until 40 days after the later of the
commencement of the offering of the Initial Securities pursuant hereto
and the Closing Date, to a U.S. person (as defined in Rule 902 of the
Act) or for the account or benefit of a U.S. person (other than a
distributor (as defined in Rule 902 of the Act)).
(vii) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Initial Securities by it to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration during the 40-day restricted period referred to in Rule
903(c)(2) under the Act, it will send to such distributor, dealer or
person receiving a selling concession, fee or other remuneration a
confirmation or notice to substantially the following effect:
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<PAGE> 25
"The Initial Securities covered hereby have not been
registered under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and may not be offered and sold
within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of your distribution at
any time or (ii) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date,
except in either case in accordance with Regulation S under
the Securities Act (or Rule 144A or to Accredited Investors
in transactions that are exempt from the registration
requirements of the Securities Act)."
(viii) Each Initial Purchaser represents, warrants and agrees
that (A) it has not offered or sold and prior to the expiration of six
months from the Closing Date will not offer or sell Securities to persons
in the United Kingdom, other than to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(whether as principal or agent) for the purposes of their businesses or
otherwise in circumstances which will not result in an offer to the public
within the meaning of the Public Offers of Securities Regulations 1995, (B)
it has complied and will comply with all applicable provisions of the
Public Offers of Securities Regulations and the Financial Services Act of
1986 with respect to anything done by it in relation to the Securities in,
from, or otherwise involving the United Kingdom, and (C) it has only issued
or passed on and will only issue or pass on, to any person in the United
Kingdom any documents received by it in connection with the issue of the
Securities if the person is of a kind described in Article 11(c) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom the documents may lawfully be issued or
passed on.
The Initial Purchasers understand that the Company and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel for the Company and the Guarantors and counsel for the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
(a) The Company and the Guarantors, jointly and severally,
shall indemnify and hold harmless (i) each of the Initial Purchasers, (ii) each
person, if any, who controls either of the Initial Purchasers within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the
respective officers, directors, partners, employees, representatives and agents
of each of the Initial Purchasers or any controlling person, from and against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred
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<PAGE> 26
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any investigation or litigation, commenced or threatened, or any claim
whatsoever, and in enforcing this indemnification, and any and all amounts paid
in settlement of any claim or litigation) to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Offering Memorandum or the
Offering Memorandum, or in any supplement thereto or amendment thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company and the Guarantors will not be
liable in any such case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with information
relating to either of the Initial Purchasers furnished to the Company in
writing by or on behalf of such Initial Purchaser expressly for use therein;
provided, further, that such indemnity with respect to the Preliminary
Offering Memorandum shall not inure to the benefit of either Initial Purchaser
(or any persons controlling such Initial Purchaser) from whom the person
asserting such loss, claim, damage or liability purchased the Securities which
are the subject thereof if such person did not receive a copy of the Offering
Memorandum (or the Offering Memorandum as amended or supplemented) at or prior
to the confirmation of the sale of such Securities to such person (and the
Offering Memorandum or any such amended or supplemented Offering Memorandum, as
applicable, shall have been delivered by the Company to such Initial Purchaser a
reasonable amount of time prior to the mailing or delivery, as applicable, of
such confirmation) and any such untrue statement or omission or alleged untrue
statement or omission of a material fact contained in such Preliminary Offering
Memorandum was corrected in the Offering Memorandum (or the Offering Memorandum
as amended or supplemented). This indemnity agreement will be in addition to any
liability which the Company and the Guarantors may otherwise have, including
under this Agreement.
(b) Each of the Initial Purchasers, severally and not jointly,
agrees to indemnify and hold harmless (i) the Company and the Guarantors, (ii)
each person, if any, who controls the Company and the Guarantors within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and (iii)
the respective officers, directors, partners, employees, representatives and
agents of the Company and the Guarantors, against any losses, liabilities,
claims, damages and reasonable expenses whatsoever (including but not limited to
reasonable attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement
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<PAGE> 27
of a material fact contained in the Preliminary Offering Memorandum or the
Offering Memorandum, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with information
relating to such Initial Purchaser furnished to the Company in writing by or on
behalf of such Initial Purchaser expressly for use therein; provided, however,
that in no case shall either of the Initial Purchasers be liable or responsible
for any amount in excess of the discounts and commissions received by such
Initial Purchaser. This indemnity will be in addition to any liability which the
Initial Purchasers may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the identifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnifying party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent,
provided that such consent was not unreasonably withheld. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which
26
<PAGE> 28
any indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement includes
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
7. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 6 is for any
reason held to be unavailable from any identifying party or is insufficient to
hold harmless a party indemnified thereunder, the Company and the Guarantors, on
the one hand, and each Initial Purchaser, on the other hand, shall contribute to
the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting in the case of losses, claims, damages, liabilities and
expenses suffered by the Company and the Guarantors, any contribution received
by the Company and the Guarantors from persons, other than the Initial
Purchasers, who may also be liable for contribution, including persons who
control the Company and the Guarantors within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act) as incurred to which the Company, the
Guarantors and such Initial Purchaser may be subject, in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on one hand, and such Initial Purchaser, on the other hand, from the
offering of the Initial Securities or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 6, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company and the Guarantors, on one
hand, and such Initial Purchaser, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Guarantors, on one hand,
and each Initial Purchaser, on the other hand, shall be deemed to be in the same
proportion as (i) the total proceeds from the offering of Initial Securities
(net of discounts and commissions but before deducting expenses) received by the
Company and the Guarantors and (ii) the discounts and commissions received by
such Initial Purchaser, respectively. The relative fault of the Company and the
Guarantors, on one hand, and of each Initial Purchaser, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Guarantors
or such Initial Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding the
provisions of this Section 7, (i) in no case shall either of the Initial
Purchasers be required to contribute any amount in excess of the amount by which
the discounts and commissions applicable to the Initial Securities purchased by
such Initial
27
<PAGE> 29
Purchaser pursuant to this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
(A) each person, if any, who controls either of the Initial Purchasers within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
(B) the respective officers, directors, partners, employees, representatives and
agents of each of the Initial Purchasers or any controlling person shall have
the same rights to contribution as such Initial Purchaser, and (A) each person,
if any, who controls the Company and the Guarantors within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives and agents
of the Company and the Guarantors shall have the same rights to contribution as
the Company and the Guarantors, subject in each case to clauses (i) and (ii) of
this Section 7. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim, settled
without its prior written consent, provided that such written consent was not
unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The obligations
of the Initial Purchasers to purchase and pay for the Initial Securities, as
provided herein, shall be subject to the satisfaction of the following
conditions:
(a) All of the representations and warranties of the Company
and the Guarantors contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as if made on
and as of the date hereof and the Closing Date, respectively. Each of the
Company and the Guarantors shall have performed or complied with all of the
agreements herein contained and required to be performed or complied with by it
at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers in New York as soon as practicable after
the date of this Agreement but not later than such time as the Initial
Purchasers reasonably request, and no stop order suspending the qualification or
exemption from qualification of the Initial Securities in any jurisdiction
referred to in Section 4(e) shall have been issued and no proceeding for that
purpose shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as
28
<PAGE> 30
of the Closing Date, prevent the issuance of the Initial Securities or the
Subsidiary Guarantees; no action, suit or proceeding shall have been commenced
and be pending against or affecting or, to the best knowledge of the Company and
the Guarantors, threatened against, the Company or any of its subsidiaries
before any court or arbitrator or any governmental body, agency or official
that, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect; and no stop order shall have been issued preventing the
use of the Offering Memorandum, or any amendment or supplement thereto, or which
could reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the
Offering Memorandum and other than as set forth in the Offering Memorandum (i)
there shall not have been any material and adverse change, or any development
that is reasonably likely to result in a material and adverse change, in the
capital stock or the long-term debt, or material increase in the short-term
debt, of the Company or any of its subsidiaries from that set forth in the
Offering Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company or any of its subsidiaries on any
class of its capital stock and (iii) none of the Company or any of its
subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and its subsidiaries, taken as a whole, and that are required to be disclosed on
a balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering Memorandum, there shall
not have occurred any material adverse change in the business, prospects,
financial condition or results of operation of the Company and its subsidiaries,
taken as a whole.
(e) The Initial Purchasers shall have received certificates,
dated the Closing Date, signed on behalf of the Company and the Guarantors, in
form and substance satisfactory to the Initial Purchasers, confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of this
Section 8 and that, as of the Closing Date, the obligations of the Company and
the Guarantors to be performed hereunder on or prior thereto have been duly
performed.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel for the Initial Purchasers, of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., counsel for the Company and the Guarantors, to
the effect set forth in Exhibit A hereto.
(g) At the time this Agreement is executed and at the Closing
Date, the Initial Purchasers shall have received from Arthur Andersen LLP,
independent public accountants for the Company, dated as of the date of this
Agreement and as of the Closing Date, customary comfort letters addressed to the
Initial Purchasers and in form and substance satisfactory to the Initial
Purchasers and counsel for the Initial Purchasers with respect to the
29
<PAGE> 31
financial information of the Company and its subsidiaries contained in the
Offering Memorandum. Prior to the Closing Date the Initial Purchasers shall have
received from Arthur Andersen LLP a report with respect to the Company's
accounts payable satisfactory to the Initial Purchasers.
(h) The Initial Purchasers shall have received an opinion,
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the
Initial Purchasers, covering such matters as are customarily covered in such
opinions.
(i) Paul, Weiss, Rifkind, Wharton & Garrison shall have been
furnished with such documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 8 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(j) Prior to the Closing Date, the Company and the Guarantors
shall have furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably request.
(k) The Company, the Guarantors and the Trustee shall have
entered into the Indenture and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(l) The Company and the Guarantors shall have entered into the
Registration Rights Agreement and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(m) The New Credit Facility shall be executed and delivered
prior to, or simultaneously with, the Closing of the Offering on substantially
the terms described in the Offering Memorandum, the Initial Purchasers shall
have received counterparts, conformed as executed, of the New Credit Facility
and such other documentation as they deem necessary to evidence the consummation
thereof and the Company shall be aware of no reason which would prevent the
consummation thereof.
(n) There shall not have been any announcement (a "Rating
Downgrade Announcement") by any "nationally recognized statistical rating
organization," as defined for purposes of Rule 463(g) under the Securities Act,
that (i) it is downgrading its rating assigned to any class of securities of the
Company or (ii) it is reviewing its ratings assigned to any class of securities
of the Company with a view to possible downgrading, or with negative
implications, or direction not determined.
All opinions, certificates, letters and other documents required
by this Section 8
30
<PAGE> 32
to be delivered by the Company and the Guarantors will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers and their Counsel. The Company and the Guarantors
shall furnish the Initial Purchasers with such conformed copies of such
opinions, certificates, letters and other documents as they shall reasonably
request.
9. Initial Purchasers' Information. The Company and the
Guarantors acknowledge that the statements with respect to the offering of the
Initial Securities set forth in the last paragraph of the cover page and the
fourth paragraph and the fifth sentence of the sixth paragraph under the caption
"Plan of Distribution" in the Offering Memorandum constitute the only
information relating to any of the Initial Purchasers furnished to the Company
in writing by or on behalf of any of the Initial Purchasers expressly for use in
the Offering Memorandum.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Initial
Purchasers, the Company and the Guarantors contained in this Agreement,
including the agreements contained in Sections 4(f) and 11(d), the indemnity
agreements contained in Section 6 and the contribution agreements contained in
Section 7, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of either of the Initial Purchasers, any
controlling person thereof, or by or on behalf of the Company and the Guarantors
or any controlling person thereof, and shall survive delivery of and payment for
the Initial Securities to and by the Initial Purchasers. The representations
contained in Section 5 and the agreements contained in Sections 4(f), 6, 7 and
11(d) shall survive the termination of this Agreement, including any termination
pursuant to Section 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the Company
from the Initial Purchasers, without liability (other than with respect to
Sections 6 and 7) on the Initial Purchasers' part to the Company or any of the
Guarantors if, on or prior to such date, (i) the Company or any of the
Guarantors shall have failed, refused or been unable to perform in any material
respect any agreement on their part to be performed hereunder, (ii) any other
condition to the obligations of the Initial Purchasers hereunder as provided in
Section 8 is not fulfilled when and as required in any material respect, (iii)
in the reasonable judgment of the Initial Purchasers, any material adverse
change shall have occurred since the respective dates as of which information is
given in the Offering Memorandum in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects, net worth, results of
operations or cash flows of the Company and its subsidiaries, taken as a whole,
other than as set forth in the Offering Memorandum, (vi) there shall have
occurred a Rating Downgrade Announcement,
31
<PAGE> 33
(v) any securities of the Company shall have been suspended from trading on an
exchange or (vi)(A) any domestic or international event or act or occurrence has
materially disrupted, or in the opinion of the Initial Purchasers will in the
immediate future materially disrupt, the market for the Company's securities or
for securities in general; or (B) trading in securities generally on the New
York or American Stock Exchange shall have been suspended or materially limited,
or minimum or maximum prices for trading shall have been established, or maximum
ranges for prices for securities shall have been required, on such exchange, or
by such exchange or other regulatory body or governmental authority having
jurisdiction; or (C) a banking moratorium shall have been declared by federal or
state authorities, or a moratorium in foreign exchange trading by major
international banks or persons shall have been declared; or (D) there is an
outbreak or escalation of armed hostilities involving the United States on or
after the date hereof, or if there has been a declaration by the United States
of a national emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to proceed with
the offering or delivery of the Initial Securities on the terms and in the
manner contemplated in the Offering Memorandum; or (E) there shall have been
such a material adverse change in general economic, political or financial
conditions or if the effect of international conditions on the financial markets
in the United States shall be such as, in the Initial Purchasers' judgment, to
make it inadvisable or impracticable to proceed with the delivery of the Initial
Securities as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone or telephonic facsimile and, in either case, confirmed in
writing by letter within five days thereof.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to clause (vi) of Section 11(b),
in which case each party will be responsible for its own expenses), the Company
and the Guarantors shall reimburse the Initial Purchasers for all out-of-pocket
expenses (including the reasonable fees and expenses of the Initial Purchasers'
counsel), reasonably incurred by the Initial Purchasers in connection herewith.
12. Notice. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to the
Initial Purchasers shall be mailed, delivered, telecopied and confirmed in
writing or sent by a nationally recognized overnight courier service
guaranteeing delivery on the next business day to Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167, Attention: Corporate Finance Department,
telecopy number: (212) 272-3092, with a copy to Paul, Weiss, Rifkind, Wharton &
Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064, Attention:
Carl L. Reisner, telecopy number: (212) 757-3990; and if sent to the Company or
any of the Guarantors, shall be mailed, delivered, telecopied and confirmed in
writing or sent by a nationally recognized overnight courier service
guaranteeing delivery on the next business day to HealthCor Holdings, Inc., 8150
North Central Expressway, Suite M-2000, Dallas, Texas 75206, Attention: Chief
Financial Officer, telecopy number: (214) 696-6756, with a copy to
32
<PAGE> 34
Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue, Suite 4100,
Dallas, Texas 75201-4675, Attention: J. Kenneth Menges, Jr., P.C., telecopy
number: (214) 969-4343.
13. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Initial Purchasers, the Company and the
Guarantors and the controlling persons and agents referred to in Sections 6 and
7, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Securities from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance
with the internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. Captions. The captions included in this Agreement are
included solely for convenience of reference and are not to be considered a part
of this Agreement.
16. Counterparts. This Agreement may be executed in various
counterparts which together shall constitute one and the same instrument.
[Signature page to follow]
33
<PAGE> 35
If the foregoing correctly sets forth the understanding among the
Initial Purchasers, the Company and the Guarantors please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
HEALTHCOR HOLDINGS, INC.
By:/s/ CHERYL C. BAZZLE
------------------------------------
Name: Cheryl C. Bazzle
Title: President
HEALTHCOR INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HEALTHCOR OXYGEN AND MEDICAL
EQUIPMENT, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR FOUNDATION
HC PERSONNEL RESOURCES, INC.
CARE NETWORK, INC., as Guarantors
By:/s/ CHERYL C. BAZZLE
------------------------------------
Name: Cheryl C. Bazzle
Title: President
34
<PAGE> 36
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:/s/ BRIAN MCCARTHY
-----------------------------
Name: Brian McCarthy
Title: Senior Managing Director
CHASE SECURITIES INC.
By:/s/ JAMES P. CASEY
-----------------------------
Name: James P. Casey
Title: Managing Director
35
<PAGE> 37
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Initial Securities
- ----------------- ---------------------
<S> <C>
Bear, Stearns & Co. Inc. $68,000,000
Chase Securities Inc. $12,000,000
-----------
Total $80,000,000
</TABLE>
36
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
================================================================================
HEALTHCOR HOLDINGS, INC., as Issuer,
THE GUARANTORS SIGNATORIES HERETO, as Guarantors,
and
NORWEST BANK MINNESOTA, N.A., as Trustee
____________________
INDENTURE
Dated as of December 1, 1997
$80,000,000
11% Senior Notes due 2004
================================================================================
<PAGE> 2
Reconciliation and Tie between Trust Indenture Act
of 1939 and Indenture, dated as of December 1, 1997*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- ----------
<S> <C> <C> <C>
Section 310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.08
(b)(1) 7.10
(b)(9) 7.10
(c) N.A.
Section 311 (a) 7.11
(b) 7.11
(c) N.A.
Section 312 (a) 2.05
(b) 11.03
(c) 11.03
Section 313 (a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06; 11.02
(d) 7.06
Section 314 (a) 4.02; 4.04; 11.02
(b) N.A.
(c)(1) 11.04; 11.05
(c)(2) 11.04; 11.05
(c)(3) 11.04; 11.05
(d) N.A.
(e) 11.05
(f) N.A.
Section 315 (a) 7.01; 7.02
(b) 7.05; 11.02
(c) 7.01
(d) 6.05; 7.01; 7.02
(e) 6.11
Section 316 (a)(last sentence) 11.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) 8.02
(b) 6.07
(c) 8.04
Section 317 (a)(1) 6.08
(a)(2) 6.09
(b) 7.12
Section 318 (a) 11.01
</TABLE>
"N.A." means Not Applicable.
__________
* Note: This reconciliation and tie shall not, for any purpose, be
deemed to be part of this Indenture.
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 24
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 2. THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.01. Dating; Incorporation of Form in Indenture . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.05. Noteholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 2.09. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 2.10. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.12. Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.13. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.14. Wire Payments to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 3. REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.02. Selection by Trustee of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.02. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.03. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.06. Limitations on Additional Indebtedness and Preferred Equity Interests . . . . . . . . . . . . 52
Section 4.07. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.08. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.09. Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 4.10. [Intentionally Deleted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 4.11. Limitation on Subsidiaries and Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . 57
Section 4.12. Additional Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . 58
Section 4.14. Restriction on Sale and Issuance of Subsidiary Interests . . . . . . . . . . . . . . . . . . 59
Section 4.15. Limitation on Sale and Lease-Back Transactions . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.16. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.17. Limitation on Status as Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.18. Payments for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.19. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.20. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 4.21. Limitation on Certain Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 4.22. General Provisions Related to Change of Control Offers and Excess Proceeds Offers . . . . . . 65
Section 4.23. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 4.24. Maintenance of Properties and Insurance; Books and Records; Compliance with Laws. . . . . . . 66
Section 4.25. Further Assurance to the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 5. SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 5.01. Merger, Consolidation or Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 5.02. Successor Person Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 6.04. Waiver of Past Defaults and Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 7. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion . . . . . . . . . . . . . . . . . . 80
</TABLE>
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<TABLE>
<S> <C>
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . 81
Section 7.12. Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE 8. AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 8.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 8.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 8.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 8.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 8.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.06. Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 9. DISCHARGE OF INDENTURE; DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 9.01. Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 9.02. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . 86
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscel. . . . . . 88
Section 9.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 9.07. Moneys Held by Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 9.08. Moneys Held by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE 10. GUARANTEE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 10.01. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 10.02. Execution and Delivery of Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10.03. Limitation of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 10.04. Release of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 10.05. Additional Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 11.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 11.03. Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 95
Section 11.05. Statements Required in Certificate and Opinion . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.06. When Treasury Notes Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.07. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.08. Business Days; Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.10. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.11. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.12. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.13. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.14. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 11.15. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
</TABLE>
iv
<PAGE> 6
EXECUTION COPY
INDENTURE, dated as of December 1, 1997, among HEALTHCOR
HOLDINGS, INC., a Delaware corporation, as issuer (the "Company"), the
Guarantors signatory hereto from time to time (the "Guarantors") and NORWEST
BANK MINNESOTA, N.A., as trustee (the "Trustee").
The Company and the Guarantors have duly authorized the
execution and delivery of this Indenture to provide for the issuance of the
Notes (as hereinafter defined) to be issued as provided for in this Indenture.
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
11% Senior Notes due 2004, unconditionally guaranteed by the Guarantors (the
"Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means the global note in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with and registered in the name of the Depositary or its
nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed in connection
with an Asset Acquisition from such Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities (including, without limitation, any guarantees of
Indebtedness)), but excluding liabilities under the Guarantee of such Guarantor
at such date and (y) the present fair salable value of the assets of such
Guarantor exceeds the total amount of its debts (after giving effect to all
other fixed and contingent liabilities (including, without limitation, any
guarantees of Indebtedness) and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
"Affiliate" of any specified Person means any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any
<PAGE> 7
2
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"Applicable Procedures" means with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any Person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such Person or (c) the acquisition by the Company or any Subsidiary
of the Company of any division or line of business of any Person (other than a
Subsidiary of the Company).
"Asset Sale" means the direct or indirect sale, transfer,
issuance, conveyance, lease (other than operating leases entered into in the
ordinary course of business pursuant to ordinary business terms), assignment or
other disposition (including, without limitation, by eminent domain,
condemnation or similar governmental proceeding) and any merger or
consolidation of any Subsidiary of the Company with or into another Person
(other than the Company or any Wholly-Owned Subsidiary of the Company) whereby
such Subsidiary shall cease to be a Wholly-Owned Subsidiary (each, a
"disposition" or "issuance") involving in any consecutive twelve month period
property or assets with a fair market value in excess of $1,000,000 of (a) any
Equity Interest in any Subsidiary, (b) real property owned by the Company or
any Subsidiary thereof, or a division, line of business or comparable business
segment of the Company or any Subsidiary thereof or (c) other property, assets
or rights (including, without limitation leasehold rights) of the Company or
any Subsidiary thereof, provided, however, that, except as noted in the last
sentence in this paragraph, Asset Sales shall not include (i) dispositions or
issuances to the Company or to a Subsidiary thereof or to any other Person if
after giving effect to such disposition or issuance such other Person becomes a
Wholly-Owned Subsidiary of the Company, (ii) transactions involving the Company
which are subject to and effected in compliance with Section 5.01, (iii)
dispositions of services and products in the ordinary course of business, (iv)
a disposition that is an Investment or a Restricted Payment not prohibited by
Section 4.07, (v) a disposition that complies with the covenant described under
Section 4.20, (vi) exchanges of assets that comply with the requirements of
Section 4.21(c), (vii) a designation of a Subsidiary as an Unrestricted
Subsidiary if permitted under this Indenture, (viii) the grant in the ordinary
course of business of any
<PAGE> 8
3
license, (ix) the disposition of any Temporary Cash Investment, (x) any
disposition of defaulted receivables for collection, (xi) the grant of any Lien
securing Indebtedness permitted under this Indenture and (xii) the disposition
of assets received in settlement of obligations (including, without limitation,
under any bankruptcy or similar proceeding) owing to the Company or any
Subsidiary, which obligations were incurred in the ordinary course of business.
Notwithstanding any provision of this Indenture to the contrary, the expiration
or non-renewal of any lease of property at the normal expiration date thereof
shall not constitute an Asset Sale. For purposes of the definition of
Consolidated Fixed Charge Coverage Ratio, transactions referred to in clauses
(iv), (v), (vi) or (vii) shall be included as Asset Sales.
"Asset Sale Proceeds" means, with respect to any Asset Sale,
(i) cash received by the Company or any Subsidiary thereof from such Asset Sale
after (a) provision for all income or other taxes measured by or resulting from
such Asset Sale, (b) payment of all brokerage commissions, underwriting, legal,
accounting, title and other fees, costs and expenses related to such Asset
Sale, (c) provision for minority interest Holders in any Subsidiary or in any
asset subject to such Asset Sale as a result of such Asset Sale, (d) payments
made to retire Indebtedness secured by the assets subject to such Asset Sale or
otherwise required to be paid and (e) deduction of appropriate amounts to be
provided by the Company or a Subsidiary thereof as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Sale and retained by the Company or a Subsidiary thereof after such
Asset Sale including, without limitation, pension and other post employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets disposed of in such
Asset Sale and (ii) any securities, notes or other obligations received by the
Company or any Subsidiary thereof from such Asset Sale upon the liquidation or
conversion of such securities, notes or other obligations into cash prior to
the Reinvestment Date.
"Attributable Indebtedness" when used with respect to any Sale
and Lease-Back Transaction means, as at the time of determination, the present
value (discounted at a rate equivalent to the interest rate implicit in the
lease, compounded on a semi-annual basis) of the total obligations of the
lessee for rental payments (after excluding all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, utilities and other
similar expenses payable by the lessee pursuant to the terms of the lease)
during the remaining term of the lease included in any such Sale-Lease-Back
Transaction or until the earliest date on which the lessee may terminate such
lease without penalty or upon payment of a penalty (in which case the rental
payments shall include such penalty).
"Board of Directors" means, as to any Person, the board of
directors or any duly authorized committee thereof of such Person or, if such
Person is a partnership (or other non-corporate Person), of the managing
general partner or partners (or Persons serving an analogous function) of such
Person.
<PAGE> 9
4
"Board Resolution" means, as to any Person, a copy of a
resolution certified pursuant to an Officers' Certificate to have been duly
adopted by the Board of Directors of such Person, and to be in full force and
effect, and, if required hereunder, delivered to the Trustee.
"Capital Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cedel" means Cedel Bank, societe anonyme.
"Certificated Note" means a certificated Note registered in
the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A hereto except that such Note shall not bear
the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act); (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company; (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than an Excluded
Person, is or becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of more than 35% of the Common Equity Interest of the Company
(measured by voting power rather than number of shares or equivalent units); or
(iv) the first day on which less than a majority of the members of the Board of
Directors of the Company are Continuing Directors.
"Common Equity Interest" of any Person means all Equity
Interests of such Person that are generally entitled to (i) vote in the
election of directors of such Person or (ii) if such Person is not a
corporation, vote or otherwise participate in the selection of the governing
body, partners, managers or others that will control the management and
policies of such Person.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5
of this Indenture and thereafter means the successor.
"Company Request" means any written request signed in the name
of the
<PAGE> 10
5
Company by any two of the following: the Chief Executive Officer; the
President; any Vice President; the Chief Financial Officer; the Treasurer; or
the Secretary or any Assistant Secretary (but not both the Secretary and any
Assistant Secretary) of the Company.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus, to
the extent deducted in computing such Consolidated Net Income, (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale, (ii) provision for taxes based on income or profits, (iii)
consolidated interest expense whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (iv)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization of, a
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior approval (that has not been obtained) pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Subsidiary or
its stockholders.
"Consolidated Fixed Charge Coverage Ratio" means with respect
to any Person, the ratio of the aggregate amount of Consolidated Cash Flow of
such Person for the four full fiscal quarters immediately preceding the date of
the transaction (the "Transaction Date") giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter
period being referred to herein as the "Four Quarter Period") to the aggregate
amount of Consolidated Fixed Charges of such Person for the Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated Cash Flow" and "Consolidated Fixed Charges"
shall be calculated after giving effect on a pro forma basis for the period of
such calculation to, without duplication, (a) the incurrence of any
Indebtedness of such Person or any of its Subsidiaries (and the application of
the net proceeds thereof) during the period commencing on the first day of the
Four Quarter Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation (and the application of the
net proceeds thereof), as if such incurrence
<PAGE> 11
6
(and application) occurred on the first day of the Four Quarter Period (it
being understood that with respect to Indebtedness incurred under a revolving
facility used primarily to finance working capital, the average daily principal
amount outstanding during the Reference Period shall be deemed to be the amount
incurred during the Reference Period), and (b) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Four Quarter Period.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining this "Consolidated Fixed Charge Coverage Ratio," (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period. In calculating the Consolidated Fiscal
Charge Coverage Ratio and giving pro forma effect to the incurrence of
Indebtedness during a Reference Period, pro forma effect shall be given to use
of proceeds thereof to permanently repay or retire Indebtedness. If such Person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, for purposes of determining the "Consolidated Fixed Charge
Coverage Ratio," effect shall be given to the incurrence of such guaranteed
Indebtedness as if such Person or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum of, without duplication, the amounts for such period of
(i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), (ii) the consolidated interest
expense of such Person and its Subsidiaries that was capitalized during such
period, (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Subsidiaries or secured by a Lien on
assets of such Person or one of its Subsidiaries (whether or not such guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of Disqualified Equity Interests of such
Person or any of its Subsidiaries, other than dividend payments on Disqualified
Equity Interests payable solely in Equity Interests of the Company, times (b) a
fraction, the numerator of which is one and the denominator
<PAGE> 12
7
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that
is not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Subsidiary
thereof, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and
(v) any non- cash compensation expense in connection with the issuance of
employee stock options shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at
any date, the consolidated stockholders' equity of such Person less the amount
of such stockholders' equity attributable to Disqualified Equity Interests of
such Person and its Subsidiaries, as determined in accordance with GAAP, less
(i) all write-ups (other than write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (ii) all investments as of
such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries and (iii) all unamortized debt discount and expense and
unamortized deferred charges as of such date, in each case determined in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of
such Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to
the applicable provision of this Indenture.
<PAGE> 13
8
"Disqualified Equity Interests" means any Equity Interest
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the Holder), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the option of
the Holder thereof, in whole or in part, on or prior to the date that is 91
days following the maturity date of the Notes, for cash or securities
constituting Indebtedness; provided, however, that Preferred Equity Interests
of the Company or any Subsidiary thereof that are issued with the benefit of
provisions requiring a change of control offer or asset sale proceeds offer to
be made for such Preferred Equity Interest in the event of a change of control
or sale of assets of the Company or such Subsidiary, which provisions have
substantially the same effect as the provisions of this Indenture described
under Section 4.20 or Section 4.21 shall not be deemed to be Disqualified
Equity Interests solely by virtue of such provisions.
"Equity Interests" means, with respect to any Person, any and
all shares or other equivalents (however designated) of capital stock,
partnership interests or any other participation, right or other interests in
the nature of an equity interest in such Person or any option, warrant or other
security convertible into or exchangeable for any of the foregoing.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Note" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f).
"Exchange Offer" means the "Registered Exchange Offer" as
defined in the Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Excluded Person" means C. Wayne Bazzle and Cheryl C. Bazzle
and any Related Party of either of them.
"Existing Credit Facility" means that certain Credit
Agreement, dated as of October 31, 1996, as amended prior to the Issue Date,
among the Company, Texas Commerce Bank National Association, and the other
parties thereto.
"fair market value" or "fair value" means, with respect to any
assets or property, the price which could be negotiated in an arm's-length free
market
<PAGE> 14
9
transaction, for cash, between a willing seller and a fully informed, willing
and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction, all as reasonably determined by a majority of the
Board of Directors acting in good faith, such determination to be evidenced by
a board resolution delivered to the Trustee. No such determination need be
supported by an appraisal or expert opinion.
"GAAP" means generally accepted accounting principles applied
as in effect in the United States on the Issue Date.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Guarantee" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
Company with respect to the Notes by each Guarantor pursuant to the terms of
Article 10 hereof.
"Guarantor" means the parties named as such in the first
paragraph of this Indenture and any other Person, in each case so long as such
Person guarantees the Obligations of the Company with respect to the Notes
pursuant to the terms of Article 10 hereof.
"Hedging Obligations" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates, currency exchange rates or commodity prices.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"IAI Global Note" means the global Note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes transferred to institutional accredited investors
subsequent to the initial issuance of the Notes.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become, directly or indirectly,
liable in respect of such Indebtedness or other obligation or the recording, as
required pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such person (and "incurrence," "incurred,
"incurable," and "incurring" shall have meanings correlative to the foregoing),
provided, however, that a change in GAAP that results in an obligation of such
Person that exists at such time becoming Indebtedness shall not be deemed an
incurrence of such Indebtedness and provided, further, that accrual of
<PAGE> 15
10
interest, the accretion of accreted value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness. Any Indebtedness or Equity Interests of a Person existing at the
time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be incurred by such Person at the
time it becomes a Subsidiary. Indebtedness consisting of reimbursement
obligations in respect of a letter of credit will be deemed to be incurred when
the letter of credit is issued or renewed.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to
a portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other liabilities arising in
the ordinary course of business) and shall also include, to the extent not
otherwise included (i) any Capital Lease Obligations, (ii) obligations of
Persons other than such Person secured by a Lien to which the property or
assets owned or held by such Person is subject, whether or not the obligation
or obligations secured thereby shall have been incurred or assumed by such
Person, (iii) all Indebtedness of others of the types described in the other
clauses of this definition (including all dividends of other Persons) the
payment of which is guaranteed, directly or indirectly, by such Person or that
is otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to supply
or advance funds (whether or not such items would appear upon the balance sheet
of the guarantor), (iv) all obligations for the reimbursement of any obligation
or on any letter of credit, banker's acceptance or similar credit transaction,
(v) Disqualified Equity Interests, (vi) Hedging Obligations of any such Person
and (vii) Attributable Indebtedness. The amount of Indebtedness of any Person
at any date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations, the
maximum liability upon the occurrence of the contingency giving rise to the
obligation, provided, however, that (i) the amount outstanding at any time of
any Indebtedness issued with original issue discount, including the Notes, if
applicable, is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, and (ii) Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business shall not be deemed to be "Indebtedness" for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
<PAGE> 16
11
"Independent Financial Advisor" means an accounting,
appraisal, investment banking or consulting firm of nationally recognized
standing that is, in the good faith judgment of the Board of Directors of the
Company, qualified to perform the task for which such firm has been engaged.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Interest" when used with respect to any Note, means the
amount of all interest accruing on such Note, including all interest accruing
subsequent to the occurrence of any events specified in Sections 6.01 (8) and
(9) or which would have accrued but for any such event.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Investments" means, directly or indirectly, any advance,
account receivable (other than an account receivable arising in the ordinary
course of business (including accounts receivable arising in the ordinary
course of business and acquired as a part of the assets acquired by the Company
or a Subsidiary in connection with an acquisition of assets which is otherwise
permitted by the terms of this Indenture)), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any stock, bonds,
notes, debentures, partnership or joint venture interests or other securities
of, the acquisition, by purchase or otherwise, of all or substantially all of
the business or stock or other evidence of beneficial ownership of, any Person,
the guarantee or assumption of the Indebtedness of any other Person (except for
an assumption of Indebtedness for which the assuming Person receives
consideration with a fair market value at least equal to the principal amount
of the Indebtedness assumed), the designation of a Subsidiary as an
Unrestricted Subsidiary or the making of any investment in any Person and all
other items that would be classified as investments on a balance sheet of such
Person prepared in accordance with GAAP. Investments shall exclude (i)
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices, (ii) endorsements of negotiable instruments for
collection or deposit in the ordinary course of business, (iii) commission,
travel, payroll and similar advances to directors, officers and employees made
in the ordinary course of business and (iv) workers' compensation, utility,
lease and similar deposits and prepaid expenses in the ordinary course of
business.
"Issue Date" means the closing date for the sale and original
issuance of the Notes to the Initial Purchasers.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection
<PAGE> 17
12
with the Exchange Offer.
"Lien" means with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capital Lease Obligation, conditional sales,
or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 6 of the Registration Rights Agreement.
"Maturity Date" means December 1, 2004.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP and
before any reduction in respect of dividends on Preferred Equity Interests,
excluding, however, (i) any gain (but not loss, except the loss to be incurred
in the fourth quarter of 1997 relating to the extinguishment of the Existing
Credit Facility), together with any related provision for taxes on such gain
(but not loss, except as specifically permitted above), realized in connection
with (a) any Asset Sale or (b) the disposition of any securities by such Person
or any of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring
gain (or loss incurred prior to the Issue Date, but not loss incurred after the
Issue Date), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss, except to the extent referred
to above).
"Net Investments" means the excess of (i) the aggregate of all
Investments made by the Company or a Subsidiary thereof on or after the Issue
Date (in the case of an Investment made other than in cash, the amount shall be
the fair market value of such Investment at the time made as determined in good
faith by the Board of Directors of the Company) over (ii) the sum of (a) the
aggregate amount returned in cash on such Investments (in the case of a noncash
return on such Investments, the amount thereof shall be the fair market value
of such noncash consideration at the time of receipt thereof as determined in
good faith by the Board of Directors of the Company) whether through interest
payments, principal payments, dividends or other distributions and (b) the net
cash proceeds received by the Company or such Subsidiary from the disposition
of all or any portion of such Investments (other than to a Subsidiary of the
Company), provided, however, that with respect to all Investments made in
Unrestricted Subsidiaries the sum of clauses (a) and (b) above with respect to
such Investments shall not exceed the aggregate amount of all Investments made
in all Unrestricted Subsidiaries.
"New Credit Facility" means that certain Second Amended and
Restated
<PAGE> 18
13
Credit Agreement, dated as of December 1, 1997, among the Company, the Banks
party thereto and Texas Commerce Bank National Association, as agent, including
any related notes, guarantees (by subsidiaries of the Company or otherwise),
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, restated, modified, renewed, refunded,
replaced or refinanced (in each case, in whole or in part, and without
limitation as to amount, terms, conditions, covenants and other provisions),
with the same or other agents and lenders, in whole or in part, from time to
time and any agreement (and related documents) governing Indebtedness incurred
to refinance or refund borrowings and commitments then outstanding or permitted
to be outstanding under such credit facility or a successor New Credit
Facility, whether by the same or other agent lender or group of lenders.
"Non-Recourse Debt" means Indebtedness: (i) as to which
neither the Company nor any of its Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the Holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any Holder of any other Indebtedness of the
Company or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Notes" means the securities that are issued under this
Indenture, as amended or supplemented from time to time pursuant to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chief
Executive Officer, the President, any Vice President, the Chief Financial
Officer or the Treasurer of such Person, the Controller, the Secretary or any
other officer designated by the Board of Directors of such Person, as the case
may be (or, in the case of a Person that is a partnership (or other
non-corporate Person), of a general partner (or analogous individuals) of such
Person in such capacity).
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer or assistant
Treasurer of such Person (or, in the case of a Person that is a partnership (or
other non-corporate Person), of a general
<PAGE> 19
14
partner (or analogous individuals) of such Person in such capacity) that shall
comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel which counsel is reasonably acceptable to the Trustee.
"Participant" means, with respect to DTC, Euroclear or Cedel,
a Person who has an account with DTC, Euroclear or Cedel, respectively (and,
with respect to DTC, shall include Euroclear and Cedel).
"Permitted Indebtedness" means:
(i) Indebtedness (plus interest, premium, fees and other
obligations associated therewith) of the Company or any Subsidiary
thereof arising under or in connection with the New Credit Facility of
up to $20.0 million;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) Hedging Obligations;
(iv) Additional Indebtedness of the Company or any
Guarantor (which may be Indebtedness under the New Credit Facility) in
an aggregate principal amount outstanding at any time not to exceed
$3.0 million;
(v) Indebtedness of a Wholly-Owned Subsidiary issued to
and held by the Company or a Wholly-Owned Subsidiary or Indebtedness
of the Company to a Wholly-Owned Subsidiary in respect of intercompany
advances or transactions;
(vi) Indebtedness outstanding on the Issue Date after
giving effect to the application of the proceeds of this Offering
(including repayment of all obligations under the Existing Credit
Agreement);
(vii) Refinancing Indebtedness;
(viii) Indebtedness constituting an agreement or commitment
to pay a dividend that has been declared or otherwise to make a
payment or distribution as described in Section 4.07(b)(i);
(ix) Capital Lease Obligations and Purchase Money
Indebtedness in a combined aggregate principal amount not to exceed
$3.0 million at any time outstanding; and
(x) Indebtedness in connection with one or more letters
of credit, guarantees, bid, surety or performance bonds or other
reimbursement
<PAGE> 20
15
obligations or banker's acceptances, in each case issued in the
ordinary course of business and not in connection with the borrowing
of money or the obtaining of advances or credit.
"Permitted Investments" means, for any Person, Investments
made on or after the Issue Date consisting of:
(i) Temporary Cash Investments;
(ii) (A) Investments in the Company or a Wholly-Owned
Subsidiary of the Company, (B) Investments in any Person, if (1) as a
result of such Investment (y) such Person or a Subsidiary of such
Person becomes a Wholly-Owned Subsidiary of the Company or (z) such
Person or a Subsidiary of such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of
its assets to, or is liquidated into, the Company or a Wholly-Owned
Subsidiary thereof and (2) after giving effect to such Investment the
Company is in compliance with Section 4.16 and (C) Net Investments in
any Persons, provided, however, that the aggregate amount of all such
Net Investments made pursuant to this clause (C) shall not exceed $2.0
million at any one time outstanding;
(iii) Investments represented by accounts receivable
created or acquired in the ordinary course of business;
(iv) Advances to employees, officers and directors in the
ordinary course of business not to exceed an aggregate of $500,000
outstanding at any one time;
(v) Investments under or pursuant to Hedging Obligations;
(vi) An Investment that is made by the Company or a
Subsidiary thereof in the form of any Equity Interests, Indebtedness
or other assets received as partial consideration for the consummation
of a transaction that is otherwise permitted under the covenant
described under Section 4.21;
(vii) Investments in the Notes otherwise permitted under
this Indenture;
(viii) Investments existing on the Issue Date;
(ix) any Investment acquired solely in exchange for, by
conversion of, or out of the net cash proceeds of, the issuance of
Equity Interests (other than Disqualified Equity Interests) of the
Company;
(x) stocks, obligations or other securities received in
settlement of debts (including, without limitation, under any
bankruptcy or other similar
<PAGE> 21
16
proceeding) owing to the Company or any of its Subsidiaries as a
result of foreclosure, perfection, enforcement or settlement of any
Indebtedness or Liens in favor of the Company or a Subsidiary; and
(xi) guarantees not prohibited by Section 4.06.
"Permitted Liens" means, without duplication, (i) Liens
existing on the Issue Date, (ii) Liens in favor of the Company or any
Subsidiary thereof, (iii) Liens on the Equity Interests or property of a Person
existing at the time such Person becomes a Subsidiary of, or is acquired by,
merged into or consolidated with the Company or any Subsidiary thereof, or such
property is acquired by the Company or a Subsidiary, provided, however, that
such Liens (a) were not created in connection with or in anticipation of such
acquisition, merger or consolidation or such Person becoming a Subsidiary and
(b) are not applicable to any other property of the Company or any of the other
Subsidiaries of the Company, (iv) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, provided, however, that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor, (v)
landlords', carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business (whether
contractual, statutory or constitutional in nature) and with respect to amounts
which are not yet delinquent or are being contested in good faith by
appropriate proceedings, (vi) pledges or deposits made in the ordinary course
of business in connection with (a) leases, performance bonds and similar
obligations, (b) workers' compensation, unemployment insurance and other social
security legislation, or (c) securing the performance of surety bonds and
appeal bonds required (1) in the ordinary course of business or in connection
with the enforcement of rights or claims of the Company or a Subsidiary thereof
or (2) in connection with judgments that do not give rise to an Event of
Default, (vii) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar encumbrances which, in the aggregate,
do not materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the Company
or any Subsidiary in connection therewith, (viii) Liens to secure Purchase
Money Indebtedness that is otherwise permitted under this Indenture, provided,
however, that (a) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including commissions, sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or charged in
connection with, such purchase or construction and such financing) of such
Property, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such costs, and (c) such Lien does not extend to or
cover any Property other than such item of Property and any improvements on
such item, (ix) Liens securing the New Credit Facility (x) Liens securing
Capital Lease Obligations permitted to be incurred under this Indenture,
provided, however, that such Lien does not extend to any property other than
that subject to the underlying lease, (xi) Liens pursuant to leases and
subleases of real
<PAGE> 22
17
property which do not interfere with the ordinary conduct of the business of
the Company or any of its Subsidiaries and which are made on customary and
usual terms applicable to similar properties and do not extend to any property
of the Company or a Subsidiary other than the personal property located on such
real property, (xii) Liens securing reimbursement obligations under commercial
letters of credit, but only in or upon the goods the purchase of which were
financed by such letters of credit, (xiii) Liens arising under this Indenture
in favor of the Trustee for its own benefit or for the benefit of the Holders,
(xiv) Liens resulting from the deposit of funds or government securities in
trust for the purpose of decreasing or defeasing Indebtedness of the Company
and its Subsidiaries so long as such deposit of funds or government securities
and such decreasing or defeasing of Indebtedness are permitted under Section
4.07, (xv) Liens constituting licenses not otherwise prohibited under the terms
of this Indenture, (xvi) setoff, chargeback and other rights of depository and
collecting banks and other regulated financial institutions with respect to
money or instruments of the Company or its Subsidiaries on deposit with or in
the possession of such institutions, (xvii) any interest or title of a lessor
in the property subject to any Capital Lease Obligation permitted under this
Indenture or operating lease, (xviii) Liens on Equity Interests of Unrestricted
Subsidiaries, (xix) judgment or attachment Liens not giving rise to an Event of
Default, (xx) Liens in connection with Sale and Leaseback Transactions
otherwise permitted under this Indenture, and (xxi) Liens securing Refinancing
Indebtedness, provided, however, that such Liens extend only to the assets
(plus improvements thereon and additions thereto) securing the Indebtedness
being extended, refinancing, renewed or replaced, and such Indebtedness was
previously secured by such assets and provided, further, the terms of such
Liens taken as a whole are no less favorable to the Holders of the Notes than
the Liens being extended, refinanced, renewed or replaced.
"Person" means any individual, corporation, partnership,
limited liability company or partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government
(including any agency or political subdivision thereof).
"Preferred Equity Interest" means any Equity Interest of a
Person, however designated, which entitles the Holder thereof to a preference
with respect to dividends, distributions or liquidation proceeds of such Person
over the Holders of any other Equity Interest issued by such Person.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i).
"Property" or "property" of any Person means all types of
real, personal, tangible, intangible or mixed property owned by such Person
whether or not included in the most recent consolidated balance sheet of such
Person and its Subsidiaries under GAAP.
<PAGE> 23
18
"Public Equity Offering" means, with respect to any Person, a
public offering by such Person of some or all of its Common Equity Interests
other than Disqualified Equity Interests (however designated and whether voting
or non-voting) and any and all rights, warrants or options to acquire such
Equity Interests.
"Purchase Money Indebtedness" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii) fees and
expenses of such Person incurred in connection therewith. The acquisition of a
business or substantially all the assets of a business shall not be considered
to be in the ordinary course.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, renews or replaces ("refinances") any Indebtedness of the Company
or its Subsidiaries outstanding on the Issue Date or other Indebtedness
permitted to be incurred by the Company or its Subsidiaries pursuant to the
terms of this Indenture, whether involving the same or any other lender or
creditor or group of lenders or creditors, but only to the extent that (i) the
Refinancing Indebtedness is subordinated to the Notes or the Guarantees, as
applicable, to at least the same extent as the Indebtedness being refinanced,
if at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a)
no earlier than the Indebtedness being refinanced, or (b) after the maturity
date of the Notes, (iii) except where such Refinancing Indebtedness is
Attributable Indebtedness, has a Weighted Average Life to Maturity at the time
such Refinancing Indebtedness is incurred that is equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced, (iv)
except where such Refinancing Indebtedness is Attributable Indebtedness, such
Refinancing Indebtedness is in an aggregate principal amount that is less than
or equal to the aggregate principal or accreted amount (in the case of any
Indebtedness issued with original issue discount, as such) then outstanding
under the Indebtedness being refinanced plus the amount of all fees and
expenses (including premiums and penalties) associated with such refinancing)
and (v) such Refinancing Indebtedness is incurred by the same Person that
initially incurred the Indebtedness being refinanced, except that the Company
or a Guarantor may incur Refinancing Indebtedness to refinance Indebtedness of
the Company or any Wholly-Owned Subsidiary of the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 1, 1997, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
<PAGE> 24
19
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Related Party" with respect to an Excluded Person means (i)
any Wholly-Owned Subsidiary, or spouse or immediate family member of such
Excluded Person or (ii) any trust, corporation, partnership or other entity,
the beneficiaries, stockholders, partners, owners or persons beneficially
holding a controlling interest of which consist of such Excluded Person and/or
such other Persons referred to in the immediately preceding clause (i).
"Restricted Certificated Note" means a Certificated Note
bearing the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Equity Interests of the Company or any Subsidiary thereof (including, without
limitation, any payment in connection with any merger or consolidation
including the Company) or any payment made to the direct or indirect Holders
(in their capacities as such) of Equity Interests of the Company or any
Subsidiary or Affiliate thereof (other than (a) dividends or distributions
payable solely in Equity Interests of the Company (other than Disqualified
Equity Interests) or in options, warrants or other rights to purchase Equity
Interests of the Company (other than Disqualified Equity Interests) or (b)
dividends or distributions payable to the Company or to a Wholly-Owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Equity Interests of the Company or any
Subsidiary or Affiliate thereof (other than Equity Interests owned by the
Company or a Wholly-Owned Subsidiary, excluding Disqualified Equity Interests),
(iii) the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment,
of any Subordinated Indebtedness (except, if no Default or Event of Default is
continuing or would result therefrom, any such payment, purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value made (a)
out of Excess Proceeds available for general corporate purposes if (1) such
payment or other action is required by this Indenture or other agreement or
instrument pursuant to which such Subordinated Indebtedness was issued and (2)
the Company has purchased all Notes and other Senior Indebtedness properly
tendered pursuant to an Asset Sale Offer required under Section 4.21 or (b)
upon the occurrence of a Change of Control if (1) such payment or other action
is required by this Indenture or other agreement or
<PAGE> 25
20
instrument pursuant to which such Subordinated Indebtedness was issued and (2)
the Company has purchased all Notes and other Senior Indebtedness properly
tendered pursuant to the Change of Control Offer resulting from such Change of
Control), or (iv) the making of any Investment other than a Permitted
Investment. For purposes of determining the amount expended for Restricted
Payments, cash distributed or invested shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market value.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Sale and Lease-Back Transaction" means any arrangement with
any Person providing for the leasing by the Company or any Subsidiary of the
Company of any real or tangible personal property, which (i) property has been
or is to be sold, conveyed or transferred by the Company or such Subsidiary to
such Person in contemplation of such leasing and (ii) constitutes an Asset Sale
permitted under Section 4.21.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means Indebtedness of any Person which
is not Subordinated Indebtedness.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" shall have the meaning set forth in
Rule 1-02 of Regulation S-X promulgated by the Commission.
"Subordinated Indebtedness" means Indebtedness of the Company
or any Guarantor which is expressly subordinated in right of payment to the
Notes or a Guarantee, as the case may be.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Equity Interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, officers or trustees thereof is held by such first-named
Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint
venture, association or other business entity, with respect to which such
first-named Person or any of its Subsidiaries has the power to direct or cause
the direction of the management and policies of such entity by contract or
otherwise or if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the
Company other than for purposes of the definition of Unrestricted Subsidiary,
unless the Company shall have designated such Unrestricted Subsidiary as a
"Subsidiary" by written notice to the
<PAGE> 26
21
Trustee. An Unrestricted Subsidiary may be designated as a Subsidiary at any
time by the Company by written notice to the Trustee, provided, however, that
(i) no Default or Event of Default shall have occurred and be continuing or
would arise therefrom and (ii) if such Unrestricted Subsidiary is an obligor of
any Indebtedness, any such designation shall be deemed to be an incurrence as
of the date of such designation by the Company of such Indebtedness and
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 4.06.
"Temporary Cash Investments" means (i) United States dollars,
(ii) any evidence of Indebtedness issued or directly and fully guaranteed or
insured by the United States government or any agency or instrumentality
thereof (provided the full faith and credit of the United States government is
behind such obligation) having maturities of not more than 12 months from the
date of acquisition, (iii) certificates of deposit and eurodollar time deposits
with maturities of 12 months or less from the date of acquisition, demand
deposits, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank that is
a member of the Federal Reserve System and having capital and surplus in excess
of $500.0 million, or whose short-term debt has the highest rating obtainable
from Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings
Group ("S&P"), (iv) any money market deposit account issued or offered by a
domestic commercial bank that is a member of the Federal Reserve System and
having capital and surplus in excess of $500.0 million, or whose short-term
debt has the highest rating obtainable from Moody's or S&P, (v) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (vi) commercial paper having the highest rating obtainable from Moody's
or S&P, and in each case maturing within 270 days after the date of acquisition
and (vii) investments in money market funds having assets in excess of $500.0
million, substantially all of which consist of investments of the types
described in (i) through (vi) above.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the Issue Date (except as provided in
Section 8.03 hereof).
"Treasury Rate" means, at any time of computation, the yield
to maturity at such time (as compiled by and published in the most recent
Federal Reserve Statistical Release H.15(519), which has become publicly
available at least two business days prior to the date of the redemption notice
or, if such Statistical Release is no longer published, any publicly available
source of similar market data) of United States Treasury securities with a
constant maturity most nearly equal to the Make-Whole Average Life; provided,
however, that if the Make-Whole Average Life is not equal to the constant
maturity of the United States Treasury security for which a weekly average
yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to
<PAGE> 27
22
the nearest one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given, except that if the
Make-Whole Average Life is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trust Officer" when used with respect to the Trustee, means
any officer or assistant officer of the Trustee assigned to the Corporate Trust
Administration department or similar department performing corporate trust work
of the Trustee or any successor to such department or, in the case of a
successor Trustee, any officer of such successor Trustee performing corporate
trust functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"Unrestricted Certificated Note" means one or more
Certificated Notes that do not bear and are not required to bear the Private
Placement Legend, do not contain Paragraph 1(b) of the form of Note attached
hereto as Exhibit A, and the principal of which does not accrue Liquidated
Damages.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing Notes that do not bear the Private Placement
Legend, do not contain Paragraph 1(b) of form of Note attached hereto as
Exhibit A, and the principal of which does not accrue Liquidated Damages.
"Unrestricted Subsidiary" means, any Subsidiary of the Company
which shall have been designated as an Unrestricted Subsidiary in accordance
with this Indenture. An Unrestricted Subsidiary may be designated as a
Subsidiary at a later date in the manner provided in the definition of
"Subsidiary" above.
"U.S. Government Obligations" means (i) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
Holder of
<PAGE> 28
23
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the Holder of such depository receipt from any amount received by the custodian
in respect of the U.S. Government Obligation or a specific payment of principal
or interest on any such U.S. Government Obligation held by such custodian for
the account of the Holder of such depository receipt.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly-Owned Subsidiary" means any Subsidiary, all of the
outstanding Equity Interests (except directors' qualifying shares or shares
required to be held by foreign nationals, in each case to the extent mandated
by applicable law) of which are owned, directly or indirectly, by the Company.
Section 1.02. Other Definitions.
The definitions of the following terms may be found in the
sections indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . 4.08
"Agent Members" . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Base Period . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . 11.08
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . 4.20
"Change of Control Payment Date" . . . . . . . . . . . . . . . . 4.20
"Change of Control Purchase Price" . . . . . . . . . . . . . . . 4.20
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . 9.03
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . 4.21
"Excess Proceeds Offer" . . . . . . . . . . . . . . . . . . . . 4.21
"Exchange Securities" . . . . . . . . . . . . . . . . . . . . . 2.02
"Global Notes" . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . 9.02
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . 11.08
"Noteholder" ("Holder"). . . . . . . . . . . . . . . . . . . . . 1.01
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Physical Notes" . . . . . . . . . . . . . . . . . . . . . . . . 2.12
"Private Exchange" . . . . . . . . . . . . . . . . . . . . . . . 2.02
"Private Exchange Securities" . . . . . . . . . . . . . . . . . 2.02
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Reinvestment Dates" . . . . . . . . . . . . . . . . . . . . . . 4.21
"Required Filing Date" . . . . . . . . . . . . . . . . . . . . . 4.02
</TABLE>
<PAGE> 29
24
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and
made a part of this Indenture. The following TIA terms used in this Indenture
have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on this Indenture securities" means the Company, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
<PAGE> 30
25
(4) words in the singular include the plural, and in the
plural include the singular;
(5) words used herein implying any gender shall apply to
every gender; and
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section
or Subdivision, unless expressly stated otherwise.
ARTICLE 2.
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantors and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
Notes issued in global form shall be substantially in the form
of Exhibit A attached hereto (including the Global Note Legend and the
"Schedule of Exchanges in the Global Note" attached thereto). Notes issued in
certificated form shall be substantially in the form of Exhibit A attached
hereto (but without the Global Note Legend and without the "Schedule of
Exchanges of Interests in the Global Note" attached thereto). Each Global Note
shall represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear
System"
<PAGE> 31
26
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms
and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Restricted
Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto
("Global Notes") that are held by the Members of, or participants in, the
Depository ("Agent Members") through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
The Notes shall be executed on behalf of the Company by two
Officers of the Company or an Officer and an Assistant Secretary of the
Company. Such signatures may be either manual or facsimile.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note or at anytime
thereafter, the Note shall be valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate
Notes for original issue in the aggregate principal amount of $80,000,000 upon
a Company Request. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof.
Upon receipt of the Company Request and an Officers' Certificate certifying
that the registration statement relating to the exchange offer specified in the
Registration Rights Agreement is effective or that the conditions precedent to
a Private Exchange (as defined in the Registration Rights Agreement) thereunder
have been met, the Trustee shall authenticate Notes in an aggregate principal
amount not to exceed $80,000,000 for issuance in exchange for all Notes
previously issued and tendered for exchange pursuant to an exchange offer
registered under the Securities Act or pursuant to a Private Exchange.
Exchange Securities (as defined in the Registration Rights Agreement) or
Private Exchange Securities (as defined in the Registration Rights Agreement)
may have such distinctive series designations and such changes in the form
thereof as are specified in the Company Request referred to in the preceding
sentence. The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same right as the Trustee in dealing with the Company or an Affiliate.
Notwithstanding the foregoing, only the
<PAGE> 32
27
Trustee may authenticate any replacement Note authenticated pursuant to Section
2.07.
Section 2.03. Registrar and Paying Agent.
The Company shall appoint a registrar, which shall maintain an
office or agency where Notes may be presented for registration of transfer or
for exchange ("Registrar"), and a paying agent, which shall maintain an office
or agency where Notes may be presented for payment ("Paying Agent") and shall
maintain an office or agency where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served, each located in the
City and State of New York. The Registrar shall keep a register of the Notes
and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. Neither the Company
nor any Affiliate may act as Paying Agent. The Company may change any Paying
Agent, Registrar or co-registrar without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and address of any
such Agent. If the Company fails to maintain a Registrar or Paying Agent, or
agent for service of notices and demands, or fails to give the foregoing
notice, the Trustee shall act as such and shall be entitled to appropriate
compensation pursuant to Section 7.07. The Company initially appoints the
Trustee as Registrar, Paying Agent and agent for service of notices and demands
in connection with the Notes.
The Company initially appoints the Depositary Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
On or before each due date of the principal of and interest on
any Notes, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal and interest so becoming due. Each Paying Agent shall hold
in trust for the benefit of the Noteholders or the Trustee all money held by
the Paying Agent for the payment of principal of or interest on the Notes
(whether such money has been paid to it by the Company or any other obligor on
the Notes), and the Company and the Paying Agent shall notify the Trustee of
any default by the Company (or any other obligor on the Notes) in making any
such payment. Money held in trust by the Paying Agent need not be segregated
except as required by law and in no event shall the Paying Agent be liable for
any interest on any money received by it hereunder. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and the
Trustee, may at any time during the continuance of any Event of Default
specified in Section 6.01(1) or (2), upon written request to a Paying Agent,
require such Paying Agent to forthwith pay to the Trustee all sums so held in
trust by such Paying Agent
<PAGE> 33
28
together with a complete accounting of such sums. Upon doing so, the Paying
Agent shall have no further liability for the money delivered to the Trustee.
Section 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee in writing on or before the fifth Business Day
before each Interest Payment Date, as of the relevant record date, and at such
other times as the Trustee may request in writing, a list in such form and as
of such date as the Trustee may reasonably require of the names and addresses
of Noteholders, including the aggregate principal amount of Notes held by each
such Noteholder.
Section 2.06. Transfer and Exchange.
Holders of the Notes may transfer or exchange Notes in
accordance with this Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by this Indenture. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any
Note for a period of 15 days before selection of the Notes to be redeemed.
(a) Transfer and Exchange of Global Notes. A Global Note
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Notes will be exchanged by the Company for Certificated Notes if (i) the
Company delivers to the Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 90 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged
for Certificated Notes and delivers a written notice to such effect to the
Trustee. Upon the occurrence of either of the preceding events in (i) or (ii)
above, Certificated Notes shall be issued in such names as the Depositary or
the Company shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in
this Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
<PAGE> 34
29
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs as
applicable:
(i) Transfer of Beneficial Interests in the Same
Global Note. Beneficial interests in any Restricted Global Note may
be transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend; provided, however, that prior to the expiration of any
restricted period under applicable law, transfers of beneficial
interests in the Regulation S Global Note may not be made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred only to Persons who take delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note. No
written orders or instructions shall be required to be delivered to
the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of
Beneficial Interests in Global Notes. In connection with all
transfers and exchanges of beneficial interests (other than a transfer
of a beneficial interest in a Global Note to a person who takes
delivery thereof in the form of a beneficial interest in the same
Global Note), the transferor of such beneficial interest must delivery
to the Registrar either (A)(1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to
be credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and
(2) instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be
credited with such increase or (B)(1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Certificated Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Certificated Note
shall be registered to effect the transfer or exchange referred to in
(1) above. Upon an Exchange Offer by the Company in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii)
shall be deemed to have been satisfied upon receipt by the Registrar
of the instructions contained in the Letter of Transmittal delivered
by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or
<PAGE> 35
30
exchange of beneficial interests in Global Notes contained in this
Indenture, the Notes and otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the relevant
Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery thereof
in the form of a beneficial interest in another Restricted Global Note
if the transfer complies with the requirements of clause (ii) above
and the Registrar receives the following:
(A) if the transferee will take delivery
in the form of a beneficial interest in the 144A Global Note,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transferee will take delivery
in the form of a beneficial interest in the Regulation S
Global Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transferee will take delivery
in the form of a beneficial interest in the IAI Global Note,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications and
certificates and an Opinion of Counsel required by item (3)
thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests
in a Restricted Global Note for Beneficial Interests in the
Unrestricted Global Note. A beneficial interest in any Restricted
Global Note may be exchanged by any Holder thereof for a beneficial
interest in an Unrestricted Global Note or transferred to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of clause (ii) above and:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder of the beneficial
interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected
pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;
<PAGE> 36
31
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial interest in
an Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (1)(a) thereof;
(2) if the Holder of such
beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in
item (4) thereof; and
(3) in each such case set forth in
this subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are not required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraph
(B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for
Certificated Notes.
(i) If any Holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Certificated Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Certificated Note,
then, upon receipt by the Registrar of
<PAGE> 37
32
the following documentation:
(A) if the Holder of such beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Certificated Note, a certificate
from such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (1)(a) thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(C) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Certificated Note in the appropriate
principal amount. Any Certificated Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this section 2.06(c)(i) shall
be registered in such name or names and in such authorized
<PAGE> 38
33
denomination or denominations as the Holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Certificated Notes to the Person in whose names such Notes are so registered.
Any Certificated Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the
Private Placement Legend and shall be subject to all restrictions on transfer
contained therein.
(ii) Notwithstanding 2.06(c)(i) hereof, a Holder
of a beneficial interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Certificated Note or may
transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Certificated Note only if:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected
pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Certificated Note that
does not bear the Private Placement Legend, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof;
(2) if the Holder of such
beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take
delivery thereof in the form of a Certificated Note that does
not bear the Private Placement Legend, a certificate from such
Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
<PAGE> 39
34
(3) in each such case set forth in
this subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Company, to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are not required in order to
maintain compliance with the Securities Act.
(iii) If any Holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest
for a Certificated Note or to transfer such beneficial interest to a
person who takes delivery thereof in the form of a Certificated Note,
then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly
pursuant to Section 2.06(h) hereof, and the Company shall execute and
the Trustee shall authenticate and deliver to the Person designated in
the instructions a Certificated Note in the appropriate principal
amount. Any Certificated Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in
such name or names and in such authorized denomination or
denominations as the Holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Certificated Notes to the Persons in whose names such Notes are so
registered. Any Certificated Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend. A beneficial interest in an Unrestricted
Global Note cannot be exchanged for a Certificated Note bearing the
Private Placement Legend or transferred to a Person who takes delivery
thereof in the form of a Certificated Note bearing the Private
Placement Legend.
(d) Transfer and Exchange of Certificated Notes for
Beneficial Interests.
(i) If any Holder of a Restricted Certificated
Note proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Certificated Notes to a
Person who takes delivery thereof in the form of a beneficial interest
in a Restricted Global Note, then, upon receipt by the Registrar of
the following documentation:
(A) if the Holder of such Restricted
Certificated Note proposes to exchange such Note for a
beneficial interest in a Restricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(b) thereof;
(B) if such Certificated Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate
<PAGE> 40
35
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Certificated Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit C hereto,
including the certifications in item (2) thereof;
(D) if such Certificated Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item 3(a) thereof;
(E) if such Certificated Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Certificated Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Certificated Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Certificated Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Note, in the case of clause (B) above, the
144A Global Note, in the case of clause (C) above, the Regulation S Global
Note, and in all other cases, the IAI Global Note.
(ii) A Holder of a Restricted Certificated Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Certificated Note to a Person
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer, is
not (1) a broker-dealer, (2) a Person
<PAGE> 41
36
participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected
pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
Certificated Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof;
(2) if the Holder of such
Certificated Notes proposes to transfer such Notes to a Person
who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in
this subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act,
that the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Certificated
Notes are being exchanged or transferred in compliance with
any applicable blue sky securities laws of any State of the
United States.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Certificated
Notes and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Note.
(iii) A Holder of an Unrestricted Certificated Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Certificated Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Certificated Note and increase or cause to be increased
the aggregate principal amount of one of the Unrestricted Global
Notes.
<PAGE> 42
37
If any such exchange or transfer from a Certificated Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above.
(e) Transfer and Exchange of Certificated Notes for
Certificated Notes. Upon request by a Holder of Certificated Notes and such
Holder's compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of Certificated Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Certificated Notes duly endorsed or accompanied
by a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, pursuant to the provisions of this
Section 2.06(e).
(i) Restricted Certificated Notes may be
transferred to and registered in the name of Persons who take delivery
thereof if the Registrar receives the following:
(A) if the transfer will be made
pursuant to Rule 144A under the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made
pursuant to Rule 903 or Rule 904, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transfer will be made
pursuant to any other exemption from the registration
requirements of the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) Any Restricted Certificated Note may be
exchanged by the Holder thereof for an Unrestricted Certificated Note
or transferred to a Person or Persons who take delivery thereof in the
form of an Unrestricted Certificated Note if:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights
<PAGE> 43
38
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected
pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
Restricted Certificated Notes proposes to exchange such Notes
for an Unrestricted Certificated Note, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(2) if the Holder of such
Restricted Certificated Notes proposes to transfer such Notes
to a Person who shall take delivery thereof in the form of an
Unrestricted Certificated Note, a certificate from such Holder
in the form of Exhibit B hereto, including the certifications
in item (4) thereof; and
(3) in each such case set forth in
this subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act,
that the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Restricted
Certificated Note is being exchanged or transferred in
compliance with any applicable blue sky securities laws of any
State of the United States.
(iii) A Holder of Unrestricted Certificated Notes
may transfer such Notes to a Person who takes delivery thereof in the
form of an Unrestricted Certificated Note. Upon receipt of a request
for such a transfer, the Registrar shall register the Unrestricted
Certificated Notes pursuant to the instructions from the Holder
thereof. Unrestricted Certificated Notes cannot be exchanged for or
transferred to Persons who take delivery thereof in the form of a
Restricted Certificated Note.
(f) Exchange Offer. Upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, the Company shall
issue and, upon
<PAGE> 44
39
receipt of an authentication order in accordance with the Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by persons
that are not (x) broker-dealers, (y) Persons participating in the distribution
of the Exchange Notes or (z) Persons who are affiliates (as defined in Rule
144) of the Company and accepted for exchange in the Exchange Offer and (ii)
Certificated Notes in an aggregate principal amount equal to the principal
amount of the Restricted Certificated Notes accepted for exchange in the
Exchange Offer. Concurrent with the issuance of such Notes, the Trustee shall
cause the aggregate principal amount of the applicable Restricted Global Notes
to be reduced accordingly, and the Company and the Guarantors shall execute and
the Trustee shall authenticate and deliver to the Persons designated by the
Holders of Certificated Notes so accepted Certificated Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the
face of all Global Notes and Certificated Notes issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph
(B) below each Global Note and each Certificated Note (and all
Notes issued in exchange therefor or substitution thereof)
shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS A NON-U.S. PERSON THAT IS
OUTSIDE THE UNITED STATES; (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) TO A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A
TRANSACTION IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE EXEMPTION FROM
<PAGE> 45
40
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A
"U.S. PERSON" AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF SUCH HOLDER'S PROPERTY OR
THE PROPERTY OF SUCH ACCOUNT AT ALL TIMES BE WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THE TRANSFER
RESTRICTIONS SET FORTH IN THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF ANY CERTIFICATED SECURITY, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE OF SUCH CERTIFICATED SECURITY RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT SUCH CERTIFICATED SECURITY TO
THE TRUSTEE. IF ANY PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR APPLICABLE SECURITIES LAWS OF ANY JURISDICTION. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS."
(B) Notwithstanding the foregoing, any
Global Note or Certificated Note issued pursuant to
subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii),
(e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not
bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall
bear a legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS THEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER
<PAGE> 46
41
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial interests in a particular Global Note have been
exchanged for Certificated Notes or a particular Global Note has been redeemed,
repurchased or canceled in whole and not in part, each such Global Note shall
be returned to or retained and canceled by the Trustee in accordance with
Section 2.10 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note or for Certificated Notes, the principal amount of Notes represented by
such Global Note shall be reduced accordingly and an endorsement shall be made
on such Global Note, by the Trustee or by the Depositary at the direction of
the Trustee, to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note, by the Trustee or by the Depositary at the direction of the Trustee, to
reflect such increase. If appropriate, in accordance with Section 2.02
hereof, the Trustee shall authenticate one or more Global Notes in an aggregate
principal amount equal to the principal amount of beneficial interests so
transferred.
(i) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Global Notes and Certificated Notes upon the Company's
order or at the Registrar's request.
(ii) No service charge shall be made to a Holder
of a beneficial interest in a Global Note or to a Holder of a
Certificated Note for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith.
(iii) The Registrar shall not be required to
register the transfer of or exchange any Note selected for redemption
in whole or in part, except the unredeemed portion of any Note being
redeemed in part.
<PAGE> 47
42
(iv) All Global Notes and Certificated Notes
issued upon any registration of transfer or exchange of Global Notes
or Certificated Notes shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Global Notes or Certificated Notes surrendered upon
such registration of transfer or exchange.
(v) The Company shall not be required (A) to
issue, to register the transfer of or to exchange Notes during a
period beginning at the opening of business 15 days before the day of
any selection of Notes for redemption under Section 3.02 hereof and
ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any
Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration
of a transfer of any Note, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes
and Certificated Notes in accordance with the provisions of Section
2.02 hereof.
(viii) All certifications, certificates and Opinions
of Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a transfer or exchange may be submitted by
facsimile.
(j) Neither the Company nor the Trustee will be liable
for any delay by the Global Note Holder or the Depositary in identifying the
beneficial owners of Notes and the Company and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the Global Note
Holder or the Depositary for all purposes.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Registrar or Trustee
or if the Holder of a Note presents evidence to the satisfaction of the Company
and the Trustee that the Note has been lost, destroyed or wrongfully taken and
of the ownership thereof, the Company shall issue and the Trustee shall
authenticate a replacement Note if the Holder of such Note furnishes to the
Company and the Trustee evidence reasonably acceptable to them of the ownership
and destruction, loss or theft of such Note. An indemnity bond may be required
by the Company or the Trustee that is sufficient in the judgment of the Company
and the Trustee to protect the Company, the
<PAGE> 48
43
Trustee or any Agent from any loss which any of them may suffer if a Note is
replaced. The Company and the Trustee each may charge for its expenses
(including reasonable attorneys' fees and expenses) in replacing a Note. Every
replacement Note is an additional obligation of the Company.
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding until the Company and the Trustee receive proof satisfactory to
each of them that the replaced Note is held by a bona fide purchaser in whose
hands such obligation is a legal, valid and binding obligation of the Company.
If a Paying Agent holds on a Redemption Date or the Maturity
Date money sufficient to pay the principal of, premium, if any, and all accrued
interest with respect to Notes payable on that date and is not prohibited from
paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Notes cease to be outstanding and
interest on them ceases to accrue.
Subject to Section 11.06, a Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, benefits and
privileges, of definitive Notes but may have variations that the Company
considers appropriate for temporary Notes. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes presented to it.
Section 2.10. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and retain or, upon written request of the Company, may destroy
(subject to the record-retention requirements of the Exchange Act) or return to
the Company in accordance with its normal practice, all Notes surrendered for
transfer, exchange, payment or cancellation and if such Notes are destroyed,
deliver a certificate of destruction to the Company unless the Company
instructs the Trustee in writing to deliver the Notes to the Company. Subject
to Section 2.07 hereof, the Company may
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44
not issue new Notes to replace Notes in respect of which it has previously paid
all principal, premium and interest accrued thereon, or delivered to the
Trustee for cancellation.
Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted amounts, plus (to the extent permitted by law) any
interest payable on defaulted amounts pursuant to Section 4.01 hereof, to the
Persons who are Noteholders on a subsequent special record date. The Company
shall fix the special record date and payment date in a manner satisfactory to
the Trustee and provide the Trustee at least twenty days notice of the proposed
amount of default interest to be paid and the special payment date. At least
15 days before the special record date, the Company shall mail or cause to be
mailed to each Noteholder at his address as it appears on the Notes register
maintained by the Registrar a notice that states the special record date, the
payment date (which shall be not less than five nor more than ten days after
the special record date), and the amount to be paid. In lieu of the foregoing
procedures, the Company may pay defaulted interest in any other lawful manner
satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and the Maturity Date, the Company shall have deposited with the
Paying Agent in New York, New York, or such other location as shall be
designated by the Paying Agent, in immediately available funds money sufficient
to make cash payments, if any (including, without limitation, Liquidated
Damages, if any), due on such Interest Payment Date or Maturity Date, as the
case may be, in a timely manner which permits the Trustee to remit payment to
the Holders on such Interest Payment Date or Maturity Date, as the case may be.
Payments in respect of the Global Notes (including principal, premium, interest
and Liquidated Damages, if any) shall be made by wire transfer of immediately
available funds to the accounts specified by the Holder of such Global Note.
With respect to Certificated Notes, the Company will make all payments of
principal, premium, interest and Liquidated Damages, if any, by wire transfer
of immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address.
Section 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number (or
numbers), and if so, the Trustee shall use the CUSIP number(s) in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company will promptly
<PAGE> 50
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notify in writing the Trustee of any such CUSIP number used by the Company in
connection with the Notes and any change in such CUSIP number.
Section 2.14. Wire Payments to Holders.
Notwithstanding any provisions of this Indenture and the Notes
to the contrary, at the request of a Holder, all payments with respect to any
of the Notes, may be made by the Paying Agent upon receipt from the Company of
immediately available funds prior to 11:30 a.m., New York City time, directly
to the Holder of such Note by wire transfer of immediately available funds to
the accounts specified by the Holder; provided, however, that no such payment
in immediately available funds shall be made to any Holder of Certificated
Notes under this Section 2.14 unless such Holder has delivered written
instructions to the Trustee prior to the relevant record date for such payment
requesting that such payment will be so made and designating the bank account
to which such payments shall be so made and in the case of payments of
principal, surrenders the Note to the Trustee in exchange for a Note or Notes
aggregating the same principal amount as the unredeemed principal amount of the
Notes surrendered. The Trustee shall be entitled to rely on the last
instruction delivered by the Holder pursuant to this Section 2.14 unless a new
instruction is delivered prior to the relevant record date for a payment date.
The Company will indemnify and hold the Trustee harmless against any loss,
liability or expense (including attorneys' fees and expenses) resulting from
any act or omission to act on the part of the Company or any such Holder in
connection with this Section 2.14 or which the Paying Agent may incur as a
result of making any payment in accordance with this Section 2.14, other than
acts or omissions constituting negligence, gross negligence or willful
misconduct.
ARTICLE 3.
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Section 3.07
hereof, (i) at least 60 days prior to the Redemption Date in the case of a
partial redemption, (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to in writing, the Company shall notify the Trustee in writing of the
Redemption Date, the principal amount of Notes to be redeemed and the
redemption price, and deliver to the Trustee an Officers' Certificate stating
that such redemption will comply with the conditions contained in Section 3.07
hereof, as appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
In the event of redemption of fewer than all of the Notes, the
Trustee shall select pro rata, by lot or in such other manner as it shall deem
fair and equitable,
<PAGE> 51
46
the Notes to be redeemed. No Notes of $1,000 or less shall be redeemed in part.
Subject to the limitations described herein, the Notes will be redeemable in
whole or in part upon not less than 30 nor more than 60 days' prior written
notice, mailed by first class mail to a Holder's last address as it shall
appear on the register maintained by the Registrar of the Notes. Notices of
redemption may not be conditional. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note, in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. After any redemption
date, unless the Company shall default in the payment of the redemption price,
interest will cease to accrue on the Notes or portions thereof called for
redemption.
Section 3.03. Notice of Redemption.
At least 30 days, but no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued
interest, if any, to be paid;
(3) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the Redemption
Date and upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date and that the only remaining right of the Holders
of such Notes is to receive payment of the Notes redemption price upon
surrender to the Paying Agent of the Notes redeemed;
(7) the paragraph of Section 3.07 hereof pursuant to
which the Notes
<PAGE> 52
47
called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are
being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest (and
Liquidated Damages, if any) accrued to the Redemption Date. Upon surrender to
the Paying Agent, such Notes shall be paid at the redemption price, including
any premium, plus interest (and Liquidated Damages, if any) accrued to the
Redemption Date, provided that if the Redemption Date is after a regular
interest payment record date and on or prior to the Interest Payment Date, the
accrued interest (and Liquidated Damages, if any) shall be payable to the
Holder of the redeemed Notes registered on the relevant record date, and
provided, further, that if a Redemption Date is a Legal Holiday, payment shall
be made on the next succeeding Business Day and no interest (and Liquidated
Damages, if any) shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of and accrued
interest (and Liquidated Damages, if any) on all Notes to be redeemed on that
date other than Notes or portions thereof called for redemption on that date
which have been delivered by the Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of and accrued interest (and Liquidated Damages, if any)
on Notes called for redemption shall have been made available in accordance
with the preceding paragraph, the Notes called for redemption will cease to
accrue interest (and Liquidated Damages, if any) and the only right of the
Holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid interest
(and Liquidated Damages, if any) on such Notes to the Redemption Date. If any
Note called for redemption shall not be so paid, interest (and Liquidated
Damages, if any) will be paid, from the Redemption Date until such redemption
payment is made, on the unpaid principal of the Note, premium, if any (and
Liquidated Damages, if any), and interest, if any, not paid on such unpaid
principal, in each case, at the rate and in the manner provided in the Notes.
<PAGE> 53
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Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth below, the Notes will not be
redeemable at the option of the Company prior to December 1, 2001. Thereafter,
the Notes will be redeemable at any time, and from time to time, at the option
of the Company, in whole or in part, at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date, if redeemed during the twelve-month period beginning on December 1, of
each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . . . . 106.50%
2002 . . . . . . . . . . . 103.25%
2003 . . . . . . . . . . . 100.00%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to
December 1, 2000, the Company may redeem up to an aggregate of $25 million in
principal amount of Notes at a redemption price equal to 111% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the Redemption Date with the net cash proceeds of one or more
Public Equity Offerings, provided that at least $55 million in principal amount
of Notes remains outstanding immediately following each such redemption and
that any such redemption occurs within 90 days following the closing of any
such Public Equity Offering.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.20 and 4.21 hereof, the
Company is not obligated to make any mandatory redemption of or sinking fund
payments with respect to the Notes.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay the principal of, premium, if any, and
interest (plus all Liquidated Damages as provided in the Registration Rights
Agreement,) on the Notes on the dates and in the manner provided in the Notes
and this Indenture. An
<PAGE> 54
49
installment of principal, interest or Liquidated Damages shall be considered
paid on the date it is due if the Trustee or Paying Agent holds on that date
money designated for and sufficient to pay such installment. All payments
hereunder shall be due and payable in New York, New York or as otherwise
directed by a Holder.
Section 4.02. Reports.
(a) The Company will file with the SEC all information,
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements, on or prior to the respective dates (the "Required Filing Dates")
by which the Company would have been or is required to so file such documents.
The Company (at its own expense) shall also in any event within 5 days after
each Required Filing Date (i) transmit by mail to all Holders, at their
addresses appearing in the register of Notes maintained by the Registrar and
(ii) file with the Trustee within 5 days after the Required Filing Date, copies
(without exhibits) of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act and (iii) make such
information available to securities analysts and prospective investors upon
request. Upon qualification of this Indenture under the TIA, the Company shall
also comply with the provisions of TIA Section 314(a). Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
(b) The Company will, upon request, provide to any Holder
of Notes or any prospective transferee of any such Holder or to securities
analysts any information concerning the Company (including financial
statements) necessary in order to permit such Holder to sell or transfer Notes
in compliance with Rule 144A under the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Company and each Guarantor covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, or plead (as a
defense or otherwise) or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury law or other law which
would prohibit or forgive the Company or such Guarantor, as the case may be,
from paying all or any portion of the principal of, premium, if any, and
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance
of this Indenture; and (to the extent that it may lawfully do so) the Company
and each Guarantor hereby expressly waives all benefit or
<PAGE> 55
50
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, on or
before 90 days after the end of the Company's fiscal year and on or before 45
days after the end of the first, second and third fiscal quarters of each
fiscal year, an Officers' Certificate (one of the signers of which shall be the
principal executive officer, principal financial officer or principal
accounting officer of the Company or such Guarantor, as the case may be)
stating that a review of the activities of the Company or such Guarantor, as
the case may be, during such fiscal year or fiscal quarter, as the case may be,
has been made under the supervision of the signing Officers with a view to
determining whether the Company or such Guarantor, as the case may be, has
kept, observed, performed and fulfilled its obligations under this Indenture,
and further stating, as to each such Officer signing such certificate, that to
the best of his or her knowledge the Company or such Guarantor, as the case may
be, has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all or such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company or such Guarantor, as the case may be, is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of, premium, if any, or interest on the Notes are
prohibited or, if such event has occurred, a description of the event and what
action the Company or such Guarantor, as the case may be, is taking or proposes
to take with respect thereto.
(b) So long as (and to the extent) not contrary to the
then current recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to Section
4.02 shall be accompanied by a written statement of the Company's independent
public accountants (who shall be a firm of established national reputation)
that in making the examination necessary for certification of such financial
statements nothing has come to their attention which would lead them to believe
that the Company has violated any provisions of this Article 4 or Article 5 of
this Indenture or, if any such violation has occurred, specifying the nature
and period of existence thereof, it being understood that such accountants
shall not be liable directly or indirectly for any failure to obtain knowledge
of any such violation.
(c) The Company and each Guarantor will, so long as any
of the Notes are outstanding, deliver to the Trustee, forthwith upon any
Officer becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action the
Company or such Guarantor, as the
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51
case may be, is taking or proposes to take with respect thereto.
Section 4.05. Taxes.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon it or its Subsidiaries' or
Unrestricted Subsidiaries' income, profits or property and (b) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become
a Lien upon their property; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate negotiations or proceedings and for
which disputed amounts adequate reserves (in the good faith judgment of the
Officers of the Company) have been made.
Section 4.06. Limitations on Additional Indebtedness and Preferred Equity
Interests.
(a) The Company and the Guarantors will not, and will not
permit any of their Subsidiaries to, directly or indirectly, incur any
Indebtedness (including Acquired Indebtedness) other than Permitted
Indebtedness, provided, however, that the Company and the Guarantors may incur
Indebtedness (including Acquired Indebtedness) if (a) after giving effect on a
pro forma basis to the incurrence of such Indebtedness and to the extent set
forth in the definition of Consolidated Fixed Charge Coverage Ratio the receipt
and application of the proceeds thereof, the Company's Consolidated Fixed
Charge Coverage Ratio would be greater than (i) 2.00 if such Indebtedness is to
be incurred on or before December 1, 1999; and (ii) 2.25 if such Indebtedness
is to be incurred after December 1, 1999; and (b) no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence
of the incurrence of such Indebtedness. Notwithstanding any other provision of
this covenant, a guarantee of Indebtedness will not constitute a separate
incurrence of Indebtedness, if the Indebtedness being guaranteed was incurred
in compliance with the terms of this Indenture.
(b) For purposes of determining compliance with this
Section 4.06, in the event that an item of Indebtedness meets the criteria of
more than one of the categories of Permitted Indebtedness described in the
definition thereof or is otherwise entitled to be incurred pursuant to Section
4.06(a), the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred as so classified.
(c) The Company will not issue Subordinated Indebtedness
or Preferred Equity Interests with change of control provisions or asset sales
provisions requiring the payment of such Subordinated Indebtedness or Preferred
Equity Interests prior to the payment in full to the Holders of Notes that have
accepted the Company's Change of Control Offer following a Change in Control or
payment of the Excess
<PAGE> 57
52
Proceeds to Holders of Notes that have accepted an Excess Proceeds Offer, as
the case may be.
Section 4.07. Limitation on Restricted Payments.
(a) The Company and the Guarantors will not, and will not
permit any of their Subsidiaries to, directly or indirectly, make, any
Restricted Payment unless:
(i) no Default or Event of Default shall have
occurred and be continuing at the time of or immediately after giving
effect to such Restricted Payment;
(ii) immediately after giving pro forma effect to
such Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.06;
and
(iii) immediately after giving effect to such
Restricted Payment, the aggregate of all Restricted Payments declared
or made after the Issue Date through and including the date of such
Restricted Payment (the "Base Period") does not exceed the sum of (1)
50% of the Company's Consolidated Net Income (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit) from the Issue Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment, (2) 100% of the
aggregate net cash proceeds received by the Company from the issue or
sale, during the Base Period, of Equity Interests (other than
Disqualified Equity Interests or Equity Interests of the Company
issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Equity Interests (other than
Disqualified Equity Interests) of the Company which have been so
converted or exercised or exchanged, as the case may be, (3) if any
Restricted Investment that was made after the Closing Date is sold for
cash, the net cash proceeds from such sale to the extent received by
the Company or any Restricted Subsidiary, minus the initial amount of
such Restricted Investment and (4) in the event an Unrestricted
Subsidiary is redesignated as a Restricted Subsidiary, an amount equal
to the lesser of (i) the net book value of such Investments at the
time of such designation, (ii) the fair market value of such
Investments at the time of such designation and (iii) the original
fair market value of such Investments at the time they were made. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face
amount thereof and property other than cash shall be valued at its
fair market value at the time expended.
(b) The provisions of this covenant shall not prohibit
(i) the
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53
agreement or commitment to make any payment or distribution permitted under
this Indenture or the payment or distribution so agreed or committed to be made
as long as such payment or distribution is made on the date of such agreement
or commitment or within 60 days thereof, provided, however, that on the date of
such agreement or commitment such payment would comply with the foregoing
provisions, it being understood that the agreement or commitment to make such
payment or distribution shall constitute Permitted Indebtedness, (ii) the
purchase, redemption or other acquisition or retirement of any Equity Interests
or the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement of Subordinated
Indebtedness by conversion into, or by or in exchange for, Equity Interests
(other than Disqualified Equity Interests), or out of, the net cash proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company)
of other Equity Interests of the Company (other than Disqualified Equity
Interests), (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement of
Subordinated Indebtedness in exchange for, by conversion into, or out of the
net cash proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (including Disqualified Equity Interests) (other than any
Indebtedness owed to a Subsidiary) of the Company or a Subsidiary that (1) is
contractually subordinated in right of payment to the Notes to at least the
same extent as, and (2) has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity at least equal to the
Weighted Average Life to Maturity of, the Subordinated Indebtedness being paid,
purchased, defeased, repurchased, redeemed or otherwise acquired or retired,
(iv) the purchase, redemption or other acquisition or retirement of any
Disqualified Equity Interests by conversion into, or by exchange for, shares of
Disqualified Equity Interests, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Disqualified Equity Interests and (v) the purchase, redemption or other
acquisition or retirement for value of any Equity Interests held by any current
or past member of the Company's (or any of its Subsidiaries') management or
board of directors (or the estate, heirs or legatees of any such individual)
pursuant to any management equity subscription agreement, stock option
agreement or other similar agreement; provided that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $500,000 in any twelve-month period; provided, however, that in the
case of the immediately preceding clauses (ii), (iii), (iv) and (v), no Default
or Event of Default shall have occurred and be continuing at the time of such
Restricted Payment or would occur as a result thereof.
(c) In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date for purposes of clause (iii) of
Section 4.07(a), amounts expended pursuant to clauses (i), (ii) and (v) of
Section 4.07(b) shall be included, but without duplication, in such
calculation, and amounts expended pursuant to clauses (iii) and (iv) thereof
shall be excluded.
(d) For purposes of calculating the net cash proceeds
received by the Company from the issuance or sale of its Equity Interests
either upon the conversion of,
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54
or exchange for, Indebtedness of the Company or any Subsidiary, such amount
will be deemed to be an amount equal to the difference of (a) the sum of (i)
the principal amount or accreted value (whichever is less) of such Indebtedness
on the date of such conversion or exchange and (ii) the additional cash
consideration, if any, received by the Company upon such conversion or
exchange, less any payment on account of fractional shares, minus (b) all
expenses incurred in connection with such issuance or sale. For purposes of
calculating the net cash proceeds received by the Company from the issuance or
sale of its Equity Interests upon the exercise of any options or warrants of
the Company, such amount will be deemed to be an amount equal to the difference
of (a) the additional cash consideration, if any, received by the Company upon
such exercise, minus (b) all expenses incurred in connection with such issuance
or sale.
(e) Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed, which
calculations may be based upon the Company's latest available financial
statements, and, where required, that no Default or Event of Default exists and
is continuing and no Default or Event of Default will occur immediately after
giving effect to such Restricted Payment.
(f) Section 4.22(b) contains additional limitations on
certain types of Restricted Payments.
Section 4.08. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate of the Company (including entities in which the Company or any
Subsidiary thereof owns a minority interest) (each such transaction, an
"Affiliate Transaction") or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue Date unless (i)
such Affiliate Transaction is solely between or among the Company and its
Wholly-Owned Subsidiaries; (ii) such Affiliate Transaction is solely between or
among Wholly-Owned Subsidiaries of the Company; or (iii) the terms of such
Affiliate Transaction are fair and reasonable to the Company or such
Subsidiary, as the case may be, and the terms of such Affiliate Transaction are
at least as favorable as the terms which could be obtained by the Company or
such Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $1.0 million in any one year
which is not permitted under clause (i) or (ii) above, the Company or such
Subsidiary, as the case may be, must obtain a resolution of its Board of
Directors certifying that such Affiliate Transaction complies with clause (iii)
above. In transactions with a value in excess of $5.0 million which are not
permitted under clause (i) or (ii) above, the Company or such Subsidiary, as
the case may be, must obtain a
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55
written opinion as to the fairness of such a transaction, from a financial
point of view, from an Independent Financial Advisor.
(b) Section 4.08(a) shall not apply to (i) any
transaction with any current or former officer, director or employee of the
Company (in his or her capacity as such) (or the estate, heirs or legatees of
any such individual) entered into in the ordinary course of business, including
entering into employment agreements, indemnification agreements and
compensation and employee benefit plans, (ii) Restricted Payments to the extent
not prohibited by Section 4.07 and other transactions specifically excluded
from the definition of "Restricted Payments" by reason of exceptions set forth
in such definition and (iii) issuances of Equity Interests of the Company.
Section 4.09. Limitations on Liens.
The Company will not, and will not permit any of its
Subsidiaries to, create, assume, incur or otherwise cause or suffer to exist or
become effective any Liens of any kind (other than Permitted Liens) upon any
property or asset of the Company or any Subsidiary of the Company whether owned
on the Issue Date, or acquired after the Issue Date or on any shares of stock
or debt of any Subsidiary, now owned or hereafter acquired, or on any income or
profits therefrom, or assign or otherwise convey any right to receive income or
profits thereon unless (i) if such Lien secures Senior Indebtedness, the Notes
or such Guarantee are secured on an equal and ratable basis with the obligation
so secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Subordinated Indebtedness, such Lien shall be
subordinated to a Lien granted to the Holders on the same collateral as that
securing such Lien to the same extent as such Subordinated Indebtedness is
subordinated to the Notes or such Guarantee.
Section 4.10. [Intentionally Deleted.]
Section 4.11. Limitation on Subsidiaries and Unrestricted Subsidiaries.
(a) The Company may by written notice to the Trustee
designate any Subsidiary (including a newly acquired or a newly formed
Subsidiary) to be an Unrestricted Subsidiary, provided, however, that (i) no
Default or Event of Default shall have occurred and be continuing or would
arise therefrom and (ii) such designation is at that time permitted under
Section 4.07. For purposes of determining whether such designation is
permitted under Section 4.07 above:
(i) an "Investment" shall be deemed to have been
made at the time any Subsidiary is designated as an Unrestricted
Subsidiary in an amount (proportionate to the Company's percentage
Common Equity Interest in such Subsidiary) equal to the greatest of
(a) the net book value of such Investments at the time of such
designation, (b) the fair market value of such Investments at the time
of such designation and (c) the original fair market value of such
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Investments at the time they were made;
(ii) at any date the aggregate of all Restricted
Payments made as Investments since the Issue Date shall exclude and be
reduced by an amount (proportionate to the Company's percentage Common
Equity Interest in such Subsidiary) equal to the net worth of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary
is designated a Subsidiary, not to exceed, in the case of any such
redesignation of an Unrestricted Subsidiary as a Subsidiary, the
amount of Investments previously made by the Company and its
Subsidiaries in such Unrestricted Subsidiary (in each case (i) and
(ii) "net worth" to be calculated based upon the fair market value of
the assets of such Subsidiary as of any such date of designation); and
(iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at
the time of such transfer.
(b) Notwithstanding paragraph (a), the Board of Directors
of the Company may not designate a Subsidiary of the Company to be an
Unrestricted Subsidiary unless such Subsidiary: (i) has no Indebtedness other
than Non-Recourse Debt; (ii) is not party to any agreement, contract,
arrangement or understanding with the Company or any Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of the Company;
(iii) is a Person with respect to which neither the Company nor any of its
Subsidiaries has any direct or indirect obligation (1) to subscribe for
additional Equity Interests or (2) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (iv) does not guarantee or otherwise directly or indirectly
provide credit support for any Indebtedness of the Company or any of its
Subsidiaries; and (v) has at least one director on its board of directors that
is not a director or executive officer of the Company or any of its
Subsidiaries and has at least one executive officer that is not a director or
executive officer of the Company or any of its Subsidiaries.
(c) If, at any time, any Unrestricted Subsidiary would
fail to meet the definition of an Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Person shall be deemed to be incurred by a Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.06, the Company shall be in default of
such covenant).
Section 4.12. Additional Guarantees.
If the Company or any of its Subsidiaries organized under the
laws of the United States or any state thereof (a "domestic Subsidiary") shall
acquire or create another domestic Subsidiary after the Issue Date, then such
newly acquired or created
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57
domestic Subsidiary will be required to execute a supplemental indenture, in
the form attached as Exhibit E and reasonably satisfactory in form and
substance to the Trustee (and with such documentation relating thereto as the
Trustee shall require, including, without limitation, an Opinion of Counsel as
to the enforceability of such supplemental indenture and Guarantee).
Section 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any of its Subsidiaries to (a) pay dividends or make any
other distributions in cash or otherwise to the Company or any Subsidiary on
its Equity Interests, (b) pay any Indebtedness owed to the Company or any
Subsidiary, (c) make loans or advances to the Company or any Subsidiary
thereof, (d) transfer any of its properties or assets to the Company or any
Subsidiary thereof (other than customary restrictions on transfer of property
subject to a Permitted Lien under the term of the agreements creating such
Permitted Lien (other than a Lien on cash not constituting proceeds of non-cash
property subject to a Permitted Lien) which would not materially adversely
affect the Company's ability to satisfy its obligations under the Notes), or
(e) guarantee the Notes, except, in each case, for such encumbrances or
restrictions existing under or contemplated by or by reason of (i) the Notes or
this Indenture; (ii) any restrictions existing under or contemplated by
agreements evidencing the New Credit Facility as in effect as of the Issue
Date, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive with respect
to such dividend and other payment restrictions affecting Subsidiaries than
those contained in the New Credit Facility as in effect on the Issue Date;
(iii) any restrictions with respect to a Subsidiary of the Company that was not
a Subsidiary of the Company on the Issue Date, which are in existence at the
time such Person becomes a Subsidiary of the Company (but not created in
connection with or contemplation of such Person becoming a Subsidiary of the
Company and which encumbrance or restriction is not applicable to any Person or
the property or assets of any Person other than such Person or the property or
assets of such Person so acquired); (iv) any agreement that governs Refinancing
Indebtedness, provided, however, that the terms and conditions of any such
restrictions are not materially less favorable in the aggregate to the Holders
of the Notes than those under or pursuant to the agreement evidencing the
Indebtedness being refinanced or replaced; (v) customary non-assignment
provisions in any contract or licensing agreement entered into by the Company
or any Subsidiary of the Company in the ordinary course of business or in any
lease governing any leasehold interest of the Company or a Subsidiary; (vi)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (d) above
on the property so acquired; (vii) restrictions existing by reason of or under
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Indebtedness existing on the Issue Date; (viii) any restrictions existing under
any agreement entered into with respect to the sale or disposition of all or
substantially all the Equity Interests or assets of a Subsidiary provided that
the disposition or sale is governed by the restrictions described under
Sections 4.20 and 4.21; or (ix) restrictions contained in agreements governing
other Indebtedness permitted to be incurred in accordance with this Indenture
provided that the restrictions are not materially more restrictive in the
aggregate than the restrictions contained in this Indenture.
Section 4.14. Restriction on Sale and Issuance of Subsidiary Interests.
The Company (i) will not, and will not permit any Subsidiary
to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests
of any Subsidiary to any Person other than the Company or a Wholly-Owned
Subsidiary (except directors' qualifying shares or shares required to be held
by foreign nationals, in each case to the extent mandated by applicable law),
unless (a) such transfer, conveyance, sale, lease or other disposition is of
all the Equity Interests of such Subsidiary and (b) the net cash proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.21 and (ii) will not permit any Subsidiary to issue
any of its Equity Interests (except directors' qualifying shares or shares
required to be held by foreign nationals, in each case to the extent mandated
by applicable law) to any Person other than to the Company or a Wholly-Owned
Subsidiary.
Section 4.15. Limitation on Sale and Lease-Back Transactions.
The Company will not, and will not permit any of its
Subsidiaries to, enter into any Sale and Lease- Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least
equal to the fair market value of the property sold, (ii) immediately prior to
and after giving effect to the Attributable Indebtedness in respect of such
Sale and Lease-Back Transaction, the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.06 and (iii) the net cash proceeds received by the Company or its
Subsidiaries from the Sale and Lease-Back Transaction are applied in accordance
with Section 4.21.
Section 4.16. Line of Business.
The Company will not, and will not permit any of its
Subsidiaries to, engage as a material part of its business in any business
other than the business conducted by the Company and its Subsidiaries as of the
Issue Date or any other business determined by the Company's Board of
Directors, in good faith, to be reasonably related to the foregoing.
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59
Section 4.17. Limitation on Status as Investment Company.
Neither the Company nor any of its Subsidiaries shall take any
action or suffer to exist any condition that would require the Company or any
of its Subsidiaries to register as an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended), or to otherwise
become subject to regulation as an investment company.
Section 4.18. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all Holders of the Notes which so consent,
waive or agree to amend within any time period set forth in the solicitation
documents relating to such consent, waiver or agreement.
Section 4.19. Corporate Existence.
Subject to Article 5 and Section 10.04 hereof, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, and the corporate, partnership or
other existence of each Subsidiary, in accordance with the respective
organizational documents (as the same may be amended from time to time) of each
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and its Subsidiaries; provided, however, that the Company shall not
be required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Subsidiaries, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders.
Section 4.20. Change of Control.
(a) Within 30 days of the occurrence of a Change of
Control, the Company shall notify the Trustee in writing of such occurrence and
shall make an offer to purchase (the "Change of Control Offer") all or any
portion (equal to $1,000 or an integral multiple of $1,000) of the outstanding
Notes at a cash purchase price equal to 101% of the principal amount thereof
plus any accrued and unpaid interest and Liquidated Damages, if any, thereon to
the Change of Control Payment Date (as hereinafter defined) (such applicable
purchase price being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this covenant.
(b) Within 30 days of the occurrence of a Change of
Control, the Company also shall (i) cause a notice of the Change of Control
Offer to be sent at least once to the Dow Jones News Service or similar
business news service in the United
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States and (ii) send by first-class mail, postage prepaid, to the Trustee and
to each Holder of the Notes, at the address appearing in the register
maintained by the Registrar of the Notes, a notice describing the transactions
constituting a Change of Control and stating:
(1) that the Change of Control Offer is being
made pursuant to this Section 4.20 and that all Notes tendered will be
accepted for payment, subject to the terms and conditions set forth
herein;
(2) the Change of Control Purchase Price and the
purchase date (which shall be a Business Day no earlier than 20
Business Days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in the
payment of the Change of Control Purchase Price, any Notes accepted
for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date;
(5) that Holders accepting the offer to have
their Notes purchased pursuant to a Change of Control Offer will be
required to surrender the Notes to the Paying Agent at the address
specified in the notice prior to the close of business on the Business
Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw
their acceptance if the Paying Agent receives, not later than the
close of business on the fifth Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Notes delivered for purchase, and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, provided that each Note
purchased and each such new Note issued shall be in an original
principal amount in denominations of $1,000 and integral multiples
thereof;
(8) any other reasonable procedures that a Holder
must follow to accept a Change of Control Offer or effect withdrawal
of such acceptance; and
(9) the name and address of the Paying Agent.
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(c) On the Change of Control Payment Date, the Company
shall, to the extent lawful, (i) accept for payment all Notes or portions
thereof or beneficial interests under a Global Note tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Notes or portions thereof or beneficial interests
so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly (1) mail to
each Holder of Notes so accepted and (2) cause to be credited to the respective
accounts of the Holders under a Global Note of beneficial interests so accepted
payment in an amount equal to the Change of Control Purchase Price for such
Notes, and the Company shall execute and issue, and the Trustee shall promptly
authenticate and mail to such Holder, a new Certificated Note equal in
principal amount to any unpurchased portion of the Certificated Notes
surrendered and shall issue a new Global Note equal in principal amount to any
unpurchased portion of beneficial interest so surrendered or shall reflect on
such Global Note or a schedule thereto such change in beneficial interest;
provided, however, that each such new Note shall be issued in an original
principal amount in denominations of $1,000 and integral multiples thereof.
(d) The Change of Control provisions described above will
be applicable whether or not any other provisions of this Indenture are
applicable. The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change or Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
(e) Section 4.22 contains additional provisions relating
to Change of Control Offers.
Section 4.21. Limitation on Certain Asset Sales.
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value thereof (as
reasonably determined for Asset Sales in excess of $1 million in good faith by
its Board of Directors); (ii) not less than 75% of the consideration received
by the Company or the Subsidiary, as the case may be, from such Asset Sale is
in the form of cash or Temporary Cash Investments; provided that the amount of
(A) any liabilities (as shown on the Company's or a Subsidiary's most recent
balance sheet) of the Company or a Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any Guarantee thereof) that are assumed by the transferee of any such assets
or an Affiliate thereof pursuant to a customary novation agreement that
releases the Company or such Subsidiary from further liability and (B) any
securities, notes or other obligations
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received by the Company or a Subsidiary from such transferee or an Affiliate
thereof that are converted by the Company or a Subsidiary into cash prior to
the Reinvestment Date (to the extent of the cash received) shall be deemed to
be cash for purposes of this provision; and (iii) the Asset Sale Proceeds
received by the Company or such Subsidiary are applied, to the extent the
Company elects, (A) to repay and permanently reduce outstanding Senior
Indebtedness under the New Credit Facility, other secured Senior Indebtedness
or any other Senior Indebtedness that has a maturity date earlier than the
maturity of the Notes and to permanently reduce the commitments in respect
thereof, provided, however, that such repayment and commitment reduction occurs
prior to the Reinvestment Date or (B) to an investment in assets (including
Equity Interests or other securities purchased in connection with the
acquisition of Equity Interests or property of another Person) used or useful
in the Company's business; provided, however, that such investment occurs or
the Company or a Subsidiary enters into contractual commitments to make such
investment, subject only to customary conditions (other than the obtaining of
financing), on or prior to the 270th day following receipt of such Asset Sale
Proceeds (the "Reinvestment Date") (and notifies the Trustee of the same in
writing) and Asset Sale Proceeds contractually committed are so applied within
360 days following the receipt of such Asset Sale Proceeds or (C) as Excess
Proceeds as set forth below. Pending the final application of any such Asset
Sale Proceeds, the Company may temporarily reduce Senior Indebtedness or
otherwise invest such Asset Sale Proceeds in any manner that is not prohibited
by this Indenture. Any Asset Sale Proceeds that are not applied as permitted by
clause (iii)(A) or (iii)(B) of the preceding sentence shall constitute "Excess
Proceeds." If at any time from and after the Issue Date the aggregate amount of
Excess Proceeds exceeds $5 million, the Company shall offer (an "Excess
Proceeds Offer") to purchase from all Holders of Notes, pursuant to procedures
set forth in this Indenture and if the Company is required to do so under the
terms of any other Senior Indebtedness, to purchase from the Holders of such
other Senior Indebtedness the maximum principal amount of Notes and principal
of such other Senior Indebtedness that may be purchased with such Excess
Proceeds at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued interest, and Liquidated Damages, if any, to the date of
the purchase. To the extent that the purchase price of Notes and principal of
such other Senior Indebtedness tendered pursuant to such Excess Proceeds Offer
is less than the amount of Excess Proceeds, the Company may use such portion of
the Excess Proceeds that is not used to purchase Notes or such other Senior
Indebtedness so tendered for general corporate purposes not inconsistent with
the Notes or this Indenture. If the aggregate purchase price of Notes and
principal of such other Senior Indebtedness tendered pursuant to such Excess
Proceeds Offer is more than the amount of the Excess Proceeds, the Notes and
principal of such other Senior Indebtedness tendered will be repurchased on a
basis pro rata to the amount tendered or by such other method as the Trustee
shall deem fair and appropriate. Upon the completion of any Excess Proceeds
Offer and the closing of any repurchase of Notes and principal of such other
Senior Indebtedness tendered pursuant to such Excess Proceeds Offer, the amount
of Excess Proceeds shall be deemed to be zero.
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(b) If the Company is required to make an Excess Proceeds
Offer, the Company shall mail, within 30 days following the Reinvestment Date,
a notice to the Holders of the Notes describing the transactions giving rise to
the Excess Proceeds Offer and stating, among other things: (1) that such
Holders have the right to require the Company to apply the Excess Proceeds to
repurchase such Notes at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase; (2) the purchase date, which shall be
no earlier than 30 days and not later than 60 days from the date such notice is
mailed; (3) the instructions, reasonably determined by the Company, that each
Holder of Notes must follow in order to have such Notes repurchased; and (4)
the calculations used in determining the amount of Excess Proceeds to be
applied to the repurchase of such Notes.
(c) The Company or any of its Subsidiaries may engage in
transactions in which assets are transferred in exchange for one or more
like-kind assets; provided that if the fair market value of the assets to be
transferred by the Company or such Subsidiary, plus the fair market value of
any other consideration paid or credited by the Company or such Subsidiary
exceeds $1 million, such transaction shall require approval of the Board of
Directors of the Company; provided that no such transaction shall be permitted
if the Consolidated Fixed Charge Coverage Ratio of the Company would be reduced
after giving effect to such transaction. Each transaction governed by this
Section 4.21(c) shall be valued at an amount equal to all consideration
received by the Company or such Subsidiary in such transaction, other than the
like-kind assets received pursuant to such exchange ("Other Consideration"),
for purposes of determining whether an Asset Sale has occurred. If the Other
Consideration is of an amount and character such that such transaction
constitutes an Asset Sale, then the first paragraph of this Section 4.21 shall
be applicable to any Asset Sale Proceeds of such Other Consideration.
(d) Section 4.22 contains additional provisions relating
to Excess Proceeds Offers.
Section 4.22. General Provisions Related to Change of Control
Offers and Excess Proceeds Offers.
(a) If any Indebtedness under the New Credit Facility is
outstanding at the time of the occurrence of a Change of Control or at the time
the Company is required to make an Excess Proceeds Offer and the New Credit
Facility shall prohibit the Company from fully complying with its obligations
to make and consummate a Change in Control Offer or an Excess Proceeds Offer,
prior to the mailing of the notice to Holders described in the preceding
paragraphs, but in any event within 30 days following any Change of Control or
Reinvestment Date, the Company shall (i) repay in full all obligations and
terminate all commitments under the New Credit Facility or offer to repay in
full all obligations and terminate all commitments under the New Credit
Facility or (ii) obtain the requisite consent under the New Credit Facility to
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permit the making of, and the repurchase of the Notes pursuant to, the Change
of Control Offer or the Excess Proceeds Offer. The time by which the Company is
required to commence and consummate a Change of Control Offer or an Excess
Proceeds Offer shall be deferred until the Company has taken the actions
required by this Section 4.22(a).
(b) If the Company or any Subsidiary thereof has issued
any outstanding (i) Subordinated Indebtedness or (ii) Preferred Equity
Interests, and the Company or such Subsidiary is required to make a Change of
Control Offer or an Excess Proceeds Offer or to make a distribution with
respect to such Subordinated Indebtedness or Preferred Equity Interests in the
event of a change of control or sale of assets, the Company and such Subsidiary
shall not consummate any such offer or distribution with respect to such
Subordinated Indebtedness or Preferred Equity Interests until such time as the
Company shall have paid the Change of Control Purchase Price in full to the
Holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes, or until such time as the Company has paid the Excess Proceeds to
Holders of the Notes that have accepted the Excess Proceeds Offer and shall
otherwise have consummated the Excess Proceeds Offer, as the case may be.
(c) The Company will comply with any applicable
requirements of Rule 14e-1 as then in effect with respect to any Change in
Control Offer or Excess Proceeds Offer and the purchase of any Notes
thereunder.
Section 4.23. Maintenance of Office or Agency.
The Company shall maintain in the City and State of New York
an office or agency where Notes may be surrendered for registration of transfer
or exchange or for presentation for payment and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee as set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency; provided, however, that no such designation or rescission shall relieve
the Company of its obligation to maintain an office or agency in the City and
State of New York for such purposes.
The Company hereby initially designates the Corporate Trust Office of
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the Trustee as such office of the Company; provided, however, that no such
designation or rescission shall relieve the Company or its agent of its
obligation to maintain an office or agency in the Borough of Manhattan, City of
New York for such purposes.
Section 4.24. Maintenance of Properties and Insurance; Books and Records;
Compliance with Laws.
(a) The Company shall, and shall cause its Subsidiaries
to, at all times, cause all material properties used or useful to the conduct
of their business, taken as a whole, to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) as
determined in the good faith judgment of the Officers of the Company; provided,
however, that the Company or any Subsidiary shall not be prevented hereby from
discontinuing the operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is in the good
faith judgment of any Officer or the Board of Directors of the Company or the
Subsidiary concerned, as the case may be, desirable in the conduct of the
business of the Company or such Subsidiary, as the case may be.
(b) The Company and each of its Subsidiaries shall
provide or cause to be provided, for itself and each of their respective
Subsidiaries, insurance (including appropriate self-insurance) that is adequate
and appropriate (in the good faith judgment of an Officer of the Company) for
the conduct of the business of the Company and such Subsidiaries in a prudent
manner.
(c) The Company shall and shall cause each of its
Subsidiaries to keep books of record and account, in which entries shall be
made of all material financial transactions and the assets and business of the
Company and its Subsidiaries as are necessary to permit the Company to prepare
financial statements in accordance with GAAP.
(d) The Company shall and shall cause each of its
Subsidiaries to comply in all material respects with all statutes, laws,
ordinances, or government rules and regulations to which they are subject,
non-compliance with which would materially adversely affect the financial
condition of the Company and its Subsidiaries taken as a whole.
Section 4.25. Further Assurance to the Trustee.
The Company shall, upon request of the Trustee, execute and
deliver such further instruments and do such further acts as may reasonably be
necessary or proper to carry out more effectively the provisions of this
Indenture.
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ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.01. Merger, Consolidation or Sale of Assets.
(a) The Company will not consolidate with, merge with or
into, or sell, assign, lease, convey, transfer or otherwise dispose of (a
"transfer") all or substantially all of its assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), to any Person unless: (i) the Company shall be the continuing
Person, or the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or to which the properties and assets of
the Company are transferred shall be a corporation organized and existing under
the laws of the United States or any State thereof or the District of Columbia
and shall expressly assume, by a supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all of the obligations of
the Company under the Notes and this Indenture, and the obligations under this
Indenture shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iii) except in the case of
a merger or consolidation of the Company with or into a Wholly-Owned Subsidiary
of the Company, the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (a) immediately after giving effect to such transaction on a pro forma
basis could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under Section 4.06 and (b)
immediately thereafter shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction.
(b) In connection with any consolidation, merger or
transfer of assets contemplated by this provision, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and the
supplemental indenture in respect thereto comply with this provision and that
all conditions precedent herein provided for relating to such transaction or
transactions have been complied with.
Section 5.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the successor corporation formed by such consolidation or into which the
Company is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named as the Company herein, and thereafter the predecessor corporation shall
be relieved of all obligations and covenants under this Indenture and the
Notes, except that such predecessor corporation shall not be so relieved if it
retains any material assets other than (i) the proceeds of the sale of assets
and (ii) Equity Interests in Unrestricted Subsidiaries.
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ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(1) there is a default in payment of any principal of, or
premium, if any, on the Notes when such principal or premium becomes due and
payable;
(2) there is a default for 30 days in the payment of any
interest on or Liquidated Damages, if any, with respect to the Notes after such
interest or Liquidated Damages becomes due and payable;
(3) there is a failure of the Company or its Subsidiaries
to comply with any purchase or payment obligations set forth in Section 4.20 or
4.21 or with Section 4.07 or Section 5.01;
(4) there is a default by the Company or its subsidiaries
in the observance or performance of any other provision in the Notes or this
Indenture for 30 days after written notice from the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Notes then outstanding;
(5) there is a default under any agreement, mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Subsidiaries), whether such Indebtedness or guarantee now exists
or is created after the Issue Date, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness at final
maturity (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5.0 million or more;
(6) a court of competent jurisdiction enters any final
judgment or judgments which can no longer be appealed for the payment of money
in excess of $5.0 million (which are not paid or covered by third party
insurance by financially sound insurers that have not disclaimed or threatened
to disclaim coverage) shall be rendered against the Company or any Subsidiary
thereof, and shall not be discharged for any period of 60 consecutive days
during which a stay of enforcement shall not be in effect;
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(7) any Guarantee of a Significant Subsidiary shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor that is a
Significant Subsidiary shall deny or disaffirm its obligations under its
Guarantee; and
(8) the Company or any Subsidiary pursuant to or within
the meaning of any Bankruptcy Law;
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(D) makes a general assignment for the benefit of
its creditors, or
(E) generally is not paying its debts as they
become due; or
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of the property of the
Company or any Subsidiary, or
(C) orders the liquidation of the Company or any
Subsidiary, and, in each case under this clause (9), the order or
decree remains unstayed and in effect for 60 consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors as in effect from time
to time. The term "Custodian," as used in this Article 6, means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
Subject to the provisions of Sections 7.01 and 7.02, the
Trustee shall not be charged with knowledge of any Default or Event of Default
unless written notice thereof shall have been given to a Trust Officer at the
Corporate Trust Office by the Company or any other Person.
The Trustee may withhold notice to the Holders of the Notes
of any
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default (except in payment of principal or premium, if any, or interest on the
Notes or that resulted from the failure of the Company to comply with the
provisions of Sections 4.20 and 4.21) if the Trustee considers it to be in the
best interest of the Holders of the Notes to do so.
Section 6.02. Acceleration.
(a) If an Event of Default (other than an Event of
Default with respect to the Company under Section 6.01(8) or (9)) shall have
occurred and be continuing, then the Trustee or the Holders of not less than
25% in aggregate principal amount of the Notes then outstanding may declare to
be immediately due and payable the entire principal amount of all the Notes
then outstanding plus accrued interest and Liquidated Damages to the date of
acceleration. If an Event of Default specified in Section 6.01(8) or (9) with
respect to the Company occurs, the principal of and interest on all the Notes
shall become immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders. The Holders of a majority in
principal amount of the Notes by notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal, premium, interest and Liquidated Damages
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
(b) Upon the occurrence of an Event of Default under
Sections 6.01(8) or (9) with respect to the Company, the principal, premium and
interest amount with respect to all of the Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or the Holders of the Notes.
(c) In the event of a declaration of acceleration of the
Notes because an Event of Default has occurred and is continuing as a result of
a Payment Default on or the acceleration of any Indebtedness described in
Section 6.01(5), the declaration of acceleration of the Notes shall be
automatically rescinded and annulled if such Payment Default is waived or cured
or the holders of such Indebtedness described in such Section 6.01(5) have
rescinded the declaration of acceleration in respect of such Indebtedness, as
appropriate, within 30 days from the date of such declaration and if (i) the
rescission and annulment of the acceleration of the Notes would not conflict
with any judgment or decree of a court of competent jurisdiction and (ii) all
existing Events of Default, except non-payment of principal, interest,
Liquidated Damages or premium on the Notes that became due solely because of
the acceleration of the Notes, have been cured or waived.
(d) In the case of any Event of Default occurring solely
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding payment of the premium
that the Company would have
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had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of, or premium, if any, interest and Liquidated
Damages on the Notes or to enforce the performance of any provision of the
Notes or this Indenture and make take any necessary action requested of it as
Trustee to settle, compromise, adjust or otherwise conclude any proceeding to
which it is a party.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.07, 8.02 and 11.06 hereof, the Holders
of a majority in principal amount of the Notes then outstanding have the right
to waive any existing or potential future Default or Event of Default or
compliance with any provision of this Indenture or the Notes. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent to any such subsequent Default or Event of Default
except as specifically contemplated thereby.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the Notes
then outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
this Indenture or that the Trustee determines may be unduly prejudicial to the
rights of another Noteholder not taking part in such direction, and the Trustee
shall have the right to decline to follow any such direction if the Trustee,
being advised by counsel, determines that the action so directed may not
lawfully be taken or if the Trustee in good faith shall determine that the
proceedings so directed may involve it in personal liability unless the Trustee
has asked for and received indemnification reasonably satisfactory to it
against any loss, liability or expense caused by its following such direction;
provided that the Trustee may take
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any other action deemed proper by the Trustee which is not inconsistent with
such direction.
Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Noteholder may not institute
any proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer, and if requested,
provide to the Trustee indemnity reasonably satisfactory to the Trustee against
any loss, liability or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60 day period by the Holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal of, or premium,
if any, and interest of the Note on or after the respective due dates expressed
in the Note, or to bring suit for the enforcement of any such payment on or
after such respective dates, is absolute and unconditional and shall not be
impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium,
interest or Liquidated Damages specified in Section 6.01(1) or (2) hereof
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or the Guarantors (or any
other obligor on the Notes) for the whole amount of unpaid principal and
accrued interest remaining unpaid, together with any premium, interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate
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then borne by the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, including all sums due and owing to the Trustee pursuant to
Section 7.07.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company or the
Guarantors (or any other obligor upon the Notes), their respective creditors or
property and shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same after deduction of its reasonable charges and expenses to the extent
that any such charges and expenses are not paid out of the estate in any such
proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Noteholder any plan or
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, interest and Liquidated Damages as to each,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes; and
THIRD: to the Company or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10. The Trustee shall give
the Company prior
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notice of any such record date and payment date; provided, however, that the
failure to give any such notice shall not affect the establishment of such
record date or payment date or any payment to Noteholders pursuant to this
Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 6.07 hereof or a suit by Holders of more than 10%
in principal amount of the Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the same circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties
that are specifically set forth in this Indenture and no others and no
implied covenants or obligations shall be read into this Indenture
against the Trustee.
(2) In the absence of bad faith on its part, the
Trustee may
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conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture but, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) In the absence of bad faith on its part, the
Trustee shall not be liable for any error of judgment made in good
faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Sections 6.02 and 6.05
hereof.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity satisfactory to it against such risk or liability is not reasonably
assured to it.
(e) Whether or not therein expressly so provided,
paragraphs (a), (b), (c), (d), (f) and (g) of this Section 7.01 shall govern
every provision of this Indenture that in any way relates to the Trustee.
(f) The Trustee may refuse to perform any duty or
exercise any right or power unless it receives indemnity reasonably
satisfactory to it against any loss, liability, expense or fee.
(g) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company or any Guarantor. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by the law.
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Section 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely on and shall be protected in
acting or refraining from acting upon any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel, or both, which
shall conform to the provisions of Section 11.05 hereof. The Trustee shall be
protected and shall not be liable for any action it takes or omits to take in
good faith in reliance on such certificate or opinion.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent (other than the
negligence or willful misconduct of an agent who is an employee of the Trustee)
appointed by it with due care.
(4) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers; provided that the Trustee's conduct
does not constitute negligence or bad faith.
(5) The Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel as to matters of law shall
be full and complete authorization and protection from liability in respect of
any action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may make loans to, accept deposits
from, perform services for or otherwise deal with the Company or any Guarantor,
or any Affiliates thereof, with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The Trustee, however,
shall be subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the sale of Notes or any money paid to the
Company pursuant to the terms of this Indenture and it shall not be responsible
for any statement in the Notes or any document used in connection with the sale
of the Notes other than its certificate of
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authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is known to
the Trustee based upon information contained in an Officers' Certificate or
upon notice from Holders of 25% or more of the aggregate principal amount of
the Notes then outstanding, the Trustee shall mail to each Noteholder notice of
the Default within 60 days after it occurs. Except in the case of a Default in
payment of principal or premium, if any, or interest on the Notes, or that
resulted from the failure of the Company to comply with Section 4.20 or 4.21,
the Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines it to be in the best interests of the Holders
of the Notes to do so.
Section 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after May
15 of any year, commencing the May 15 following the date of this Indenture, the
Trustee shall mail to each Noteholder a brief report dated as of such May 15
that complies with TIA Section 313(a); provided that no such report need be
transmitted if no such events listed in TIA Section 313(a) have occurred
within such period. The Trustee also shall comply with TIA Section 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA Section
313(c) and TIA Section 313(d).
A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange on which the
Notes are listed. The Company shall promptly notify the Trustee when the Notes
are listed on any stock exchange and the Trustee shall comply with TIA Section
313(d).
Section 7.07. Compensation and Indemnity.
The Company and the Guarantors (on a joint and several basis)
shall pay to the Trustee from time to time such reasonable compensation as
shall be agreed in writing between the Company and the Trustee for its services
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust). The Company and
the Guarantors (on a joint and several basis) shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or
made by it in connection with its duties under this Indenture, including the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company and the Guarantors (on a joint and several basis)
shall indemnify each of the Trustee and any predecessor Trustee for, and hold
it harmless against, any and all loss, damage, claim, liability, reasonable
expense (including but not
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limited to reasonable attorneys' fees and expenses) or taxes (other than taxes
based on the income of the Trustee) incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder (including, without limitation, settlement costs). The
Trustee shall notify the Company and the Guarantors in writing promptly of any
claim asserted against the Trustee for which it may seek indemnity. However,
the failure by the Trustee to so notify the Company and the Guarantors shall
not relieve the Company or the Guarantors of their obligations hereunder.
Notwithstanding the foregoing, the Company and the Guarantors
need not reimburse the Trustee for any expense or indemnify it against any loss
or liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Company and the Guarantors in this
Section 7.07, the Trustee shall have a lien prior to the Notes on all money or
property held or collected by the Trustee in its capacity as such, except such
money or property held in trust to pay principal of, premium, if any, or
interest on particular Notes. The obligations of the Company and the Guarantors
under this Section 7.07 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall be joint and several
liabilities of the Company and each of the Guarantors and shall survive the
satisfaction and discharge of this Indenture, including the termination or
rejection hereof in any bankruptcy proceeding to the extent permitted by law.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(8) or (9) hereof occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company and the
Guarantors in writing, such resignation to become effective upon the
appointment of a successor Trustee. The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee by notifying the removed
Trustee in writing and may appoint a successor Trustee with the Company's
written consent which consent shall not be unreasonably withheld. The Company
may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
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(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 25% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of
the Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, bank, trust company or national banking association, subject to
Section 7.10 hereof, the successor corporation or national banking association
without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1);
provided that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities, or
conflicts of interest or participation in other securities, of the Company or
the Guarantors are outstanding if the requirements for exclusion set forth in
TIA Section 310(b)(1) are met.
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Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
Section 7.12. Paying Agents.
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which
such agent shall agree with the Trustee, subject to the provisions of this
Section 7.12:
(A) that it will hold all sums held by it as agent for
the payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Company or by any obligor on the
Notes) in trust for the benefit of Holders of the Notes or the Trustee;
(B) that it will at any time during the continuance of
any Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(C) that it will give the Trustee written notice within
three (3) Business Days of any failure of the Company (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium, if any,
or interest on, the Notes when the same shall be due and payable.
ARTICLE 8.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders
The Company and/or one or more Guarantors and the Trustee may
modify, waive, amend or supplement this Indenture or the Notes without notice
to or consent of any Noteholder:
(1) to comply with Section 5.01;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(3) to comply with any requirements of the SEC under the
TIA;
(4) to cure any ambiguity, defect or inconsistency;
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(5) to make any other change that does not adversely affect
the rights of any Noteholder;
(6) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the Notes; or
(7) to add additional Guarantors with respect to the Notes.
The Trustee is hereby authorized to join with the Company and
the Guarantors, if any, in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which adversely affects its own rights, duties or immunities under this
Indenture.
Section 8.02. With Consent of Holders.
The Company and/or one or more Guarantors and the Trustee,
with the written consent of Holders of at least a majority in aggregate
principal amount of the outstanding Notes, may modify, amend, waive or
supplement this Indenture, the Notes or Guarantees, except that no such
modification amendment, waiver or supplement shall, without the consent of each
Holder affected thereby, (i) reduce the amount of Notes whose Holders must
consent to an amendment, modification, supplement, or waiver to this Indenture
or the Notes, (ii) reduce the rate of or change the time for payment of
interest on any Note, (iii) reduce the principal of or premium or Liquidated
Damages on or change the stated maturity of any Note, (iv) make any Note
payable in money other than that stated in the Note or change the place of
payment to outside of the United States, (v) change the amount or time of any
payment required by the Notes or reduce the premium payable upon any redemption
of Notes or change the time before which no such redemption may be made, (vi)
waive a default on the payment of the principal of, interest, premium or
Liquidated Damages on, or redemption payment with respect to any Note (except a
rescission of acceleration of the Notes by Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration to the extent permitted under Section
6.02), (vii) subordinate in right of payment, or otherwise subordinate the
Notes or any Guarantee to any other Indebtedness or obligation of the Company
or the Guarantors, (viii) amend, alter, change or modify the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate an Excess Proceeds Offer or waive any
Default in the performance of any such offers or modify any of the provisions
or definitions with respect to any such offers, (ix) except pursuant to this
Indenture, release any Guarantor from its obligations under its Guarantee, or
change any Guarantee in a manner that adversely affects Holders of the Notes,
(x) take any other action otherwise prohibited by this Indenture to be taken
without the consent of each Holder affected thereby or
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(xi) modify, amend, waive or supplement this Section 8.02, or Section 6.04 or
Section 6.07.
After a modification, amendment, supplement or waiver under
this Section 8.02 becomes effective, the Company shall mail to the Holders a
notice briefly describing the modification, amendment, supplement or waiver.
Any failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such
modification, amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed amendment,
modification, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
Until a modification, amendment, supplement, waiver or other
action becomes effective, a consent to it by a Holder of a Note is a continuing
consent conclusive and binding upon such Holder and every subsequent Holder of
the same Note or portion thereof, and of any Note issued upon the transfer
thereof or in exchange therefor or in place thereof, even if notation of the
consent is not made on any such Note. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Note or portion of a Note, if the
Trustee receives the notice of revocation before the date the modification,
amendment, supplement, waiver or other action becomes effective.
Notwithstanding the foregoing, nothing in this paragraph shall impair the right
of any Holder under TIA Section 316(b).
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
modification, amendment, supplement, or waiver. If a record date is fixed,
then, notwithstanding the preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only such Persons,
shall be entitled to consent to such modification, amendment, supplement, or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid
or effective for more than 90 days after such record date unless the consent of
the requisite number of Holders has been obtained.
After a modification, amendment, supplement, waiver or other
action becomes effective, it shall bind every Noteholder and every subsequent
Noteholder.
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Section 8.05. Notation on or Exchange of Notes.
If a modification, amendment, supplement or waiver changes
the terms of a Note, the Trustee may request the Holder of the Note to deliver
it to the Trustee. In such case, the Trustee shall place an appropriate
notation on the Note about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new
security that reflects the changed terms. Failure to make the appropriate
notation or issue a new Note shall not affect the validity and effect of such
modification, amendment, supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any modification, amendment,
supplement or waiver authorized pursuant to this Article 8 if the modification,
amendment, supplement or waiver does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but
need not, sign it. In signing or refusing to sign such modification,
amendment, supplement or waiver, the Trustee shall be entitled to receive and,
subject to Section 7.01 hereof, shall be fully protected in relying upon an
Officers' Certificate and an Opinion of Counsel stating that such modification,
amendment, supplement or waiver is authorized or permitted by this Indenture
and such supplemental indenture constitutes the legal, valid and binding
obligation of the Company and the Guarantors enforceable against each of them
in accordance with its terms (subject to customary exceptions). The Company or
any Guarantor may not sign a modification, amendment or supplement under
Section 8.02 until the Board of Directors of the Company or such Guarantor, as
appropriate, approves it.
ARTICLE 9.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
The Company and the Guarantors, if any, may terminate their
obligations under the Notes, the Guarantees, if any, and this Indenture, except
the obligations referred to in the last paragraph of this Section 9.01, if (i)
there shall have been canceled by the Trustee or delivered to the Trustee for
cancellation all Notes theretofore authenticated and delivered (other than any
Notes that are asserted to have been destroyed, lost or stolen and that shall
have been replaced as provided in Section 2.07 hereof) or (ii) all Notes not
theretofore surrendered or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee, and the Company has paid all sums
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payable by it hereunder or irrevocably deposited all required sums with the
Trustee.
After such delivery the Trustee upon request shall
acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Notes, the Guarantees and this Indenture except for those
surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 2.07, 7.07, 9.05, 9.06
and 9.08 hereof shall survive.
Section 9.02. Legal Defeasance.
The Company may at its option, by Board Resolution, be
discharged from its obligations with respect to the Notes and the Guarantors,
if any, discharged from their obligations under the Guarantees, if any, on the
date the conditions set forth in Section 9.04 below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Notes and to have satisfied all its other obligations under
such Notes and this Indenture insofar as such Notes are concerned (and the
Trustee, at the expense of the Company, shall, subject to Section 9.06 hereof,
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A)
the rights of Holders of outstanding Notes to receive solely from the trust
funds described in Section 9.04 hereof and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (B) the Company's obligations with
respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, and 2.08,
(C) the rights, powers, trusts, duties, and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.07) and (D) this Article 9. Subject to compliance with this Article 9, the
Company may exercise its option under this Section 9.02 with respect to the
Notes notwithstanding the prior exercise of its option under Section 9.03 below
with respect to the Notes.
Section 9.03. Covenant Defeasance.
At the option of the Company, pursuant to a Board Resolution,
the Company and the Guarantors, if any, shall be released from their respective
obligations under Sections 4.02 through 4.16, inclusive, Sections 4.18 through
4.22, inclusive, Section 4.24, Section 4.25, Section 5.01, Section 6.01(3),
Sections 6.01(5) through Section 6.01(7), inclusive, Sections 6.01(8) and
6.01(9) (only with respect to Subsidiaries) and Article 10 hereof with respect
to the outstanding Notes on and after the date the conditions set forth in
Section 9.04 hereof are satisfied (hereinafter, "Covenant Defeasance") and the
Notes shall thereafter be deemed to not be outstanding for purposes of any
direction, waiver, consent, declaration or act of the Holders (and
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the consequences thereof) in connection with such covenants but shall continue
to be outstanding for all other purposes hereunder. For this purpose, such
Covenant Defeasance means that the Company and the Guarantors, if any, may omit
to comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section or portion thereof, whether
directly or indirectly by reason of any reference elsewhere herein to any such
specified Section or portion thereof or by reason of any reference in any such
specified Section or portion thereof to any other provision herein or in any
other document, but the remainder of this Indenture and the Notes shall be
unaffected thereby.
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of
Section 9.02 or Section 9.03 to the outstanding Notes:
(1) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for the
purpose of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the Notes, (A) money in
an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than the due date of any payment, money in an
amount, or (C) a combination thereof, in each case sufficient, in the opinion
of a nationally-recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and accrued interest on the
outstanding Notes at the maturity date of such principal, premium, if any, or
interest, or on dates for payment and redemption of such principal, premium, if
any, and interest selected in accordance with the terms of this Indenture and
of the Notes;
(2) no Event of Default or Default (other than (i)
Defaults or Events of Default related to or arising out of incurrences of
Indebtedness (and liens and customary documentation related thereto) the
proceeds of which are used to satisfy the requirement in clause (1) above and
(ii) Defaults and Events of Default arising under Section 6.01(5) related to
Defaults and Events of Default described in clause (i) of this parenthetical)
with respect to the Notes shall have occurred and be continuing on the date of
such deposit, or shall be continuing on the 91st day after the date of such
deposit or, if longer, ending on the day following the expiration of the
longest preference period under any Bankruptcy Law applicable to the Company in
respect of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall
not result in
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a breach or violation of, or constitute default under any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) the Company shall have delivered to the Trustee an
Opinion of Counsel stating that, as a result of such Legal Defeasance or
Covenant Defeasance, neither the trust nor the Trustee will be required to
register as an investment company under the Investment Company Act of 1940, as
amended;
(5) in the case of an election under Section 9.02, the
Company shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling to the effect that or (ii) there has been a change in
any applicable Federal income tax law with the effect that, and such opinion
shall confirm that, the Holders of the outstanding Notes or persons in their
positions will not recognize income, gain or loss for Federal income tax
purposes solely as a result of such deposit, defeasance and discharge and will
be subject to Federal income tax on the same amounts, in the same manner,
including as a result of prepayment, and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred;
(6) in the case of an election under Section 9.03, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(7) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Legal Defeasance under
Section 9.02 or the Covenant Defeasance under Section 9.03 (as the case may be)
have been complied with; and
(8) The Company shall have delivered to the Trustee a
certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others.
Section 9.5. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions
All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Notes, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued interest, but
such money need not be segregated from other funds except to the
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extent required by law. The Trustee shall be under no duty to invest such
money or U.S. Government Obligations.
The Company and the Guarantors shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 9.04 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the
Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money
or U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03
hereof by reason of any legal proceeding or by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the obligations of the Company and any Guarantor
under this Indenture, the Notes and the Guarantees, if any, shall be revived
and reinstated as though no deposit had occurred pursuant to this Article 9
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 9.01 hereof;
provided, however, that if the Company or any Guarantors have made any payment
of principal of, premium, if any, or accrued interest on any Notes because of
the reinstatement of their obligations, the Company or such Guarantors, as the
case may be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of
this Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.04 hereof, to the
Company (or, if such moneys had been deposited by any Guarantors, to such
Guarantors), and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
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Section 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company or any Guarantors in trust for the payment of the
principal of, or premium, if any, or interest on any Note that are not applied
but remain unclaimed by the Holder of such Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Note shall
have respectively become due and payable shall be repaid to the Company (or, if
appropriate, the Guarantors) upon Company Request, or if such moneys are then
held by the Company or any Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Company
and the Guarantors, if any, for the payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Trustee or any such Paying Agent, before
being required to make any such repayment, may, at the expense of the Company
and the Guarantors, if any, either mail to each Noteholder affected, at the
address shown in the register of the Notes maintained by the Registrar pursuant
to Section 2.03 hereof, or cause to be published once a week for two successive
weeks, in a newspaper published in the English language, customarily published
each Business Day and of general circulation in The City of New York, New York,
a notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such mailing or
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Company. After payment to the Company or the Guarantors, if any, or the
release of any money held in trust by the Company or any Guarantors, as the
case may be, Noteholders entitled to the money must look only to the Company
and any Guarantors for payment as general unsecured creditors unless applicable
abandoned property law designates another person.
ARTICLE 10.
GUARANTEE OF NOTES
Section 10.01. Guarantee.
(a) Subject to the provisions of this Article 10, each
Guarantor hereby jointly and severally and unconditionally guarantees to each
Holder and to the Trustee, on behalf of the Holders, (i) the full and punctual
payment of the principal of, and premium, if any, and interest, and Liquidated
Damages, if any, on each Note, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal of, and premium, if any,
and interest on the Notes, to the extent lawful, and the due and punctual
performance of all other Obligations of the Company to the Holders or the
Trustee all in accordance with the terms of such Note and this Indenture, and
(ii) in the case of any extension of time of payment or renewal of any Notes or
any of such other Obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal, at
stated maturity,
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by acceleration or otherwise. Each Guarantor, by execution of the Guarantee,
agrees that its obligations thereunder and hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Note or this Indenture, any
failure to enforce the provisions of any such Note or this Indenture, any
waiver, modification or indulgence granted to the Company with respect thereto
by the Holder of such Note or the Trustee, or any other circumstances which may
otherwise constitute a legal or equitable discharge of a surety or such
Guarantor.
(b) Each Guarantor, by execution of the Guarantee, waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of merger or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest or notice with respect to any such Note or
the Indebtedness evidenced thereby and all demands whatsoever, and covenants
that the Guarantee will not be discharged as to any such Note except by payment
in full of the principal thereof, premium if any, and interest thereon and as
provided in Sections 9.01, 9.02, 9.03 and 10.04 hereof. The obligations of
each Guarantor hereunder shall not be affected by (a) the failure of any Holder
or the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Registration
Rights Agreement, the Purchase Agreement, the Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Registration Rights Agreement, the Notes or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or Trustee to
exercise any right or remedy against any other Guarantor of the Obligations; or
(f) any change in the ownership of such Guarantor, except as provided in
Section 10.04. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or any Guarantor or any Custodian, trustee,
liquidator or other similar official acting in relation to either the Company
or any Guarantor, any amount paid by either the Company or any Guarantor to the
Holder or Trustee, each Guarantor's Guarantee, to the extent therefor
discharged, shall be reinstated in full force and effect. Each Guarantor
further agrees that, as between such Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (i) the maturity of the Obligations
guaranteed by the Guarantee may be accelerated as provided in Article 6 hereof
for the purposes of the Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed thereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for the purpose of the Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article 6 hereof,
the Trustee shall promptly make a demand for payment on the Notes under the
Guarantee provided for in this Article 10 and not discharged. Failure to make
such demand shall not affect the validity or enforceability of the Guarantee
upon any Guarantor.
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(c) A Guarantee shall not be valid or become obligatory
for any purpose with respect to a Note unless the certificate of authentication
on such Note shall have been signed by or on behalf of the Trustee.
(d) Each Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorney's fees) incurred by the Trustee as
any Holder in enforcing any rights under this section.
Section 10.02. Execution and Delivery of Guarantees.
(a) To evidence the Guarantee set forth in this Article
10, each Guarantor hereby agrees that a notation of such Guarantee may be
placed on each Note authenticated and made available for delivery by the
Trustee and that this Guarantee shall be executed on behalf of each Guarantor
by the manual or facsimile signature of an Officer of each Guarantor.
(b) Each Guarantor hereby agrees that the Guarantee set
forth in Section 10.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Guarantee.
(c) If an Officer of a Guarantor whose signature is on
the Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which the Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
(d) The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Guarantee set forth in this Indenture on behalf of each Guarantor.
Section 10.03. Limitation of Guarantee.
The obligations of each Guarantor will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Indenture, result in the obligations of
such Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under Federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the Adjusted Net Assets
of each Guarantor.
Section 10.04. Release of Guarantor.
(a) No Guarantor may consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person), another Person
whether or not
<PAGE> 95
90
affiliated with such Guarantor unless (i) subject to the provisions of the
following paragraph (b), the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee in respect of the Notes, this
Indenture and such Guarantor's Guarantee, and (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists.
(b) In the event of a sale or other disposition of all
or substantially all of the assets of any Guarantor to a third party or an
Unrestricted Subsidiary in a transaction that does not violate any of the
covenants in this Indenture (including, without limitation, Section 4.21), by
way of merger, consolidation or otherwise, or a sale or other disposition of
all of the capital stock of any Guarantor, or the designation of such Guarantor
as an Unrestricted Subsidiary in accordance with this Indenture, then (i) in
the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor, or
in the event of such designation, such Guarantor will be released from and
relieved of any obligations under its Guarantee, or (ii) in the event of a sale
or other disposition of all of the assets of such Guarantor, the Person
acquiring such assets will not be required to assume the obligations of such
Guarantor under its Guarantee.
Section 10.05. Additional Guarantors.
(a) The Company covenants and agrees that it will cause
any Person which becomes obligated to guarantee the Notes, pursuant to the
terms of this Indenture, including, without limitation, Section 4.11 and
Section 10.04 hereof, to promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit E hereto pursuant to which such
Subsidiary shall become a Guarantor under this Article 10 and shall Guarantee
the Obligations. Concurrently with the execution and delivery of such
supplemental indenture, the Company shall deliver to the Trustee an Opinion of
Counsel and an Officers' Certificate to the effect that such supplemental
indenture has been duly authorized, executed and delivered by such Subsidiary
and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors'
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
(b) Any Guarantor that is designated an Unrestricted
Subsidiary in accordance with the terms of this Indenture shall be released
from and relieved of its obligations under its Guarantee and any Unrestricted
Subsidiary that ceases to be an Unrestricted Subsidiary will be required to
execute a Guarantee in accordance with the terms of this Indenture.
<PAGE> 96
91
ARTICLE 11.
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 11.02. Notices.
Any notice or communication shall be given in writing and
delivered in person, sent by facsimile, delivered by commercial courier service
or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor:
HealthCor Holdings, Inc.
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
Attention: General Counsel
Telecopier No.: 214-692-4666
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attention: J. Kenneth Menges, Jr., P.C.
Telecopier No.: 214-969-4343
If to the Trustee:
Norwest Bank Minnesota, N.A.
Corporate Trust Services
Sixth & Marquette
Minneapolis, MN 55479-0069
Attention: Corporate Trust Services
Telecopier No.: 612-667-9825
Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.
The Company, any Guarantors or the Trustee by written notice
to the
<PAGE> 97
92
others may designate additional or different addresses for subsequent notices
or communications.
Any notice or communication mailed to a Holder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar. If a notice or communication to a Holder is
mailed in the manner provided above, it shall be deemed duly given on the date
so deposited in the mail, whether or not the addressee receives it.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
In case, by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 11.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Guarantors, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any
Guarantor to the Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied;
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 11.05) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the Trustee that
complies with TIA Section 314(c).
<PAGE> 98
93
Section 11.05. Statements Required in Certificate and Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, she or
he has made such examination or investigation as is necessary to enable her or
him to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been satisfied.
Section 11.06. When Treasury Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company, any Guarantor or any other obligor on the Notes or
by any Affiliate of any of them shall be disregarded as though they were not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which the Trustee actually knows are so owned shall be so disregarded.
Notes so owned which have been pledged in good faith shall not be disregarded
if the pledgee establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to the Notes and that the pledgee is not the
Company, a Guarantor or any other obligor upon the Notes or any Affiliate of
any of them.
Section 11.07. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at
meetings of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for their functions.
Section 11.08. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A
"Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a
day on which banking institutions are not required to be open in the State of
New York. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the
<PAGE> 99
94
intervening period.
Section 11.09. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 11.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan, security or debt agreement of the Company or any Subsidiary
thereof. No such indenture, loan, security or debt agreement may be used to
interpret this Indenture.
Section 11.11. No Recourse Against Others.
No recourse for the payment of the principal of or premium,
if any, or interest on any of the Notes, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company or any Guarantor in this Indenture or in
any supplemental indenture, or in any of the Notes, or because of the creation
of any Indebtedness represented thereby, shall be had against any stockholder,
officer, director, partner, affiliate, beneficiary or employee, as such, past,
present or future, of the Company or of any successor corporation or against
the property or assets of any such stockholder, officer, employee, partner,
affiliate, beneficiary or director, either directly or through the Company or
any Guarantor, or any successor corporation thereof, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or penalty or otherwise; it being expressly understood that this Indenture and
the Notes are solely obligations of the Company and the Guarantors, and that no
such personal liability whatever shall attach to, or is or shall be incurred
by, any stockholder, officer, employee, partner, affiliate, beneficiary or
director of the Company or any Guarantor, or any successor corporation thereof,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or the Notes or implied therefrom, and that any and all such personal liability
of, and any and all claims against every stockholder, officer, employee,
partner, affiliate, beneficiary and director, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issuance of the Notes. It is understood that this limitation
on recourse is made expressly for the benefit of any such shareholder,
employee, officer, partner, affiliate, beneficiary or director and may be
enforced by any one or all of them.
<PAGE> 100
95
Section 11.12. Successors.
All agreements of the Company and the Guarantors in this
Indenture and the Notes shall bind their respective successors except as
otherwise provided in Section 10.04. All agreements of the Trustee, any
additional trustee and any Paying Agents in this Indenture shall bind its
successor.
Section 11.13. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 11.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.15. Separability.
Each provision of this Indenture shall be considered
separable and if for any reason any provision which is not essential to the
effectuation of the basic purpose of this Indenture or the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
<PAGE> 101
96
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed, all as of the date and year first written above.
HEALTHCOR HOLDINGS, INC.
By: /s/ S. WAYNE BAZZLE
--------------------------------
Name: S. Wayne Bazzle
Title: Chairman of the Board and Chief
Executive Officer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By: /s/ CURTIS D. SCHWEGMAN
--------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
HEALTHCOR INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HEALTHCOR OXYGEN AND MEDICAL EQUIPMENT,
INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR FOUNDATION
HC PERSONNEL RESOURCES, INC.
CARE NETWORK, INC., as Guarantors
By: /s/ JOEL H. WILLIAMS
--------------------------------
Name: Joel H. Williams
Title: Vice President and
Chief Financial Officer
<PAGE> 102
EXHIBIT A
FORM OF NOTE
(FACE OF NOTE)
[Delete this paragraph in the case of an Unrestricted Certificated Note or an
Unrestricted Global Note] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS A
NON-U.S. PERSON THAT IS OUTSIDE THE UNITED STATES; (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) TO A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM
OF WHICH CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E)
OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A "U.S. PERSON" AS DEFINED IN
RULE 902 UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO
ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF SUCH HOLDER'S PROPERTY OR THE
PROPERTY OF SUCH ACCOUNT AT ALL TIMES BE WITHIN ITS CONTROL AND TO COMPLIANCE
WITH APPLICABLE SECURITIES LAWS OF ANY JURISDICTION; AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THE TRANSFER RESTRICTIONS SET FORTH IN THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF ANY CERTIFICATED SECURITY, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE OF SUCH
CERTIFICATED SECURITY RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT SUCH
CERTIFICATED SECURITY TO THE TRUSTEE. IF ANY PROPOSED TRANSFEREE IS AN
INSTITUTIONAL
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<PAGE> 103
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR APPLICABLE
SECURITIES LAWS OF ANY JURISDICTION. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
[Delete this paragraph in the case of a Certificated Note] THIS GLOBAL NOTE IS
HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS THEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
A-2
<PAGE> 104
CUSIP NUMBER ________________
HEALTHCOR HOLDINGS, INC.
11% Senior Note Due 2004
HEALTHCOR Holdings, Inc., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to ________________________ or registered assigns the principal
sum of ___________________ Dollars, on December 1, 2004.
Interest Payment Dates: June 1 and December 1, commencing June 1, 1998
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE> 105
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: December 1, 1997
HEALTHCOR HOLDINGS, INC.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
Certificate of Authentication:
This is one of the 11% Senior
Notes due 2004 referred to in
the within-mentioned Indenture
NORWEST BANK MINNESOTA, N.A.,
as Trustee
By: ___________________________________
Authorized Signatory
A-4
<PAGE> 106
(REVERSE SIDE)
HEALTHCOR HOLDINGS, INC.
11% Senior Note Due 2004
1. INTEREST.
(a) HealthCor Holdings, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at a
rate of 11% per annum from the date of original issuance until maturity.
Interest is payable semi-annually in arrears on June 1 and December 1 of each
year, commencing on June 1, 1998, to Holders of record of the Notes at the
close of business on the immediately preceding May 15 and November 15,
respectively (whether or not a Business Day). Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
The Notes will be issued in denominations of $1,000 and any integral multiple
of $1,000. The Company shall pay interest on overdue principal at 12% per
annum, and it shall pay interest on overdue installments of interest at the
same rate to the extent lawful.
[Delete the following paragraph in the case of an Unrestricted
Certificated Note or an Unrestricted Global Note]
(b) If (i) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (ii) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (iii) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (i) through (iv) above a "Registration
Default"), then the Company will pay Liquidated Damages to each holder of
Notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, in an amount equal to one-half of
one percentage point (0.5%) per annum of the principal amount of Notes held by
such holder. The amount of the Liquidated Damages will increase by an
additional one-half of one percent (0.5%) per annum for each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of one and one-half percent (1.5%) per annum. All accrued Liquidated Damages
will be paid by the Company on each Interest Payment Date to the holder of any
Global Note by wire transfer of immediately available funds or by federal funds
check and to holders of Certificated Securities by wire transfer to the
accounts specified by them or by mailing
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<PAGE> 107
checks to their registered addresses if no such accounts have been specified.
2. METHOD OF PAYMENT.
The Company will pay interest on the Notes (except defaulted
interest) and Liquidated Damages to the Persons who are registered Holders of
Notes at the close of business on the May 15 or November 15 next preceding the
Interest Payment Date, even if such Notes are canceled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.11
of the Indenture with respect to defaulted interest. If this Note is a Global
Note, payments in respect of this Note (including principal, premium, interest
and Liquidated Damages, if any) shall be made by wire transfer of immediately
available funds to the accounts specified by the Holder hereof. If this Note
is a Certificated Note, the Company will make all payments of principal,
premium, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holder hereof or,
if no such account is specified, by mailing a check to such Holder's registered
address. Such payment shall be in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR.
Initially, Norwest Bank Minnesota, N.A., the Trustee under the
Indenture, will act as Paying Agent.
4. INDENTURE.
The Company issued this Note under an Indenture dated as of
December 1, 1997 (as such may be amended, supplemented or otherwise modified
from time to time, the "Indenture") among the Company, the Guarantors and the
Trustee. The terms of this Note include those stated in this Indenture and
those made part of this Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of this
Indenture. This Note is subject to all such terms, and the Holder of this Note
is referred to this Indenture and said Trust Indenture Act for a statement of
them. All capitalized terms in this Note, unless otherwise defined, have the
meanings assigned to them in the Indenture. The Notes will be limited to up to
$80,000,000 aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth below, the Notes will not be
redeemable at the option of the Company prior to December 1, 2001. Thereafter,
the Notes will be redeemable at any time, and from time to time, at the option
of the Company, in whole or in part, at the redemption prices set forth in
Section 3.07.
(b) Notwithstanding the foregoing, at any time prior to
December 1,
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<PAGE> 108
2000, the Company may redeem up to an aggregate of $25 million in principal
amount of Notes at a redemption price equal to 111% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date with the net cash proceeds of one or more Public
Equity Offerings, provided that at least $55 million in principal amount of
Notes remains outstanding immediately following each such redemption and that
any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth under Sections 4.20 and 4.21 the Company
is not obligated to make any mandatory redemption of or sinking fund payments
with respect to the Notes.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at
least 30 days but not more than 60 days prior to the Redemption Date to each
Holder of Notes to be redeemed at its registered address as it shall appear on
the register of the Notes maintained by the Registrar. On and after any
Redemption Date, interest will cease to accrue on the Notes or portions thereof
called for redemption unless the Company shall fail to deposit the redemption
price of such Notes or portions thereof with the paying agent.
8. OFFERS TO PURCHASE.
This Indenture requires that certain proceeds from Asset Sales
be used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth
in this Indenture. The Company is also required to make an offer to purchase
Notes upon occurrence of a Change of Control in accordance with procedures set
forth in this Indenture.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Holder may register
the transfer or exchange of Notes in accordance with this Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by this
Indenture. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed or any Note after
it is called for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part.
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<PAGE> 109
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner
of it for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture, the Notes and
the Guarantees thereof may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Certain amendments
specified in the Indenture shall not be effective against a Holder without the
consent of such Holder (or a prior Holder). Without the consent of any Holder
of a Note, the Company and the Trustee may amend or supplement the Indenture,
the Notes or any Guarantee thereof to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's or any
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that does not adversely affect the legal
rights under the Indenture of any such Holder, to evidence and provide for the
acceptance of appointment under the Indenture by a successor Trustee with
respect to the Notes or to add additional guarantors with respect to the Notes.
13. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under this Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company, any Guarantor or their Affiliates, and may otherwise deal with
the Company, any Guarantor or their Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS.
As more fully described in this Indenture, a director,
officer, employee, partner, affiliate, beneficiary or stockholder, as such, of
the Company or any Guarantor shall not have any liability for any obligations
of the Company or any Guarantor under the Notes or this Indenture or for any
claim based on, in respect or by reason of, such
A-8
<PAGE> 110
obligations or their creation. The Holder of this Note by accepting this Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of this Note.
15. DEFEASANCE AND COVENANT DEFEASANCE.
This Indenture contains provisions for defeasance of the
entire indebtedness on this Note and for defeasance of certain covenants in
this Indenture upon compliance by the Company with certain conditions set forth
in this Indenture.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Notes and the Trustee may use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
18. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
HealthCor Holdings, Inc.
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
Attention: General Counsel
A-9
<PAGE> 111
19. AUTHENTICATION
This Note shall not be valid until the Trustee or an
authenticating agent manually signs the Certificate of Authentication on the
other side of this Note.
20. INDEMNIFICATION
The Holder of this Note, by acceptance hereof, agrees to
indemnify the Company and the Trustee against any liability that may result
from the transfer, exchange or assignment of this Note in violation of any
provision of this Indenture and/or applicable U.S. Federal or state securities
law.
A-10
<PAGE> 112
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________
________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
Check One
_ (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder.
or
_ (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and this Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.06 (Transfer and Exchange) of
the Indenture shall have been satisfied.
Date: _______________________
Your Signature: _________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ____________________________________________________
A-11
<PAGE> 113
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ____________________
______________________________________
NOTICE: To be executed by an executive officer
A-12
<PAGE> 114
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.20 or Section 4.21 of the
Indenture, check the appropriate box:
_ Section 4.20
_ Section 4.21
If you want to have only part of the Note purchased by the
Company pursuant to Section 4.20 or Section 4.21 of this Indenture, state the
principal amount you elect to have purchased:
$____________________
(multiple of $1,000)
Date: _______________
Your Signature: ______________________________________
(Sign exactly as your name appears on the face of this Note)
________________________
Signature Guaranteed
A-13
<PAGE> 115
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note have been made:
<TABLE>
<CAPTION>
----------------- --------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
Principal Principal Note following officer of
Amount of this Amount of this such decrease (or Trustee or Note
Date of Exchange Global Note Global Note increase) Custodian
</TABLE>
A-14
<PAGE> 116
FORM OF NOTATION ON NOTE RELATING TO GUARANTEE
Pursuant and subject to the terms of the Indenture, each Guarantor has
jointly and severally and unconditionally guaranteed to each Holder and to the
Trustee the full and punctual payment of the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes.
Each Guarantor's liability shall be limited as set forth in Section
10.03 of the Indenture, and Guarantors may be released from the Guarantee as
provided in Sections 9.01, 9.02, 9.03 and 10.04 of the Indenture.
The provision of Article 10 of the Indenture are incorporated herein
by reference. Capitalized terms used herein have the same meanings given in
the Indenture unless otherwise indicated.
HEALTHCOR INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HEALTHCOR OXYGEN AND MEDICAL
EQUIPMENT, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR FOUNDATION
HC PERSONNEL RESOURCES, INC.
CARE NETWORK, INC., as Guarantors
By:__________________________________
Name:
Title:
A-15
<PAGE> 117
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
HealthCor Holdings, Inc.
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
[Registrar address block]
Re: 11% Senior Notes due 2004
Reference is hereby made to the Indenture, dated as of December 1,
1997 (as such may have been amended, supplemented or otherwise modified to the
date hereof, the "Indenture"), among HealthCor Holdings, Inc., as issuer (the
"Company"), the Guarantors parties thereto and Norwest Bank Minnesota, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
_______________________ (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto,
in the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to ____________ (the "Transferee"), as further specified in Annex
A hereto. In connection the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A CERTIFICATED NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Certificated Note is being transferred to a Person that the
Transferor reasonably believes is purchasing the beneficial interest or
Certificated Note for its own account or for one or more accounts with respect
to which such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A and such
Transfer is in compliance with any applicable blue sky securities laws of
states of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Certificated Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the
B-1
<PAGE> 118
144A Global Note and/or the Certificated Note and in the Indenture and the
Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION GLOBAL NOTE OR A CERTIFICATED NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby, further
certifies that (i) the Transfer is not being made to a Person in the United
States, and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of any restricted period under applicable law, the Transfer is not
being made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an initial Purchaser). Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Certificated Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Regulation S Global
Note and/or the Certificated Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A CERTIFICATED NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of states of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof:
or
(c) [ ] such Transfer is being effected pursuant to an effective registration
statement under the Securities Act and in compliance with the prospectus
delivery requirements of
B-2
<PAGE> 119
the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or
Restricted Certificated Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Certificated Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Note and/or the Certificated Notes and in the Indenture and the
Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED CERTIFICATED NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of states of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Certificated Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Certificated Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of
states of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Certificated Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Certificated Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being, effected pursuant to and in compliance with an exemption
from the
B-3
<PAGE> 120
registration requirements of the Securities Act other than Rule 144, Rule 903
or Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of states of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Certificated Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Certificated Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit, for the benefit of the Company, and for the benefit of your counsel
and the Company's counsel, who may rely hereon.
-----------------------------------
[insert Name of Transferor]
By:
-------------------------------
Name:
Title:
Dated: _____________, ____
B-4
<PAGE> 121
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _______), or
(ii) [ ] Regulation S Global Note (CUSIP ________), or
(iii) [ ] IAI Global Note (CUSIP ________): or
(b) [ ] a Restricted Certificated Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ________), or
(ii) [ ] Regulation S Global Note (CUSIP ________), or
(iii) [ ] IAI Global Note (CUSIP _______); or
(iv) [ ] Unrestricted Global Note (CUSIP____); or
(b) [ ] a Restricted Certificated Note: or
(c) [ ] an Unrestricted Certificated Note.
in accordance with the terms of the indenture.
B-5
<PAGE> 122
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
HealthCor Holdings, Inc.
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
[Registrar address block]
Re: 11% Senior Notes due 2004
(CUSIP_________)
Reference is hereby made to the Indenture, dated as of December 1,
1997 (as such may have been amended, supplemented, or otherwise modified to the
date hereof, the "Indenture"), among HealthCor Holdings, Inc., as issuer (the
"Company"), the Guarantors parties thereto and Norwest Bank Minnesota, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
___________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$___________ in such Note[s] or interest (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
EXCHANGE OF RESTRICTED CERTIFICATED NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED CERTIFICATED NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE.
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL
NOTE TO AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the
Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Global Note in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in accordance
with the United States Securities Act of 1933, as amended (the "Securities
Act"), (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the beneficial interest in an Unrestricted Global
Note is being acquired in compliance with any applicable blue sky securities
laws of states of the United States.
C-1
<PAGE> 123
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED CERTIFICATED NOTE. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note for
an Unrestricted Certificated Note, the Owner hereby certifies (i) the
Certificated Note is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Certificated
Note is being acquired in compliance with any applicable blue sky securities
laws of states of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Certificated Note for a beneficial interest
in an Unrestricted Global Note in an equal principal amount, the owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Certificated Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest is being acquired in compliance with any applicable blue
sky, securities laws of states of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTE TO AN
UNRESTRICTED CERTIFICATED NOTE. In connection with the Exchange of the Owner's
Restricted Certificated Note for an Unrestricted Certificated Note, the Owner
hereby certifies (i) the Certificated Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Certificated Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company, and for the benefit of your counsel and the
Company's counsel, who may rely hereon.
---------------------------
[Insert Name of Owner]
By:
------------------------
Name:
Title:
Dated: ___________, ____
C-2
<PAGE> 124
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
HealthCor Holdings, Inc.
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
[Registrar address block]
Re: 11% Senior Notes due 2004
Reference is hereby made to the Indenture, dated as of December 1,
1997 (as such may have been amended, supplemented or otherwise modified to the
date hereof the "Indenture"), among HealthCor Holdings, Inc., as issuer (the
"Company"), the Guarantors parties thereto and Norwest Bank Minnesota, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
In connection with our proposed purchase of $__________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Certificated Note.
we confirm that:
1. We understand that any subsequent transfer of the
Notes or any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by and not to
resell, pledge or otherwise transfer the Notes or any interest therein except
in compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that
D-1
<PAGE> 125
if we should sell the Notes or any interest therein, we will do so only (A) to
the Company or any subsidiary thereof, (B) in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined therein),
(C) to an institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially in the
form of this letter and an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144 under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
Person purchasing the Certificated Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the
Notes or beneficial interest therein, we will be required to furnish to you and
the Company such certifications, legal opinions and other information as you
and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the Notes
purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the Notes.
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each
of which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company (and your respective counsel) are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interest party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
----------------------------------------------
[Insert Name of Accredited Investor]
By:
-----------------------------------------
Name:
Title:
Dated: __________, ____
D-2
<PAGE> 126
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of [
], among [NEW GUARANTOR] (the "New Guarantor"), HEALTHCOR HOLDINGS, INC., a
Delaware corporation (the "Company") and the existing Guarantors (the "Existing
Guarantors") under this Indenture referred to below, and NORWEST BANK
MINNESOTA, N.A., as trustee under this Indenture referred to below (the
"Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to
the Trustee an Indenture (as such may have been amended, supplemented and
modified to the date hereof, the "Indenture"), dated as of December 1, 1997,
providing for the issuance of an aggregate principal amount of $80,000,000 of
11% Senior Notes due 2004 (the "Notes");
WHEREAS this Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all of the Company's obligations
under the Notes pursuant to a Guarantee on the terms and conditions set forth
herein; and
WHEREAS pursuant to Section 8.01 of this Indenture, the
Trustee, the Company and Existing Guarantors are authorized to execute and
deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Guarantor, the Company, the Existing Guarantors and the Trustee
mutually covenant and agree for the equal and ratable benefit of the Holders of
the Notes as follows:
1. Definitions. (a) Capitalized terms used herein without
definition shall have the meanings assigned to them in this Indenture.
(b) For all purposes of this Supplement, except as otherwise
herein expressly provided or unless the context otherwise requires: (i) the
terms and expressions used herein shall have the same meanings as corresponding
terms and expressions used in this Indenture; and (ii) the words "herein,"
"hereof" and "hereby"
<PAGE> 127
and other words of similar import used in this Supplemental Indenture refer to
this Supplemental Indenture as a whole and not to any particular section
hereof.
2. Agreement to Guarantee. The New Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
obligations under the Notes on the terms and subject to the conditions set
forth in Article 10 of the Indenture and to be bound by all other applicable
provisions of the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect. This Supplemental Indenture
shall form a part of the Indenture for all purposes, and every Holder of Notes
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.
6. Counterparts. The parties may sign any number of copies
of this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR]
By:
--------------------------------
Name:
Title:
E-2
<PAGE> 128
HEALTHCOR HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
[EXISTING GUARANTORS]
By:
--------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, N.A.
as Trustee
By:
--------------------------------
Name:
Title:
E-3
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EXHIBIT 4.3
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HEALTHCOR HOLDINGS, INC.,
THE GUARANTORS SIGNATORIES HERETO,
as Guarantors
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
____________________
FIRST SUPPLEMENTAL INDENTURE
Dated December 2, 1997
to
INDENTURE
Dated as of December 1, 1997
____________________
11% Senior Notes due 2004
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FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), is
dated as of December 2, 1997, among CareNetwork, Inc., an Arkansas corporation
("CARENETWORK"), HealthCor Holdings, Inc., a Delaware corporation (the
"COMPANY"), the Guarantors parties hereto and Norwest Bank Minnesota, National
Association, as trustee (the "TRUSTEE").
RECITALS
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $80,000,000 of 11% Senior
Notes due 2004 (the "Notes"); and
WHEREAS, pursuant to Section 8.01 of this Indenture, the Trustee, the
Company and the Guarantors are authorized to execute and deliver this
Supplemental Indenture without the consent of the Holders of the Notes to cure
any ambiguity, defect or inconsistency in the Indenture; and
WHEREAS, a possible defect may exist with respect to the
enforceability of the Indenture against CareNetwork;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
CareNetwork, the Company, the Guarantors and the Trustee mutually covenant and
agree for the equal and ratable benefit of the Holders of the Notes as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture. For all purposes of
this Supplemental Indenture, except as otherwise herein expressly provided or
unless the context otherwise requires, the words "herein," "hereof" and
"hereby" and other words of similar import used in this Supplemental Indenture
refer to this Supplemental Indenture as a whole and not to any particular
section hereof.
2. Agreement to Guarantee. CareNetwork hereby agrees, jointly
and severally with all other Guarantors, to guarantee the Company's obligations
under the Notes on the terms and subject to the conditions set forth in Article
10 of the Indenture and to be bound by all other applicable provisions of the
Indenture.
3. Confirmation and Novation of Prior Guarantee. CareNetwork
hereby confirms and novates its guarantee of the Company's obligations under
the Notes as set forth in the Indenture pursuant to its execution and delivery
thereof as of December 1, 1997.
4. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby.
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5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
6. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.
7. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
8. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
CARENETWORK, INC., as Guarantor
By: /s/ JOEL H. WILLIAMS
-------------------------------------
Name: Joel H. Williams
Title: Vice President and
Chief Financial Officer
HEALTHCOR HOLDINGS, INC.
By: /s/ S. WAYNE BAZZLE
-------------------------------------
Name: S. Wayne Bazzle
Title: Chairman of the Board and
Chief Executive Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By: /s/ CURTIS D. SCHWEGMAN
-------------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
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HEALTHCOR, INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HEALTHCOR OXYGEN & MEDICAL EQUIPMENT, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR FOUNDATION
HC PERSONNEL RESOURCES, INC.,
as Guarantors
By: /s/ S. WAYNE BAZZLE
----------------------------
Name: S. Wayne Bazzle
Title: Chairman of the Board
and Chief Executive Officer
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EXHIBIT 4.5
EXECUTION COPY
$80,000,000
HEALTHCOR HOLDINGS, INC.
11% SENIOR NOTES DUE 2004
UNCONDITIONALLY GUARANTEED BY THE SIGNATORIES HERETO
REGISTRATION RIGHTS AGREEMENT
December 1, 1997
Bear, Stearns & Co. Inc.
Chase Securities Inc.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue, 3rd Floor
New York, NY 10167
Dear Sirs:
HealthCor Holdings, Inc., a Delaware corporation (the "Issuer"),
proposes to issue and sell to Bear, Stearns & Co. Inc. ("Bear Stearns") and
Chase Securities Inc. (collectively, the "Initial Purchasers"), upon the terms
set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), $80,000,000 aggregate principal amount of its 11% Senior Notes Due
2004 (the "Initial Securities") to be unconditionally guaranteed (the
"Guaranties") by the guarantor subsidiaries of the Issuer signatories hereto
(the "Guarantors" and together with the Issuer, the "Company"). The Initial
Securities will be issued pursuant to an Indenture, dated as of December 1,
1997, (the "Indenture") among the Issuer, the Guarantors named therein and
Norwest Bank Minnesota, N.A. (the "Trustee"). As an inducement to the Initial
Purchasers, the Company agrees with the Initial Purchasers, for the benefit of
the holders of the Initial Securities (including, without limitation, the
Initial Purchasers), of the Exchange Securities (as defined below in Section 1)
and of the Private Exchange Securities (as defined below in Section 1)
(collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own
cost, prepare and, not later than 45 days after (or if the 45th day is not a
business day, the first business day thereafter) the date of original issue of
the Initial Securities (the "Issue Date"), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to a proposed offer
(the "Registered Exchange Offer") to the Holders of Transfer Restricted
Securities (as defined in Section 6(e) hereof), who are not prohibited by any
law or policy of the Commission from participating in the Registered Exchange
Offer, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of
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debt securities (the "Exchange Securities") of the Company issued under the
Indenture and identical in all material respects to the Initial Securities
(except for the transfer restrictions relating to the Initial Securities and
the provisions relating to the matters described in Section 6 hereof) that
would be registered under the Securities Act. The Company shall use its best
efforts to cause such Exchange Offer Registration Statement to become effective
under the Securities Act within 90 days (or if the 90th day is not a business
day, the first business day thereafter) after the Issue Date of the Initial
Securities and shall keep the Exchange Offer Registration Statement effective
for not less than 30 business days (or longer, if required by applicable law)
after the date notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer 30 business days after the
commencement thereof provided that the Company has accepted all the Initial
Securities theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange
Securities, from and after their receipt, without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States.
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and (c) Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received
by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an
Initial Purchaser that elects to sell Exchange Securities acquired in exchange
for Initial Securities constituting any portion of an unsold allotment is
required to deliver a prospectus containing the information required by Items
507 or 508 of Regulation S-K under the Securities Act, as applicable, in
connection with such sale.
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The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however,
that (i) in the case where such prospectus and any amendment or supplement
thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such
period shall be the lesser of 180 days and the date on which all Exchanging
Dealers and the Initial Purchasers have sold all Exchange Securities held by
them (unless such period is extended pursuant to Section 3(j) below) and (ii)
the Company shall make such prospectus and any amendment or supplement thereto,
available to any broker- dealer for use in connection with any resale of any
Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver
to such Initial Purchaser upon the written request of such Initial Purchaser,
in exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects (including
the existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States, but excluding
provisions relating to the matters described in Section 6 hereof) to the
Initial Securities (the "Private Exchange Securities"). The Initial
Securities, the Exchange Securities and the Private Exchange Securities are
herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than
30 business days (or longer, if required by applicable law) after the
date notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any
time prior to the close of business, New York time, on the last
business day on which the
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Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to
each Holder of the Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to
the Initial Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all
the Securities will vote and consent together on all matters as one class and
that none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Initial Securities surrendered in exchange therefor or
(ii) if the Initial Securities are surrendered for exchange on a date in a
period which includes the record date for an interest payment date to occur on
or after the date of such exchange and as to which interest will be paid, the
date of such interest payment date or (B) if no interest has been paid on the
Initial Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any person to participate in
the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or if it is an
affiliate, such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such Holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Securities and (v) if
such Holder is a broker-dealer, that it will receive Exchange Securities for
its own account in exchange for Initial Securities that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale
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of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies in
all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
prospectus forming part of any Exchange Offer Registration Statement, together
with any supplement to such prospectus, does not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of applicable law or
Commission policy, the Company is not permitted to effect a Registered
Exchange Offer, as contemplated by Section 1 hereof, or (ii) any holder of
Transfer Restricted Securities notifies the Company prior to the 20th day
following consummation of the Registered Exchange Offer that (a) it is
prohibited by law or Commission policy from participating in the Registered
Exchange Offer or (b) that it may not resell the Exchange Securities acquired
by it in the Registered Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (c) that it is a
broker-dealer and owns Initial Securities acquired directly from the Company or
an affiliate of the Company, the Company shall take the following actions:
(a) The Company shall, at its cost, use its best efforts to,
within 30 days after so required or requested pursuant to this Section
2, file with the Commission and thereafter shall use its best efforts
to cause to be declared effective a registration statement (the "Shelf
Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate
form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined in Section 6(e) hereof) by
the Holders thereof from time to time in accordance with the methods
of distribution set forth in the Shelf Registration Statement and Rule
415 under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than an Initial Purchaser)
shall be entitled to have the Securities held by it covered by such
Shelf Registration Statement unless such Holder agrees in writing to
be bound by all the provisions of this Agreement applicable to such
Holder.
(b) The Company shall use its best efforts to (i) cause the
Shelf Registration Statement to be declared effective under the
Securities Act within 90 days after the filing obligation with respect
thereto arises; and (ii) subject to
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Section 6(b), keep the Shelf Registration Statement continuously
effective in order to permit the prospectus included therein to be
lawfully delivered by the Holders of the relevant Securities, for a
period of two years (or for such longer period if extended pursuant to
Section 3(j) below) from the date of its effectiveness or such shorter
period that will terminate when all the Securities covered by the
Shelf Registration Statement (i) have been sold pursuant thereto or
(ii) are no longer restricted securities (as defined in Rule 144 under
the Securities Act, or any successor rule thereof). Subject to
Section 6(b), the Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result
in Holders of Securities covered thereby not being able to offer and
sell such Securities during that period, unless such action is
required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment
or supplement, (i) to comply in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable,
any Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered
Exchange Offer or the Shelf Registration Statement, the Company shall
use its best efforts to reflect in each such document, when so filed
with the Commission, such comments as such Initial Purchaser
reasonably may propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section
and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement
and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if requested by an Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in the prospectus forming
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a part of the Exchange Offer Registration Statement; (iv) include
within the prospectus contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably
acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the
Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Exchange Securities received by such broker-dealer in the
Registered Exchange Offer (a "Participating Broker-Dealer"), whether
such positions or policies have been publicly disseminated by the
staff of the Commission or such positions or policies, in the
reasonable judgment of the Initial Purchasers based upon advice of
counsel (which may be in-house counsel), represent the prevailing
views of the staff of the Commission; and (v) in the case of a Shelf
Registration Statement, include the names of the Holders, who propose
to sell Securities pursuant to the Shelf Registration Statement, as
selling securityholders.
(b) The Company shall give written notice to the Initial
Purchasers, the Holders of the Securities and any Participating
Broker-Dealer from whom the Company has received prior written notice
that it will be a Participating Broker-Dealer in the Registered
Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of
the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus do not contain an untrue statement of a material
fact nor omit to state a material fact required to be
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stated therein or necessary to make the statements therein (in
the case of the prospectus, in light of the circumstances
under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending
the effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without
charge, at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and
each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if any Initial Purchaser or
any such Holder requests, all exhibits thereto (including those
incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of
the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto
as such person may reasonably request. The Company consents, subject
to the provisions of this Agreement, to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders of
the Securities in connection with the offering and sale of the
Securities covered by the prospectus, or any amendment or supplement
thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus
included in the Exchange Offer Registration Statement and any
amendment or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or supplement
thereto by any Initial Purchaser, if necessary, any Participating
Broker-Dealer and such other persons required to deliver a prospectus
following the Registered Exchange Offer in connection with the
offering and sale of the Exchange Securities covered by the
prospectus, or any amendment or supplement thereto, included in such
Exchange Offer Registration Statement.
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(h) Prior to any public offering of the Securities, pursuant
to any Registration Statement, the Company shall register or qualify
or cooperate with the Holders of the Securities included therein and
their respective counsel in connection with the registration or
qualification of the Securities for offer and sale under the
securities or "blue sky" laws of such states of the United States as
any Holder of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities covered by such
Registration Statement; provided, however, that the Company shall not
be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action
which would subject it to general service of process or to taxation in
any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request
a reasonable period of time prior to sales of the Securities pursuant
to such Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the period
for which the Company is required to maintain an effective
Registration Statement, the Company shall promptly prepare and file a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus and any other required document so that, as
thereafter delivered to Holders of the Securities or purchasers of
Securities, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the
Company notifies the Initial Purchasers, the Holders of the Securities
and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use
of the prospectus until the requisite changes to the prospectus have
been made, then the Initial Purchasers, the Holders of the Securities
and any such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration
Statement provided for in Section 2(b) above and the Exchange Offer
Registration Statement provided for in Section 1 above shall each be
extended by the number of days from and including the date of the
giving of such notice to and including the date when the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer shall have received such amended or supplemented
prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable
Registration
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Statement, the Company will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, and provide the applicable trustee
with printed certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case may be, in
a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90
days, if such period is a fiscal year) beginning with the first month
of the Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statement shall cover such
12-month period.
(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.
(n) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Securities as the Company may from time to time reasonably require
for inclusion in the Shelf Registration Statement, and the Company may
exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable
time after receiving such request.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the
Securities shall reasonably request in writing in order to facilitate
the disposition of the Securities pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall
(i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant
to the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all
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relevant information reasonably requested by the Holders of the
Securities or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary to enable such persons, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in
Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall cause (i)
its counsel to deliver an opinion and updates thereof relating to the
Securities in customary form addressed to such Holders and the
managing underwriters, if any, thereof and dated, in the case of the
initial opinion, the effective date of such Shelf Registration
Statement (it being agreed that the matters to be covered by such
opinion shall include, without limitation, the due incorporation and
good standing of the Company and its subsidiaries; the qualification
of the Company and its subsidiaries to transact business as foreign
corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(o) hereof; the
due authorization, execution, authentication and issuance, and the
validity and enforceability, of the applicable Securities; the absence
of material legal or governmental proceedings involving the Company
and its subsidiaries; the absence of governmental approvals required
to be obtained in connection with the Shelf Registration Statement,
the offering and sale of the applicable Securities, or any agreement
of the type referred to in Section 3(o) hereof; the compliance as to
form of such Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the
effective date of the Shelf Registration Statement or most recent
post- effective amendment thereto, as the case may be, the absence
from such Shelf Registration Statement and the prospectus included
therein, as then amended or supplemented, and from any documents
incorporated by reference therein of an untrue statement of a material
fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading (in the case of any such documents, in the light of the
circumstances existing at the time that such documents were filed with
the Commission under the Exchange Act)); (ii) its officers to execute
and deliver all customary documents and certificates and updates
thereof requested by any underwriters of the applicable Securities and
(iii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Shelf Registration Statement to provide
to the selling Holders of the applicable Securities and any
underwriter therefor a comfort letter in customary form and covering
matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings,
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<PAGE> 12
subject to receipt of appropriate documentation as contemplated, and
only if permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if
requested by any Initial Purchaser or any known Participating
Broker-Dealer, the Company shall cause (i) its counsel to deliver to
such Initial Purchaser or such Participating Broker-Dealer a signed
opinion respecting the matters set forth in Exhibit A of the Purchase
Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its independent
public accountants and the independent public accountants with respect
to any other entity for which financial information is provided in the
Registration Statement to deliver to such Initial Purchaser or such
Participating Broker-Dealer a comfort letter in substantially the form
delivered in Section 8(g) of the Purchase Agreement, with appropriate
date changes.
(s) If a Registered Exchange Offer or a Private Exchange is
to be consummated, upon delivery of the Initial Securities by Holders
to the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Company shall mark, or caused to
be marked, on the Initial Securities so exchanged that such Initial
Securities are being canceled in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be; in no event
shall the Initial Securities be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts to (a) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (b) if the Initial Securities
were not previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate rating
agencies, if so requested by Holders of a majority in aggregate
principal amount of Securities covered by such Registration Statement,
or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules (the "Rules")
of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a Holder of such Securities or as an underwriter,
a placement or sales agent or a broker or dealer in respect thereof,
or otherwise, the Company will assist such broker-dealer in complying
with the requirements of such Rules, including, without limitation, by
(i) if such Rules, including Rule 2720, shall so require, engaging a
"qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Registration Statement relating
to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by
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<PAGE> 13
such Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof and (iii) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules.
(v) The Company shall cause all Securities covered by any
Registration Statement to be listed on each securities exchange on
which any Securities are listed.
(w) The Company shall use its best efforts to take all other
steps necessary to effect the registration of the Securities covered
by a Registration Statement contemplated hereby.
4. Registration Expenses. (a) All expenses incident to the
Company's performance of or compliance with this Agreement will be borne by the
Company regardless of whether a Registration Statement is filed or becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Initial Purchasers or Holder with
the NASD (and, if applicable, the reasonable fees and expenses of any
"qualified independent underwriter" and its counsel that may be required by the
rules and regulations of the NASD)); (ii) all fees and expenses associated with
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Securities to
be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and, subject to Section 4(b) below, the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing Securities on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) all fees and disbursements
of independent certified public accountants of the Company (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of their officers and employees
performing legal or accounting duties), the expenses of any annual audit and
the fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by
this Agreement, the Company will reimburse the Initial Purchasers and the
Holders of Transfer Restricted Securities being tendered in the Exchange Offer
and/or resold pursuant to the "Plan of Distribution" contained in the Exchange
Offer Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Paul,
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<PAGE> 14
Weiss, Rifkind, Wharton & Garrison or such other counsel as may be chosen by
the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
5. Indemnification. (a) The Company agrees to indemnify and
hold harmless the Initial Purchasers, each Holder of the Securities, any
Participating Broker-Dealer and each person, if any, who controls such Holder
or such Participating Broker-Dealer within the meaning of the Securities Act or
the Exchange Act (each Holder, any Participating Broker-Dealer and such
controlling persons are referred to collectively as the "Indemnified Parties")
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof as incurred (including, but not limited to,
any losses, claims, damages, liabilities or actions relating to purchases and
sales of the Securities and including reasonable attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any investigation or litigation, commenced or threatened, or any claim
whatsoever, and in enforcing this indemnification, and any and all amounts paid
in settlement of any claim or litigation) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arise out of, or are
based upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse, as incurred, the Indemnified Parties for any
reasonable legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action in respect thereof; provided, however, that the Company shall not be
liable in any such case to the extent that such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in a Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein; provided further, however, that this
indemnity agreement will be in addition to any liability which the Company may
otherwise have to such Indemnified Party under any other agreement or under
applicable law. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly,
will indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act from and against any losses, claims, damages or liabilities or any actions
in respect thereof, to which the Company or any such controlling person may
become subject under the Securities Act,
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<PAGE> 15
the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or omission or alleged untrue statement or omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; provided, however, that in no case shall any Holder be
liable or responsible for any amount in excess of the dollar amount of the
proceeds received by such Holder upon the sale of the Securities giving rise to
such indemnification obligation. This indemnity agreement will be in addition
to any liability which such Holder may otherwise have to the Company or any of
its controlling persons under any other agreement or under applicable law.
(c) Promptly after receipt by an indemnified party under this
Section 5(a) or (b) of notice of the commencement of any action or proceeding
(including a governmental investigation), such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 5, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof except to the extent set forth
below the indemnifying party will not be liable to such indemnified party under
this Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. Notwithstanding the foregoing, the indemnified party
or parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (in
addition to
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<PAGE> 16
any local counsel) for all indemnified parties in each jurisdiction in which
any claim or action is brought. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such Holder or such
other indemnified party, as the case may be, on the other, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid by an indemnified party as
a result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding
any other provision of this Section 5(d), no Holder shall be required to
contribute any amount in excess of the amount by which the net proceeds
received by such Holder from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution
as such indemnified party and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive
the sale of the
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<PAGE> 17
Securities pursuant to a Registration Statement and shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement or
any investigation made by or on behalf of any indemnified party.
6. Liquidated Damages. (a) If (i) any of the Registration
Statements required by this Agreement is not filed with the Commission on or
prior to the date specified for such filing in this Agreement, (ii) any of such
Registration Statements has not been declared effective by the Commission on or
prior to the date specified for such effectiveness in this Agreement (the
"Effectiveness Target Date"), (iii) the Registered Exchange Offer has not been
consummated within 30 business days after the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective, (each such event referred to in clauses (ii) through (iv),
a "Registration Default"), the Company agrees to pay liquidated damages
("Liquidated Damages") to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of the
first Registration Default, in an amount equal to one-half of one percentage
point (0.5%) per annum of the principal amount of Transfer Restricted
Securities held by such Holder. The amount of the Liquidated Damages shall
increase by an additional one-half of one percent (0.5 %) per annum of the
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of one and one-half percent (1.5%) per
annum of the principal amount of Transfer Restricted Securities held by such
Holder. All accrued Liquidated Damages shall be paid by the Company on each
Interest Payment Date (as defined in the Indenture) to each Holder of a Global
Note (as defined in the Indenture) by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfers to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified, on each Interest
Payment Date, as provided for in the Indenture. The filing of a Registration
Statement after the date specified for such filing, the declaration of
effectiveness of a Registration Statement after the Effectiveness Target Date
or the consummation of the Registered Exchange Offer at any time, as
appropriate, shall constitute a cure of the related Registration Default.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease.
(b) All obligations of the Company and the Guarantors set
forth in the preceding paragraph that are outstanding with respect to any
Transfer Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such obligations with
respect to such security shall have been satisfied in full.
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(c) For the purposes of this Agreement, a Registration
Statement or the related prospectus ceases to be usable when either (1) any
event occurs as a result of which the related prospectus forming part of such
Registration Statement would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein in the
light of the circumstances under which they were made not misleading, or (2) it
shall be necessary to amend such Registration Statement or supplement the
related prospectus, to comply with the Securities Act or the Exchange Act or
the respective rules thereunder.
(d) Any amounts of liquidated damages due pursuant to Section
6(a) above will be determined by multiplying the applicable rate by the
principal amount of the Securities, multiplied by a fraction, the numerator of
which is the number of days such liquidated damage rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve
30-day months), and the denominator of which is 360.
(e) "Transfer Restricted Securities" means each Security
until (i) the date on which such Transfer Restricted Security has been
exchanged by a person other than a broker-dealer for a freely transferable
Exchange Security in the Registered Exchange Offer, (ii) following the exchange
by a broker-dealer in the Registered Exchange Offer of an Initial Security for
an Exchange Security, the date on which such Exchange Security is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Initial Security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Initial Security is
distributed to the public pursuant to Rule 144 under the Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Initial
Securities, make publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any Holder of Initial
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Initial Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144
and 144A (including the requirements of Rule 144A(d)(4)). The Company will
provide a copy of this Agreement to prospective purchasers of Initial
Securities identified to the Company by the Initial Purchasers upon request.
Upon the request of any Holder of Initial Securities, the Company shall deliver
to such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall
be deemed to require the Company to register any of its securities pursuant to
the Exchange Act.
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8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering provided, however, that
such Managing Underwriters shall be reasonably satisfactory to the Company, it
being understood that Bear Stearns shall be deemed reasonably satisfactory to
the Company.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, except by the Company
and the written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which guarantees
overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.
(2) if to the Initial Purchasers, at the following
address:
Bear, Stearns & Co. Inc.
245 Park Avenue, 3rd Floor
New York, NY 10167
Fax No.: (212) 272-3092
Attention: Corporate Finance Group
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with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Fax No.: (212) 757-3990
Attention: Carl L. Reisner, Esq.
(3) if to the Company, at its address as follows:
HealthCor Holdings, Inc.
8150 North Central Expressway, Suite M 2000
Dallas, TX 75206
Telecopy No.: (214) 692-4663
Attention: Chief Financial Officer
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, TX 75201-4675
Telecopy No.: (214) 969-4343
Attention: J. Kenneth Menges, Jr., P.C.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(c) No Inconsistent Agreements. The Company has not, as of
the date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with
the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof. The Company will take no action with respect to the
Securities that would materially and adversely affect the ability of the
Holders to consummate any Exchange Offer.
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
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(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Company or its affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed to
be affiliates solely by reason of their holdings of such Securities) shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Remedies. The Company agrees that monetary damages
(including the Liquidated Damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
[Intentionally left blank]
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers, the Issuer and the Guarantors in
accordance with its terms.
Very truly yours,
HEALTHCOR HOLDINGS, INC.
By: /s/ CHERYL BAZZLE
---------------------------
Name: Cheryl Bazzle
Title: President
HEALTHCOR INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HEALTHCOR OXYGEN AND MEDICAL
EQUIPMENT, INC.
HEALTHCOR REHABILITATION SERVICES, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR FOUNDATION
HC PERSONNEL RESOURCES, INC.
CARE NETWORK, INC.,
as Guarantors,
By: /s/ CHERYL BAZZLE
-----------------------------
Name: Cheryl Bazzle
Title: President
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the
date first above written.
Acting on behalf of itself and as the
Representative of the Initial Purchasers
BEAR, STEARNS & CO. INC.
By: /s/ BRIAN MCCARTHY
------------------------------
Name: Brian McCarthy
Title: Senior Managing Director
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ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 24
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Initial Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE> 25
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received
in exchange for Initial Securities where such Initial Securities were acquired
as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 180 days after the Expiration Date, it
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 199 , all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Securities and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
__________________________________
(1) In addition, the legend required by Item 502(e) of Regulation
S-K will appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 26
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: ____________________________________________
Address: _________________________________________
_________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Initial Securities that
were acquired as a result of market- making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Securities; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT AND AN ISSUING BANK,
THE SEVERAL FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO
and
HEALTHCOR HOLDINGS, INC.,
as Borrower
Dated as of December 1, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II - Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.3 Repayment of Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.6 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.7 Reduction or Termination of Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III - Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.1 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.2 Participation by Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.3 Procedure for Issuing Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.4 Reimbursements; Payments Constitute Revolving Credit Loans . . . . . . . . . . . . . . . . . . . 20
Section 3.5 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.7 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.8 Letter of Credit Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV - Borrowing Procedure; Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.1 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.2 Conversions and Continuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.3 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.4 Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.5 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.6 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.7 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.8 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.9 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V - Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.4 Treatment of Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.7 Additional Costs in Respect of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI - Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.2 Lockbox Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.3 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.4 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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ARTICLE VII - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.1 Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.2 All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.3 Corporate Action; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.5 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.6 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.7 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.8 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.11 Use of Proceeds; Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.15 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.16 Compliance with Laws; Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.17 Fraud and Abuse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.18 Self Referral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX - Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.2 Maintenance of Existence; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.12 Security Agreements; Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X - Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.1 Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.3 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.4 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.5 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.6 Limitation on Issuance of Subsidiaries' Capital Stock . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.7 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.8 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.9 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<TABLE>
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Section 10.10 Prepayment of Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.11 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.12 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.13 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.14 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.15 Modification of Senior Note Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XI - Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.1 Funded Debt to EBITDAA Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.2 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.3 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.4 Funded Debt to Capitalization Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XII - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.4 Performance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE XIII - The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 13.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 13.2 Rights of Agent as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 13.3 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 13.4 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 13.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XIV - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 14.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 14.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 14.3 LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 14.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 14.5 No Fiduciary Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 14.6 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 14.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 14.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 14.9 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 14.10 Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 14.11 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 14.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.13 GOVERNING LAW; VENUE; SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.17 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.18 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.19 Treatment of Certain Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 68
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement"),
dated as of December 1, 1997, is among HEALTHCOR HOLDINGS, INC., a corporation
duly organized and validly existing under the laws of the State of Delaware
("Borrower"), each of the banks or other lending institutions which is or which
may from time to time become a signatory hereto or any successor or assignee
thereof (individually, a "Bank" and, collectively, the "Banks") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as an
issuing bank (in such capacity, together with its successors in such capacity,
an "Issuing Bank") and as agent for itself, the Issuing Banks and the other
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
R E C I T A L S:
A. The Borrower, HealthCor, Inc., a Delaware corporation
("HealthCor"), the Agent and certain of the Banks previously entered into that
certain Amended and Restated Credit Agreement dated as of October 31, 1996, as
amended pursuant to that certain First Amendment to Amended and Restated Credit
Agreement dated as of April 30, 1997, and as further amended by that certain
Second Amendment to Amended and Restated Credit Agreement dated as of September
19, 1997 (as amended, the "Existing Credit Agreement"), pursuant to which the
Banks, together with the other banks thereunder extended credit to the Borrower
in the form of term loans and to HealthCor in the form of revolving credit
loans (collectively, the "Existing Loans").
B. The Borrower guaranteed all obligations, liabilities and
indebtedness of HealthCor under the existing Agreement including, without
limitation, the reimbursement obligations of HealthCor in respect of the
letters of credit outstanding thereunder. Certain of the letters of credit
issued under the Existing Agreement for the account of HealthCor remain
outstanding on the date hereof and shall continue to remain outstanding under
this Agreement (collectively, the "Existing Letters of Credit").
C. The Borrower has repaid the indebtedness (other than the
reimbursement obligations in respect of the Existing Letters of Credit) under
the Existing Credit Agreement and has requested the Banks to make a revolving
credit loan in the form of advances and letters of credit (including the
Existing Letters of Credit) available to the Borrower in an aggregate principal
amount not to exceed $20,000,000.00 outstanding at any time.
D. The Banks are willing to make such extensions of credit to the
Borrower upon the terms and conditions hereinafter set forth.
E. The parties hereto desire to amend the Existing Credit Agreement
as hereinafter provided and have agreed for purposes of clarity and ease of
administration, to amend the Existing Credit Agreement and then restate the
Existing Credit Agreement in its entirety by means of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows, and the
Existing Credit Agreement is hereby amended and restated in its entirety as
follows:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 1
<PAGE> 6
ARTICLE I
Definitions
Section 1.1 Definitions. As used in this Agreement, the following
terms have the following meanings:
"Acquired Company" means, as of any date of calculation of
EBITDAA, a Subsidiary acquired by a Company, or a Person all or
substantially all of the assets of which have been acquired by a
Company, in each case, following September 30, 1997.
"Acquired EBITDA" means for each Acquired Company, (a) EBITDA for
such Acquired Company for the twelve (12) month period ended on the
date of calculation, calculated as of the Initial Report Date for such
Acquired Company, multiplied by (b) the EBITDA Factor for such
Acquired Company.
"Additional Costs" has the meaning specified in Section 5.1.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) determined by the Agent to be
equal to the Eurodollar Rate for such Eurodollar Loan for such
Interest Period divided by 1 minus the Reserve Requirement for such
Eurodollar Loan for such Interest Period.
"Adjustment Date" means the last day of each calendar quarter.
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, such Person; (b)
that directly or indirectly beneficially owns or holds five percent or
more of any class of voting stock of such Person; or (c) five percent
or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Person in question. The term
"control" means the possession, directly or indirectly, of the power
to direct or cause direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event shall the
Agent, any Issuing Bank or any Bank be deemed an Affiliate of Borrower
or any of the Subsidiaries.
"Agent's Fee Letter" means the letter agreement dated November 6,
1997, among the Agent, Chase Securities Inc. and Borrower.
"Alternate Base Rate" means, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day, or (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Agent as its prime
rate in effect at its principal office in Houston, Texas; and "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 2
<PAGE> 7
selected by it. If for any reason the Agent determines (which
determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate, for any reason,
including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms hereof, the Alternate Base
Rate shall be determined without regard to clause (b) of the first
sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"Alternate Base Rate Loans" means Loans, the interest rates on
which are determined on the basis of the rates referred to in the
definition of "Alternate Base Rate" in this Section 1.1.
"Applicable Commitment Fee Rate" means, for any day, a per annum
percentage rate that is subject to adjustment (upwards or downwards,
as appropriate) based on the Funded Debt to EBITDAA Ratio. Effective
as of each Adjustment Date the Applicable Commitment Fee Rate shall be
adjusted to reflect the Applicable Commitment Fee Rate prescribed
below for the Funded Debt to EBITDAA Ratio as demonstrated by the
Compliance Certificate delivered for that fiscal quarter:
<TABLE>
<CAPTION>
APPLICABLE COMMITMENT
FUNDED DEBT TO EBITDAA RATIO FEE RATE
<S> <C>
Less than 1.00 to 1.00 .250%
Greater than or equal to 1.00 to 1.00, but less than 1.75
to 1.00 .250%
Greater than or equal to 1.75 to 1.00, but less than 2.50
to 1.00 .375%
Greater than or equal to 2.50 to 1.00 .375%
</TABLE>
The Applicable Commitment Fee Rate shall be .375% from the date hereof
until the first Adjustment Date after the date hereof that the
Compliance Certificate demonstrates a change in the Funded Debt to
EBITDAA Ratio that would cause another Applicable Commitment Fee Rate
to be applicable. After each adjustment of the Applicable Commitment
Fee Rate in accordance herewith, the new Applicable Commitment Fee
Rate shall apply until the next Adjustment Date that the Compliance
Certificate demonstrates a change in the Funded Debt to EBITDAA Ratio
that would cause another Applicable Commitment Fee Rate to be
applicable. Upon the request of the Agent, the Borrower must
demonstrate to the reasonable satisfaction of the Required Banks the
calculation of the required applicable ratio in order to obtain an
adjustment to a lower Applicable Commitment Fee Rate. If the Borrower
fails to furnish to the Agent any Compliance Certificate by the date
required by this Agreement, then the maximum Applicable Commitment Fee
Rate shall apply until the Borrower furnishes the required Compliance
Certificate to the Agent.
"Applicable Lending Office" means for each Bank and each Type of
Loan, the Lending Office of such Bank (or of an Affiliate of such
Bank) designated for such Type of Loan below its name on the signature
pages hereof or such other office of such Bank (or of an Affiliate of
such Bank) as such Bank may from time to time specify to the Borrower
and the Agent as the office by which its Loans of such Type are to be
made and maintained.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 3
<PAGE> 8
"Applicable Margin" means, for any day, the margin of interest
over the Eurodollar Rate or Alternate Base Rate, as the case may be,
that is applicable when any Applicable Rate based on the Eurodollar
Rate or the Alternate Base Rate is determined under this Agreement.
The Applicable Margin is subject to adjustment (upwards or downwards,
as appropriate) based on the Funded Debt to EBITDAA Ratio. Effective
as of each Adjustment Date the Applicable Margin for each type of Loan
shall be adjusted to reflect the Applicable Margin prescribed below
for the Funded Debt to EBITDAA Ratio as demonstrated by the Compliance
Certificate delivered for that fiscal quarter:
<TABLE>
<CAPTION>
FUNDED DEBT TO EURODOLLAR RATE ALTERNATE BASE RATE
EBITDAA RATIO APPLICABLE MARGIN APPLICABLE MARGIN
<S> <C> <C>
Less than 1.00 to 1.00 1.25% 0%
Greater than or equal to 1.00 to 1.00, 1.75% 0%
but less than 1.75 to 1.00
Greater than or equal to 1.75 to 1.00, 2.25% .250%
but less than 2.50 to 1.00
Greater than or equal to 2.50 to 1.00 2.75% .750%
</TABLE>
The Applicable Margin shall be .750% with respect to the Alternate
Base Rate and 2.75% with respect to the Eurodollar Rate from the date
hereof until the first Adjustment Date after the date hereof that the
Compliance Certificate demonstrates a change in the Funded Debt to
EBITDAA Ratio that would cause another Applicable Margin to be
applicable. After each adjustment of the Applicable Margin for each
Type of Loan in accordance herewith, the new Applicable Margin for
each Type of Loan shall apply to all Loans of each such Type
thereafter outstanding or made until the next Adjustment Date that the
Compliance Certificate demonstrates a change in the Funded Debt to
EBITDAA Ratio that would cause another Applicable Margin to be
applicable. Upon the request of the Agent, the Borrower must
demonstrate to the reasonable satisfaction of the Required Banks the
calculation of the required applicable ratio in order to obtain an
adjustment to a lower applicable margin for each Type of Loan. If the
Borrower fails to furnish to the Agent any Compliance Certificate by
the date required by this Agreement, then the maximum Applicable
Margin shall apply to all Loans of each such Type thereafter
outstanding or made until the Borrower furnishes the required
Compliance Certificate to the Agent.
"Applicable Rate" means: (a) during the period that a Loan is an
Alternate Base Rate Loan, the Alternate Base Rate plus the Applicable
Margin; and (b) during the period that a Loan is a Eurodollar Loan,
the Adjusted Eurodollar Rate plus the Applicable Margin.
"Assignee" has the meaning assigned to it in Section 14.7(b).
"Assigning Bank" has the meaning assigned to it in Section
14.7(b).
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Bank and its assignee and accepted by the Agent
pursuant to Section 14.7, in substantially the form of Exhibit "J"
hereto.
"Assignments of Life Insurance" shall have the meaning specified
in Section 6.1(d).
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 4
<PAGE> 9
"Borrower Security Agreement" means the Second Amended and
Restated Security Agreement of the Borrower in favor of the Agent for
the benefit of the Agent, the Banks and the Issuing Banks, in
substantially the form of Exhibit "D-1" hereto, as the same may be
amended, supplemented, or modified.
"Business Day" means (a) a day other than Saturday, Sunday or day
on which commercial banks in Houston, Texas or New York, New York are
not authorized or required to close, and (b) with respect to all
borrowings, payments, Conversions, Continuations, Interest Periods,
and notices in connection with Eurodollar Loans, any day which is a
Business Day described in clause (a) above and which is also a day on
which dealings in Dollar deposits are carried out in the Eurodollar
interbank market.
"Capital Lease Obligations" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease
of (or other agreement conveying the right to use) real and/or
personal property, which obligations are required to be classified and
accounted for as a capital lease on a balance sheet of such Person
under GAAP. For purposes of this Agreement, the amount of such
Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Cash Collateralized Loans" means Revolving Credit Loans that are
fully secured by cash and/or Permitted Investments of the types
described in clauses (a) through (c) of Section 10.5 that are subject
to the "control" as defined in Section 8.106 of the UCC of the Agent
and with respect to which all steps necessary to perfect a first
priority security interest in favor of the Agent have been taken and
shall be satisfactory to the Agent.
"Closing Date" means December 1, 1997, which shall be the date of
the closing of the transactions contemplated by this Agreement and
delivery of the items required to be delivered pursuant to Section
7.1.
"Code" means the Internal Revenue Code of 1986, as amended, and
the regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Commitment" means, as to each Bank, its Revolving Credit
Commitment.
"Companies" means collectively, Borrower and (a) all of its
affiliated entities including, without limitation, those entities
described on Schedule 1 hereto, (b) all of its Subsidiaries and all
Subsidiaries of any other present or future Company formed or acquired
after the date of this Agreement, and (c) the successors and assigns
of each of the foregoing entities, and "Company" means any one of the
foregoing.
"Compliance Certificate" means a certificate in substantially the
form of Exhibit "K" hereto delivered by the Borrower to the Agent
pursuant to Section 9.1(c).
"Consolidated Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
stockholders' equity on a consolidated balance sheet of the Companies.
"Continue," "Continuation," and "Continued" shall refer to the
continuation pursuant to Section 4.2 of a Eurodollar Loan as a
Eurodollar Loan from one Interest Period to the next Interest Period.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 5
<PAGE> 10
"Contribution and Indemnification Agreement" has the meaning
specified in Section 7.1(o).
"Convert," "Conversion," and "Converted" shall refer to a
conversion pursuant to Section 4.2 or Article V of one Type of Loan
into another Type of Loan.
"Default" means an Event of Default or the occurrence of an event
or condition which with notice or lapse of time or both would become
an Event of Default.
"Default Rate" means the lesser of (i) the Maximum Rate, or (ii)
the sum of the Applicable Rate in effect from day to day, plus four
percent (4%).
"Dollars" and "$" mean lawful money of the United States of
America.
"EBITDA" means, for any Person for any period, the sum of the
following for such period determined in accordance with GAAP on a
consolidated basis: (a) net income before provision for income taxes,
plus (b) Interest Expense, plus (c) depreciation, amortization and
other non-cash charges to the extent actually deducted in arriving at
net income, minus (d) extraordinary income, plus (e) extraordinary
losses.
"EBITDA Factor" means, for each Acquired Company, as of any date
of calculation of EBITDAA, the percentage set forth below
corresponding to the Initial Report Date for such Acquired Company,
relative to such date of calculation of EBITDAA:
<TABLE>
<CAPTION>
INITIAL REPORT DATE EBITDA FACTOR
<S> <C>
Same as date of calculation of EBITDAA 1.000
Last day of first calendar month prior to date of .917
calculation of EBITDAA
Last day of second calendar month prior to date .833
of calculation of EBITDAA
Last day of third calendar month prior to date of .750
calculation of EBITDAA
Last day of fourth calendar month prior to date .667
of calculation of EBITDAA
Last day of fifth calendar month prior to date of .583
calculation of EBITDAA
Last day of sixth calendar month prior to date of .500
calculation of EBITDAA
Last day of seventh calendar month prior to date .417
of calculation of EBITDAA
Last day of eighth calendar month prior to date .333
of calculation of EBITDAA
Last day of ninth calendar month prior to date of .250
calculation of EBITDAA
Last day of tenth calendar month prior to date of .167
calculation of EBITDAA
Last day of eleventh calendar month prior to date .083
of calculation of EBITDAA
Last day of twelfth calendar month prior to date 0.000
of calculation of EBITDAA
</TABLE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 6
<PAGE> 11
"EBITDAA" means, for any period, the sum of (a) EBITDA for the
Companies on a consolidated basis for such period (excluding the $5.5
million non-cash charge taken during the quarter ending June 30,
1997), plus (b) the Historical Acquired EBITDA for all Historical
Acquired Companies for such period, plus (c) the Acquired EBITDA for
all Post-Compliance Acquired Companies for such period.
"Eligible Assignee" means any commercial bank, savings and loan
association, savings bank or other financial institution having
capital and surplus of at least $100,000,000 and reasonably acceptable
to the Agent.
"Environmental Laws" means any and all federal, state, and local
laws, regulations, and requirements pertaining to health, safety, or
the environment, as such laws, regulations, and requirements may be
amended or supplemented from time to time.
"Environmental Liabilities" means, as to any Person, all
liabilities, obligations, responsibilities, remedial actions, losses,
damages, costs, and expenses (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest arising from environmental,
health or safety conditions or the Release or threatened Release of a
Hazardous Material into the environment, resulting from the past,
present, or future operations of such Person or its Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA Affiliate" means any corporation or trade or business which
is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Borrower or is under
common control (within the meaning of Section 414(c) of the Code) with
the Borrower.
"Eurodollar Loans" means Loans the interest rates on which are
determined on the basis of the rates referred to in the definition of
"Adjusted Eurodollar Rate" in this Section 1.1.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) at which the Reference Bank or any of its
Affiliates is offered Dollar deposits at or about 10:00 A.M., New York
City time, two Business Days prior to the first day of such Interest
Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar
Loans are then being conducted for delivery on the first day of such
Interest Period for a number of days comprised therein and in an
amount comparable to the principal amount of the Eurodollar Loan to
which such Interest Period relates.
"Event of Default" has the meaning specified in Section 12.1.
"Existing Credit Agreement" has the meaning specified in the
Recitals hereto.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 7
<PAGE> 12
"Existing Letters of Credit" has the meaning specified in the
Recitals hereto.
"Existing Loans" has the meaning specified in the Recitals hereto.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day,
provided that (a) if the day for which such rate is to be determined
is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (b) if such rate
is not so published on such next succeeding Business Day, the Federal
Funds Rate for any day shall be the average rate charged to the Agent
on such day on such transactions as determined by the Agent.
"Funded Debt" means at any time (without duplication): (a) all
obligations of the Companies, or any of them, for borrowed money and
all obligations of the Companies, or any of them, evidenced by bonds,
notes, debentures, or other similar instruments, including without
limitation the indebtedness of the Borrower pursuant to this
Agreement, (b) all Capital Lease Obligations of the Companies, or any
of them, (c) all debt or other obligations of others Guaranteed by the
Companies, or any of them to the extent of such Guarantee, (d) all
reimbursement obligations of the Companies, or any of them (whether
contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments, (e) all
obligations of the Companies, or any of them, to pay the deferred
purchase price of property or services, except trade accounts payable
of the Companies, or any of them, arising in the ordinary course of
business that are not past due by more than ninety (90) days, (f) all
obligations secured by a Lien existing on property owned by the
Companies, or any of them, whether or not the obligations secured
thereby have been assumed by the Companies, or any of them, or are
non-recourse to the credit of the Companies, or any of them, and (g)
all other debt of the Companies, or any of them.
"Funded Debt to EBITDAA Ratio" means, at any time, the ratio of
Funded Debt (excluding Cash Collateralized Loans) to EBITDAA.
"Funded Debt to Pre-Compliance EBITDAA Ratio" means, at any time,
the ratio of Funded Debt (excluding Cash Collateralized Loans) to
Pre-Compliance EBITDAA.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards
Board and/or their respective successors and which are applicable in
the circumstances as of the date in question. Accounting principles
are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to
those accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state
or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any debt
or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 8
<PAGE> 13
contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such debt or
other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such debt or other
obligation of the payment thereof or to protect the obligee against
loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"Guaranties" means (i) the second amended and restated guaranty of
the respective Guarantors in favor of the Agent for the benefit of the
Agent, the Issuing Banks and the Banks, in substantially the form of
Exhibit "E" hereto, as the same may be amended, supplemented or
modified, and (ii) the guaranties, each in substantially the form of
Exhibit "E" hereto, hereafter executed by any Companies formed or
acquired after the date of this Agreement, as the same may be amended,
supplemented or modified.
"Guarantors" means the Companies other than the Borrower.
"Hazardous Material" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
and polychlorinated biphenyls.
"Health Care Regulators" means all federal and state governmental
regulators and accreditation agencies and their respective official
intermediaries and/or carriers, including without limitation the Texas
Department of Health, and the Health Care Financing Administration and
its intermediary and/or carrier.
"Historical Acquired Company" means, as of any date of calculation
of EBITDAA, a Subsidiary acquired by a Company, or a Person all or
substantially all of the assets of which have been acquired by a
Company, in each case, prior to September 30, 1997.
"Historical Acquired EBITDA" means for each Historical Acquired
Company the amount of EBITDA set forth next to the relevant date of
calculation and the name of such Historical Acquired Company on
Schedule 5 attached hereto.
"HOME" means HealthCor Oxygen and Medical Equipment, Inc.
(formerly known as Permian Medical, Inc. and successor in interest by
merger to Colfax Medical Service and Supply, Inc., L.M. Supply &
Service, Inc. and Arlington Diversified Medical Equipment, Inc.), a
Texas corporation.
"Initial Report Date" for an Acquired Company means either (a) the
last day of the calendar month immediately preceding the calendar
month in which the stock or assets of such Acquired Company are
acquired by a Company, or (b) if the requisite financial information
cannot be determined for the dates or periods set forth in clause (a)
above, then the last day of another preceding calendar month approved
by the Required Banks.
"Interest Coverage Ratio" means, for any period, the ratio
determined on a consolidated basis of (a) the sum of (i) EBITDA, plus
(ii) Historical Acquired EBITDA, less (iii) the total capital
expenditures of the Companies for such period to (b) the Interest
Expense of the Companies for such period.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 9
<PAGE> 14
"Interest Expense" means for any Person for any period of
calculation thereof, the net cash interest expense on debt,
liabilities or other obligations of such Person during such period;
provided, that until and including December 31, 1998, Interest Expense
shall be calculated to include pro forma interest expense on the
Senior Notes but excluding interest expense on the senior debt
refinanced with the proceeds of the Senior Notes.
"Interest Period" means with respect to any Eurodollar Loans, each
period commencing on the date such Loan is made or converted from an
Alternate Base Rate Loan or, in the case of each subsequent,
successive Interest Period applicable to a Eurodollar Loan, the last
day of the next preceding Interest Period with respect to such Loan,
and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Borrower may select
as provided in Section 4.1, except that each such Interest Period
which commences on the last Business Day of a calendar month (or on
any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month. Notwithstanding the
foregoing: (a) each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business
Day (or, if such succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (b) any Interest
Period for a Eurodollar Loan which would otherwise extend beyond the
maturity date of the Note evidencing such Eurodollar Loan shall end on
the maturity date of such Note; (c) no more than six (6) Interest
Periods shall be in effect at the same time; (d) no Interest Period
shall have a duration of less than one (1) month and, if the Interest
Period would otherwise be a shorter period, Eurodollar Loans shall not
be available hereunder, and (e) no Interest Period for any Loans may
extend beyond a principal repayment date unless, after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans having
Interest Periods that end after such principal payment date shall be
equal to or less than the Loans to be outstanding hereunder after such
principal payment date.
"Issuing Bank" means, with respect to any Letter of Credit, TCB or
any of its Affiliates or, with the approval of the Agent, any other
Bank which elects to be an Issuing Bank hereunder, in its capacity as
issuer of a Letter of Credit.
"L/C Application" has the meaning specified in Section 3.1.
"L/C Documents" has the meaning specified in Section 3.1.
"LC Participation" means, with respect to any Bank at any time,
the amount of the participating interest held by such Bank in respect
of a Letter of Credit.
"Letter of Credit" means collectively, any standby letter of
credit issued by an Issuing Bank for the account of Borrower pursuant
to Article IV and the Existing Letters of Credit.
"Letter of Credit Liabilities" means, at any time, the aggregate
face amounts of all outstanding Letters of Credit and the aggregate
amount of any unreimbursed payments made in respect of any drawing
under a Letter of Credit.
"Letter of Credit Request Form" means a certificate, in
substantially the form of Exhibit "C" hereto, properly completed and
signed by Borrower requesting issuance of a Letter of Credit.
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"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or
title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, pledge agreements, deeds of trust, fee letters,
assignments, guaranties, letters of credit, letter of credit
applications and other instruments, documents, and agreements executed
and delivered pursuant to or in connection with this Agreement, as
such instruments, documents, and agreements may be amended, modified,
renewed, extended, or supplemented from time to time.
"Loan Request Form" means a certificate, in substantially the form
of Exhibit "B-1" hereto, properly completed and signed by Borrower
requesting a Revolving Credit Loan.
"Loans" means the Revolving Credit Loans.
"Maximum Rate" means, at any time and with respect to any Bank,
the maximum rate of interest under applicable law that such Bank may
charge the Borrower. The Maximum Rate shall be calculated in a manner
that takes into account any and all fees, payments, and other charges
in respect of the Loan Documents that constitute interest under
applicable law. Each change in any interest rate provided for herein
based upon the Maximum Rate resulting from a change in the Maximum
Rate shall take effect without notice to the Borrower at the time of
such change in the Maximum Rate. For purposes of determining the
Maximum Rate under Texas law, the applicable rate ceiling shall be the
indicated rate ceiling described in, and computed in accordance with,
Article 5069-1D.001, Vernon's Texas Civil Statutes.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by
Borrower or any ERISA Affiliate and which is covered by Title IV of
ERISA.
"Notes" means the Revolving Credit Notes.
"Notice of Continuation or Conversion" means a certificate, in
substantially the form of Exhibit "B-2" hereto, properly completed and
signed by the Borrower requesting the conversion of a Loan from one
Type into another Type or the continuation of a Eurodollar Loan.
"Obligated Party" means any Guarantor or any other Person who is
or becomes party to any agreement that guarantees or secures payment
and performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness, and liabilities
of the Borrower to the Agent, the Issuing Banks and the Banks, their
successors and assigns, or any of them, arising pursuant to any of the
Loan Documents, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligations, indebtedness, and liabilities of the
Borrower under this Agreement and the other Loan Documents (including,
without limitation, all of Borrower's contingent reimbursement
obligations in respect of Letters of Credit), and all interest
accruing thereon and all attorneys' fees and other expenses incurred
in the enforcement or collection thereof.
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"Operating Lease" means any lease (other than a lease constituting
a Capital Lease Obligation) of real or personal property.
"Payor" has the meaning assigned to it in Section 4.6.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"Permitted Debt" has the meaning specified in Section 10.1.
"Permitted Investments" has the meaning specified in Section 10.5.
"Permitted Liens" has the meaning specified in Section 10.2.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental
Authority, or other entity.
"Pharmacy" means HealthCor Pharmacy, Inc., a Texas corporation.
"Plan" means any employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate and which is covered by
Title IV of ERISA.
"Pledge Agreement" means that certain second amended and restated
pledge agreement in favor of the Agent for the benefit of the Agent,
the Issuing Banks and the Banks, in substantially the form of Exhibit
"F" hereto, as the same may be amended, supplemented or modified.
"Post-Compliance Acquired Company" means an Acquired Company
following the date on which Borrower's Funded Debt to Pre-Compliance
EBITDAA Ratio is less than 3.50 to 1.00 for the four fiscal quarters
then ended.
"Pre-Compliance EBITDAA" means, for any period, the sum of (a)
EBITDA for the Companies on a consolidated basis for such period
(excluding the $5.5 million non-cash charge taken during the quarter
ending June 30, 1997), plus (b) the Historical Acquired EBITDA for all
Historical Acquired Companies for such period, plus (c) the Acquired
EBITDA for all Acquired Companies for such period.
"Preferred Stock" shall mean HealthCor's Convertible Series A and
Series B Preferred Stock, $.01 par value.
"Preferred Stock Purchase Agreements" means Borrower's Convertible
Preferred Stock Purchase Agreement dated October 18, 1989, as amended,
and Series B Convertible Preferred Stock Purchase Agreement dated June
1, 1992, as amended.
"Principal Office" means the principal office of the Agent,
presently located at 707 Travis, Houston, Texas 77002.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
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"Quarterly Payment Date" means the first day of each January,
April, July and October of each year, the first of which shall be the
first such day after the date of this Agreement.
"Reference Bank" means Texas Commerce Bank National Association.
"Register" has the meaning assigned to it in Section 14.7(d).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from
time to time.
"Regulatory Change" means, with respect to any Bank, any change
after the date of this Agreement in United States federal, state, or
foreign laws or regulations (including Regulation D) or the adoption
or making after such date of any interpretations, directives, or
requests applying to a class of banks including such Bank of or under
any United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Reportable Event" means any of the events set forth in Section
4043 of ERISA.
"Required Banks" means at any time while no Loans or Letter of
Credit Liabilities are outstanding, Banks having at least 80% of the
aggregate amount of the Commitments and, at any time while Loans or
Letter of Credit Liabilities are outstanding, Banks holding at least
80% of the outstanding aggregate principal amount of the Loans and LC
Participations.
"Required Payment" has the meaning assigned to it in Section 4.6.
"Reserve Requirement" means, for any Eurodollar Loan for any
Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation
D by member banks of the Federal Reserve System in New York City with
deposits exceeding one billion Dollars against "Eurocurrency
Liabilities" as such term is used in Regulation D. Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by
reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of
extensions of credit or other assets which include Eurodollar Loans.
"Revolving Credit Commitment" means, as to each Bank, the
obligation of such Bank to make Revolving Credit Loans and purchase
participations in Letters of Credit pursuant to Section 3.1 in an
aggregate principal amount at any one time outstanding up to but not
exceeding the amount set forth opposite the name of such Bank on the
signature pages hereto under the heading "Revolving Credit
Commitment," or in the Assignment and Acceptance pursuant to which
such Bank assumed its Revolving Credit Commitment, as applicable, as
the same may be (a) reduced pursuant to Section 2.7 or terminated
pursuant to Section 2.7 or 12.2 and (b) reduced or increased from time
to time pursuant to assignments by or to such Bank pursuant to Section
14.7.
"Revolving Credit Loan" means, as to each Bank, the loans to be
made by such Bank pursuant to Section 2.1.
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"Revolving Credit Note" means a promissory note of Borrower
payable to the order of a Bank, in substantially the form of Exhibit
"A" hereto, and all extensions, renewals, and modifications thereof
and all substitutions therefor.
"Revolving Credit Termination Date" means 11:00 A.M. Houston,
Texas time on December 1, 2000, or such earlier date and time on which
the Revolving Credit Commitments terminate as provided in this
Agreement.
"RICO" means the Racketeer Influenced and Corrupt Organization Act
of 1970, as amended from time to time.
"Security Agreements" means (i) the second amended and restated
security agreements in favor of the Agent for the benefit of the
Agent, the Issuing Banks and the Banks, in the form of Exhibit "D-1"
hereto for the Borrower or Exhibit "D-2" hereto for the Guarantors, as
the same may be amended, supplemented or modified, and (ii) the
Security Agreements, each in substantially the form of Exhibit "D-2"
hereto, hereafter executed by any Companies formed or acquired after
the date of this Agreement, as the same may be amended, supplemented
or modified.
"Senior Notes" means the Borrower's 11% Senior Notes due 2004 as
in effect on the Closing Date, and as the same may be amended,
supplemented or modified pursuant to the terms hereof and thereof.
"Senior Notes Documents" shall mean and include each of the
documents and other agreements entered into (including, without
limitation, the Senior Notes Indenture) relating to the issuance by
the Borrower of the Senior Notes, as in effect on the Closing Date and
as the same may be amended, supplemented or modified pursuant to the
terms hereof and thereof.
"Senior Notes Indenture" shall mean the Indenture, dated as of
December 1, 1997, among the Borrower, the Subsidiary Guarantors and
Norwest Corporate Trust, N.A., as trustee thereunder, as in effect on
the Closing Date and as the same may be amended, supplemented or
modified pursuant to the terms hereof and thereof.
"Subsidiary" means any corporation of which at least a majority of
the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by Borrower or one or
more of the Subsidiaries or by Borrower and one or more of the
Subsidiaries.
"Subsidiary Guarantors" means the Companies guaranteeing the
obligations of Borrower under the Senior Notes.
"Type" means any type of Loan (i.e., Alternate Base Rate Loan or
Eurodollar Loan).
"UCC" means the Uniform Commercial Code as in effect in the State
of Texas.
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "hereof,"
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"herein," and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all Article and
Section references pertain to this Agreement. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. Terms
used herein that are defined in the UCC, unless otherwise defined herein, shall
have the meanings specified in the UCC.
ARTICLE II
Revolving Credit Loans
Section 2.1 Revolving Credit Commitments. Subject to the
terms and conditions of this Agreement, each Bank severally agrees to make one
or more Revolving Credit Loans to Borrower from time to time from the date
hereof to and including the Revolving Credit Termination Date in an aggregate
principal amount at any time outstanding up to but not exceeding the amount of
such Bank's Revolving Credit Commitment as then in effect, provided that the
aggregate amount of all Revolving Credit Loans at any time outstanding shall
not exceed the aggregate amount of the Revolving Credit Commitments minus the
outstanding Letter of Credit Liabilities. Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, Borrower may
borrow, repay, and reborrow hereunder the amount of the Revolving Credit
Commitments by means of Alternate Base Rate Loans and Eurodollar Loans and,
until the Revolving Credit Termination Date, Borrower may Convert Loans of one
Type into Loans of another Type. Loans of each Type made by each Bank shall be
made and maintained at such Bank's Applicable Lending Office for Loans of such
Type.
Section 2.2 Revolving Credit Notes. The obligation of
Borrower to repay each Bank for Revolving Credit Loans made by such Bank and
interest thereon shall be evidenced by a Revolving Credit Note executed by
Borrower, payable to the order of such Bank, in the principal amount of such
Bank's Revolving Credit Commitment, and dated the date hereof or such later
date as may be required with respect to transactions contemplated by Section
14.7.
Section 2.3 Repayment of Revolving Credit Loans. Borrower
shall repay the unpaid principal amount of all Revolving Credit Loans on the
Revolving Credit Termination Date.
Section 2.4 Interest. The unpaid principal amount of the
Revolving Credit Loans shall bear interest at a varying rate per annum equal
from day to day to the lesser of (a) the Maximum Rate, or (b) the Applicable
Rate. If at any time the Applicable Rate for any Revolving Credit Loan shall
exceed the Maximum Rate, thereby causing the interest accruing on such
Revolving Credit Loan to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate for such Revolving Credit Loan shall not
reduce the rate of interest on such Revolving Credit Loan below the Maximum
Rate until the aggregate amount of interest accrued on such Revolving Credit
Loan equals the aggregate amount of interest which would have accrued on such
Revolving Credit Loan if the Applicable Rate had at all times been in effect.
Accrued and unpaid interest on the Revolving Credit Loans shall be due and
payable as follows:
(i) in the case of Alternate Base Rate Loans, on each
Quarterly Payment Date;
(ii) in the case of each Eurodollar Loan, on the last day of
the Interest Period with respect thereto and in the case of an
Interest Period with a duration greater than three months, on the last
day of each third month during such Interest Period;
(iii) upon the payment or prepayment of any Revolving Credit
Loan or the
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Conversion of any Loan to a Loan of another Type (but only on the
principal amount so paid, prepaid, or Converted); and
(iv) on the Revolving Credit Termination Date.
Notwithstanding the foregoing, any outstanding principal of any Revolving
Credit Loan and (to the fullest extent permitted by law) any other amount
payable by Borrower under this Agreement or any other Loan Document that is not
paid in full when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest at the Default Rate for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time
on demand.
Section 2.5 Use of Proceeds. The proceeds of Revolving Credit
Loans shall be used by Borrower for general corporate purposes, including
support of working capital and issuance of Letters of Credit for all
Subsidiaries but excluding the financing of acquisitions of the assets or stock
of any other Person.
Section 2.6 Commitment Fee. Borrower agrees to pay to the
Agent for the account of each Bank a nonrefundable commitment fee on the daily
average unused amount of such Bank's Revolving Credit Commitment for the period
from and including the date of this Agreement to and including the Revolving
Credit Termination Date, at the Applicable Commitment Fee Rate based on a 360
day year and the actual number of days elapsed. For the purposes of
calculating the commitment fee hereunder, the Revolving Credit Commitment shall
be deemed utilized by the amount of all outstanding Revolving Credit Loans and
Letter of Credit Liabilities. Accrued commitment fee shall be payable in
arrears on each Quarterly Payment Date and on the Revolving Credit Termination
Date.
Section 2.7 Reduction or Termination of Revolving Credit
Commitments. Subject to the terms of Section 5.4 regarding prepayments,
Borrower shall have the right at any time and from time to time to terminate in
whole or reduce in part the unused portion of the Revolving Credit Commitments
upon at least five Business Days' prior notice (which notice shall be
irrevocable) to the Agent specifying the effective date thereof, whether a
termination or reduction is being made, and the amount of any partial
reduction, provided, however, the aggregate Revolving Credit Commitments shall
never be reduced below an amount equal to the outstanding Letter of Credit
Liabilities. Each partial reduction shall be in the amount of $1,000,000 or an
integral multiple thereof and Borrower shall simultaneously prepay the amount
by which the unpaid principal amount of the Revolving Credit Loans plus the
outstanding Letter of Credit Liabilities exceeds the Revolving Credit
Commitments (after giving effect to such notice) plus accrued and unpaid
interest on the principal amount so prepaid. The Revolving Credit Commitments
may not be reinstated after they have been terminated or reduced.
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ARTICLE III
Letters of Credit
Section 3.1 Letters of Credit. Subject to the terms and
conditions of this Agreement, the Issuing Banks agree to issue one or more
Letters of Credit for the account of Borrower from time to time from the date
hereof to and including the Revolving Credit Termination Date; provided,
however, that the outstanding Letter of Credit Liabilities shall not at any
time exceed the lesser of (1) $2,000,000, or (2) an amount equal to the
aggregate amount of the Revolving Credit Commitments minus the sum of the
outstanding Revolving Credit Loans and provided further, that all Existing
Letters of Credit shall be deemed to be issued under this Agreement and shall,
for purposes of Section 3.2 be deemed issued on the Closing Date. Each Letter
of Credit shall have an expiration date prior to the Revolving Credit
Termination Date, shall be payable in Dollars must be satisfactory in form and
substance to the applicable Issuing Bank, and shall be issued pursuant to such
documents and instruments (including, without limitation, such Issuing Bank's
standard application for issuance of letters of credit as then in effect [each
an "L/C Application"]) as such Issuing Bank may require (collectively, the "L/C
Documents"). No Letter of Credit shall require any payment by the Issuing Bank
to the beneficiary thereunder pursuant to a drawing prior to the third Business
Day following presentment of a draft and any related documents to the Issuing
Bank.
Section 3.2 Participation by Banks. By the issuance of any
Letter of Credit and without any further action on the part of the applicable
Issuing Bank or any of the Banks in respect thereof, each Issuing Bank hereby
grants to each Bank and each Bank hereby agrees to acquire from each Issuing
Bank a participation in each such Letter of Credit and the related Letter of
Credit Liabilities, effective upon the issuance thereof without recourse or
warranty, except as to the amount of any draws made on any Letter of Credit,
equal to such Bank's pro rata part (based on the Revolving Credit Commitments)
of such Letter of Credit and Letter of Credit Liabilities. Each Issuing Bank
shall provide a copy of each Letter of Credit to each other Bank promptly after
issuance. This agreement to grant and acquire participations is an agreement
between each Issuing Bank and the Banks, and neither Borrower nor any
beneficiary of a Letter of Credit shall be entitled to rely thereon. Borrower
agrees that each Bank purchasing a participation from any Issuing Bank pursuant
to this Section 3.2 may exercise all its rights to payment against Borrower
including the right of setoff, with respect to such participation as fully as
if such Bank were the direct creditor of Borrower in the amount of such
participation.
Section 3.3 Procedure for Issuing Letters of Credit. Each
Letter of Credit shall be issued on at least three Business Days prior notice
from the Borrower to the applicable Issuing Bank (with a copy to the Agent) by
means of a Letter of Credit Request Form describing the transaction proposed to
be supported thereby and specifying the information required therein. Such
Issuing Bank shall notify each Bank of the contents of each such notice on the
day such notice is received by such Issuing Bank if received by 11:00 a.m.
Houston, Texas time on a Business Day and otherwise on the next succeeding
Business Day. Upon fulfillment of the applicable conditions precedent
contained in Article VII, such Issuing Bank shall make the applicable Letter of
Credit available to Borrower or, if so requested by Borrower, to the
beneficiary of the Letter of Credit.
Section 3.4 Reimbursements; Payments Constitute Revolving
Credit Loans. Each payment by an Issuing Bank pursuant to a drawing under a
Letter of Credit shall constitute and be deemed an Alternate Base Rate Loan by
each Bank to Borrower under such Bank's Revolving Credit Note and this
Agreement as of the day and time such payment is made by such Issuing Bank and
in the amount of such Bank's pro rata share of such payment; provided, however,
if the applicable conditions precedent contained in Section 7.2 are not
satisfied on the date such payment
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 17
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is made, Borrower shall pay to the Agent for the account of the Issuing Bank,
prior to 11:00 a.m. Houston, Texas time on the Business Day immediately
following the date such payment is made by the Issuing Bank, the amount of such
payment, together with interest thereon at the Alternate Base Rate plus the
Applicable Margin from the date such payment is made by the Issuing Bank. If
Borrower fails to reimburse the Issuing Bank for such drawing prior to 11:00
a.m. Houston, Texas time on the Business Day following the date such payment is
made by the Issuing Bank, such amount shall bear interest at the Default Rate
for the period from and including the due date thereof to but excluding the
date the same is paid in full. Promptly on the Business Day immediately
following the date each payment is made by an Issuing Bank pursuant to a
drawing under a Letter of Credit and after receipt of notice from the Issuing
Bank of Borrower's failure to reimburse the Issuing Bank for such payment and
the amount of such payment, each Bank will make available to the Agent for the
account of the Issuing Bank at the Principal Office in immediately available
funds, such Bank's pro rata share of such payment.
Section 3.5 Letter of Credit Fee. Borrower shall pay to the
Agent for the account of the Banks (to be shared ratably) a nonrefundable
letter of credit fee payable on the date each Letter of Credit is issued,
renewed or extended in an amount equal to the greater of (i) a percentage per
annum equal from day to day to the Applicable Margin then in effect for
Eurodollar Loans multiplied by the face amount of such Letter of Credit, for
the period during which such Letter of Credit will remain outstanding, based on
a 360 day year and the actual number of days elapsed, or (ii) $500.00. Such
letter of credit fee shall be payable upon the issuance of each such Letter of
Credit, as a condition to such issuance. A nonrefundable fee in the amount of
one-eighth of one percent (1/8%) per annum of the average daily face amount of
such Letter of Credit shall be payable by Borrower to the applicable Issuing
Bank for its own account. In addition to the foregoing fees, but without
duplication, Borrower shall pay or reimburse the applicable Issuing Bank for
such normal and customary costs and expenses as are incurred or charged by such
Issuing Bank in issuing, effecting payment under, amending or otherwise
administering any Letter of Credit.
Section 3.6 Obligations Absolute. The obligations of the
Borrower under this Agreement and the other Loan Documents (including without
limitation the obligation of the Borrower to reimburse the applicable Issuing
Bank for draws under any Letter of Credit) shall be absolute, unconditional,
and irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement and the other Loan Documents under all circumstances
whatsoever, including without limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit
or any other Loan Document;
(b) The existence of any claim, set-off, counterclaim, defense or
other rights which Borrower, any Obligated Party, or any other Person
may have at any time against any beneficiary of any Letter of Credit,
the Issuing Bank, or any other Person, whether in connection with this
Agreement or any other Loan Document or any unrelated transaction;
(c) Any statement, draft, or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(d) Payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or other document which does not comply with
the terms of such Letter of Credit; or
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(e) Any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 3.7 Limitation of Liability. Borrower assumes all
risks of the acts or omissions of any beneficiary of any Letter of Credit with
respect to its use of such Letter of Credit. Neither the Issuing Bank, the
Agent, any Bank nor any of their officers or directors shall have any
responsibility or liability to Borrower or any other Person for: (a) the
failure of any draft to bear any reference or adequate reference to any Letter
of Credit, or the failure of any documents to accompany any draft at
negotiation, or the failure of any Person to surrender or to take up any Letter
of Credit or to send documents apart from drafts as required by the terms of
any Letter of Credit, or the failure of any Person to note the amount of any
instrument on any Letter of Credit, each of which requirements, if contained in
any Letter of Credit itself, it is agreed may be waived by the Issuing Bank,
(b) errors, omissions, interruptions, or delays in transmission or delivery of
any messages, (c) the validity, sufficiency, or genuineness of any draft or
other document, or any endorsement(s) thereon, even if any such draft, document
or endorsement should in fact prove to be in any and all respects invalid,
insufficient, fraudulent, or forged or any statement therein is untrue or
inaccurate in any respect, (d) the payment by the Issuing Bank to the
beneficiary of any Letter of Credit against presentation of any draft or other
document that does not comply with the terms of the Letter of Credit, or (e)
any other circumstance whatsoever in making or failing to make any payment
under a Letter of Credit. The Issuing Bank may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
Section 3.8 Letter of Credit Documents. Certain additional
provisions regarding the obligations, liabilities, rights, remedies and
agreements of Borrower and the Issuing Bank relative to the Letters of Credit
shall be set forth in the L/C Documents. To the extent the terms of this
Agreement conflict with any L/C Documents, this Agreement shall control.
ARTICLE IV
Borrowing Procedure; Payments
Section 4.1 Borrowing Procedure. The Borrower shall give the
Agent notice of each requested Loan by means of a Loan Request Form containing
the information therein required on the requested date of each Alternate Base
Rate Loan and at least three Business Days before the requested date of each
Eurodollar Loan. The Agent at its option may accept telephonic requests for
Loans, provided that such acceptance shall not constitute a waiver of the
Agent's right to delivery of a Loan Request Form in connection with subsequent
Loans. Any telephonic request for a Loan by the Borrower shall be promptly
confirmed by submission of a properly completed Loan Request Form to the Agent.
Each Revolving Credit Loan shall be in a minimum principal amount of $100,000
or an integral multiple thereof. The aggregate principal amount of Eurodollar
Loans having the same Interest Period shall be at least equal to $1,000,000.
The Agent shall promptly notify each Bank of the contents of each such notice
in writing. Not later than 12:00 Noon Houston, Texas time on the date
specified for each Loan hereunder, each Bank will make available to the Agent
at the Principal Office in immediately available funds, for the account of the
Borrower, its pro rata share of each Loan. After the Agent's receipt of such
funds and subject to the other terms and conditions of this Agreement, the
Agent will make each Loan available to the Borrower by depositing the same, in
immediately available funds, in an account of Borrower (designated by Borrower)
maintained with the Agent at the Principal Office. All notices under this
Section shall be irrevocable and unless otherwise provided, shall be given not
later than 11:00 A.M. Houston, Texas, time on the day which is not less than
the number of Business Days specified above for such notice.
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Section 4.2 Conversions and Continuations. The Borrower shall
have the right from time to time to Convert all or part of a Loan of one Type
into a Loan of another Type or to Continue Eurodollar Loans as Eurodollar Loans
by giving the Agent written notice at least three Business Days before
Conversion or Continuation by means of a Notice of Conversion or Continuation
containing the information required therein; provided that (i) Eurodollar Loans
may only be Converted on the last day of the Interest Period, and (ii) except
for Conversions into Alternate Base Rate Loans, no Conversions shall be made
while a Default has occurred and is continuing. The Agent shall promptly
notify each Bank of the contents of each such notice in writing. All notices
under this Section shall be irrevocable and shall be given not later than 11:00
A.M. Houston, Texas time on the day which is not less than the number of
Business Days specified above for such notice. If the Borrower shall fail to
give the Agent the notice as specified above for Continuation or Conversion of
a Eurodollar Loan prior to the end of the Interest Period with respect thereto,
such Eurodollar Loan shall be Converted automatically into an Alternate Base
Rate Loan on the last day of the then current Interest Period for such
Eurodollar Loan.
Section 4.3 Method of Payment. All payments of principal,
interest, and other amounts to be made by the Borrower under this Agreement and
the other Loan Documents shall be made to the Agent at the Principal Office for
the account of each Bank's Applicable Lending Office in Dollars and in
immediately available funds, without setoff, deduction, or counterclaim, not
later than 11:00 A.M., Houston, Texas time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Borrower shall,
at the time of making each such payment, specify to the Agent the sums payable
by Borrower under this Agreement and the other Loan Documents to which such
payment is to be applied (and in the event that Borrower fails to so specify,
or if an Event of Default has occurred and is continuing, the Agent may apply
such payment to the Obligations in such order and manner as it may elect in its
sole discretion, subject to Section 4.5 hereof). Each payment received by the
Agent under this Agreement or any other Loan Document for the account of a Bank
shall be paid promptly to such Bank, in immediately available funds, for the
account of such Bank's Applicable Lending Office. Whenever any payment under
this Agreement or any other Loan Document shall be stated to be due on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest and commitment fee, as the case may be.
Section 4.4 Voluntary Prepayment. The Borrower may, with same
day notice in the case of Alternate Base Rate Loans and upon at least three
Business Days' prior notice to the Agent in the case of Eurodollar Loans,
prepay the Loans in whole at any time or from time to time in part without
premium or penalty (except as set forth in Section 5.5) but with accrued
interest to the date of prepayment on the amount so prepaid, provided that (a)
Eurodollar Loans may be prepaid only on the last day of the Interest Period for
such Loans, and (b) each partial prepayment shall be in the principal amount of
$500,000 or an integral multiple thereof. Otherwise, the Borrower shall pay to
the Agent on demand for the account of the Banks, any loss or expense that the
Banks incur because of such prepayment as set forth in Section 5.5. All
notices under this Section shall be irrevocable and shall be given not later
than 11:00 A.M. Houston, Texas, time on the day which is not less than the
number of Business Days specified above for such notice.
Section 4.5 Pro Rata Treatment. Except to the extent
otherwise provided herein: (a) each Loan shall be made by the Banks under
Section 2.1 or deemed made by the Banks under Section 3.4, each payment of
commitment fee under Sections 2.6 and letter of credit fee under Section 3.5
shall be made for the account of the Banks, and each termination or reduction
of the Revolving Credit Commitments under Section 2.7 shall be applied to the
Revolving Credit
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 20
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Commitments of the Banks, pro rata according to the respective unused Revolving
Credit Commitments and each Letter of Credit shall be deemed participated in by
the Banks, pro rata according to the amounts of their respective Revolving
Credit Commitments; (b) the making, Conversion, and Continuation of Loans of a
particular Type (other than Conversions provided for by Section 5.4) shall be
made pro rata among the Banks holding Loans of such Type according to the
amounts of their respective Commitments; (c) each payment and prepayment of
principal of or interest on Loans by the Borrowers of a particular Type shall
be made to the Agent for the account of the Banks holding Loans of such Type
pro rata in accordance with the respective unpaid principal amounts of such
Loans held by such Banks; and (d) Interest Periods for Loans of a particular
Type shall be allocated among the Banks holding Loans of such Type pro rata
according to the respective principal amounts held by such Banks.
Section 4.6 Non-Receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Bank or Borrower (the "Payor") prior to the
date on which such Bank is to make payment to the Agent of the proceeds of a
Loan to be made by it hereunder or Borrower is to make a payment to the Agent
for the account of one or more of the Banks, as the case may be (such payment
being herein called the "Required Payment"), which notice shall be effective
upon receipt, that the Payor does not intend to make the Required Payment to
the Agent, the Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Agent, the recipient of
such payment shall, on demand, pay to the Agent the amount made available to it
together with interest thereon in respect of the period commencing on the date
such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to the Alternate Base Rate plus
the Applicable Margin (or, if the recipient of such payment is a Bank or an
Issuing Bank, the Federal Funds Rate) for such period, but in no event in
excess of the maximum nonusurious rate permitted by applicable law.
Section 4.7 Withholding Taxes.
(a) Borrower agrees to pay to each Bank that is not a U.S. Person
such additional amounts as are necessary in order that the net payment
of any amount due to such non-U.S. Person hereunder after deduction
for or withholding in respect of any U.S. taxes imposed with respect
to such payment (or in lieu thereof, payment of such U.S. taxes by
such non-U.S. Person), will not be less than the amount stated herein
to be then due and payable, provided that the foregoing obligation to
pay such additional amounts shall not apply:
(i) to any payment to any Bank hereunder unless such Bank is,
on the date hereof (or on the date it becomes a Bank hereunder as
provided in Section 14.8 hereof) and on the date of any change in
the Applicable Lending Office of such Bank, either entitled to
submit a Form 1001 (relating to such Bank and entitling it to a
complete exemption from withholding on all interest to be received
by it hereunder in respect of the Loans) or Form 4224 (relating to
all interest to be received by such Bank hereunder in respect of
the Loans),
(ii) to any U.S. taxes imposed solely by reason of the
failure of such non-U.S. Person (or, if such non-U.S. Person is
not the beneficial owner of the relevant Loan, such beneficial
owner) to comply with applicable certification, information,
documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United
States of America of such non-U.S. Person (or beneficial owner, as
the case may be) if such compliance
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 21
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is required by statute or regulation of the United States of
America as a precondition to relief or exemption from such U.S.
taxes.
For the purposes of this Section 5.7(a), (A) "Form 1001" shall mean
Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the
Department of the Treasury of the United States of America, and (B)
"Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade Business in
the United States) of the Department of the Treasury of the United
States of America (or in relation to either such Form such successor
and related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a claim
to which such Form relates).
(b) Within 30 days after paying any amount to the Agent or any
Bank from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit
such deduction or withholding to any relevant taxing or other
authority, the Borrower shall deliver to the Agent for delivery to
such non-U.S. Person evidence satisfactory to such Person of such
deduction, withholding or payment (as the case may be).
Section 4.8 Withholding Tax Exemption. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Agent two duly completed
copies of Form 1001 or 4224, certifying in either case that such Bank is
entitled to receive payments from the Borrower under any Loan Document without
deduction or withholding of any United States federal income taxes. Each Bank
which so delivers a Form 1001 or 4224 further undertakes to deliver to the
Borrower and the Agent two additional copies of such form (or a successor form)
on or before the date such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent, in each case certifying that
such Bank is entitled to receive payments from the Borrower under any Loan
Document without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank advises the Borrower and the Agent that it is not
capable of receiving such payments without any deduction or withholding of
United States federal income tax.
Section 4.9 Computation of Interest. Interest on Eurodollar
Loans and all other amounts payable by the Borrowers hereunder (other than
Alternate Base Rate Loans) shall be computed on the basis of a year of 360 days
and the actual number of days elapsed (including the first day but excluding
the last day) unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest on Alternate Base Rate Loans shall be computed on
the basis of a year of 365 or 366 days, as the case may be.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 22
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ARTICLE V
Yield Protection and Illegality
Section 5.1 Additional Costs.
(a) Borrower shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate
it for any costs incurred by such Bank which such Bank determines are
attributable to Borrower and its making or maintaining of any
Eurodollar Loans hereunder or its obligation to make any of such Loans
hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change
which:
(i) changes the basis of taxation of any amounts payable
to such Bank under this Agreement or its Note in respect of any of
such Loans (other than taxes imposed on the overall net income of
such Bank or its Applicable Lending Office for any Eurodollar
Loans by the jurisdiction in which such Bank has its principal
office or such Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating to
any extensions of credit or other assets of, or any deposits with
or other liabilities or commitments of, such Bank (including any
Eurodollar Loans or any deposits referred to in the definition of
"Eurodollar Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement
or the Notes or any of such extensions of credit or liabilities or
commitments.
Each Bank will notify the Borrower of any event occurring after the
date of this Agreement which will entitle such Bank to compensation
pursuant to this Section 5.1(a) as promptly as practicable after it
obtains knowledge thereof (but in any event within 360 days after such
event) and determines to request such compensation, and will designate
a different Applicable Lending Office for the Loans affected by such
event if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole opinion of such
Bank, violate any law, rule, or regulation or be in any way
disadvantageous to such Bank, provided that such Bank shall have no
obligation to so designate an Applicable Lending Office located
outside the United States of America. Each Bank will furnish the
Borrower with a certificate (which absent manifest error, shall be
conclusive) setting forth the basis and the amount of each request of
such Bank for compensation under this Section 5.1(a). If any Bank
requests compensation from the Borrower under this Section 5.1(a), the
Borrower may, by notice to such Bank (with a copy to the Agent)
suspend the obligation of such Bank to make or Continue making, or
Convert Loans into, Loans of the Type with respect to which such
compensation is requested until the Regulatory Change giving rise to
such request ceases to be in effect (in which case the provisions of
Section 5.4 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of
this Section 5.1, in the event that, by reason of any Regulatory
Change that becomes effective after date hereof, any Bank either (i)
incurs Additional Costs based on or measured by the excess above a
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 23
<PAGE> 28
specified level of the amount of a category of deposits or other
liabilities of such Bank which includes deposits by reference to which
the interest rate on Eurodollar Loans is determined as provided in
this Agreement or a category of extensions of credit or other assets
of such Bank which includes Eurodollar Loans or (ii) becomes subject
to restrictions on the amount of such a category of liabilities or
assets which it may hold, then, if such Bank so elects by notice to
the Borrower (with a copy to the Agent), the obligation of such Bank
to make or Continue making, or Convert Loans into, Eurodollar Loans
hereunder shall be suspended until such Regulatory Change ceases to be
in effect (in which case the provisions of Section 5.4 hereof shall be
applicable).
(c) Determinations and allocations by any Bank for purposes of
this Section 5.1 of the effect of any Regulatory Change on its costs
of maintaining its obligations to make Eurodollar Loans or of making
or maintaining Eurodollar Loans or on amounts receivable by it in
respect of Eurodollar Loans, and of the additional amounts required to
compensate such Bank in respect of any Additional Costs, shall be
conclusive, provided that such determinations and allocations are made
on a reasonable basis.
Section 5.2 Limitation on Types of Loans. Anything herein to
the contrary notwithstanding, if with respect to any Eurodollar Loans for any
Interest Period therefor:
(a) The Agent determines (which determination shall be conclusive)
that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Rate" in Section 1.1 hereof are
not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for
Eurodollar Loans as provided in this Agreement; or
(b) Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in Section 1.1
hereof on the basis of which the rate of interest for such Loans for
such Interest Period is to be determined do not accurately reflect the
cost to the Banks of making or maintaining Eurodollar Loans for such
Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant amounts or periods, and so long as such condition remains in effect,
the Banks shall be under no obligation to make additional Eurodollar Loans or
to Convert Alternate Base Rate Loans into Eurodollar Loans and the Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Eurodollar Loans or Convert
such Eurodollar Loans into Alternate Base Rate Loans in accordance with the
terms of this Agreement.
Section 5.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to (a) honor its obligation to make Eurodollar Loans hereunder
or (b) maintain Eurodollar Loans hereunder, then such Bank shall promptly
notify the Borrower (with a copy to the Agent) thereof and such Bank's
obligation to make or maintain Eurodollar Loans and to Convert Alternate Base
Rate Loans into Eurodollar Loans hereunder shall be suspended until such time
as such Bank may again make and maintain Eurodollar Loans (in which case the
provisions of Section 5.4 hereof shall be applicable).
Section 5.4 Treatment of Eurodollar Loans. If the Eurodollar Loans of
any Bank are to be Converted pursuant to Section 5.1 or 5.3 hereof, such Bank's
Eurodollar Loans shall be automatically Converted into Alternate Base Rate
Loans on the last day(s) of the then current Interest Period(s) for the
Eurodollar Loans (or, in the case of a Conversion required by Section 5.1(b) or
5.3 hereof, on such earlier date as such Bank may specify to the Borrowers with
a
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 24
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copy to the Agent) and, unless and until such Bank gives notice as provided
below that the circumstances specified in Section 5.1 or 5.3 hereof which gave
rise to such Conversion no longer exist:
(a) To the extent that such Bank's Eurodollar Loans have been so
Converted, all payments and prepayments of principal which would
otherwise be applied to such Bank's Eurodollar Loans shall be applied
instead to its Alternate Base Rate Loans;
(b) All Loans which would otherwise be made or Continued by such
Bank as Eurodollar Loans shall be made as or Converted into Alternate
Base Rate Loans and all Loans of such Bank which would otherwise be
Converted into Eurodollar Loans shall be Converted instead into (or
shall remain as) Alternate Base Rate Loans; and
If such Bank gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 5.1 or 5.3 hereof which gave rise to the
Conversion of such Bank's Eurodollar Loans pursuant to this Section 5.4 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans are outstanding, such Bank's
Alternate Base Rate Loans shall be automatically Converted, on the first day(s)
of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans
to the extent necessary so that, after giving effect thereto, all Loans held by
the Banks holding Eurodollar Loans and by such Bank are held pro rata (as to
principal amounts, Types, and Interest Periods) in accordance with their
respective Commitments.
Section 5.5 Compensation. The Borrower shall pay to the Agent
for the account of each Bank, upon the request of such Bank through the Agent,
such amount or amounts as shall be sufficient (in the reasonable opinion of
such Bank) to compensate it for any loss, cost, or expense incurred by it as a
result of:
(a) Any payment, prepayment or Conversion of a Eurodollar Loan for
any reason (including, without limitation, the acceleration of the
outstanding Loans pursuant to Section 12.2) on a date other than the
last day of an Interest Period for such Loan; or
(b) Any failure by the Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in
Article VII to be satisfied) to borrow, Convert, or prepay a
Eurodollar Loan on the date for such borrowing, Conversion, or
prepayment, specified in the relevant notice of borrowing, prepayment,
or Conversion under this Agreement.
Section 5.6 Capital Adequacy. If after the date hereof, any
Bank shall have determined that the adoption or implementation of any
applicable law, rule, or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
central bank or other Governmental Authority charged with the interpretation or
administration thereof, or compliance by such Bank (or its parent) with any
guideline, request, or directive regarding capital adequacy (whether or not
having the force of law) of any central bank or other Governmental Authority,
has or would have the effect of reducing the rate of return on such Bank's (or
its parent's) capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which such Bank (or its
parent) could have achieved but for such adoption, implementation, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within ten (10) Business Days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its parent) for such reduction;
provided, however, the Borrower shall not
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 25
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be required to compensate any such Bank for any such reduction for any period
prior to the date upon which such Bank gives notice to the Borrower that an
event or change resulting in a reduced rate of return on the Bank's capital has
occurred. A certificate of such Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive, provided that the determination thereof is made on a
reasonable basis. In determining such amount or amounts, such Bank may use any
reasonable averaging and attribution methods.
Section 5.7 Additional Costs in Respect of Letters of Credit.
If as a result of any Regulatory Change there shall be imposed, modified, or
deemed applicable any tax, reserve, special deposit, or similar requirement
against or with respect to or measured by reference to Letters of Credit issued
or to be issued hereunder or the commitments to issue or participate in Letters
of Credit hereunder, and the result shall be to increase the cost to an Issuing
Bank or any Bank of issuing, maintaining or participating in any Letter of
Credit or its commitment to issue or participate in Letters of Credit hereunder
or reduce any amount receivable by an Issuing Bank or any Bank hereunder in
respect of any Letter of Credit (which increase in cost, or reduction in amount
receivable, shall be the result of the Issuing Bank's or such Bank's reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Issuing Bank or such Bank, the Borrower
agrees to pay such Issuing Bank or such Bank, from time to time as specified by
such Issuing Bank or such Bank, such additional amounts as shall be sufficient
to compensate such Issuing Bank or such Bank for such increased costs or
reductions in amount. A statement delivered to Borrower within 360 days after
the occurrence of any event entitling it to compensation pursuant to this
Section 5.7, as to such increased costs or reductions in amount incurred by
such Issuing Bank or such Bank, submitted by such Issuing Bank or such Bank to
the Borrower, shall be conclusive as to the amount thereof, provided that the
determination thereof is made on a reasonable basis.
ARTICLE VI
Security
Section 6.1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver or cause
to be executed and delivered the documents described below covering the
property and collateral described in this Section 6.1 (which, together with any
other property and collateral which may now or hereafter secure the Obligations
or any part thereof, is sometimes herein called the "Collateral"):
(a) Each of the Companies shall grant to the Agent for the benefit
of the Agent, the Banks and the Issuing Banks a first priority
security interest in all of its accounts, accounts receivable,
investment property, equipment, machinery, fixtures, inventory,
chattel paper, documents, instruments, and general intangibles,
whether now owned or hereafter acquired, and all products and proceeds
thereof, pursuant to the Security Agreements, provided that such
security interest may be subject in priority to certain Permitted
Liens. The Agent may file and cause to be filed such documents and
instruments, including without limitation, Uniform Commercial Code
financing statements, as the Agent, in its sole discretion, deems
necessary or desirable to evidence and perfect its Liens and security
interests in the Collateral described in the Security Agreements.
(b) The Borrowers shall cause each Person that becomes a Company
after the date hereof to grant to the Agent for the benefit of the
Agent, the Banks and the Issuing Banks a first priority security
interest in all of its accounts, accounts receivable, investment
property, equipment, machinery, fixtures, inventory, chattel paper,
documents, instruments,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 26
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and general intangibles, whether now owned or hereafter acquired, and
all products and proceeds thereof, pursuant to a Security Agreement,
provided that such security interest may be subject in priority to
certain Permitted Liens. The Agent may file and cause to be filed
such documents and instruments, including without limitation, Uniform
Commercial Code financing statements, as the Agent, in its sole
discretion, deems necessary or desirable to evidence and perfect its
Liens and security interests in the Collateral described in each such
Security Agreement.
(c) Borrower shall pledge and grant to the Agent for the benefit
of the Agent, the Banks and the Issuing Banks a continuing first
priority security interest in one hundred percent (100%) of the issued
and outstanding capital stock of each of its Subsidiaries, whether now
existing or hereafter formed or acquired, and all products and
proceeds thereof, pursuant to the Pledge Agreement. The Agent shall
retain possession of the certificates evidencing the capital stock of
the Subsidiaries, together with stock powers duly executed in blank by
Borrower.
(d) A life insurance policy issued on the life of S. Wayne Bazzle
in the amount of $2,000,000.00 and a life insurance policy issued on
the life of Cheryl C. Bazzle in the amount of $1,500,000 have been and
shall continue to be collaterally assigned to the Agent for the
benefit of the Agent, the Issuing Banks and the Banks pursuant to
assignments of life insurance policy as collateral, each in form and
substance satisfactory to the Agent (the "Assignments of Life
Insurance").
(e) Each of the Companies shall execute and cause to be executed
such further documents and instruments, including without limitation,
Uniform Commercial Code financing statements, as the Agent, in its
sole discretion, deems necessary or desirable to evidence and perfect
its liens and security interests in the Collateral.
Section 6.2 Lockbox Accounts. Borrower shall (and shall cause
each other presently existing Company and each Company formed or acquired in
the future to) (a) establish and maintain one or more lockboxes and/or accounts
(the "Lockbox Accounts") with the Agent (the maintenance of which shall be
subject to such rules and regulations as the Agent shall from time to time
specify), (b) grant security interests to the Agent for the benefit of the
Agent, the Issuing Banks and the Banks in each such Lockbox Account and the
related deposit accounts by executing one or more, as appropriate, assignments
in substantially the form of Exhibit "G" hereto, and (c) promptly notify all of
their respective accounts receivable obligors hereafter to direct all payments
on such accounts receivable directly into one of the Lockbox Accounts. At any
time while a Default does not exist and will not occur as a result of any
withdrawal, then (and at all other times to the extent required by applicable
law), the Companies may have full access to their respective Lockbox Accounts
and may withdraw from their respective Lockbox Accounts in the amounts then
remaining in excess of the minimum deposit required to keep such account
active. While an Event of Default exists, the Agent may, without prior notice
or demand, take and apply against the Obligations for the pro rata benefit of
the Banks any and all funds then or thereafter on deposit in any one or more
Lockbox Accounts.
Section 6.3 Guaranties. Borrower shall cause (a) the
presently existing Companies jointly and severally (without limit) to guarantee
full payment and performance of the Obligations, and (b) each Company formed or
acquired in the future to execute and deliver to the Agent on demand a
guarantee of the full payment and performance of the Obligations, pursuant to
the respective Guaranties.
Section 6.4 Setoff. If an Event of Default shall have
occurred and is continuing, the
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<PAGE> 32
Agent, Issuing Banks and each Bank are hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being hereby
expressly waived by the Borrower), to set off and apply any and all deposits
(general, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Agent, Issuing Banks or such Bank to or
for the credit or the account of the Borrower (other than trust fund accounts
held by the Borrower for the benefit of non-Affiliates) against any and all of
the obligations of the Borrower now or hereafter existing under this Agreement,
the Notes, or any other Loan Document, irrespective of whether or not the
Agent, the Issuing Banks or such Bank shall have made any demand under this
Agreement, the Notes or any other Loan Document and although such obligations
may be unmatured. As further security for the Obligations, Borrower hereby
grants to the Agent for the benefit of the Agent, the Banks and the Issuing
Banks a security interest in all money, instruments and other property of
Borrower (other than trust fund accounts held by the Borrower for the benefit
of non-Affiliates) now or hereafter held by the Agent. In addition to the
right of setoff and as further security for the Obligations, Borrower hereby
grants to the Agent for the benefit of the Agent, the Banks and the Issuing
Banks a security interest in all deposits (general or special, time or demand,
provisional or final) and other accounts of Borrower (other than trust fund
accounts held by the Borrower for the benefit of non-Affiliates) now or
hereafter on deposit with or held by the Agent and all other sums at any time
credited or owing from the Agent, the Banks or the Issuing Banks to the
Borrower. The rights and remedies of the Agent, Issuing Banks and each Bank
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Agent, the Issuing Banks and the
Banks may have.
ARTICLE VII
Conditions Precedent
Section 7.1 Initial Loans. The obligation of each Bank to make
its initial Loan or of any Issuing Bank to issue the initial Letter of Credit
is subject to the condition precedent that the Agent shall have received on or
before the day of such Loan or issuance all of the following, each dated
(unless otherwise indicated) the date hereof, in form and substance
satisfactory to the Agent:
(a) Resolutions. Resolutions of the Board of Directors of each of
the Companies certified by a Secretary or an Assistant Secretary of
such Company which authorize the execution, delivery, and performance
by such Company of the Loan Documents to which such Company is or is
to be a party;
(b) Incumbency Certificate. A certificate of incumbency of each
of the Companies certified as of the Closing Date by the Secretary or
an Assistant Secretary of such Company certifying the names of the
officers of such Company authorized to sign this Agreement and each of
the other Loan Documents to which such Company is or is to be a party
(including the certificates contemplated herein) together with
specimen signatures of such officers;
(c) Articles or Certificate of Incorporation. The articles or
certificate of incorporation, as applicable, of each of the Companies
certified by the Secretary of State of such Company's jurisdiction of
incorporation as of a current date acceptable to the Agent;
(d) Bylaws. A certificate for each Company certified by the
Secretary or an Assistant Secretary of such Company certifying that
the bylaws of each of the Companies have not been amended or modified
since October 31, 1996 and are still in full force and effect;
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(e) Governmental Certificates. Certificates of the appropriate
government officials of the state of incorporation of each of the
Companies as to the existence and good standing of such Company, each
dated a current date acceptable to the Agent;
(f) Revolving Credit Notes. The Revolving Credit Notes executed
by Borrower;
(g) Security Agreements. The Security Agreements executed by the
respective Companies;
(h) Guaranties. The Guaranties executed by each Guarantor;
(i) Pledge Agreement. The Pledge Agreement executed by Borrower;
(j) Stock Certificates. The original stock certificates
evidencing the stock pledged pursuant to the Pledge Agreement,
together with stock powers duly executed in blank;
(k) Financing Statements. Uniform Commercial Code financing
statements executed by the Companies and covering such Collateral as
the Agent may request;
(l) Assignments of Deposit Accounts. Assignments of deposit
accounts, executed by the appropriate parties in accordance with
Section 6.2;
(m) Senior Note Offering. Evidence satisfactory to the Agent that
the Borrower shall have received at least $76 million in proceeds from
the sale of the Senior Notes and a portion of such proceeds shall have
been utilized by Borrower on the Closing Date to satisfy in full all
obligations, indebtedness and liabilities of the Borrower and
HealthCor (other than the contingent reimbursement obligations in
respect of the Existing Letters of Credit) under the Existing Credit
Agreement;
(n) Senior Note Documents. On or prior to the Closing Date, there
shall have been delivered to the Banks true and correct copies of the
Senior Note Documents and all terms and conditions of the Senior Note
Documents (including, without limitation, maturity, interest rate,
covenants, defaults and remedies) shall be in form and substance
satisfactory to the Agent and Required Banks;
(o) Contribution and Indemnification Agreement. The Contribution
and Indemnification Agreement (herein so called) in substantially the
form of Exhibit "H" hereto, executed by the Companies;
(p) Corporate Structure. The corporate structure of Borrower and
its Subsidiaries shall be satisfactory to the Agent and the Required
Banks;
(q) Material Adverse Change. No material adverse change shall
have occurred since the date of the most recent consolidated financial
statements delivered by Borrower to the Agent, in the financial
condition, business, operations, or prospects of the Borrower or in
its assets, liabilities and properties and there shall be no material
threatened or pending litigation adversely affecting its property;
(r) Insurance Policies. Copies of all insurance policies required
by Section 9.5, together with insurance certificates evidencing such
policies and showing the Agent as an additional insured and loss
payee;
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(s) UCC Searches. The results of Uniform Commercial Code
searches showing all financing statements and other documents or
instruments on file against the Companies in such jurisdictions as the
Agent shall determine;
(t) Existing Credit Agreement. On or prior to the Closing Date,
the commitments under the Existing Credit Agreement shall have been
terminated, all loans thereunder shall have been paid in full,
together with all accrued and unpaid interest thereon, all accrued and
unpaid fees thereunder shall have been paid in full, all letters of
credit issued thereunder shall have been incorporated hereunder as
Letters of Credit, and all other amounts owing to the banks thereunder
shall have been repaid in full, and the Agent shall have received
evidence thereof in form, scope and substance satisfactory to it;
(u) Lien Releases. Executed UCC-3 Termination Statements or
Assignments and other Lien releases that release or assign to the
Agent all Liens held by holders of Funded Debt not constituting
Permitted Debt and all other Liens that do not constitute Permitted
Liens;
(v) Opinion of Counsel. Favorable opinions of in-house legal
counsel to the Companies and outside legal counsel to the Companies,
Akin, Gump, Strauss, Hauer & Feld LLP, which taken together, address
each of the matters set forth in Exhibit "I" hereto, and such other
matters as the Agent may reasonably request;
(w) Fees. Evidence that the Borrower shall have paid to the Agent
and the Banks all fees to the extent then due referred to in the
Agent's Fee Letter;
(x) Attorneys' Fees and Expenses. Evidence that the costs, fees
and expenses (including attorneys' fees) referred to in the Agent's
Fee Letter and in Section 14.1, to the extent incurred, shall have
been paid in full by the Borrower.
Section 7.2 All Loans. The obligation of each Bank to make
any Loan or of any Issuing Bank to issue any Letter of Credit (including the
initial Loan or issuance) is subject to the following additional conditions
precedent:
(a) Request for Loan or Letter of Credit. The Agent or the
Issuing Bank shall have received, in accordance with Section 4.1 or
3.3, as the case may be, a Loan Request Form or Letter of Credit
Request Form, dated the date of such Loan or Letter of Credit,
executed by an authorized officer of the Borrower;
(b) No Default. No Default shall have occurred and be continuing,
or would result from such Loan or Letter of Credit, as the case may
be;
(c) Representations and Warranties. All of the representations
and warranties contained in Article VIII hereof and in the other Loan
Documents shall be true and correct on and as of the date of such Loan
with the same force and effect as if such representations and
warranties had been made on and as of such date; and
(d) Additional Documentation. The Agent shall have received such
additional approvals, opinions, or documents as the Agent or its legal
counsel, Winstead Sechrest & Minick P.C., may reasonably request.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 30
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ARTICLE VIII
Representations and Warranties
To induce the Agent, the Issuing Banks and the Banks to enter into
this Agreement, Borrower represents and warrants to the Agent, the Issuing Bank
and the Banks that:
Section 8.1 Corporate Existence. Each Company (a) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power and authority to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. Borrower has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party. Each Guarantor has the
corporate power and authority to execute, deliver, and perform its obligations
under its Guaranty and the other Loan Documents to which it is or may become a
party.
Section 8.2 Financial Statements. Borrower has delivered to
the Agent audited consolidated financial statements of the Companies as at and
for the fiscal year ended December 31, 1996, and unaudited consolidated and
consolidating financial statements of the Companies for the nine (9)-month
period ended September 30, 1997. Such financial statements have been prepared
in accordance with GAAP (subject to year end adjustments and disclosures in the
case of unaudited interim financial statements), and fairly present in all
material respects, on a consolidated and consolidating basis, the financial
condition of the Companies as of the respective dates indicated therein and the
results of operations for the respective periods indicated therein. None of
the Companies has any material obligations or liabilities (direct, indirect,
contingent or liquidated), liabilities for taxes, unusual forward or long-term
commitments, or unrealized or anticipated losses from any unfavorable
commitments required by GAAP to be reflected therein that are not reflected in
such financial statements. There has been no material adverse change in the
business, condition (financial or otherwise), operations, prospects, or
properties of any of the Companies since the effective date of the most recent
financial statements referred to in this Section.
Section 8.3 Corporate Action; No Breach. The execution,
delivery, and performance by each Company of this Agreement and the other Loan
Documents to which such Company is or may become a party and compliance with
the terms and provisions hereof and thereof have been duly authorized by all
requisite corporate action on the part of such Company and do not and will not
(a) violate or conflict with, or result in a breach of, or require any consent
under (i) the articles of incorporation or bylaws of such Company, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or decree
of any Governmental Authority or arbitrator, which violation or conflict could
have a material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of any Company, the Collateral
taken as a whole, or the ability of the Companies to pay and perform the
Obligations, or (iii) any material agreement or instrument to which such
Company is a party or by which any of them or any of their property is bound or
subject, or (b) constitute a default under any such material agreement or
instrument, or result in the creation or imposition of any Lien (except as
provided in Article VI) upon any of the revenues or assets of such Company.
Section 8.4 Operation of Business. Each Company possesses
all licenses, permits,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 31
<PAGE> 36
franchises, patents, copyrights, trademarks, and tradenames, or rights thereto,
necessary to conduct its business substantially as now conducted and as
presently proposed to be conducted, and no Company is in violation of any valid
rights of others with respect to any of the foregoing, which violation would
have a material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of any Company, the Collateral
taken as a whole, or the abilities of the Companies to pay and perform the
Obligations. Without in any way limiting the foregoing, (a) Borrower is (and
each Company is, except to the extent that it would not have a material adverse
effect on the business, condition [financial or otherwise], operations,
prospects, or properties of such Company) an accredited, licensed, registered,
or certified, as the case may be, healthcare provider with the appropriate
Healthcare Regulators where the nature and extent of its business require, and
(b) each Company has obtained and possesses all requisite licenses and permits
from and has registered with all of the appropriate Governmental Authorities as
necessary for such Company to distribute or dispense drugs or controlled
substances, to the extent such Company does so, including without limitation,
the Drug Enforcement Agency of the United States Department of Justice and the
Texas Department of Public Safety except to the extent that the failure to
obtain or possess any such license would not have a material adverse effect on
the business, condition (financial or otherwise), operations, prospects, or
properties of any Company, the Collateral taken as a whole, or the abilities of
the Companies to pay and perform the Obligations.
Section 8.5 Litigation and Judgments. Except as disclosed on
Schedule 2 hereto, there is no action, suit, investigation, or proceeding
before or by any Governmental Authority or arbitrator pending, or to the
knowledge of Borrower, threatened against or affecting any Company, that would,
if adversely determined, have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of any
Company or the ability of the Companies to pay and perform the Obligations.
There are no outstanding judgments against any Company.
Section 8.6 Rights in Properties; Liens. Each Company has
good and indefeasible title to or valid leasehold interests in its properties
and assets, real and personal, including the properties, assets, and leasehold
interests reflected in the financial statements described in Section 8.2, and
none of the properties, assets, or leasehold interests of any Company is
subject to any Lien, except the Permitted Liens.
Section 8.7 Enforceability. This Agreement constitutes, and
the other Loan Documents, when delivered, shall constitute the legal, valid,
and binding obligations of the respective Companies that are party thereto,
enforceable against the respective Companies in accordance with their
respective terms, except as limited by bankruptcy, insolvency, or other laws of
general application relating to the enforcement of creditors' rights.
Section 8.8 Approvals. No authorization, approval, or consent
of, and no registration with, any Governmental Authority or third party is or
will be necessary for the execution or delivery by the Companies of the
respective Loan Documents to which they are or may become a party or for the
validity or enforceability thereof.
Section 8.9 Debt. The Companies have no Funded Debt, except
as disclosed on Schedule 3 hereto.
Section 8.10 Taxes. Each Company has filed all tax returns
(federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales tax returns, and has paid all of its
liabilities for taxes, assessments, governmental charges, and other levies that
are due and payable, except (i) any such taxes, assessments, levies, or other
charges the amount or validity of which are currently being contested in good
faith by appropriate proceedings
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 32
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and with respect to which adequate reserves in accordance with GAAP have been
established on the books of such Company, and (ii) where failure to pay state
taxes does not and will not have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects or properties of any
Company, the Collateral taken as a whole, or the ability of the Companies to
pay and perform the Obligations. Borrower knows of no pending investigation of
any Company by any taxing authority or of any pending but unassessed tax
liability of any Company.
Section 8.11 Use of Proceeds; Margin Securities. None of the
Companies is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations G, T, U, or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Loan will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying margin stock.
Section 8.12 ERISA. Each Company is in compliance in all
material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. No Company or ERISA Affiliate has completely or partially
withdrawn from a Multiemployer Plan. Each Company and each ERISA Affiliate
have met their minimum funding requirements under ERISA with respect to all of
their Plans, and the present value of all vested benefits under each Plan do
not exceed the fair market value of all Plan assets allocable to such benefits,
as determined on the most recent valuation date of the Plan and in accordance
with ERISA. No Company or ERISA Affiliate has incurred any liability to the
PBGC under ERISA.
Section 8.13 Disclosure. No statement, information, report,
representation, or warranty made by any Company in this Agreement or in any
other Loan Document or furnished to the Agent, any Issuing Bank or any Bank in
connection with this Agreement or any transaction contemplated hereby contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower which has a material adverse effect, or which could
reasonably be expected to have a material adverse effect, on the business,
condition (financial or otherwise), operations, prospects, or properties of any
Company that has not been disclosed in writing to the Agent, the Issuing Banks
and the Banks.
Section 8.14 Subsidiaries. Borrower has no Subsidiaries other
than those listed on Schedule 1 hereto, and Schedule 1 sets forth the
jurisdiction of incorporation of each Subsidiary and the percentage of
Borrower's ownership of the outstanding voting stock of each Subsidiary. All
of the outstanding capital stock of each Subsidiary has been validly issued, is
fully paid, and is nonassessable.
Section 8.15 Agreements. No Company is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction the compliance
with which is reasonably likely to have a material adverse effect on the
business, condition (financial or otherwise), operations, prospects, or
properties of such Company, or the ability of such Company to pay and perform
its obligations under the Loan Documents to which it is a party. No Company is
in default in any respect in the performance, observance, or fulfillment of any
of the obligations, covenants, or conditions contained in any agreement or
instrument material to its business to which it is a party which could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of
such Company.
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Section 8.16 Compliance with Laws; Environmental Liabilities.
No Company is in violation in any material respect of any law, rule,
regulation, order, or decree of any Governmental Authority or arbitrator,
including without limitation any Environmental Laws. No Company is aware of,
nor has any Company received notice of, any conditions or circumstances
associated with the currently or previously owned or leased properties or
operations of any Company that has given or could reasonably be expected to
give rise to any Environmental Liabilities of any Company, and no Lien arising
under any Environmental Law has attached to any property or revenues of any
Company.
Section 8.17 Fraud and Abuse. None of the Companies, and to
Borrower's knowledge, none of the officers, directors, agents, and employees of
any of the respective Companies, have engaged in any activities that are
prohibited under 42 U.S.C. Section 1320a-7b, known as the anti-kickback
statute, or the regulations promulgated thereunder, or related or similar state
or local statutes or regulations (including, but not limited to, Texas Health &
Safety Code Section 161.091), including but not limited to the following: (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment; (c) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another; (d) knowingly and
willfully soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or knowingly and willfully offering or paying such remuneration as an
inducement (a) in return for referring an individual to a Person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by Medicare, Medicaid, or other
government program or (b) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service, or item for which payment may be made in whole or in part by
Medicare, Medicaid, or other government program.
Section 8.18 Self Referral. None of the Companies, and to
Borrower's knowledge none of the officers, directors, agents, and employees of
any of the respective Companies, have engaged in any activities that are
prohibited under 42 U.S.C. Section 1395nn, known as the self-referral or Stark
statute, or the regulations promulgated thereunder, or related or similar state
or local statutes or regulations. The Companies' respective businesses
currently are conducted in a manner that will not violate 42 U.S.C. Section
1395nn as amended and to be effective January 1, 1995.
ARTICLE IX
Positive Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder or any
Issuing Bank has any obligation to issue Letters of Credit hereunder, Borrower
will perform and observe the following positive covenants:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 34
<PAGE> 39
Section 9.1 Reporting Requirements. The Borrower will furnish
to the Agent, the Issuing Banks and each Bank:
(a) Annual Financial Statements. As soon as available, and in any
event within ninety (90) days after the end of each fiscal year of the
Borrower, beginning with the fiscal year ending December 31, 1997, a
copy of the annual audit report of the Companies for such fiscal year
containing, on a consolidated and consolidating basis, balance sheets
and statements of income, retained earnings, and cash flow as at the
end of such fiscal year and for the 12-month period then ended, in
each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and audited and
certified by and accompanied by the unqualified opinion of,
independent certified public accountants of recognized standing
acceptable to the Agent, to the effect that such report has been
prepared in accordance with GAAP and presents fairly in all material
respects the financial conditions and results of operations of the
Companies;
(b) Quarterly and Monthly Financial Statements. As soon as
available, and in any event within forty-five (45) days after the end
of each fiscal quarter and each calendar month, a copy of an unaudited
financial report of the Companies as of the end of such quarter or
month, as the case may be and for the portion of the fiscal year then
ended, containing, on a consolidated and consolidating basis, balance
sheets and statements of income, retained earnings, and cash flow, in
each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail and prepared in accordance with GAAP to fairly present in all
material respects (subject to year-end audit adjustments and
disclosures) the financial condition and results of operations of the
Companies, on a consolidated and consolidating basis, at the date and
for the periods indicated therein;
(c) Compliance Certificate.
(i) Concurrently with the delivery of each of the financial
statements referred to in subsection 9.1(a), and within forty-five
(45) days after the end of each fiscal quarter, a compliance
certificate of the chief financial officer or chief executive
officer of the Companies in substantially the form of Exhibit "K"
hereto;
(ii) The Agent and the Banks hereby acknowledge and agree
that the Borrower shall only be required to test compliance with
Sections 11.1, 11.2, 11.3 and 11.4 as of the last day of each
fiscal quarter or year of the Borrower, provided that the Borrower
hereby acknowledges and agrees that (x) if it has actual knowledge
of any Default or Event of Default under Section 11.1, 11.2, 11.3
or 11.4 at any time it shall give notice thereof to the Agent and
the Banks pursuant to Section 9.1(g) and (y) if the Agent or the
Required Banks reasonably believe that the Borrower is not in
compliance with Section 11.1, 11.2, 11.3 or 11.4 at any time, the
Agent or the Required Banks, as the case may be, may request that
the Borrower demonstrate (in which case the Borrower hereby agrees
to promptly demonstrate) (in reasonable detail) whether the
Borrower is in compliance with Section 11.1, 11.2, 11.3 and/or
11.4, as the case may be at such time;
(d) Accounts Receivable Report. Concurrently with the delivery of
each of the financial statements referred to in subsection 9.1(b), an
accounts receivable report in form and detail satisfactory to the
Agent and the Required Banks;
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 35
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(e) Regulatory Noncompliance. Promptly, notice of any
investigation or claim in respect of any Company's status as a
provider by or before any Health Care Regulator that is not resolved
in favor of such Company in the exit interview or that results in
notification to any Company that it is out of compliance and that
could reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), operations, prospects,
or properties of such Company;
(f) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting any Company seeking
$100,000 or more in damages or which, if determined adversely to such
Company, could have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or
properties of such Company;
(g) Notice of Default. As soon as possible and in any event
within five (5) days after the occurrence of each Default, a written
notice setting forth the details of such Default and the action that
the Borrower has taken and proposes to take with respect thereto;
(h) Notice of Material Adverse Change. As soon as possible and in
any event within five (5) days after the occurrence thereof, written
notice of any matter that is reasonably likely to have a material
adverse effect on the business, condition (financial or otherwise),
operations, prospects, or properties of any Company;
(i) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and other information and reports, if
any, which the Borrower or any Company shall file with the Securities
and Exchange Commission or any successor thereto or deliver to holders
of its Funded Debt which principal amount equals or exceeds $2,000,000
pursuant to the terms of the documentation governing such Funded Debt
(or any trustee, agent or other representative therefor);
(j) Annual Projections. As soon as available, and in any event
within forty-five (45) days after the end of each fiscal year of
Borrower, beginning with the fiscal year ending December 31, 1997,
financial projections for the Borrower and its Subsidiaries, prepared
on a quarter by quarter basis and in form and substance reasonably
satisfactory to the Agent;
(k) General Information. Promptly, such other information
concerning the Companies as the Agent or any Bank may from time to
time reasonably request.
Section 9.2 Maintenance of Existence; Conduct of Business.
Borrower will preserve and maintain, and will cause each Company to preserve
and maintain, its corporate existence and all of its leases, privileges,
licenses, permits, franchises, qualifications, and rights that are necessary or
desirable in the ordinary conduct of its business, except where the failure to
do so does not and will not have a material adverse effect on the business,
condition (financial or otherwise), operations, prospects, or properties of any
Company, the Collateral taken as a whole, or the ability of the Companies to
pay and perform the Obligations. Without in any way limiting the foregoing,
the Borrower will preserve and maintain, and will cause each Company to
preserve and maintain its status as an approved provider with all the Health
Care Regulators and other applicable Governmental Authorities where the failure
to do so would have a material adverse effect on its business, condition
(financial or otherwise), operations, prospects, or properties.
Section 9.3 Maintenance of Properties. Borrower will
maintain, keep, and preserve, and cause each Company to maintain, keep, and
preserve, all of its properties (tangible and intangible)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 36
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necessary or useful in the proper conduct of its business in good working order
and condition, unless the failure to do so would not have a material adverse
effect on the Borrower's or such Company's business, condition (financial or
otherwise), operations, prospects, or properties.
Section 9.4 Taxes and Claims. Borrower will pay or discharge,
and will cause each Company to pay or discharge, at or before maturity or
before becoming delinquent (a) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its property, and (b)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of its property; provided, however, that neither
Borrower nor any Company shall be required to pay or discharge any tax, levy,
assessment, or governmental charge which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves
have been established; provided, further that with respect to taxes in an
aggregate amount in excess of $100,000, the conditions of Permitted Liens as
described in Section 10.2 shall exist and notice shall have been given to the
Agent and the Banks.
Section 9.5 Insurance. Borrower will maintain, and will cause
each of the Companies to maintain, insurance with financially sound and
reputable insurance companies in such amounts and covering such risks as is
usually carried by corporations engaged in similar businesses and owning
similar properties in the same general areas in which Borrower and the
Companies operate, provided that in any event Borrower will maintain and cause
each Company to maintain property and casualty insurance coverage for each
Company of at least $1,000,000 per incident and $2,000,000 maximum coverage and
medical malpractice liability coverage for each Company of at least $1,500,000
per incident and $3,000,000 maximum coverage. Each insurance policy covering
Collateral or general liability shall, within ten (10) Business Days following
the Closing Date, name the Agent as loss payee or as an additional insured, as
applicable, and shall provide that such policy will not be cancelled or reduced
without thirty (30) days' prior written notice to the Agent. The Borrower
shall at all times keep and maintain the insurance coverage on the lives of S.
Wayne and Cheryl C. Bazzle described in Section 6.1. Additional covenants with
respect to insurance coverage are set forth in Section 3.6 of the Security
Agreements.
Section 9.6 Inspection Rights. At any reasonable time and
from time to time, the Borrower will permit, and will cause each Company to
permit, representatives of the Agent, the Issuing Bank and each Bank to
examine, copy, and make extracts from its books and records, to visit and
inspect its properties, and to discuss its business, operations, and financial
condition with its officers and independent certified public accountants.
Section 9.7 Keeping Books and Records. Borrower will
maintain, and will cause each Company to maintain, proper books of record and
account in which entries in conformity with GAAP (subject to year-end
adjustments and disclosures) shall be made of all dealings and transactions in
relation to its business and activities.
Section 9.8 Compliance with Laws. Borrower will comply, and
will cause each Company to comply, in all material respects with all applicable
laws, rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator, except where the failure to comply would not have a material
adverse effect on the Borrower's or such Company's business, condition
(financial or otherwise), operations, prospects or properties.
Section 9.9 Compliance with Agreements. Borrower will comply,
and will cause each Company to comply with all agreements, contracts, and
instruments binding on it or affecting its properties or business, except where
the failure to comply would not have a material adverse effect on the
Borrower's or such Company's business, condition (financial or otherwise),
operations, prospects or properties.
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Section 9.10 Further Assurances. Borrower will, and will cause
each Company to, execute and deliver such further agreements and instruments
and take such further action as may be requested by the Agent to carry out the
provisions and purposes of this Agreement and the other Loan Documents and to
create, preserve, and perfect the Liens of the Agent for the benefit of the
Agent, the Issuing Banks and the Banks in the Collateral.
Section 9.11 ERISA. Borrower will comply, and will cause each
Company to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
Section 9.12 Security Agreements; Guaranties. Borrower shall
cause each Person that becomes a Company after the date hereof to execute and
deliver to the Agent a Security Agreement and a Guaranty within thirty (30)
days after the date such Person becomes a Company. Contemporaneously with the
execution and delivery of such Security Agreement and Guaranty, Borrower shall
cause all outstanding capital stock of such Company to be pledged to the Agent
pursuant to a counterpart of the Pledge Agreement and deliver to the Agent such
other documents as the Agent may reasonably request.
ARTICLE X
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder or any
Issuing Bank has any obligation to issue Letters of Credit hereunder, Borrower
will perform and observe the following negative covenants:
Section 10.1 Funded Debt. Borrower will not incur, create,
assume, or permit to exist, and will not permit any Company to incur, create,
assume, or permit to exist, any Funded Debt, except the following (herein
referred to as "Permitted Debt"):
(a) Funded Debt to the Agent, the Banks and the Issuing Banks
pursuant to the Loan Documents;
(b) Funded Debt under the Senior Notes in an aggregate principal
amount not to exceed $80,000,000;
(c) Funded Debt in an aggregate amount not to exceed $2,000,000 at
any time outstanding;
(d) Funded Debt of any Company to any other Company, so long as
each such Company shall have executed and delivered to the Agent a
Security Agreement, Uniform Commercial Code Financing Statements,
assignment of deposit accounts, and a Guaranty in accordance with
Article VI, shall be a party to the Contribution and Indemnification
Agreement, and shall have delivered to the Agent Uniform Commercial
Code Lien searches and tax and judgment Lien searches for all
appropriate names and jurisdictions as the Agent may require;
(e) Purchase money indebtedness of any Company representing the
purchase price of equipment, that is secured by the asset purchased;
provided that the principal amount of such indebtedness does not
exceed the purchase price of the equipment acquired
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 38
<PAGE> 43
and the Lien does not attach to any other asset of any Company;
capital leases so long as such leases do not cover any property other
than the property acquired in connection therewith, together with
renewals and extensions thereof; and
(f) Existing Funded Debt described on Schedule 3 hereto.
Section 10.2 Limitation on Liens. Borrower will not incur,
create, assume, or permit to exist, and will not permit any Company to incur,
create, assume, or permit to exist, any Lien upon any of its property, assets,
or revenues, whether now owned or hereafter acquired, except the following
(herein referred to as "Permitted Liens"):
(a) Existing Liens on the property described on Schedule 4 hereto
to secure Permitted Debt;
(b) Liens in favor of the Agent for the benefit of the Agent, the
Banks and the Issuing Banks to secure the Obligations;
(c) Purchase money Liens securing Funded Debt permitted by Section
10.1(e) and capital leases so long as such Liens or leases, as the
case may be, do not cover any property other than the property
acquired in connection therewith, together with renewals and
extensions thereof;
(d) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that
do not (individually or in the aggregate) materially affect the value
of the assets encumbered thereby or materially impair the ability of
such Borrower or the Subsidiaries to use such assets in their
respective businesses, and none of which is violated in any material
respect by existing or proposed structures or land use;
(e) The following to the extent no Lien has been filed in any
jurisdiction or agreed to: Liens for taxes, assessments, or other
governmental charges which are not yet due and payable;
(f) The following to the extent no Lien has been filed in any
jurisdiction or agreed to: Liens of mechanics, materialmen,
warehousemen, carriers, or other similar statutory Liens securing
obligations that are not yet due and are incurred in the ordinary
course of business; and landlord's Liens for rental not yet due and
payable and which, to the extent the same encumbers any of the
Collateral, has been waived or subordinated to the extent required by
the Security Agreements;
(g) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure
the performance of tenders, statutory obligations, surety and appeal
bonds, bids, contracts (other than for payment of Funded Debt), or
leases made in the ordinary course of business, not in excess of 10%
of the aggregate amount due thereunder;
(h) The following so long as the validity or amount thereof is
being contested in good faith and by appropriate and lawful
proceedings diligently conducted, reserve or other appropriate
provision (if any) required by GAAP shall have been made, levy and
execution thereon have been stayed and continue to be stayed, any
thereof covering any Collateral must be subordinate to all Liens in
favor of the Agent, and they do not in the aggregate materially
detract from the value of the property of the Person in question, or
materially
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 39
<PAGE> 44
impair the use thereof in the operation of its business: Claims and
Liens for taxes, assessments and other governmental charges due and
payable; claims and Liens upon, and defects of title to, real or
personal property (other than any of the Collateral), including any
attachment of personal or real property or other legal process prior
to adjudication of a dispute on the merits; claims and Liens of
mechanics, materialmen, warehousemen, carriers, landlords, or other
like Liens; and adverse judgments on appeal;
(i) Liens on the capital stock of any Subsidiary acquired after
the date of this Agreement in a transaction permitted hereunder,
securing all or part of the purchase price thereof to the seller, so
long as either (i) the indebtedness secured thereby is subordinated to
the Obligations in the manner and to the extent satisfactory to the
Agent and the Required Banks and such Subsidiary shall have executed
and delivered to the Agent a Security Agreement, Uniform Commercial
Code financing statements, and assignment of deposit accounts, and a
Guaranty in accordance with Article VI and an addendum to the
Contribution and Indemnification Agreement by which such Subsidiary is
made a party thereto, and shall have delivered to the Agent Uniform
Commercial Code Lien searches and tax and judgment Lien searches for
all appropriate names and jurisdictions as the Agent may require, or
(ii) the indebtedness secured thereby was incurred in connection with
an acquisition, no portion of the purchase price of which was financed
with funds advanced by the Banks pursuant to this Agreement;
(j) Liens securing indebtedness for the purchase price of
equipment; provided that any such Lien shall attach only to the asset
purchased; and
(k) Financing Statements filed in connection with operating lease
transactions described in Uniform Commercial Code search reports
previously furnished to the Agent.
Section 10.3 Mergers, Etc. Borrower will not, and will not
permit any Company to, form any new Subsidiary, become a party to a merger or
consolidation, or purchase or otherwise acquire or commit to purchase or
acquire all or any part of the assets of any Person or any shares or other
evidence of beneficial ownership of any Person, or wind-up, dissolve, or
liquidate; provided, however, that each Company shall be permitted to (a) form
a new Subsidiary which shall have executed and delivered to the Agent a
Security Agreement, Uniform Commercial Code financing statements, an assignment
of deposit accounts, and a Guaranty in accordance with Article VI and an
addendum to the Contribution and Indemnification Agreement by which such
Subsidiary is made a party thereto, (b) subject to the provisions of Section
10.5, merge or consolidate with any Person if the surviving Person shall have
executed and delivered to the Agent a Security Agreement, Uniform Commercial
Code financing statements, an assignment of deposit accounts, and a Guaranty in
accordance with Article VI and, if such Person was not a party thereto, an
addendum to the Contribution and Indemnification Agreement by which such Person
is made a party thereto and shall have delivered to the Agent Uniform
Commercial Code Lien searches and tax and judgment Lien searches for all
appropriate new names and jurisdictions as the Agent may require, and (c)
purchase or acquire or commit to purchase or acquire assets of or any shares or
other evidence of beneficial ownership of any Person to the extent permitted by
Section 10.5, provided that each Subsidiary so acquired shall have executed and
delivered to the Agent a Security Agreement, Uniform Commercial Code financing
statements, an assignment of deposit accounts, and a Guaranty in accordance
with Article VI and an addendum to the Contribution and Indemnification
Agreement by which such Subsidiary is made a party thereto and shall have
delivered to the Agent Uniform Commercial Code Lien searches and tax and
judgment Lien searches for all appropriate new names and jurisdictions as the
Agent may require.
Section 10.4 Restricted Payments. Borrower will not declare or
pay any dividends or
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 40
<PAGE> 45
make any other payment or distribution (whether in cash, property, or
obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or permit any of the Companies to
purchase or otherwise acquire any capital stock of another Company, or set
apart any money for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock, except for any loan, advance,
extension of credit, capital contribution, or distribution (which includes,
with respect to the equity securities issued by any Company, the retirement,
redemption, or purchase of such shares or the declaration or payment of any
dividend by that Company) by any Company to any other Company so long as each
of the Companies shall have executed and delivered to the Agent a Security
Agreement, Uniform Commercial Code financing statements, an assignment of
deposit accounts, and a Guaranty in accordance with Article VI, shall be a
party to the Contribution and Indemnification Agreement and shall have
delivered to the Agent all Uniform Commercial Code, tax and judgment lien
searches required by the Agent.
Section 10.5 Loans and Investments. Borrower will not make,
and will not permit any Company to make, any advance, loan, extension of
credit, or capital contribution to or investment in, or purchase or own, or
permit any Company to purchase or own, any stock, bonds, notes, debentures, or
other securities of, any Person, except for the following (collectively, the
"Permitted Investments"):
(a) Investments in obligations of the United States of America and
agencies thereof and obligations guaranteed by the United States of
America maturing within one year from the date of acquisition;
(b) Certificates of deposit issued by commercial banks organized
under the laws of the United States of America or any state thereof
and having (i) combined capital, surplus, and undivided profits of not
less than $100,000,000 and (ii) a commercial paper rating from Moody's
Investors Service, Inc., or Standard & Poor's Corporation of at least
P-1 and A-1, respectively;
(c) Eurodollar investments with financial institutions having (i)
combined capital, surplus, and undivided profits of not less than U.S.
$100,000,000, and (ii) a commercial paper rated at least P-1 or A-1 by
Moody's Investors Service, Inc., or Standard & Poor's Corporation,
respectively, or, if any institution does not have a commercial paper
rating, a comparable bond rating of at least A or BAA-1 by Standard &
Poor's Corporation or Moody's Investors Service, Inc., respectively;
(d) Investments in money market funds substantially all of whose
assets are comprised of securities of the types described in clauses
(a) through (c) above;
(e) Extensions of credit in connection with trade receivables and
overpayments of trade payables and prepaid expenses, in each case
resulting from transactions in the ordinary course of business;
(f) Any loan, advance, extension of credit, capital contribution,
or distribution (which includes, with respect to the equity securities
issued by any Company, the retirement, redemption, or purchase of such
shares or the declaration or payment of any dividend by that Company)
by any Company to any other Company so long as each of the Companies
shall have executed and delivered to the Agent a Security Agreement,
Uniform Commercial Code financing statements, an assignment of deposit
accounts, and a Guaranty in accordance with Article VI, shall be a
party to the Contribution and Indemnification Agreement and shall have
delivered to the Agent all Uniform Commercial Code, tax and judgment
lien searches required by the Agent;
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 41
<PAGE> 46
(g) Investments in the Companies listed on Schedule 2 and any
increase in the value of such investments; and
(h) Acquisitions of assets of any Person, so long as (i) no
Default is then continuing or would result from such acquisition, and
(ii)(A) the total consideration - cash and noncash - for such
acquisition paid or to be paid by the Companies is not more than
$5,000,000, or (B)(x) the total consideration - cash and noncash - for
such acquisition paid or to be paid by the Companies is not more than
$10,000,000, (y) no Revolving Credit Loans are then outstanding, and
(z) no Revolving Credit Loans will be outstanding immediately
following the consummation of such acquisition;
(i) Acquisition of any new Subsidiary, so long as (i) such
Subsidiary has executed and delivered to the Agent a Security
Agreement, Uniform Commercial Code financing statements, an assignment
of deposit accounts, and a Guaranty in accordance with Article VI and
an addendum to the Contribution and Indemnification Agreement by which
such Subsidiary is made a party thereto, and has delivered to the
Agent Uniform Commercial Code lien searches and tax and judgment lien
searches for all appropriate names and jurisdictions as the Agent may
require, (ii) no Default is then continuing or would result from such
acquisition, and (iii)(A) the total consideration - cash and noncash -
for each such acquisition paid or to be paid by the Companies is not
more than $5,000,000, or (B)(x) the total consideration - cash and
noncash - for such acquisition paid or to be paid by the Companies is
not more than $10,000,000, (y) no Revolving Credit Loans are then
outstanding, and (z) no Revolving Credit Loans will be outstanding
immediately following the consummation of such acquisition; and
(j) Repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (a) and
(b) above entered into with any financial institution meeting the
qualifications specified in clause (b) above.
Section 10.6 Limitation on Issuance of Subsidiaries' Capital
Stock. Borrower will not, and will not permit any of the Companies to, at any
time issue, sell, assign, or otherwise dispose of (a) any of its capital stock,
(b) any securities exchangeable for or convertible into or carrying any rights
to acquire any of its capital stock, or (c) any option, warrant, or other right
to acquire any of its capital stock; provided, however, that the following
shall be permitted so long as no Default exists or would occur as a result
thereof: (i) options for the purchase of common stock issued to employees of
the Companies, (ii) Borrower may issue common stock, warrants for common stock,
or debt convertible into common stock to a seller in connection with an
acquisition permitted by Section 10.5, and (iii) the issuance and sale of stock
to the HealthCor Employee Stock Ownership Plan.
Section 10.7 Transactions With Affiliates. Borrower will not
enter into, and will not permit any Company to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of Borrower or such Company,
except in the ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to Borrower or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of Borrower
or such Subsidiary.
Section 10.8 Disposition of Assets. Borrower will not and will
not permit any Company to, sell, lease, assign, transfer, or otherwise dispose
of any of its assets, except dispositions of old,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 42
<PAGE> 47
worn out or obsolete equipment in the ordinary course of business.
Section 10.9 Sale and Leaseback. Borrower will not enter into,
and will not permit any Company to enter into, any arrangement with any Person
pursuant to which it leases from such Person real or personal property that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.
Section 10.10 Prepayment of Funded Debt. Borrower will not
prepay, and will not permit any Company to prepay or redeem prior to the stated
maturity thereof, any Funded Debt, except the Obligations.
Section 10.11 Nature of Business. Borrower will not and will
not permit any Company to, engage in any business not reasonably related to the
businesses in which it is engaged on the date hereof.
Section 10.12 Environmental Protection. Borrower will not, and
will not permit any Company to, (a) use (or permit any tenant to use) any of
its respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Material, (b) generate any
Hazardous Material, (c) conduct any activity that is likely to cause a release
or threatened release of any Hazardous Material, or (d) otherwise conduct any
activity or use any of its respective properties or assets in any manner that
is likely to violate any Environmental Law or create any Environmental
Liabilities for which Borrower or Company would be responsible.
Section 10.13 Accounting. Borrower will not, and will not
permit any Company to, change its fiscal year or make any change (a) in
accounting treatment or reporting practices, except as required by GAAP and
disclosed to the Agent, or (b) in tax reporting treatment, except as required
by law and disclosed to the Agent.
Section 10.14 Compensation. Borrower will not pay, and will not
permit any Company to pay, to S. Wayne Bazzle or Cheryl C. Bazzle, or either of
them, any cash compensation (including salary, bonus and other cash
compensation) which would cause the aggregate combined cash compensation of S.
Wayne Bazzle and Cheryl C. Bazzle to be greater than $750,000 during any fiscal
year of the Borrower.
Section 10.15 Modification of Senior Note Documents. Borrower
will not amend, supplement or otherwise modify any provisions of the Senior
Note Documents if such amendment, supplement or modification (a) shortens the
fixed maturity or increases the amount of, or shortens the time for payment of
interest on, or increases the amount or shortens the time for payment of any
principal or premium payable whether at maturity, at a date fixed for payment
or by acceleration or otherwise, or increases the amount of, or accelerates the
time for payment of, any fees payable in connection therewith, (b) relates to
the affirmative or negative covenants, events of default or remedies under the
Senior Note Documents and the effect of which is to subject Borrower to more
onerous or restrictive provisions, or (c) otherwise adversely affects the
interests of the Banks as senior creditors or the interest of the Banks under
this Agreement or the Loan Documents.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 43
<PAGE> 48
ARTICLE XI
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder or any
Issuing Bank has any obligation to issue Letters of Credit hereunder, Borrower
will perform and observe the following financial covenants subject to Section
9.1(c)(ii):
Section 11.1 Funded Debt to EBITDAA Ratio. Borrower will not
permit the Funded Debt to EBITDAA Ratio for any four quarter period calculated
as of the last day of a fiscal quarter set forth below to exceed the ratio set
forth opposite such fiscal quarter below at any time during such quarter;
provided, however, notwithstanding the foregoing, Borrower will not permit the
Funded Debt to EBITDAA Ratio for any four quarter period to exceed 3.50 to 1.00
at any time after the Borrower's Funded Debt to Pre-Compliance EBITDAA is less
than 3.50 to 1.00:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 44
<PAGE> 49
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
12/31/97 4.25:1.00
3/31/98 4.25:1.00
6/30/98 4.00:1.00
9/30/98 4.00:1.00
12/31/98 4.00:1.00
3/31/99 3.75:1.00
6/30/99 3.75:1.00
9/30/99 3.75:1.00
12/31/99 3.75:1.00
3/31/00 3.50:1.00
and thereafter
</TABLE>
Section 11.2 Consolidated Net Worth. Borrower will at all
times maintain or cause to be maintained Consolidated Net Worth in an amount
not less than the sum of (a) eighty percent (80%) of the Consolidated Net Worth
as of December 31, 1996, plus (b) fifty percent (50%) of the consolidated net
income of the Companies (to the extent positive) for each fiscal year after
1996, plus (c) one hundred percent (100%) of the net proceeds received by the
Companies from the sale or issuance of equity securities.
Section 11.3 Interest Coverage Ratio. Borrower will not permit
the Interest Coverage Ratio for any four quarter period calculated as of the
last day of a fiscal quarter set forth below to be less than the ratio set
forth opposite such fiscal quarter below at any time during such quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
12/31/97 1.50:1.00
3/31/98 1:50:1.00
6/30/98 1.50:1.00
9/30/98 1.50:1.00
12/31/98 1.50:1.00
3/31/99 2.00:1.00
6/30/99 2.00:1.00
9/30/99 2.00:1.00
12/31/99 2.00:1.00
3/31/00 2.25:1.00
and thereafter
</TABLE>
Section 11.4 Funded Debt to Capitalization Ratio. Borrower
will not at any time permit the ratio of (a) Funded Debt of the Companies to
(b) the sum of Funded Debt of the Companies, plus Consolidated Net Worth to be
greater than seventy percent (70%) prior to June 29, 1998, and sixty-five
percent (65%) thereafter.
ARTICLE XII
Default
Section 12.1 Events of Default. Each of the following shall be
deemed an "Event of Default":
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 45
<PAGE> 50
(a) Borrower shall fail to pay (i) any principal of the
Obligations when due, or (ii) any interest or other part of the
Obligations within five (5) days after the date due.
(b) Any representation or warranty made or deemed made by Borrower
or any Obligated Party (or any of their respective officers) in any
Loan Document or in any certificate, report, notice, or financial
statement furnished at any time in connection with this Agreement
shall be false, misleading, or erroneous in any material respect when
made or deemed to have been made.
(c) Borrower or any Obligated Party shall fail to perform,
observe, or comply with any covenant, agreement, or term contained in
Article X, or Article XI of this Agreement.
(d) Borrower or any Obligated Party shall fail to perform,
observe, or comply with any other covenant, agreement, or term
contained in this Agreement or any other Loan Document (other than
covenants to pay the Obligations and the covenants contained in
Articles X and XI of this Agreement) and such failure shall continue
for a period of thirty (30) days after notice thereof to Borrower or
Borrower or Obligated Party otherwise has notice thereof.
(e) Borrower, any Company, or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or
other similar official of it or a substantial part of its property or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(f) An involuntary proceeding shall be commenced against Borrower,
any Company, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or a substantial part of
its property, and such involuntary proceeding shall remain undismissed
and unstayed for a period of sixty (60) days.
(g) Borrower, any Company, or any Obligated Party shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, or similar proceeding or
proceedings involving an aggregate amount in excess of One Hundred
Thousand Dollars ($100,000) against any of its assets or properties.
(h) A final judgment or judgments for the payment of money in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate
shall be rendered by a court or courts against Borrower, any of the
Companies, or any Obligated Party and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within thirty (30) days from
the date of entry thereof and Borrower or the relevant Company or
Obligated Party shall not, within said period of thirty (30) days, or
such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 46
<PAGE> 51
(i) Borrower, any Company, or any Obligated Party shall fail to
pay when due (after the lapse of any applicable grace periods) any
principal of or interest on any Funded Debt the principal amount of
which is in excess of Five Hundred Thousand Dollars ($500,000) (other
than the Obligations), or the maturity of any such Funded Debt shall
have been accelerated, or any such Funded Debt shall have been
required to be prepaid prior to the stated maturity thereof, or any
event shall have occurred that permits (or, with the giving of notice
or lapse of time or both, would permit) any holder or holders of such
Funded Debt or any Person acting on behalf of such holder or holders
to accelerate the maturity thereof or require any such prepayment.
(j) This Agreement or any other Loan Document shall cease to be in
full force and effect for a period of ten (10) days other than as a
result of a voluntary release or termination, or this Agreement or any
other Loan Document shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower,
any Company, any Obligated Party or any of their respective
shareholders, or Borrower or any Obligated Party shall deny that it
has any further liability or obligation under any of the Loan
Documents, or any Lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and Lien upon any of the Collateral
purported to be covered thereby.
(k) Any of the following events shall occur or exist with respect
to any Company or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any
Plan; (iii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan; (iv) any
event or circumstance that might constitute grounds entitling the PBGC
to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA
from a Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above, such
event or condition, together with all other events or conditions, if
any, have subjected or could in the reasonable opinion of Required
Banks subject any Company to any tax, penalty, or other liability to a
Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or could reasonably be expected
to exceed One Hundred Thousand Dollars ($100,000).
(l) S. Wayne Bazzle and Cheryl C. Bazzle, or either of them, shall
transfer, assign, encumber (voluntarily or involuntarily), sell, or
convey in any manner more than 10% of the equity securities of
Borrower owned or held by S. Wayne Bazzle and Cheryl C. Bazzle, or
either of them on the Closing Date.
(m) There shall occur a material change or changes in the
management of the Companies, or any of them. Without in any way
limiting the foregoing, a material change in management shall be
deemed to have occurred if S. Wayne Bazzle or Cheryl C. Bazzle ceases
to be actively involved in the management of the Companies.
(n) Any Company shall fail to be an accredited, licensed,
registered or certified health care provider, as the case may be, as
represented and warranted pursuant to Section 8.4.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 47
<PAGE> 52
Section 12.2 Remedies. If any Event of Default shall occur and
be continuing, the Agent may (and if directed by Required Banks, shall) do any
one or more of the following:
(a) Acceleration. Declare all outstanding principal of and
accrued and unpaid interest on the Notes and all other obligations of
the Borrower under the Loan Documents immediately due and payable, and
the same shall thereupon become immediately due and payable, without
notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest, or other
formalities of any kind, all of which are hereby expressly waived by
the Borrower.
(b) Termination of Commitments. Terminate the Commitments and the
obligation of the Issuing Banks to issue Letters of Credit hereunder
without notice to the Borrower.
(c) Judgment. Reduce any claim to judgment.
(d) Foreclosure. Foreclose or otherwise enforce any Lien granted
to the Agent for the benefit of itself, the Issuing Banks and the
Banks to secure payment and performance of the Obligations in
accordance with the terms of the Loan Documents.
(e) Rights. Exercise any and all rights and remedies afforded by
the laws of the State of Texas or any other jurisdiction, by any of
the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under
Subsection (e) or (f) of Section 12.1, the Commitments of all of the Banks and
the obligation of the Issuing Banks to issue Letters of Credit shall
automatically terminate, and the outstanding principal of and accrued and
unpaid interest on the Notes and all other obligations of the Borrower under
the Loan Documents shall thereupon become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, protest, or other formalities of any kind, all of
which are hereby expressly waived by the Borrower.
Section 12.3 Letters of Credit. If any Event of Default shall
occur and be continuing, Borrower shall, if requested by the Agent (either
acting on its own or at the request of the Required Banks), immediately deposit
with and pledge to the Agent cash or cash equivalent investments in an amount
equal to the outstanding Letter of Credit Liabilities as security for the
Obligations. Furthermore, in order to continue to secure the full and complete
payment and performance of the Obligations arising in connection with the
Letter of Credit Liabilities that continue to be outstanding after acceleration
of the other Obligations or the exercise of other rights after the occurrence
of an Event of Default, the Agent may do either or both of the following: (a)
segregate such Collateral or accounts and other property as the Agent may in
its sole discretion select, and (b) retain and deposit into one or more cash
collateral accounts any proceeds received by the Agent from the foreclosure of
Collateral, exercise of rights of offset or banker's lien, or exercise of other
rights.
Section 12.4 Performance by the Agent. If Borrower shall fail
to perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Agent may, at the direction of Required Banks, perform or
attempt to perform such covenant or agreement on behalf of Borrower. In such
event, Borrower shall, at the request of the Agent, promptly pay any amount
expended by the Agent or the Banks in connection with such performance or
attempted performance to the Agent at the Principal Office, together with
interest thereon at the Applicable Rate from and including the date of such
expenditure to but excluding the date of the Agent's
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 48
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request for payment, and from and including the date of such request for
payment until such expenditure is paid in full, at the Default Rate.
Notwithstanding the foregoing, it is expressly agreed that neither the Agent,
any Issuing Bank nor any Bank shall have any liability or responsibility for
the performance of any obligation of the Borrower under this Agreement or any
of the other Loan Documents.
ARTICLE XIII
The Agent
Section 13.1 Appointment, Powers and Immunities. In order to
expedite the various transactions contemplated by this agreement, the Banks and
the Issuing Banks hereby irrevocably appoint and authorize TCB to act as their
Agent hereunder and under each of the other Loan Documents. TCB hereby
consents to such appointment and agrees to perform the duties of the Agent as
specified herein. The Banks and the Issuing Banks authorize and direct the
Agent to take such action in their name and on their behalf under the terms and
provisions of the Loan Documents and to exercise such rights and powers
thereunder as are specifically delegated to or required of the Agent for the
Banks and the Issuing Banks, together with such rights and powers as are
reasonably incidental thereto. The Agent is hereby expressly authorized to act
as the Agent on behalf of itself, the other Banks and the Issuing Banks:
(a) To receive on behalf of each of the Banks and the Issuing
Banks any payment of principal, interest, fees or other amounts paid
pursuant to this Agreement and the Notes and to distribute to each
Bank and/or Issuing Bank its share of all payments so received as
provided in this Agreement;
(b) To receive all documents and items to be furnished under the
Loan Documents;
(c) To act as nominee for and on behalf of the Banks and the
Issuing Banks in and under the Loan Documents;
(d) To arrange for the means whereby the funds of the Banks are to
be made available to the Borrower;
(e) To distribute to the Banks and the Issuing Banks information,
requests, notices, payments, prepayments, documents and other items
received from the Borrower, the other Obligated Parties, and other
Persons;
(f) To execute and deliver to the Borrower, the other Obligated
Parties, and other Persons, all requests, demands, approvals, notices,
and consents received from the Banks and the Issuing Banks;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Bank and Issuing Bank all rights and remedies of the
Banks and the Issuing Banks upon the occurrence of any Event of
Default;
(h) To accept, execute, and deliver the Security Agreements, the
Pledge Agreement and any and all other security documents as the
secured party, including, without limitation all UCC financing
statements; and
(i) To take such other actions as may be contemplated by the Loan
Documents
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or requested by Required Banks or, if otherwise required by the Loan
Documents, all of the Banks. To take all such actions incidental
thereto.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to the Agent;
(ii) shall have no duties or responsibilities except those expressly set forth
in this Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Bank or
Issuing Bank; (iii) shall not be required to initiate any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by Required Banks; (iv) shall not be responsible to the Banks
or the Issuing Banks for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan Document, or any
certificate or other document referred to or provided for in, or received by
any of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, enforceability, or sufficiency of this Agreement or
any other Loan Document or any other document referred to or provided for
herein or therein or for any failure by any Person to perform any of its
obligations hereunder or thereunder; (v) may consult with legal counsel
(including counsel for the Borrower), independent public accountants, and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants, or experts; and (vi) shall incur no liability under or in respect
of any Loan Document by acting upon any notice, consent, certificate, or other
instrument or writing believed by it to be genuine and signed or sent by the
proper party or parties. As to any matters not expressly provided for by this
Agreement, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by
Required Banks (unless otherwise required by this Agreement), and such
instructions of Required Banks and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks; provided, however, that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or any other Loan Document or
applicable law.
Section 13.2 Rights of Agent as a Bank. With respect to its
Commitments, the Loans made by it and the Note issued to it, TCB in its
capacity as a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not acting as the
Agent or an Issuing Bank, as the case may be, and the term "Bank" or "Banks"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may (without having to
account therefor to any Bank or Issuing Bank) accept deposits from, lend money
to, act as trustee under indentures of, provide merchant banking services to,
and generally engage in any kind of business with the Borrower, any of the
Companies, any other Obligated Party, and any other Person who may do business
with or own securities of Borrower, any Company, or any other Obligated Party,
all as if it were not acting as the Agent and without any duty to account
therefor to the Banks or the Issuing Banks.
Section 13.3 Sharing of Payments, Etc. If any Bank shall
obtain any payment of any principal of or interest on any Loan made by it under
this Agreement or payment of any other obligation under the Loan Documents then
owed by Borrower or any other Obligated Party to such Bank, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Bank shall promptly purchase from the other Banks participations in the
Loans held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 50
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Bank to share the excess payment ratably with each of the other Banks in
accordance with its pro rata portion thereof. To such end, all of the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. Borrower agrees, to the
fullest extent it may effectively do so under applicable law, that any Bank so
purchasing a participation in the Loans made by the other Banks may exercise
all rights of setoff, banker's lien, counterclaim, or similar rights with
respect to such participation as fully as if such Bank were a direct holder of
Loans to Borrower in the amount of such participation. Nothing contained
herein shall require any Bank to exercise any such right or shall affect the
right of any Bank to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of Borrower.
Section 13.4 INDEMNIFICATION. THE BANKS HEREBY AGREE TO
INDEMNIFY THE AGENT AND THE ISSUING BANKS FROM AND HOLD THE AGENT AND THE
ISSUING BANKS HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED UNDER SECTIONS
14.1 AND 14.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER
SECTIONS 14.1 AND 14.2), RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE
COMMITMENTS, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS'
FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT OR ANY ISSUING BANK IN ANY WAY
RELATING TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY THE AGENT OR AN ISSUING BANK UNDER OR IN RESPECT OF ANY
OF THE LOAN DOCUMENTS; PROVIDED, FURTHER, THAT NO BANK SHALL BE LIABLE FOR ANY
PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S OR SUCH ISSUING
BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE
FOREGOING, IT IS THE EXPRESS INTENTION OF THE BANKS THAT THE AGENT AND THE
ISSUING BANKS SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL
OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE
OF THE AGENT OR SUCH ISSUING BANK. WITHOUT LIMITING ANY OTHER PROVISION OF
THIS SECTION, EACH BANK AGREES TO REIMBURSE THE AGENT AND THE ISSUING BANKS
PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF THE
COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) INCURRED BY THE AGENT OR AN ISSUING BANK IN CONNECTION WITH
THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT
OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE)
OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN
DOCUMENTS, TO THE EXTENT THAT THE AGENT OR SUCH ISSUING BANK IS NOT REIMBURSED
FOR SUCH EXPENSES BY THE BORROWER.
Section 13.5 Independent Credit Decisions. Each Bank agrees
that it has independently and without reliance on the Agent, any Issuing Bank
or any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 51
<PAGE> 56
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent, any Issuing Bank or any
other Bank, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself informed as to the
performance or observance by Borrower or any Obligated Party of this Agreement
or any other Loan Document or to inspect the properties or books of Borrower or
any Obligated Party. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Loan Documents, the Agent shall have no duty or
responsibility to provide the Issuing Banks or any Bank with any credit or
other financial information concerning the affairs, financial condition or
business of the Borrower or any Obligated Party (or any of their Affiliates)
which may come into the possession of the Agent or any of its Affiliates.
Section 13.6 Several Commitments. The Commitments and other
obligations of the Banks under this Agreement are several. The default by any
Bank in making a Loan in accordance with its Commitment shall not relieve the
other Banks of their obligations under this Agreement. In the event of any
default by any Bank in making any Loan, each nondefaulting Bank shall be
obligated to make its Loan but shall not be obligated to advance the amount
which the defaulting Bank was required to advance hereunder. In no event shall
any Bank be required to advance an amount or amounts which shall in the
aggregate exceed such Bank's Commitment. No Bank shall be responsible for any
act or omission of any other Bank.
Section 13.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Banks and the Borrower and the Agent may
be removed at any time with or without cause by Required Banks. Upon any such
resignation or removal of the Agent, Required Banks will have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
by Required Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Required Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or any State thereof and having
combined capital and surplus of at least $100,000,000. Upon the acceptance of
its appointment as successor Agent, such successor Agent shall thereupon
succeed to and become vested with all rights, powers, privileges, immunities,
and duties of the resigning or removed Agent, and the resigning or removed
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. After any Agent's resignation or removal as
Agent, the provisions of this Article XIII shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was the Agent.
ARTICLE XIV
Miscellaneous
Section 14.1 Expenses. Borrower hereby agrees to pay on
demand: (a) all reasonable costs and expenses of the Agent in connection with
the preparation, negotiation, execution, and delivery of this Agreement and the
other Loan Documents and any and all amendments, modifications, renewals,
extensions, and supplements thereof and thereto, including, without limitation,
the fees and expenses of legal counsel for the Agent, (b) all costs and
expenses of the Agent, the Issuing Banks and the Banks in connection with any
Default and the enforcement of this Agreement or any other Loan Document,
including, without limitation, the fees and expenses of legal counsel for the
Agent, the Issuing Banks and the Banks, and (c) all other costs and expenses
incurred by the Agent in connection with this Agreement or any other Loan
Document.
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Section 14.2 INDEMNIFICATION. BORROWER SHALL INDEMNIFY THE
AGENT, EACH ISSUING BANK AND EACH BANK AND EACH AFFILIATE THEREOF AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS (COLLECTIVELY,
THE "INDEMNIFIED PARTIES") FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY
AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF
THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO
(A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL,
REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR
AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY COMPANY, OR (E)
ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING
RELATING TO ANY OF THE FOREGOING; PROVIDED, HOWEVER, NO INDEMNIFIED PARTY SHALL
HAVE THE RIGHT TO BE INDEMNIFIED FOR ITS OWN FRAUD, GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER
LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH
PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES)
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH
PERSON.
Section 14.3 LIMITATION OF LIABILITY. NONE OF THE AGENT, ANY
ISSUING BANK, ANY BANK, OR ANY AFFILIATE, OFFICER, DIRECTOR, EMPLOYEE,
ATTORNEY, OR AGENT THEREOF SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND
BORROWER HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE ANY OF THEM UPON, ANY
CLAIM FOR ANY SPECIAL OR PUNITIVE DAMAGES SUFFERED OR INCURRED BY BORROWER IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. BORROWER HEREBY WAIVES,
RELEASES, AND AGREES NOT TO SUE THE AGENT, ANY ISSUING BANK, OR ANY BANK OR ANY
OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, OR
AGENTS FOR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING
OUT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS.
Section 14.4 No Duty. All attorneys, accountants, appraisers,
and other professional Persons and consultants retained by the Agent, the
Issuing Banks and the Banks shall have the right to act exclusively in the
interest of the Agent, the Issuing Banks and the Banks and shall have no
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 53
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duty of disclosure, duty of loyalty, duty of care, or other duty or obligation
of any type or nature whatsoever to the Borrower or any of the Borrower's
shareholders or any other Person.
Section 14.5 No Fiduciary Relationship. The relationship
between the Borrower and each Bank is solely that of debtor and creditor, and
neither the Agent, any Issuing Bank nor any Bank has any fiduciary or other
special relationship with the Borrower, and no term or condition of any of the
Loan Documents shall be construed so as to deem the relationship between the
Borrower and any Bank to be other than that of debtor and creditor.
Section 14.6 No Waiver; Cumulative Remedies. No failure on the
part of the Agent, any Issuing Bank or any Bank to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power, or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power, or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege. The rights and remedies provided for in this
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by law.
Section 14.7 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Agent
and all of the Banks. Any Bank may sell participations to one or more
banks or other institutions in or to all or a portion of its rights
and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitments
and the Loans owing to it); provided, however, that (i) such Bank's
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitments) shall remain
unchanged, (ii) such Bank shall remain solely responsible to the
Borrower for the performance of such obligations, (iii) such Bank
shall remain the holder of its Note for all purposes of this
Agreement, (iv) the Borrower shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Loan Documents, and (v)
such Bank shall not sell a participation that conveys to the
participant the right to vote or give or withhold consents under this
Agreement or any other Loan Document, other than the right to vote
upon or consent to (A) any increase of such Bank's Commitments, (B)
any reduction of the principal amount of, or interest to be paid on,
the Loans of such Bank, (C) any reduction of any commitment fee or
other amount payable to such Bank under any Loan Document, (D) any
release of Collateral or release of any Guarantor, or (E) any
postponement of any date for the payment of any amount payable in
respect of the Loans of such Bank.
(b) The Borrower and each of the Banks agree that any Bank (the
"Assigning Bank") may, with the Agent's consent and unless an Event of
Default has occurred, the Borrower's consent (except that no consent
shall be required with respect to assignments by TCB during the first
six months after the date hereof, TCB agreeing to use reasonable
efforts to keep the Borrower advised of any potential assignees),
which consent of the Borrower shall not be unreasonably withheld or
delayed, at any time assign to one or more Eligible Assignees all, or
a proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation,
its Commitment and Loans) (each an "Assignee"); provided, however,
that (i) each such assignment shall be of a consistent, and not a
varying, percentage of all of the assigning Bank's Commitment, rights
and obligations under this Agreement and the other Loan Documents,
(ii) except in
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the case of an assignment of all of a Bank's rights and obligations
under this Agreement and the other Loan Documents, the amount of the
Commitment of the assigning Bank being assigned pursuant to each
assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than
$5,000,000, and (iii) the parties to each such assignment shall
execute and deliver to the Agent for its acceptance and recording in
the Register (as defined below), an Assignment and Acceptance,
together with the Note subject to such assignment, and, except in the
case of an assignment to an Affiliate of the Assigning Bank, a
processing and recordation fee of $2,500, to be paid by the Assignee.
Upon such execution, delivery, acceptance, and recording, from and
after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the
execution thereof, or, if so specified in such Assignment and
Acceptance, the date of acceptance thereof by the Agent, (x) the
assignee thereunder shall be a party hereto as a "Bank" and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and under the Loan Documents and (y)
the Bank that is an assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of a Bank's rights and obligations under the Loan
Documents, such Bank shall cease to be a party thereto).
(c) By executing and delivering an Assignment and Acceptance, the
Bank that is an assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and
Acceptance, such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with the Loan
Documents or the execution, legality, validity, and enforceability,
genuineness, sufficiency, or value of the Loan Documents or any other
instrument or document furnished pursuant thereto; (ii) such assigning
Bank makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or any
Obligated Party or the performance or observance by Borrower or any
Obligated Party of its obligations under the Loan Documents; (iii)
such assignee confirms that it has received a copy of the other Loan
Documents, together with copies of the financial statements referred
to in Section 8.2 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent or such assignor and
based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as
agent on its behalf and exercise such powers under the Loan Documents
as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to
be performed by it as a Bank.
(d) The Agent shall maintain at its Principal Office a copy of
each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Banks
and the Commitment of, and principal amount of the Loans owing to,
each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower,
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the Agent, the Issuing Banks and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes
under the Loan Documents. The Register shall be available for
inspection by Borrower, any Issuing Bank or any Bank at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Bank and assignee representing that it is an Eligible
Assignee, together with any Note subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit "J" hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt written notice thereof
to the Borrower. Within five (5) Business Days after its receipt of
such notice, the Borrower, at its expense, shall execute and deliver
to the Agent in exchange for the surrendered Note a new Note to the
order of such Eligible Assignee in an amount equal to the Commitment
assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a portion of its Commitment, a new Note to
the order of the assigning Bank in an amount equal to the Commitment
retained by it hereunder (each such promissory note shall constitute a
"Note" for purposes of the Loan Documents). Such new Note shall be in
an aggregate principal amount of the surrendered Note, shall be dated
the effective date of such Assignment and Acceptance, and shall
otherwise be in substantially the form of Exhibit "A" hereto.
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Borrower or its
Subsidiaries furnished to such Bank by or on behalf of Borrower or its
Subsidiaries.
(g) Any Bank may pledge or assign its Note to any Federal Reserve
Bank in accordance with applicable law.
Section 14.8 Survival. All representations and warranties made
in this Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Agent, any Issuing Bank or any Bank or any closing shall
affect the representations and warranties or the right of the Agent, any
Issuing Bank or any Bank to rely upon them. Without prejudice to the survival
of any other obligation of the Borrowers hereunder, the obligations of the
Borrowers under Article V and Sections 14.1 and 14.2 shall survive repayment of
the Notes and termination of the Commitments.
Section 14.9 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND
THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO.
Section 14.10 Amendments, Etc. No amendment or waiver of any
provision of this Agreement, the Notes, or any other Loan Document to which
Borrower is a party, nor any consent to any departure by Borrower therefrom,
shall in any event be effective unless the same shall be agreed or consented to
by Required Banks and the Borrower, and each such waiver or
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 56
<PAGE> 61
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment, waiver, or consent shall,
unless in writing and signed by all of the Banks and the Borrower, do any of
the following: (a) increase the Commitments of the Banks or subject the Banks
to any additional obligations; (b) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable to the Banks hereunder; (c) postpone
any date fixed for any payment of principal of, or interest on, the Notes or
any fees or other amounts payable to the Banks hereunder; (d) waive any of the
conditions specified in Article VII; (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes or the
number of Banks which shall be required for the Banks or any of them to take
any action under this Agreement; (f) change any provision contained in this
Section 14.11; or (g) release any Collateral or any Guarantor. Notwithstanding
anything to the contrary contained in this Section, no amendment, waiver, or
consent shall be made with respect to Article XIII hereof without the prior
written consent of the Agent and no amendment, waiver, or consent shall be made
with respect to Article III hereof without the prior written consent of the
Issuing Banks.
Section 14.11 Maximum Interest Rate. No provision of this
Agreement or of any other Loan Document shall require the payment or the
collection of interest in excess of the maximum amount permitted by applicable
law. If any excess of interest in such respect is hereby provided for, or
shall be adjudicated to be so provided, in any Loan Document or otherwise in
connection with this loan transaction, the provisions of this Section shall
govern and prevail and neither the Borrower nor the sureties, guarantors,
successors, or assigns of the Borrower shall be obligated to pay the excess
amount of such interest or any other excess sum paid for the use, forbearance,
or detention of sums loaned pursuant hereto. In the event any Bank ever
receives, collects, or applies as interest any such sum, such amount which
would be in excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the principal of the indebtedness
evidenced by the Notes; and, if the principal of the Notes has been paid in
full, any remaining excess shall forthwith be paid to the Borrower. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and each Bank shall, to the extent permitted by applicable
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the entire contemplated term of
the indebtedness evidenced by the Notes so that interest for the entire term
does not exceed the Maximum Rate.
Section 14.12 Notices. All notices and other communications
provided for in this Agreement and the other Loan Documents to which Borrower
is a party shall be given or made by telecopy or in writing and telecopied,
mailed by certified mail return receipt requested, or delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof; or, as to any party at such other address as shall be
designated by such party in a notice to each other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid; provided, however, notices to the
Agent pursuant to Article II and III shall not be effective until received by
the Agent.
SECTION 14.13 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS
AGREEMENT HAS BEEN ENTERED INTO IN DALLAS COUNTY, TEXAS, AND IT SHALL BE
PERFORMABLE FOR ALL PURPOSES IN DALLAS COUNTY, TEXAS. ANY ACTION
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 57
<PAGE> 62
OR PROCEEDING AGAINST BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS.
BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT
ANY SUCH COURT IS AN INCONVENIENT FORUM. BORROWER AGREES THAT SERVICE OF
PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 14.12. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN
DOCUMENTS SHALL AFFECT THE RIGHT OF THE AGENT, ANY ISSUING BANK OR ANY BANK TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
THE AGENT, ANY ISSUING BANK OR ANY BANK TO BRING ANY ACTION OR PROCEEDING
AGAINST BORROWER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER
JURISDICTIONS. ANY ACTION OR PROCEEDING BY BORROWER AGAINST THE AGENT, ANY
ISSUING BANK OR ANY BANK SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS
COUNTY, TEXAS.
Section 14.14 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 14.15 Severability. Any provision of this Agreement
held by a court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 14.16 Headings. The headings, captions, and
arrangements used in this Agreement are for convenience only and shall not
affect the interpretation of this Agreement.
Section 14.17 Construction. Each of the Borrower, the Agent,
each Issuing Bank and each Bank acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel
and that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by the parties hereto.
Section 14.18 Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default if such action is
taken or such condition exists.
Section 14.19 Treatment of Certain Information; Confidentiality.
Each Bank, Issuing Bank and the Agent agrees to keep confidential any
non-public information supplied to it pursuant to this Agreement that is
identified in writing as confidential at the time so supplied, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for any of the Banks, Issuing Banks or the Agent, (iii) to bank
examiners, auditors, accountants, or any administrative body or commission to
whose jurisdiction such Bank, Issuing Bank or the Agent may be subject, (iv) to
the Agent, any Issuing Bank or other Bank, (v) in connection with any
litigation between any Obligated Party and any one or more of the Banks,
Issuing Banks or the Agent, (vi) to a subsidiary or affiliate
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 58
<PAGE> 63
of such Bank, provided such disclosure is reasonably necessary and such
subsidiary or affiliate is made aware of the confidential nature of the
information supplied and agrees to comply with the terms of this Section 14.19,
or (vii) with the Borrower's written consent; provided, further, that in no
event shall any Bank, Issuing Bank or the Agent be obligated or required to
return any materials furnished by any Obligated Party.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 59
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
--------
HEALTHCOR HOLDINGS, INC.
By: /s/ S. WAYNE BAZZLE
-----------------------------------
S. Wayne Bazzle
Chairman of the Board and
Chief Executive Officer
Address for Notices:
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
Fax No.: (214) 692-4666
Telephone No.: (214) 692-4663
Attention: S. Wayne Bazzle
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 60
<PAGE> 65
AGENT:
-----
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ STEVEN T. PRICHETT
-----------------------------------
Steven T. Prichett
Vice President
Address for Notices:
2200 Ross Avenue, 6th Floor
Dallas, Texas 75201
Fax No.: (214) 922-2384
Telephone No.: (214) 965-3710
Attention: Mr. Steven T. Prichett
Vice President
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 61
<PAGE> 66
ISSUING BANK:
------------
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ STEVEN T. PRICHETT
-----------------------------------
Steven T. Prichett
Vice President
Address for Notices:
2200 Ross Avenue, 6th Floor
Dallas, Texas 75201
Fax No.: (214) 922-2384
Telephone No.: (214) 965-3710
Attention: Mr. Steven T. Prichett
Vice President
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 62
<PAGE> 67
BANKS:
-----
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
Revolving Credit Commitment: By: /s/ STEVEN T. PRICHETT
$ 12,500,000 Vice President -----------------------------------
---------------- Steven T. Prichett
Address for Notices:
2200 Ross Avenue, 6th Floor
Dallas, Texas 75201
Fax No.: (214) 922-2384
Telephone No.: (214) 965-3710
Attention: Mr. Steven T. Prichett
Vice President
Lending Office for Alternate
Base Rate Loans
2200 Ross Avenue
Dallas, Texas 75201
Lending Office for Eurodollar Loans
2200 Ross Avenue
Dallas, Texas 75201
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 63
<PAGE> 68
HIBERNIA NATIONAL BANK
Revolving Credit Commitment: By: /s/ STEPHANIE FREEMAN FOR CHRIS PITRE
--------------------------------------
Name: Stephanie Freeman
---------------------------------
$ 7,500,000 Title: Banking Officer
---------- --------------------------------
Address for Notices:
313 Carondelet Street
New Orleans, Louisiana 70130
Fax No.: (504) 533-5344
Telephone No.: (504) 533-2878
Attention: Mr. Christopher B. Pitre
Lending Office for Alternate
Base Rate Loans
313 Carondelet Street
New Orleans, Louisiana 70130
Lending Office for Eurodollar Loans
313 Carondelet Street
New Orleans, Louisiana 70130
SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 64
<PAGE> 69
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Section
------- ---------------------- -------
<S> <C> <C>
"A" Form of Revolving Credit Note 2.2
"B-1" Loan Request Form 4.1
"B-2" Notice of Continuation or Conversion 4.2
"C" Letter of Credit Request Form 3.3
"D-1" Borrower Security Agreement 6.1(a)
"D-2" Subsidiary Security Agreement 6.1(b)
"E" Subsidiary Guaranty 6.3
"F" Pledge Agreement 6.1(c)
"G" Assignment of Deposit Accounts 6.2
"H" Contribution and Indemnification Agreement 7.1(o)
"I" Matters to be Addressed by Opinion of Counsel
for the Companies 7.1(v)
"J" Assignment and Acceptance 14.7
"K" Compliance Certificate 9.1(c)
</TABLE>
INDEX TO SCHEDULES
<TABLE>
<CAPTION>
Schedule Description of Schedule Section
-------- ----------------------- -------
<S> <C> <C>
1 Companies 8.14
2 Litigation 8.5
3 Existing Debt 8.9
4 Existing Liens 10.2
5 Historical Acquired EBITDA 1.1
</TABLE>
<PAGE> 70
EXHIBIT "A"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Form of Revolving Credit Note
<PAGE> 71
REVOLVING CREDIT NOTE
$__________________ Dallas, Texas December 1, 1997
FOR VALUE RECEIVED, the undersigned, HEALTHCOR HOLDINGS, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
_________________________________ ("Payee"), at the offices of Texas Commerce
Bank National Association, a national banking association, as agent (in such
capacity, "Agent"), located at 2200 Ross Avenue, Dallas, Texas 75201 or at such
other location as Agent may designate to Maker in writing, for the account of
the Applicable Lending Office (as defined in the Agreement referred to below)
of Payee, in lawful money of the United States of America and in immediately
available funds, the principal sum of ____________________ DOLLARS
($_______________), or such lesser amount as shall equal the aggregate unpaid
principal amount of the Revolving Credit Loans made by Payee to Maker under the
Agreement referred to below on the dates and in the principal amounts provided
in such Agreement, and to pay interest on the amount of each such Revolving
Credit Loan, at such office, in like money and funds, for the period commencing
on the date of such Revolving Credit Loan until the Revolving Credit Loan shall
be paid in full, at the rates per annum and on the dates provided in the
Agreement.
This Note (the "Note") has been executed and delivered by Maker
pursuant to the terms of that certain Second Amended and Restated Credit
Agreement (as the same may be amended, supplemented or modified from time to
time, the "Agreement") of even date herewith, among Maker, Payee and the other
lenders from time to time party thereto (collectively, the "Banks"), the
Issuing Banks (as defined in the Agreement), and the Agent and is one of the
Revolving Credit Notes described therein. Capitalized terms used and not
otherwise defined herein shall have the same meanings as set forth in the
Agreement. Reference is hereby made to the Agreement for provisions affecting
this Note including, but not limited to, provisions regarding interest rates,
repayments, prepayments, Events of Default, and Payee's rights as a result of
the occurrence thereof.
This Note and the other Revolving Credit Notes are in renewal,
extension and modification, but not extinguishment or novation, of the
outstanding indebtedness evidenced by those certain Revolving Credit Notes
previously executed by HealthCor, Inc., a Delaware corporation ("HealthCor"),
and delivered pursuant to that certain Amended and Restated Credit Agreement
dated October 31, 1996 among Maker, HealthCor, the lenders party thereto (the
"Existing Banks"), the Existing Banks issuing Letters of Credit thereunder and
Texas Commerce Bank National Association, as agent, which in turn are in
renewal, extension and modification, but not extinguishment or novation, of
the outstanding indebtedness evidenced by those certain Revolving Credit Notes
previously executed by HealthCor and delivered pursuant to that certain Credit
Agreement dated May 16, 1996 among Maker, HealthCor, the lenders party thereto
(the
REVOLVING CREDIT NOTE - Page 1
<PAGE> 72
"Original Banks"), the Original Banks issuing Letters of Credit thereunder and
Texas Commerce Bank National Association, as agent.
Subject to the terms of the Agreement and as otherwise calculated in
accordance with the Agreement, the outstanding principal balance hereof shall
bear interest prior to maturity at a varying rate per annum which shall from
day to day be equal to the lesser of (a) the Maximum Rate or (b) the Applicable
Rate. If at any time the Applicable Rate shall exceed the Maximum Rate,
thereby causing the interest rate hereon to be limited to the Maximum Rate,
then any subsequent reduction in the Applicable Rate shall not reduce the rate
of interest hereon below the Maximum Rate until the total amount of interest
accrued hereon equals the amount of interest which would have accrued hereon if
the Applicable Rate had at all times been in effect.
The outstanding principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be due and payable on the Revolving
Credit Termination Date. Accrued and unpaid interest on the outstanding
principal balance hereof shall be due and payable as provided in Section 2.4 of
the Agreement. All past due principal and interest shall bear interest at the
Default Rate.
Maker may prepay the principal of this Note upon the terms and
conditions specified in the Agreement. Maker may borrow, repay, and reborrow
hereunder upon the terms and conditions specified in the Agreement.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all reasonable
costs, expenses, and fees incurred by the holder, including reasonable
attorneys' fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THIS NOTE IS PERFORMABLE IN DALLAS COUNTY, TEXAS.
Maker and each surety, guarantor, endorser, and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent
to accelerate, notice of intent to demand, diligence in collecting, grace, and
all other formalities of any kind, and consent to all extensions without notice
for any period or periods of time and partial payments, before or after
maturity, all without prejudice to the holder. The holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to grant any
other indulgences or
REVOLVING CREDIT NOTE - Page 2
<PAGE> 73
forbearances whatsoever, without notice to any other party and without in any
way affecting the personal liability of any party hereunder.
Maker hereby authorizes the holder hereof to record in its internal
records the amount and Type of all Loans made to Maker hereunder and all
continuations, conversions, and payments of principal in respect of such Loans,
which recordings shall be prima facie evidence as to the outstanding principal
balance of this Note; provided, however, any failure by the holder hereof to
make any such recording shall not limit or otherwise affect the obligations of
Maker under the Agreement or this Note.
HEALTHCOR HOLDINGS, INC.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
REVOLVING CREDIT NOTE - Page 3
<PAGE> 74
EXHIBIT "B-1"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Loan Request Form
<PAGE> 75
LOAN REQUEST FORM
TO: TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Agent
2200 Ross Avenue
Post Office Box 660197
Dallas, Texas 75266-0197
Attention: Steven T. Prichett
Ladies and Gentlemen:
The undersigned is an officer of HEALTHCOR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), and is authorized to make and deliver this
certificate pursuant to that certain Second Amended and Restated Credit
Agreement dated as of December 1, 1997, among the Borrower, Texas Commerce Bank
National Association, a national banking association, as agent (in such
capacity, the "Agent"), certain other lenders from time to time party thereto
(collectively, the "Banks") and the Banks from time to time issuing letters of
credit thereunder (the "Issuing Banks") (such Second Amended and Restated
Credit Agreement, as the same may be amended, supplemented or modified from
time to time, being hereinafter referred to as the "Credit Agreement"). All
terms defined in the Credit Agreement shall have the same meanings herein.
In accordance with the Credit Agreement, the undersigned Borrower
hereby requests that the Banks make the Loan requested on schedule attached
hereto (the "Requested Loan").
In connection with the foregoing and pursuant to the terms and
provisions of the Credit Agreement, the undersigned hereby certifies to the
Agent, the Banks and the Issuing Banks that the following statements are true
and correct:
(i) The representations and warranties contained in
Article VIII of the Credit Agreement and in each of the other Loan
Documents are true and correct on and as of the date hereof with the
same force and effect as if made on and as of such date.
(ii) No Default has occurred and is continuing or would
result from the Requested Loan.
(iii) All information supplied on the schedule and
officer's certificate attached hereto is true, correct, and complete
as of the date hereof.
<PAGE> 76
BORROWER:
HEALTHCOR HOLDINGS, INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
Dated as of:___________________
[insert date of
Requested Loan]
-2-
<PAGE> 77
SCHEDULE 1
TO
LOAN REQUEST FORM
Revolving Credit Loan
Request Information
<TABLE>
<S> <C> <C>
(1) Revolving Credit Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000,000.00
(2) Aggregate outstanding principal amount of all Revolving Credit Loans . . . . . . . . . . . . . . . . $_________
(3) Aggregate amount of all Letter of Credit Liabilities . . . . . . . . . . . . . . . . . . . . . . . . $_________
(4) Available Revolving Credit Commitment [line (1) minus the sum of
line (2) and line (3)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $_________
(5) Amount of requested Revolving Credit Loan (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . $_________
(6) Type of requested Revolving Credit Loan (check whichever is applicable):
_____ Alternate Base Rate Loan
_____ Eurodollar Loan having an Interest Period of:
_____ one month
_____ two months
_____ three months
_____ six months
(7) Number of Interest Periods currently in effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . _________
(8) Date of requested Revolving Credit Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . _________, 19___
</TABLE>
- ---------------------
(1) The requested Revolving Credit Loan must be in an amount equal to or
less than the amount shown on line (4) above.
<PAGE> 78
EXHIBIT "B-2"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Notice of Continuation or Conversion
<PAGE> 79
NOTICE OF CONTINUATION OR CONVERSION
TO: TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Agent
2200 Ross Avenue
Post Office Box 660197
Dallas, Texas 75266-0197
Attention: Steven T. Prichett
Ladies and Gentlemen:
The undersigned is an officer of HEALTHCOR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), and is authorized to make and deliver this
certificate pursuant to that certain Second Amended and Restated Credit
Agreement dated as of December 1, 1997, among Borrower, Texas Commerce Bank
National Association, a national banking association, as agent (in such
capacity, the "Agent"), the lenders from time to time party thereto
(collectively, the "Banks"), and the Banks issuing letters of credit from time
to time thereunder (in such capacity, the "Issuing Banks") (as the same may be
amended, supplemented or modified from time to time, being hereinafter referred
to as the "Credit Agreement"). All terms defined in the Credit Agreement shall
have the same meanings herein.
In accordance with the Credit Agreement, the Borrower hereby (check
whichever is applicable):
___ 1. Requests that the Banks convert a Eurodollar Loan in
the principal amount of $___________ into an Alternate Base Rate Loan; or
___ 2. Requests that the Banks convert an Alternate Base
Rate Loan in the principal amount of $___________ into a Eurodollar Loan,
having an Interest Period of (check whichever is applicable):
_____ one month
_____ two months
_____ three months
_____ six months
NOTICE OF CONTINUATION OR CONVERSION - Page 1
<PAGE> 80
___ 3. Requests that the Banks continue a Eurodollar Loan in
the amount of $__________, having an Interest Period of (check whichever is
applicable):
_____ one month
_____ two months
_____ three months
_____ six months
In connection with the foregoing and pursuant to the terms and
provisions of the Credit Agreement, if the undersigned has checked paragraph 2
or 3 above, the undersigned hereby certifies to the Agent, the Banks and the
Issuing Banks that the following statements are true and correct:
(i) The representations and warranties contained in
Article VIII of the Credit Agreement and in each of the other Loan
Documents are true and correct on and as of the date hereof with the
same force and effect as if made on and as of such date.
(ii) No Default has occurred and is continuing or would
result from the Continuation or Conversation, as the case may be,
requested hereunder.
BORROWER:
HEALTHCOR HOLDINGS, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Dated as of:_______________________
[insert date of
requested Continuation
or Conversion]
NOTICE OF CONTINUATION OR CONVERSION - Page 2
<PAGE> 81
EXHIBIT "C"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Letter of Credit Request Form
<PAGE> 82
LETTER OF CREDIT REQUEST FORM
TO: Texas Commerce Bank National Association,
as an Issuing Bank
2200 Ross Avenue
Post Office Box 660197
Dallas, Texas 75266-0197
Attention: Steven T. Prichett
Ladies and Gentlemen:
The undersigned is an officer of HEALTHCOR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), and is authorized to make and deliver this
certificate pursuant to that certain Second Amended and Restated Credit
Agreement dated as of December 1, 1997, among Borrower, Texas Commerce Bank
National Association, as agent (in such capacity, the "Agent"), the lenders
from time to time party thereto (collectively, the "Banks"), and the Banks from
time to time issuing letters of credit thereunder (in such capacity, the
"Issuing Banks") (as the same may be amended, supplemented or modified from
time to time, the "Credit Agreement"). All terms defined in the Credit
Agreement shall have the same meanings herein.
In accordance with the Credit Agreement, the Borrower hereby requests
that the Issuing Bank issue a Letter of Credit. The Letter of Credit shall:
(a) be issued on ________________, 19___;(1)
(b) be in the amount of $____________;(2)
(c) permit [a single drawing/multiple drawings](3) on the
terms and conditions set forth in the L/C Application
attached as Annex I hereto;
- ----------------------
(1) Insert date not later than the Revolving Credit Termination Date.
(2) Insert face amount of Letter of Credit. Issuance is subject to
Dollar limit on aggregate face amount of Letters of Credit
specified in Section 3.1 of the Credit Agreement ($2,000,000).
(3) Specify one.
<PAGE> 83
(d) be payable upon presentation of a [sight draft/time
draft. The time draft shall be payable on
__________________, 19___];(4) and
(e) expire on __________________, 19___.(4)
The Letter of Credit is to be delivered by the Issuing Bank to
_____________________.(5)
[Drawing/Each drawing](3) under the Letter of Credit shall be subject
to the conditions specified in the L/C Application attached as Annex I hereto.
In connection with the foregoing and pursuant to the terms and
provisions of the Credit Agreement, the undersigned hereby certifies that the
following statements are true and correct:
(i) The representations and warranties contained in
Article VIII of the Credit Agreement and in each of the other Loan
Documents are true and correct on and as of the date hereof with the
same force and effect as if made on and as of such date.
(ii) No Default has occurred and is continuing or would
result from the issuance of the Letter of Credit requested hereunder.
(iii) The face amount of the Letter of Credit requested
hereunder, when added to all outstanding Revolving Credit Loans and
Letter of Credit Liabilities, will not exceed the aggregate amount of
the Revolving Credit Commitments.
(iv) The proposed terms of the Letter of Credit requested
hereunder and the transactions proposed to be supported thereby are
accurately and completely described on the L/C Application attached as
Annex I hereto.
(v) All information supplied below is true, correct, and
complete as of the date hereof.
Information
<TABLE>
<S> <C> <C>
(a) Revolving Credit Commitment . . . . . . . . . . . . . . $20,000,000.00
(b) Aggregate outstanding principal amount of all
Revolving Credit Loans . . . . . . . . . . . . . . . . . $_____________
</TABLE>
- --------------------------
(4) Insert date not later than the earlier of (a) one year after
issuance or (b) the Revolving Credit Termination Date.
(5) Insert name of Borrower or name and address of
beneficiary.
<PAGE> 84
<TABLE>
<S> <C> <C>
(c) Aggregate outstanding amount of all Letter of
Credit Liabilities . . . . . . . . . . . . . . . . . . . . . . . $____________
(d) Net availability for Letters of Credit: [line (a) minus the
sum of line (b) and line (c)] . . . . . . . . . . . . . . . . . . $____________
(e) Face Amount of requested Letter of Credit . . . . . . . . . . . . $____________
(f) Date requested for issuance of Letter of Credit . . . . . . . . . _______, 19__
</TABLE>
BORROWER:
HEALTHCOR HOLDINGS, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Dated as of:__________________
[insert date of
proposed issuance
of Letter of Credit]
<PAGE> 85
ANNEX 1
TO
LETTER OF CREDIT REQUEST FORM
L/C Application
[See Attached]
<PAGE> 86
EXHIBIT "D-1"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Second Amended and Restated Borrower Security Agreement
<PAGE> 87
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT (this
"Agreement") dated as of December 1, 1997, is by and between HEALTHCOR
HOLDINGS, INC., a Delaware corporation (the "Debtor"), and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association, as agent (in such
capacity, the "Agent") for itself, the Issuing Banks (hereinafter defined) and
the Banks (hereinafter defined).
R E C I T A L S:
A. The Debtor, HealthCor, Inc., a Delaware corporation
("HealthCor"), the Agent, certain lenders (collectively, the "Existing Banks"),
and the Existing Banks issuing letters of credit thereunder (in such capacity,
the "Existing Issuing Banks") previously entered into that certain Amended and
Restated Credit Agreement dated as of October 31, 1996 (as amended, the
"Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, the Debtor and
HealthCor executed and delivered to the Agent an Amended and Restated Security
Agreement dated as of October 31, 1996, which secured the obligations of the
Debtor under the Existing Credit Agreement (the "Existing Security Agreement").
C. Concurrently herewith the Debtor, the Agent, certain lenders
(together with any other lenders that may from time to time become a party
thereto, the "Banks"), and the Banks issuing letters of credit thereunder (in
such capacity, the "Issuing Banks") are entering into that certain Second
Amended and Restated Credit Agreement of even date herewith (as the same may be
amended, supplemented or modified from time to time, being hereinafter referred
to as the "Credit Agreement").
D. The parties hereto now desire to amend and restate the
Existing Security Agreement, as hereinafter provided, and have agreed, for
purposes of clarity and ease of administration, to carry out the agreed upon
amendments by amending the pertinent provisions of the Existing Security
Agreement and restating the Existing Security Agreement, insofar as it relates
to property of the Debtor, in its entirety by means of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows and the Existing Security
Agreement is hereby amended, consolidated and restated in its entirety as
follows::
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 1
<PAGE> 88
ARTICLE I
Definitions; Security Interest
Section 1.1 Definitions. All capitalized terms used and not
otherwise defined herein shall have their respective meanings as set forth in
the Credit Agreement.
Section 1.2 Security Interest. The Debtor hereby grants to the
Agent for the benefit of itself, the Banks and the Issuing Banks, and ratifies
and confirms that the Agent has previously been granted and now possesses, a
security interest in the following property, whether now owned or existing or
hereafter acquired or arising and wherever arising or located (such property
being hereinafter sometimes called the "Collateral"):
(ACCOUNTS)
(a) All accounts, receivables, accounts receivable, general
intangibles, book debts, contract rights, instruments, and documents
(including, without limitation, all documents of title); (b) all
chattel paper, notes, drafts, acceptances, other evidences, and forms
of payment under leases of equipment or contracts for the sale of
inventory or the performance of services, and other forms of
obligations received by or belonging to the Debtor for goods sold or
leased and/or services rendered by the Debtor; (c) all of the rights
of the Debtor in, to, and under all purchase orders, sales contracts,
instruments, and other documents evidencing obligations for or
representing payment for goods sold or leased and/or services rendered
by the Debtor; and (d) all moneys due or to become due to the Debtor
under all contracts for the sale or lease of goods and/or the
performance of services by the Debtor; in each case of whatever
nature, now owned by the Debtor or existing or hereafter acquired,
created, or arising and the rights and interests of the Debtor in
goods, the sale and delivery of which give rise to any and all
proceeds of any of the foregoing Collateral (including, but not
limited to, all insurance and claims for insurance in respect of the
Collateral).
(INVENTORY)
All goods, merchandise, raw materials, goods in process,
finished goods, and other tangible personal property of whatever
nature now owned by the Debtor or hereafter from time to time existing
or acquired, and held for sale or lease or furnished or to be
furnished under contracts of service or used or usable or consumed or
consumable in the Debtor's business and all accessions and
appurtenances thereto, and all accounts, receivables, accounts
receivables, instruments, notes, chattel paper, documents (including,
without limitation, all documents of title), contract rights, and
general intangibles arising in connection with any of the foregoing
and all products and proceeds of any of the foregoing Collateral
(including, without limitation, all insurance and claims for insurance
effective or held for the benefit of the Debtor or the Agent in
respect of any of the foregoing Collateral).
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 2
<PAGE> 89
(EQUIPMENT)
All goods, equipment, machinery, furnishings, fixtures,
furniture, appliances, accessories, leasehold improvements, chattels,
and other articles of personal property of whatever nature now owned
by the Debtor or hereafter acquired, all accessions and appurtenances
thereto, and all renewals or replacements of or substitutions for any
of the foregoing and all proceeds of any of the foregoing Collateral
(including, but not limited to, all insurance and claims for insurance
in respect of any of the foregoing Collateral).
(TRADEMARKS AND PATENTS)
All trademarks and service marks now held or hereafter
acquired by the Debtor, which are registered in the United States
Patent and Trademark Office or in any similar office or agency of the
United States or any state thereof or any political subdivision
thereof and any application for such trademarks and service marks, as
well as any unregistered marks used by the Debtor in the United States
and trade areas including logos, designs, trade names, company names,
business names, fictitious business names and other business
identifiers in connection with which any of these registered or
unregistered marks are used in the United States (collectively, the
"Marks"), together with the registrations and right to all renewals
thereof, and the goodwill of the business of the Debtor symbolized by
the Marks, all United States patents now or hereafter owned by the
Debtor, as well as any application for a United States patent now or
hereafter owned by the Debtor (collectively, the "Patents"), and
reissues, renewals or extensions thereof, and all know-how,
technology, inventions, processes, formulas, product formulations,
blueprints, drawings, test data, manuals, production documents,
procedures, product and manufacturing specifications or standards and
other tangible (physical, electronic or other) manifestations of any
Marks and Patents now or hereafter utilized in the Debtor's business.
(INVESTMENT PROPERTY)
All investment property, including, without limitation, all
securities, whether certificated or uncertificated, investment
accounts or securities accounts, and security entitlements which may
be carried in a securities account now owned by the Debtor or
hereafter from time to time existing or acquired, and all proceeds of
any of the foregoing Collateral (including, but not limited to, all
insurance claims for insurance in respect of any of the foregoing
Collateral).
Section 1.3 Obligations. The Collateral shall secure the
following obligations, indebtedness, and liabilities (all such obligations,
indebtedness, and liabilities being hereinafter sometimes called the
"Obligations"): (a) the obligations, indebtedness, and liabilities of the
Debtor to the Banks and the Issuing Banks evidenced by the Revolving Credit
Notes (herein so called) executed by the Debtor pursuant to the Credit
Agreement; (b) the obligations, indebtedness, and liabilities of the Debtor to
the Agent, the Banks and the Issuing Banks under the Credit Agreement; (c) all
future advances by the Banks and the Issuing Banks to the Debtor;
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 3
<PAGE> 90
(d) all costs and expenses, including without limitation all attorneys' fees
and legal expenses, incurred by the Agent, the Banks and the Issuing Banks to
preserve and maintain the Collateral, collect the obligations herein described,
and enforce this Agreement; (e) all other Obligations (as such term is defined
in the Credit Agreement); and (f) all extensions, renewals, and modifications
of any of the foregoing.
Section 1.4 Renewal of Obligations and Liens. The parties hereto
acknowledge and agree that (a) the Revolving Credit Notes are in renewal,
extension and modification, but not in extinguishment of, the existing
indebtedness of the Debtor and HealthCor under the Existing Credit Agreement,
and (b) such existing indebtedness is secured by liens and security interests
granted by the Debtor pursuant to the Existing Security Agreement, which liens
and security interests are not extinguished or released, but instead are hereby
renewed, extended, carried forward and continued in accordance with the terms
of this Agreement.
ARTICLE II
Representations and Warranties
To induce the Agent to enter into this Agreement and to induce the
Banks and the Issuing Banks to extend credit to the Debtor under the Credit
Agreement, the Debtor represents and warrants to the Agent, the Banks and the
Issuing Banks that:
Section 2.1 Title. Except for the Permitted Liens, the Debtor
owns, and with respect to Collateral acquired after the date hereof the Debtor
will own, the Collateral free and clear of any Lien.
Section 2.2 Accounts. The Debtor represents, warrants, and
covenants that each and all of its accounts will meet the following
requirements continuously from the time each of them comes into existence until
it is collected in full: (a) the account arose from the performance of
services by the Debtor which services have been fully and satisfactorily
performed or from the absolute sale of goods by the Debtor in which the Debtor
had the sole and complete ownership, and the goods have been shipped or
delivered to the account debtor, evidencing which the Debtor or the Agent has
possession of shipping and delivery receipts; (b) the account is not subject to
setoff, counterclaim, defense, allowance or adjustment other than discounts for
prompt payment shown on the invoice or to dispute, objection or complaint by
the account debtor concerning his or its liability on the account, and the
goods, the sale of which gives rise to the account, have not been returned,
rejected, lost, or damaged; (c) the account arose in the ordinary course of the
Debtor's business, and no notice of bankruptcy, insolvency, or financial
embarrassment of the account debtor has been received by the Debtor; and (d)
the Debtor shall notify the Agent promptly in writing when any account ceases
to meet any of the requirements of this Agreement. Nothing in this Section
shall be construed to limit or release any right of the Agent to any Collateral
arising pursuant to Section 1.2 of this Agreement.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 4
<PAGE> 91
Section 2.3 Financing Statements. No financing statement,
security agreement, or other lien instrument covering all or any part of the
Collateral is on file in any public office, except as may have been filed in
favor of the Agent or to perfect any Permitted Lien.
Section 2.4 Organization and Authority. The Debtor is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation. The Debtor has the corporate power and
authority to execute, deliver, and perform this Agreement, and the execution,
delivery, and performance of this Agreement by the Debtor (a) have been
authorized by all necessary corporate action on the part of the Debtor, (b) do
not and will not violate (i) any law, rule or regulation which violation would
have a material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of the Debtor, the Collateral
taken as a whole, or the ability of the Companies to pay and perform the
Obligations, or (ii) the certificate of incorporation or bylaws of the Debtor,
and (c) do not and will not conflict with, result in a breach of, or constitute
a default under the provisions of any material indenture, mortgage, deed of
trust, security agreement, instrument, or agreement pursuant to which the
Debtor or any of its property is bound.
Section 2.5 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown below its name on the signature pages of this Agreement.
Section 2.6 Location of Collateral. All inventory, machinery,
and equipment (other than inventory, machinery and equipment, which
individually or in the aggregate is immaterial) of the Debtor are located at
the locations specified on Schedule I hereto, or at other locations within the
continental United States of America in the ordinary course of the Debtor's
business so long as all actions have been taken to assure the continued
perfection and priority of the Agent's security interest therein.
ARTICLE III
Covenants
The Debtor covenants and agrees with the Agent, the Banks and the
Issuing Banks that until the Obligations are paid and performed in full and all
Commitments of the Banks and the Issuing Banks to the Debtor have been
terminated:
Section 3.1 Maintenance. The Debtor shall maintain the
Collateral in good operating condition and repair, and the Debtor shall not
permit any waste or destruction of the Collateral or any part thereof except
for the ordinary wear and tear of its intended primary use. The Debtor shall
not use or permit the Collateral to be used in violation of any law or
inconsistently with the terms of any policy of insurance. The Debtor shall not
use or permit the Collateral to be used in any manner or for any purpose that
would impair the value of the Collateral or expose the Collateral to unusual
risk.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 5
<PAGE> 92
Section 3.2 Encumbrances. The Debtor shall not create, permit,
or suffer to exist, and the Debtor shall defend the Collateral against, any
Lien on the Collateral except Permitted Liens, and the Debtor shall defend the
Debtor's rights in the Collateral and the Agent's security interest in the
Collateral against the claims of all Persons.
Section 3.3 Modification of Collateral. The Debtor shall not do
anything to impair the rights of the Agent in the Collateral. Without the
prior written consent of the Agent, the Debtor shall not during the continuance
of an Event of Default (a) grant any extension of time for any payment with
respect to the Collateral, (b) compromise, compound, or settle any of the
Collateral, (c) release in whole or in part any person or entity liable for
payment with respect to the Collateral, (d) allow any credit or discount for
payment with respect to the Collateral other than normal trade discounts
granted in the ordinary course of business and other adjustments, such as bad
debt expense, made in the ordinary course of business, (e) release any lien,
security interest or assignment securing the Collateral, or (f) otherwise amend
or modify any of the Collateral.
Section 3.4 Disposition of Collateral. The Debtor shall not
sell, lease, assign, transfer or otherwise dispose of any of the Collateral,
except dispositions of old, worn out or obsolete equipment and inventory in the
ordinary course of business.
Section 3.5 Further Assurances. At any time and from time to
time, upon the request of the Agent, and at the sole expense of the Debtor, the
Debtor shall promptly execute and deliver all such further instruments and
documents and take such further action as the Agent may deem necessary or
desirable to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement, including, without
limitation, the execution and filing of such financing statements as the Agent
may require. A carbon, photographic, or other reproduction of this Agreement
or of any financing statement covering the Collateral or any part thereof shall
be sufficient as a financing statement and may be filed as a financing
statement. The Debtor shall promptly endorse and deliver to the Agent all
documents, instruments, and chattel paper that it now owns or may hereafter
acquire.
Section 3.6 Risk of Loss; Insurance. The Debtor shall be
responsible for any loss of or damage to the Collateral. The Debtor shall
maintain, with financially sound and reputable companies, insurance policies
(i) insuring the Collateral against loss by fire, explosion, theft, and such
other risks and casualties as are customarily insured against by companies
engaged in the same or a similar business, and (ii) insuring the Debtor and the
Agent against liability for personal injury and property damage relating to the
Collateral, such policies to be in such amounts and covering such risks as are
customarily insured against by companies engaged in the same or a similar
business, but at least in the amounts specified in the Credit Agreement, with
losses payable to the Debtor and the Agent as their respective interests may
appear. All insurance with respect to the Collateral shall provide that no
cancellation, reduction in amount, or change in coverage thereof shall be
effective unless the Agent has received thirty (30) days prior written notice
thereof. The Debtor shall furnish the Agent with certificates or other
evidence satisfactory to the Agent of compliance with the foregoing insurance
provisions. The Debtor shall deliver to the Agent upon demand copies of all
insurance policies covering the Collateral or any part thereof.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 6
<PAGE> 93
Section 3.7 Inspection Rights. The Debtor shall permit the
Agent, the Banks and the Issuing Banks and their representatives, upon one (1)
Business Day's prior notice, to examine or inspect the Collateral wherever
located and to examine, inspect, and copy the Debtor's books and records at any
reasonable time and as often as they may desire. The Agent may at any time and
from time to time contact account debtors and other obligors to verify the
existence, amounts, and terms of the Debtor's accounts.
Section 3.8 Mortgagee's and Landlord Waivers. The Debtor shall
deliver to the Agent an instrument satisfactory in form and substance to the
Agent, executed by the landlord of the premises located at 8150 North Central
Expressway, Suite M-2000, Dallas, Texas 75206, by which such landlord waives or
subordinates its rights, if any, in the Collateral. With respect to all other
locations of Collateral, upon the request of the Agent at any time, the Debtor
shall exert its best efforts to cause each mortgagee of real property owned by
the Debtor and each landlord of real property leased by the Debtor to execute
and deliver instruments satisfactory in form and substance to the Agent by
which such mortgagee or landlord waives or subordinates its rights, if any, in
the Collateral.
Section 3.9 Notification. The Debtor shall promptly notify the
Agent of (i) any Lien or material claim made or threatened against the
Collateral, (ii) any material change in the Collateral, including, without
limitation, any material damage to or loss of the Collateral, and (iii) the
occurrence or existence of any Default.
Section 3.10 Corporate Changes. The Debtor shall not change its
name, identity, or corporate structure in any manner that might make any
financing statement filed in connection with this Agreement seriously
misleading, unless the Debtor shall have given the Agent thirty (30) days prior
written notice thereof and shall have taken all action deemed necessary or
desirable by the Agent to make each financing statement not seriously
misleading. The Debtor shall not change its principal place of business, chief
executive office, or the place where it keeps its books and records, unless it
shall have given the Agent thirty (30) days prior written notice thereof and
shall have taken all action deemed necessary or desirable by the Agent to cause
its security interest in the Collateral to be perfected with the priority
required by this Agreement.
Section 3.11 Books and Records; Information. The Debtor shall
keep books and records of the Collateral and the Debtor's business and
financial condition in accordance with GAAP (subject to year-end adjustments
and disclosures). The Debtor shall from time to time at the request of the
Agent deliver to the Agent such information regarding the Collateral and the
Debtor as the Agent may request, including, without limitation, lists and
descriptions of the Collateral and evidence of the identity and existence of
the Collateral. Upon the request of the Agent, the Debtor shall mark its books
and records to reflect the security interest of the Agent under this Agreement.
Section 3.12 Location of Collateral. The Debtor shall not move
any of its equipment, machinery or inventory from the locations specified
herein without the prior written consent of the Agent, except to other
locations within the continental United States of America in the
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 7
<PAGE> 94
ordinary course of business so long as all actions have been taken to assure
the continued perfection and priority of the Agent's security interest therein.
Section 3.13 Lockbox Accounts. The Debtor hereby agrees to the
terms, provisions and covenants set forth in Section 6.2 of the Credit
Agreement and the rights of the Agent thereunder, and hereby agrees to comply
with each of the requirements specified therein.
ARTICLE IV
Special Provisions Concerning Marks
Section 4.1 Additional Representations and Warranties. The
Debtor represents and warrants that it is the true and lawful exclusive owner
of the Marks listed as being owned by it in Schedule II hereto and that, as of
the date hereof, the listed Marks include all the United States federal
registrations or applications registered in the United States Patent and
Trademark Office which are necessary for Debtor's business as currently
operated. The Debtor represents and warrants that it owns or is licensed to
use or is not prohibited from using all Marks that it uses. The Debtor further
warrants that it is aware of no third party claim (which could have a material
adverse effect on the business, condition (financial or otherwise), operations,
prospects or properties of such Debtor) that any aspect of such Debtor's
present or contemplated business operations infringes or will infringe any
mark. The Debtor represents and warrants that it is the owner of record of all
United States registrations and applications listed as being owned by it in
Schedule II hereto and that such registrations are valid, subsisting, have not
been cancelled and that the Debtor is not aware of any third party claim (which
could have a material adverse effect on the business, condition (financial or
otherwise), operations, prospects or properties of such Debtor) that any such
registration is invalid or unenforceable. The Debtor hereby grants to the
Agent an absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required by the
United States Patent and Trademark Office in order to effect an absolute
assignment of all right, title and interest in each such Mark and associated
goodwill, and record the same.
Section 4.2 Licenses and Assignments. Other than the license
agreements listed on Schedule II hereto and any extensions or renewals thereof,
the Debtor hereby agrees not to divest itself of any right under any Mark
except those Debtor reasonably determines are not necessary for the conduct of
its business.
Section 4.3 Infringements. The Debtor agrees, promptly upon
learning thereof, to notify the Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect
to, any party who may be infringing or otherwise violating any of the Debtor's
rights in and to any Mark, or with respect to any party claiming that the
Debtor's use of any Mark violates any property right of that party, in each
case to the extent that the Debtor reasonably believes that such infringement
or violation is material to its business. The Debtor further agrees, if
consistent with good business practice, diligently to prosecute any Person
infringing any Mark to the extent that the Debtor reasonably believes that such
infringement is material to its business.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 8
<PAGE> 95
Section 4.4 Preservation of Marks. To the extent the failure to
do so would cause a material adverse effect on the business, condition
(financial or otherwise), operations, prospects or properties of the Debtor and
the Debtor reasonably believes it to be consistent with good business practice,
the Debtor agrees to use its Marks in interstate commerce during the time in
which this Agreement is in effect, sufficiently to preserve such Marks as
trademarks or service marks registered under the laws of the United States.
Section 4.5 Maintenance of Registration. To the extent the
failure to do so would cause a material adverse effect on the business,
condition (financial or otherwise), operations, prospects or properties of the
Debtor and the Debtor reasonably believes it to be consistent with good
business practice, the Debtor shall, at its own expense, diligently process all
documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 et
seq. to maintain trademark registration, including but not limited to
affidavits of use and applications for renewals of registration in the United
States Patent and Trademark Office for all of its Marks pursuant to 15 U.S.C.
Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in
connection therewith and shall not abandon any such filing of affidavit of use
or any such application of renewal prior to the exhaustion of all reasonable
administrative and judicial remedies without prior written consent of Required
Banks.
Section 4.6 Future Registered Marks. If any Mark registration
issues hereafter to the Debtor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within thirty
(30) days of receipt of such certificate the Debtor shall deliver a copy of
such certificate, and a grant of security in such mark to the Agent, confirming
the grant thereof hereunder, the form of such confirmatory grant to be
satisfactory to the Agent.
Section 4.7 Remedies. If an Event of Default shall occur and be
continuing, the Agent may, after ten (10) days' written notice to the Debtor,
take any or all of the following actions: (i) declare the entire right, title
and interest of the Debtor in and to each of the Marks and the good will of the
business associated therewith, together with all trademark rights and rights of
protection to the same, vested, in which event such rights, title and interest
shall immediately vest, in the Agent for the benefit of the Banks and the
Issuing Banks, in which case the Agent shall be entitled to exercise the power
of attorney referred to in Section 4.1 to execute, cause to be acknowledged and
notarized and record said absolute assignment with the applicable agency; (ii)
take and use or sell the Marks and the goodwill of the Debtor's businesses
symbolized by the Marks and the right to carry on the businesses and use the
assets of the Debtor in connection with which the Marks have been used; and
(iii) direct the Debtor to refrain, in which event the Debtor shall refrain,
from using the Marks in any manner whatsoever, directly or indirectly, and
execute such other and further documents that the Agent may request to further
confirm this and to transfer ownership of the Marks and registrations and any
pending trademark application in the United States Patent and Trademark Office
or any equivalent government agency or office in any foreign jurisdiction to
the Agent.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 9
<PAGE> 96
ARTICLE V
Special Provisions
Concerning Patents
Section 5.1 Additional Representations and Warranties. The
Debtor represents and warrants that it is the true and lawful exclusive owner
of all rights in the Patents listed as being owned by it in Schedule III hereto
that, as of the date hereof, said Patents include all the United States patents
and applications for United States patents that the Debtor now owns which are
necessary for Debtor's business as currently operated. The Debtor represents
and warrants that it owns or is licensed to practice under all Patents that it
now uses or practices under. The Debtor further warrants that it is aware of
no third party claim (which could have a material adverse effect on the
business, condition (financial or otherwise), operations, prospects or
properties of the Debtor) that any aspect of such Debtor's present or
contemplated business operations infringes or will infringe any patent. The
Debtor hereby grants to the Agent an absolute power of attorney to sign, upon
the occurrence and during the continuance of any Event of Default, any document
which may be required by the United States Patent and Trademark Office in order
to effect an absolute assignment of all right, title and interest in each
Patent and record the same.
Section 5.2 Licenses and Assignments. Other than the license
agreements listed on Schedule III hereto and any extensions or renewals
thereof, the Debtor hereby agrees not to divest itself of any right under any
Patent except those Patents the Debtor reasonably determines are not necessary
for the conduct of its business.
Section 5.3 Infringements. The Debtor agrees, promptly upon
learning thereof, to furnish the Agent in writing with all pertinent
information available to the Debtor with respect to any infringement or other
violation of the Debtor's rights in any Patent, or with respect to any claim
that practice of any Patent violates any property rights of that party, in each
case to the extent that the Debtor reasonably believes that such infringement
or violation is material to its business. The Debtor further agrees,
consistent with good business practice and absent direction of the Agent to the
contrary (which direction shall only be given if an Event of Default shall have
occurred and be continuing, diligently to prosecute any Person infringing any
Patent to the extent that the Debtor reasonably believes that such infringement
is material to its business.
Section 5.4 Maintenance of Patents. At its own expense, the
Debtor shall make timely payment of all post-issuance fees required pursuant to
35 U.S.C. Section 41 to maintain in force rights under each Patent to the
extent the Debtor reasonably believes it to be consistent with good business
practice and failure to do so would cause a material adverse effect on the
business, condition (financial or otherwise), operations, prospects or
properties of the Debtor.
Section 5.5 Prosecution of Patent Application. At its own
expense, the Debtor shall diligently prosecute all applications for Patents
listed as being owned by it in Schedule III hereto and shall not abandon any
such application prior to exhaustion of all reasonable administrative and
judicial remedies, to the extent Debtor reasonably believes it to be consistent
with good
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 10
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business practice and failure to do so would cause a material adverse effect on
the business, condition (financial or otherwise), operations, prospects or
properties of the Debtor.
Section 5.6 Other Patents. Within thirty (30) days of
acquisition of a Patent, or of filing of an application for a Patent, the
Debtor shall deliver to the Agent a copy of said Patent or such application, as
the case may be, with a grant of security as to such Patent, as the case may
be, confirming the grant thereof hereunder, the form of such confirmatory grant
to be satisfactory to the Agent.
Section 5.7 Remedies. If an Event of Default shall occur and be
continuing, the Agent may after ten (10) days' written notice to the Debtor,
take any or all of the following actions: (i) declare the entire right, title,
and interest of the Debtor in each of the Patents vested, in which event such
right, title, and interest shall immediately vest in the Agent for the benefit
of the Banks and the Issuing Banks, in which case the Agent shall be entitled
to exercise the power of attorney referred to in Section 5.1 to execute, cause
to be acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and practice or sell the Patents; and (iii) direct
the Debtor to refrain, in which event the Debtor shall refrain, from practicing
the Patents directly or indirectly, and the Debtor shall execute such other and
further documents as the Agent may request further to confirm this and to
transfer ownership of the Patents to the Agent for the benefit of the Banks and
the Issuing Banks.
ARTICLE VI
Rights of the Agent
Section 6.1 Certain Covenants and Rights Regarding the
Collateral.
(a) The Debtor shall from time to time at the request of
the Agent furnish the Agent with a schedule of each account included
in the Collateral and a list of all those liable on checks, notes,
drafts, and other instruments representing the proceeds of such
accounts. The Agent shall have the right to make test verifications
of the Collateral. If any part of the Collateral is or becomes
subject to the Federal Assignment of Claims Act, the Debtor will
execute all instruments and take all steps required by the Agent to
comply with that act. If part of the Collateral is evidenced by
promissory notes, trade acceptances or other instruments for the
payment of money, the Debtor will, at the request of the Agent,
immediately deliver them to the Agent, appropriately endorsed to the
order of the Agent, and regardless of the form of endorsement, the
Debtor waives presentment, demand, notice of dishonor, protest, and
notice of protest.
(b) If the validity or priority of this Agreement or of
any rights, titles, security interests or other interests created or
evidenced hereby shall be attacked, endangered, or questioned, or if
any legal proceedings are instituted with respect thereto, the Debtor
will give prompt written notice thereof to the Agent and, at the
Debtor's own cost and expense, will diligently endeavor to cure any
defect which may be developed or claimed,
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 11
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and will take all necessary and proper steps for the defense of such
legal proceedings, and the Agent (whether or not named as a party to
the legal proceedings with respect thereto) is hereby authorized and
empowered to take such additional steps as in its judgment and
discretion may be necessary or proper for the defense of any such
legal proceedings or the protection of the validity or priority of
this Agreement and the rights, titles, security interests, and other
interests created or evidenced hereby, and all expenses so incurred of
every kind and character shall be a demand obligation owing by the
Debtor and the party incurring such expenses shall be subrogated to
all rights of the Person receiving such payment.
(c) During the existence of an Event of Default, the
Agent is authorized to take possession peaceably of the Collateral and
of all books, records and accounts relating thereto, and to exercise
without interference from the Debtor any and all rights which the
Debtor has with respect to the management, possession, protection, or
preservation of the Collateral. If necessary to obtain the possession
provided for above, the Agent may invoke any and all legal remedies to
dispossess the Debtor, including specifically one or more actions for
forcible entry and detainer. In connection with any action taken by
the Agent pursuant to this Section, the Agent shall not be liable for
any loss sustained by the Debtor resulting from any act or omission of
the Agent unless such loss is caused by the willful misconduct and bad
faith of the Agent, nor shall the Agent be obligated to perform or
discharge any obligation, duty, or liability under any sale or lease
agreement covering the Collateral or any part thereof, or under or by
reason of this Agreement or exercise of rights or remedies hereunder.
(d) At any time during the existence of a Default the
Agent may notify the account debtors or obligors of any accounts,
chattel paper, negotiable instruments, or other evidences of
indebtedness included in the Collateral to pay the Agent directly.
Until the Agent elects to exercise these rights, the Debtor is
authorized as agent of the Agent to collect and enforce such accounts.
The costs of collection and enforcement, including attorneys' fees and
expenses, shall be borne solely by the Debtor whether incurred by the
Agent or the Debtor.
Section 6.2 Performance by the Agent. If the Debtor fails to
perform or comply with any of its obligations and responsibilities contained
herein, the Agent itself may, at its sole discretion, cause or attempt to cause
performance or compliance with such agreement. In such event, the expenses of
the Agent shall be payable by the Debtor to the Agent on demand and together
with interest thereon at the Applicable Rate from and including the date the
Agent incurs such expenses to but excluding the date of such demand, and from
and including the date of such demand until such expenses are paid in full, at
the Default Rate, shall constitute Obligations secured by this Agreement. The
Agent, upon making such payment, shall be subrogated to all of the rights of
the Person receiving such payment. Notwithstanding the foregoing, it is
expressly agreed that the Agent shall not have any liability or responsibility
for the performance of any obligation of the Debtor under this Agreement.
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Section 6.3 Setoff; Property Held by the Agent. If an Event of
Default shall have occurred and be continuing, the Agent shall have the right
to set off and apply against the Obligations, at any time and without notice to
the Debtor, any and all deposits (general or special, time or demand,
provisional or final) (other than trust fund accounts held by the Debtor for
the benefit of non-Affiliates) or other sums at any time credited by or owing
from the Agent to the Debtor whether or not the Obligations are then due. As
additional security for the Obligations, the Debtor hereby grants the Agent a
security interest in all money, instruments, and other property of the Debtor
(other than trust fund accounts held by the Debtor for the benefit of
non-Affiliates) now or hereafter held by the Agent. In addition to the Agent's
right of setoff and as further security for the Obligations, the Debtor hereby
grants the Agent a security interest in all deposits (general or special, time
or demand, provisional or final) and other accounts of the Debtor (other than
trust fund accounts held by the Debtor for the benefit of non-Affiliates) now
or hereafter deposited with or held by the Agent and all other sums at any time
credited by or owing from the Agent to the Debtor. The rights and remedies of
the Agent hereunder are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Agent may have.
Section 6.4 Assignment by the Agent. Subject to Section 14.7 of
the Credit Agreement, the Agent, the Banks and the Issuing Banks may from time
to time assign the Obligations and any portion thereof, and/or the Collateral
and any portion thereof, and the assignee shall be entitled to all of the
rights and remedies of such Person under this Agreement in relation thereto.
ARTICLE VII
Default
Section 7.1 Rights and Remedies. During the existence of an
Event of Default, the Agent shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted
to the Agent in this Agreement and in any other instrument or
agreement securing, evidencing, or relating to the Obligations or any
part thereof, the Agent shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as adopted by the
State of Texas. Without limiting the generality of the foregoing, the
Agent may (A) without demand or notice to the Debtor, collect,
receive, or take possession of the Collateral or any part thereof and
for that purpose the Agent may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (B) sell, lease, or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Agent's offices or elsewhere, for cash,
on credit, or for future delivery. Upon the request of the Agent, the
Debtor shall assemble the Collateral and make it available to the
Agent at any place designated by the Agent that is reasonably
convenient to the Debtor and the Agent. The Debtor agrees that the
Agent shall not be obligated to give more than ten (10) days prior
written notice of the time and place of any public sale or of the time
after which any private sale may take
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 13
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place and that such notice shall constitute reasonable notice of such
matters. The Debtor shall be liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys' fees,
legal expenses, and all other costs and expenses incurred by the Agent
in connection with the collection of the Obligations and the
enforcement of the Agent's rights under this Agreement. The Debtor
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay the Obligations
in full. The Debtor waives all rights of marshalling in respect of
the Collateral.
(ii) The Agent may cause any or all of the Collateral held
by it to be transferred into the name of the Agent or the name or
names of the Agent's nominee or nominees.
Section 7.2 Application of Proceeds of Sale. The proceeds of any
sale of Collateral pursuant to Section 7.1 hereof, as well as any Collateral
consisting of cash, shall be applied by the Agent as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses incurred by the Agent in connection with such sale or
otherwise in connection with this Agreement or any of the Obligations,
including, but not limited to, all court costs and the reasonable fees
and expenses of its agents and one legal counsel, the repayment of all
advances made hereunder or under any other Loan Document by the Agent
on behalf of the Debtor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder;
SECOND, to the payment in full of all other Obligations that
are payable to the Agent including, without limitation, all expense
reimbursements and indemnities;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses incurred by the Issuing Banks in connection with the
Credit Agreement, any Letter of Credit, or any of the Obligations,
including, but not limited to, all court costs and the reasonable fees
and expenses of their agents and one legal counsel;
FOURTH, to the payment in full of all other Obligations that
are payable to the Issuing Banks, including, without limitation, all
Letter of Credit disbursements and all accrued and unpaid interest
thereon and all Letter of Credit fees;
FIFTH, to the payment in full of the Obligations, pro rata
among the Banks in accordance with the amounts of the Loans held by
them, or, if no Loans shall be outstanding, in accordance with the
amounts of their Commitments;
SIXTH, if any Letter of Credit remains outstanding, the Agent,
after making the applications required by paragraphs "FIRST" through
"FIFTH" above,
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 14
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shall hold back and retain as Collateral for the Obligations an amount
equal to the aggregate face amounts of all outstanding Letters of
Credit; and
SEVENTH, provided that all of the Obligations have been paid
and performed in full and all Commitments and Letters of Credit have
terminated, to the Debtor, or its successors or assigns, or to
whomsoever may lawfully be entitled to the same, or as a court of
competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation, a
sale pursuant to any applicable Uniform Commercial Code or under a judicial
proceeding), the receipt of the Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Agent or such
officer or be answerable in any way for the misapplication thereof.
ARTICLE VIII
Miscellaneous
Section 8.1 No Waiver; Cumulative Remedies. No failure on the
part of the Agent to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are
cumulative and not exclusive of any rights and remedies provided by law.
Section 8.2 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtor, the Agent, the Banks and
the Issuing Banks and their respective heirs, successors, and assigns, except
that the Debtor may not assign any of its rights or obligations under this
Agreement without the prior written consent of the Agent.
Section 8.3 AMENDMENT; ENTIRE AGREEMENT; CONTROLLING AGREEMENT.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING THE EXISTING BORROWER
SECURITY AGREEMENT) EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may
be amended or waived only by an instrument in writing signed by the parties
hereto. In the event any term or provision of this Agreement expressly
conflicts with any term or provision of the Credit Agreement, the terms and
provisions of the Credit Agreement shall govern and control.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 15
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Section 8.4 Notices. All notices and other communications
provided for in this Agreement shall be given or made in writing and
telecopied, mailed by certified mail return receipt requested, or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof; or, as to any party at such other address as shall
be designated by such party in a notice to the other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid.
Section 8.5 Applicable Law; Venue; Service of Process. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS
AGREEMENT HAS BEEN ENTERED INTO IN DALLAS COUNTY, TEXAS, AND IT SHALL BE
PERFORMABLE FOR ALL PURPOSES IN DALLAS COUNTY, TEXAS. ANY ACTION OR PROCEEDING
AGAINST THE DEBTOR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR
ANY PART THEREOF MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS COUNTY,
TEXAS. THE DEBTOR HEREBY IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURTS, AND (II) WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. THE DEBTOR AGREES THAT
SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 8.4 OF THIS AGREEMENT. NOTHING IN THIS AGREEMENT OR
ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE
OBLIGATIONS OR ANY PART THEREOF SHALL AFFECT THE RIGHT OF THE AGENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST THE DEBTOR OR WITH RESPECT TO
ANY OF THE COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER JURISDICTION.
ANY ACTION OR PROCEEDING BY THE DEBTOR AGAINST THE AGENT SHALL BE BROUGHT ONLY
IN A COURT LOCATED IN DALLAS COUNTY, TEXAS.
Section 8.6 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 8.7 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Agent, or any Bank
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 16
<PAGE> 103
or Issuing Bank shall affect the representations and warranties or the right of
the Agent, the Banks and the Issuing Banks to rely upon them.
Section 8.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 8.9 Waiver of Bond. In the event the Agent seeks to take
possession of any or all of the Collateral by judicial process, the Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.
Section 8.10 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
Section 8.11 Construction. The Debtor and the Agent acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement with its legal
counsel and that this Agreement shall be construed as if jointly drafted by the
Debtor and the Agent.
Section 8.12 Obligations Absolute. The obligations of the Debtor
under this Agreement shall be absolute and unconditional and shall not be
released, discharged, reduced, or in any way impaired by any circumstance
whatsoever, including, without limitation, any amendment, modification,
extension, or renewal of this Agreement, the Obligations, or any document or
instrument evidencing, securing, or otherwise relating to the Obligations, or
any release or subordination of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section 8.13 Release of Security Interest. At such time as all of
the Obligations have been paid and performed in full, all obligations and
commitments of the Banks and the Issuing Banks to make advances, issue letters
of credit or otherwise extend credit under the Credit Agreement have expired or
terminated, and no Letters of Credit remain outstanding, the Agent shall
release the security interest granted hereby.
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 17
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
HEALTHCOR HOLDINGS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Address for Notices:
8150 North Central Expressway, Suite M-2000
Dallas, Texas 75206
Fax No.: (214) 692-4666
Telephone No.: (214) 692-4663
Attention: S. Wayne Bazzle
AGENT:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as Agent
By:
------------------------------
Steven T. Prichett
Vice President
Address for Notices:
2200 Ross Avenue
Post Office Box 660197
Dallas, Texas 75266-0197
Fax No.: (214) 965-2384
Telephone No.: (214) 965-3710
Attention: Steven T. Prichett
SECOND AMENDED AND RESTATED BORROWER SECURITY AGREEMENT - Page 18
<PAGE> 105
SCHEDULE I
Locations of Collateral
[See Attached]
SCHEDULE I, Locations of Collateral
<PAGE> 106
SCHEDULE II
Trademarks
[See Attached]
SCHEDULE II, Trademarks
<PAGE> 107
SCHEDULE III
Patents
[See Attached]
SCHEDULE III, Patents
<PAGE> 108
EXHIBIT "D-2"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Second Amended and Restated Subsidiary Security Agreement
<PAGE> 109
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT (this
"Agreement") dated as of December 1, 1997 is by and among the undersigned
debtors (each, a "Debtor" and collectively, the "Debtors") and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association, as agent (in such
capacity, together with its successors and assigns in such capacity, the
"Agent") for itself, the Issuing Banks (hereinafter defined) and the Banks
(hereinafter defined).
R E C I T A L S:
A. HealthCor, Inc., a Delaware corporation ("HealthCor"),
HealthCor Holdings, Inc., a Delaware corporation (the "Borrower"), the Agent,
certain lenders (collectively, the "Existing Banks"), and the Existing Banks
issuing letters of credit thereunder (in such capacity, the "Existing Issuing
Banks") previously entered into that certain Amended and Restated Credit
Agreement dated as of October 31, 1996 (as amended, the "Existing Credit
Agreement").
B. Pursuant to the Existing Credit Agreement, each of the Debtors
(other than HealthCor and CareNetwork, Inc., an Arkansas corporation
("CareNetwork")) executed and delivered to the Agent an Amended and Restated
Subsidiary Security Agreement dated as of October 31, 1996 which secured the
obligations of the Borrower and Healthcor under the Existing Credit Agreement
(the "Existing Subsidiary Security Agreement").
C. Pursuant to the Existing Credit Agreement, HealthCor and
Borrower executed and delivered to the Agent an Amended and Restated Borrower
Security Agreement dated as of October 31, 1996 which secured the obligations
of the Borrower and Healthcor under the Existing Credit Agreement (the
"Existing Borrower Security Agreement").
D. Concurrently herewith the Borrower, the Agent, certain lenders
(together with any other lenders that may from time to time become a party
thereto, the "Banks"), and the Banks issuing letters of credit thereunder (in
such capacity, the "Issuing Banks") are entering into that certain Second
Amended and Restated Credit Agreement of even date herewith (as the same may be
amended, supplemented or modified from time to time, being hereinafter referred
to as the "Credit Agreement").
E. HealthCor is not a borrower under the Credit Agreement,
provided that, in connection with the execution of the Credit Agreement,
HealthCor shall continue to guarantee the obligations of the Borrower under the
Credit Agreement, and HealthCor has agreed pursuant to the terms hereof to
ratify, reaffirm and continue its obligations under the Existing Borrower
Security Agreement.
F. HealthCor desires to amend and restate its obligations under
the Existing Borrower Security Agreement, as hereinafter provided, and has
agreed, for purposes of clarity and ease of
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 1
<PAGE> 110
administration, to carry out the agreed upon amendments by amending the
pertinent provisions of the Existing Borrower Security Agreement and
consolidating and restating HealthCor's obligations under the Existing Borrower
Security Agreement, insofar as it relates to property of HealthCor, in its
entirety by means of this Agreement.
G. The Debtors (other than HealthCor and CareNetwork) desire to
amend and restate the Existing Subsidiary Security Agreement, as hereinafter
provided, and have agreed, for purposes of clarity and ease of administration,
to carry out the agreed upon amendments by amending the pertinent provisions of
the Existing Subsidiary Security Agreement and then restating the Existing
Subsidiary Security Agreement, insofar as it relates to property of the Debtors
(other than HealthCor), in its entirety by means of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows and the Existing Subsidiary
Security Agreement and HealthCor's obligations under the Existing Borrower
Security Agreement are hereby amended, consolidated and restated in their
entirety as follows::
ARTICLE I
Definitions; Security Interest
Section 1.1 Definitions. All capitalized terms used and not
otherwise defined herein shall have their respective meanings as set forth in
the Credit Agreement.
Section 1.2 Security Interest. Each Debtor hereby grants to the
Agent, for the benefit of itself, the Issuing Banks and the Banks, and ratifies
and confirms that the Agent has previously been granted and now possesses, a
security interest in the following property, whether now owned or existing or
hereafter acquired or arising and wherever arising or located (such property
being hereinafter sometimes called the "Collateral"):
(ACCOUNTS)
(a) All accounts, receivables, accounts receivable, general
intangibles, book debts, contract rights, instruments, and documents
(including, without limitation, all documents of title); (b) all
chattel paper, notes, drafts, acceptances, other evidences, and forms
of payment under leases of equipment or contracts for the sale of
inventory or the performance of services, and other forms of
obligations received by or belonging to such Debtor for goods sold or
leased and/or services rendered by such Debtor; (c) all of the rights
of such Debtor in, to, and under all purchase orders, sales contracts,
instruments, and other documents evidencing obligations for or
representing payment for goods sold or leased and/or services rendered
by such Debtor; and (d) all moneys due or to become due to such Debtor
under all contracts for the sale or lease of goods and/or the
performance of services by such Debtor; in each case of whatever
nature, now owned by such Debtor or existing or hereafter acquired,
created, or arising and the rights and
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 2
<PAGE> 111
interests of such Debtor in goods, the sale and delivery of which give
rise to any and all proceeds of any of the foregoing Collateral
(including, but not limited to, all insurance and claims for insurance
in respect of the Collateral).
(INVENTORY)
All goods, merchandise, raw materials, goods in process,
finished goods, and other tangible personal property of whatever
nature now owned by such Debtor or hereafter from time to time
existing or acquired, and held for sale or lease or furnished or to be
furnished under contracts of service or used or usable or consumed or
consumable in such Debtor's business and all accessions and
appurtenances thereto, and all accounts, receivables, accounts
receivables, instruments, notes, chattel paper, documents (including,
without limitation, all documents of title), contract rights, and
general intangibles arising in connection with any of the foregoing
and all products and proceeds of any of the foregoing Collateral
(including, without limitation, all insurance and claims for insurance
effective or held for the benefit of such Debtor or the Agent in
respect of any of the foregoing Collateral).
(EQUIPMENT)
All goods, equipment, machinery, furnishings, fixtures,
furniture, appliances, accessories, leasehold improvements, chattels,
and other articles of personal property of whatever nature now owned
by such Debtor or hereafter acquired, all accessions and appurtenances
thereto, and all renewals or replacements of or substitutions for any
of the foregoing and all proceeds of any of the foregoing Collateral
(including, without limitation, all insurance and claims for insurance
in respect of any of the foregoing Collateral).
(TRADEMARKS AND PATENTS)
All trademarks and service marks now held or hereafter
acquired by the Debtor, which are registered in the United States
Patent and Trademark Office or in any similar office or agency of the
United States or any state thereof or any political subdivision
thereof and any application for such trademarks and service marks, as
well as any unregistered marks used by the Debtor in the United States
and trade areas including logos, designs, trade names, company names,
business names, fictitious business names and other business
identifiers in connection with which any of these registered or
unregistered marks are used in the United States (collectively, the
"Marks"), together with the registrations and right to all renewals
thereof, and the goodwill of the business of the Debtor symbolized by
the Marks, all United States patents now or hereafter owned by the
Debtor, as well as any application for a United States patent now or
hereafter owned by the Debtor (collectively, the "Patents"), and
reissues, renewals or extensions thereof, and all know-how,
technology, inventions, processes, formulas, product formulations,
blueprints, drawings, test data, manuals, production documents,
procedures, product and manufacturing specifications or standards and
other tangible (physical, electronic or other)
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manifestations of any Marks and Patents now or hereafter utilized in
the Debtor's business.
(INVESTMENT PROPERTY)
All investment property, including, without limitation, all
securities, whether certificated or uncertificated, investment
accounts or securities accounts, and security entitlements which may
be carried in a securities account now owned by the Debtor or
hereafter from time to time existing or acquired, and all proceeds of
any of the foregoing Collateral (including, but not limited to, all
insurance claims for insurance in respect of any of the foregoing
Collateral).
Section 1.3 Obligations. The Collateral shall secure the
following obligations, indebtedness, and liabilities (all such obligations,
indebtedness, and liabilities being hereinafter sometimes called the
"Obligations"): (a) the obligations, indebtedness, and liabilities of the
Borrower to the Banks and the Issuing Banks evidenced by the Revolving Credit
Notes (herein so called) executed by the Borrower pursuant to the Credit
Agreement; (b) the obligations, indebtedness, and liabilities of each Debtor to
the Agent, the Issuing Banks and the Banks under that certain Second Amended
and Restated Subsidiary Guaranty of even date herewith, executed by such Debtor
in favor of the Agent, the Issuing Banks and the Banks pursuant to the Credit
Agreement; (c) the obligations, indebtedness, and liabilities of the Borrower
to the Agent, the Issuing Banks and the Banks under the Credit Agreement; (d)
all future advances by the Banks and the Issuing Banks to the Borrower and any
Debtor, or any of them; (e) all costs and expenses, including without
limitation all attorneys' fees and legal expenses incurred by the Agent, the
Issuing Banks and the Banks to preserve and maintain the Collateral, collect
the obligations herein described, and enforce this Agreement; (f) all other
Obligations (as such term is defined in the Credit Agreement); and (g) all
extensions, renewals, and modifications of any of the foregoing.
Section 1.4 Renewal of Obligations and Liens. The parties hereto
acknowledge and agree that (i) the Revolving Credit Notes are in renewal,
extension and modification, but not in extinguishment of, the existing
indebtedness under the Existing Credit Agreement, and (ii) such existing
indebtedness is secured by liens and security interests granted by (a) the
Debtors (other than HealthCor) pursuant to the Existing Subsidiary Security
Agreement and (b) HealthCor and the Borrower pursuant to the Existing Borrower
Security Agreement, which liens and security interests granted by the Debtors
(including, without limitation, HealthCor) are not extinguished or released,
but instead are hereby renewed, extended, carried forward and continued in
accordance with the terms of this Agreement.
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ARTICLE II
Representations and Warranties
To induce the Agent to enter into this Agreement and to induce the
Banks and the Issuing Banks to extend credit to the Borrower under the Credit
Agreement, each Debtor represents and warrants to the Agent, the Issuing Banks
and the Banks that:
Section 2.1 Title. Except for the Permitted Liens, such Debtor
owns, and with respect to Collateral acquired after the date hereof such Debtor
will own, the Collateral free and clear of any Lien.
Section 2.2 Accounts. Each Debtor represents, warrants, and
covenants that each and all of its accounts will meet the following
requirements continuously from the time each of them comes into existence until
it is collected in full: (a) the account arose from the performance of
services by such Debtor which services have been fully and satisfactorily
performed or from the absolute sale of goods by such Debtor in which such
Debtor had the sole and complete ownership, and the goods have been shipped or
delivered to the account debtor, evidencing which such Debtor or the Agent has
possession of shipping and delivery receipts; (b) the account is not subject to
setoff, counterclaim, defense, allowance or adjustment other than discounts for
prompt payment shown on the invoice, or to dispute, objection or complaint by
the account debtor concerning his or its liability on the account, and the
goods, the sale of which gives rise to the account, have not been returned,
rejected, lost, or damaged; (c) the account arose in the ordinary course of
such Debtor's business, and no notice of bankruptcy, insolvency, or financial
embarrassment of the account debtor has been received by such Debtor; and (d)
such Debtor shall notify the Agent promptly in writing when any account ceases
to meet any of the requirements of this Agreement. Nothing in this Section
shall be construed to limit or release any right of the Agent to any Collateral
arising pursuant to Section 1.2 of this Agreement.
Section 2.3 Financing Statements. No financing statement,
security agreement, or other lien instrument covering all or any part of the
Collateral is on file in any public office, except as may have been filed in
favor of the Agent or to perfect any Permitted Lien.
Section 2.4 Organization and Authority. Each Debtor is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation. Each Debtor has the corporate power
and authority to execute, deliver, and perform this Agreement, and the
execution, delivery, and performance of this Agreement by such Debtor (a) have
been authorized by all necessary corporate action on the part of such Debtor,
(b) do not and will not violate (i) any law, rule or regulation which violation
would have a material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of such Debtor, the Collateral
taken as a whole, or the ability of the Companies to pay and perform the
Obligations, or (ii) the articles or certificate of incorporation or bylaws of
such Debtor, and (c) do not and will not conflict with, result in a breach of,
or constitute a default under the provisions of any material indenture,
mortgage, deed of trust, security agreement, instrument or agreement pursuant
to which such Debtor or any of its property is bound.
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Section 2.5 Principal Place of Business. The principal place of
business and chief executive office of each Debtor, and the office where each
Debtor keeps its books and records, is located at the address of such Debtor
shown below its name on the signature pages hereof.
Section 2.6 Location of Collateral. All inventory, machinery,
and equipment (except for inventory, machinery and equipment which is not,
individually or in the aggregate, material in value or to the business of any
Debtor) of each Debtor are located at the locations specified on Schedule I
hereto or at other locations within the continental United States of America in
the ordinary course of each Debtor's business so long as all actions have been
taken to assure the continued perfection and priority of the Agent's security
interest therein.
ARTICLE III
Covenants
The Debtors jointly and severally covenant and agree with the Agent,
the Issuing Banks and the Banks that until the Obligations are paid and
performed in full and all Commitments of the Banks and the Issuing Banks to the
Borrower have been terminated:
Section 3.1 Maintenance. Each Debtor shall maintain the
Collateral in good operating condition and repair, and no Debtor shall permit
any waste or destruction of the Collateral or any part thereof except for the
ordinary wear and tear of its intended primary use. No Debtor shall use or
permit the Collateral to be used in violation of any law or inconsistently with
the terms of any policy of insurance. No Debtor shall use or permit the
Collateral to be used in any manner or for any purpose that would impair the
value of the Collateral or expose the Collateral to unusual risk.
Section 3.2 Encumbrances. No Debtor shall create, permit, or
suffer to exist, and each Debtor shall defend the Collateral against, any Lien
on the Collateral except Permitted Liens, and shall defend such Debtor's rights
in the Collateral and the Agent's security interest in the Collateral against
the claims of all Persons.
Section 3.3 Modification of Collateral. No Debtor shall do
anything to impair the rights of the Agent in the Collateral. Without the
prior written consent of the Agent, no Debtor shall during the continuance of
an Event of Default (a) grant any extension of time for any payment with
respect to the Collateral, (b) compromise, compound, or settle any of the
Collateral, (c) release in whole or in part any person or entity liable for
payment with respect to the Collateral, (d) allow any credit or discount for
payment with respect to the Collateral other than normal trade discounts
granted in the ordinary course of business and other adjustments, such as bad
debt expense, made in the ordinary course of business, (e) release any lien,
security interest, or assignment securing the Collateral, or (f) otherwise
amend or modify any of the Collateral.
Section 3.4 Disposition of Collateral. No Debtor shall sell,
lease, assign, transfer or otherwise dispose of any of the Collateral except
dispositions of old, worn out or obsolete equipment and inventory in the
ordinary course of business.
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Section 3.5 Further Assurances. At any time and from time to
time, upon the request of the Agent, and at the sole expense of the Debtors,
each Debtor shall promptly execute and deliver all such further instruments and
documents and take such further action as the Agent may deem necessary or
desirable to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement, including, without
limitation, the execution and filing of such financing statements as the Agent
may require. A carbon, photographic, or other reproduction of this Agreement
or of any financing statement covering the Collateral or any part thereof shall
be sufficient as a financing statement and may be filed as a financing
statement. Each Debtor shall promptly endorse and deliver to the Agent all
documents, instruments, and chattel paper that it now owns or may hereafter
acquire.
Section 3.6 Risk of Loss; Insurance. The Debtors shall be
responsible for any loss of or damage to the Collateral. Each Debtor shall
maintain, with financially sound and reputable companies, insurance policies
(i) insuring the Collateral against loss by fire, explosion, theft, and such
other risks and casualties as are customarily insured against by companies
engaged in the same or a similar business, and (ii) insuring such Debtor and
the Agent against liability for personal injury and property damage relating to
the Collateral, such policies to be in such amounts and covering such risks as
are customarily insured against by companies engaged in the same or a similar
business, but at least in the amounts specified in the Credit Agreement, with
losses payable to such Debtor and the Agent, as their respective interests may
appear. All insurance with respect to the Collateral shall provide that no
cancellation, reduction in amount, or change in coverage thereof shall be
effective unless the Agent has received thirty (30) days prior written notice
thereof. Each Debtor shall furnish the Agent with certificates or other
evidence satisfactory to the Agent of compliance with the foregoing insurance
provisions. Each Debtor shall deliver to the Agent upon demand copies of all
insurance policies covering the Collateral or any part thereof.
Section 3.7 Inspection Rights. Each Debtor shall permit the
Agent, the Banks, the Issuing Banks and their representatives, upon one (1)
Business Day's prior notice, to examine or inspect the Collateral wherever
located and to examine, inspect, and copy such Debtor's books and records at
any reasonable time and as often as they may desire. The Agent may at any time
and from time to time contact account debtors and other obligors to verify the
existence, amounts, and terms of any Debtor's accounts.
Section 3.8 Mortgagee's and Landlord Waivers. The Debtors shall
deliver to the Agent an instrument satisfactory in form and substance to the
Agent, executed by the landlord of the premises located at 8150 North Central
Expressway, Suite M-2000, Dallas, Texas 75206, by which such landlord waives or
subordinates its rights, if any, in the Collateral. With respect to all other
locations of Collateral, upon the request of the Agent at any time, each Debtor
shall exert its best efforts to cause each mortgagee of real property owned by
such Debtor and each landlord of real property leased by such Debtor to execute
and deliver instruments satisfactory in form and substance to the Agent by
which such mortgagee or landlord waives or subordinates its rights, if any, in
the Collateral.
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Section 3.9 Notification. Each Debtor shall promptly notify the
Agent of (i) any Lien or material claim made or threatened against the
Collateral, (ii) any material change in the Collateral, including, without
limitation, any material damage to or loss of the Collateral, and (iii) the
occurrence or existence of any Default.
Section 3.10 Corporate Changes. No Debtor shall change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading, unless
such Debtor shall have given the Agent thirty (30) days prior written notice
thereof and shall have taken all action deemed necessary or desirable by the
Agent to make each financing statement not seriously misleading. No Debtor
shall change its principal place of business, chief executive office, or the
place where it keeps its books and records, unless it shall have given the
Agent thirty (30) days prior written notice thereof and shall have taken all
action deemed necessary or desirable by the Agent to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 3.11 Books and Records; Information. Each Debtor shall
keep books and records of the Collateral and such Debtor's business and
financial condition in accordance with GAAP (subject to year-end adjustments
and disclosures). Each Debtor shall from time to time at the request of the
Agent deliver to the Agent such information regarding the Collateral and such
Debtor as the Agent may request, including, without limitation, lists and
descriptions of the Collateral and evidence of the identity and existence of
the Collateral. Upon request of the Agent, each Debtor shall mark its books
and records to reflect the security interest of the Agent under this Agreement.
Section 3.12 Location of Collateral. No Debtor shall move any of
its equipment, machinery or inventory from the locations specified herein
without the prior written consent of the Agent, except to other locations
within the continental United States of America in the ordinary course of
business so long as all actions have been taken to assure the continued
perfection and priority of the Agent's security interest therein.
Section 3.13 Lockbox Accounts. Each Debtor hereby agrees to the
terms, provisions and covenants set forth in Section 6.2 of the Credit
Agreement and the rights of the Agent thereunder, and hereby agrees to comply
with each of the requirements specified therein.
ARTICLE IV
Special Provisions Concerning Marks
Section 4.1 Additional Representations and Warranties. Each
Debtor represents and warrants that it is the true and lawful exclusive owner
of the Marks listed as being owned by it in Schedule II hereto and that, as of
the date hereof, the listed Marks include all the United States federal
registrations or applications registered in the United States Patent and
Trademark Office which are necessary for such Debtor's business as currently
operated. Each Debtor represents and warrants that it owns or is licensed to
use or is not prohibited from using all Marks that it uses. Each Debtor
further warrants that it is aware of no third party claim (which could have
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a material adverse effect on the business, condition (financial or otherwise),
operations, propsects, or properties of such Debtor) that any aspect of such
Debtor's present or contemplated business operations infringes or will infringe
any mark. Each Debtor represents and warrants that it is the owner of record
of all United States registrations and applications listed as being owned by it
in Schedule II hereto and that such registrations are valid, subsisting, have
not been cancelled and that such Debtor is not aware of any third-party claim
(which could have a material adverse effect on the business, condition
(financial or otherwise), operations, prospects, or properties of such Debtor)
that any such registration is invalid or unenforceable. Each Debtor hereby
grants to the Agent an absolute power of attorney to sign, upon the occurrence
and during the continuance of an Event of Default, any document which may be
required by the United States Patent and Trademark Office in order to effect an
absolute assignment of all right, title and interest in each such Mark and
associated goodwill, and record the same.
Section 4.2 Licenses and Assignments. Other than the license
agreements listed on Schedule II hereto and any extensions or renewals thereof,
each Debtor hereby agrees not to divest itself of any right under any Mark
except those such Debtor reasonably determines are not necessary for the
conduct of its business.
Section 4.3 Infringements. Each Debtor agrees, promptly upon
learning thereof, to notify the Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect
to, any party who may be infringing or otherwise violating any of such Debtor's
rights in and to any Mark, or with respect to any party claiming that such
Debtor's use of any Mark violates any property right of that party, in each
case to the extent that such Debtor reasonably believes that such infringement
or violation is material to its business. Each Debtor further agrees, if
consistent with good business practice, diligently to prosecute any Person
infringing any Mark to the extent that such Debtor reasonably believes that
such infringement is material to its business.
Section 4.4 Preservation of Marks. To the extent the failure to
do so would cause a material adverse effect on the business, condition
(financial or otherwise), operations, prospects or properties of each Debtor
and such Debtor reasonably believes it to be consistent with good business
practice, such Debtor agrees to use its Marks in interstate commerce during the
time in which this Agreement is in effect, sufficiently to preserve such Marks
as trademarks or service marks registered under the laws of the United States.
Section 4.5 Maintenance of Registration. To the extent the
failure to do so would cause a material adverse effect on the business,
condition (financial or otherwise), operations, prospects or properties of any
Debtor and any Debtor reasonably believes it to be consistent with good
business practice, such Debtor shall, at its own expense, diligently process
all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051
et seq. to maintain trademark registration, including but not limited to
affidavits of use and applications for renewals of registration in the United
States Patent and Trademark Office for all of its Marks pursuant to 15
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 9
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U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all reasonable administrative and judicial remedies without prior written
consent of Required Banks.
Section 4.6 Future Registered Marks. If any Mark registration
issues hereafter to any Debtor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within thirty
(30) days of receipt of such certificate such Debtor shall deliver a copy of
such certificate, and a grant of security in such mark to the Agent, confirming
the grant thereof hereunder, the form of such confirmatory grant to be
satisfactory to the Agent.
Section 4.7 Remedies. If an Event of Default shall occur and be
continuing, the Agent may, after ten (10) days' written notice to the Debtors,
take any or all of the following actions: (i) declare the entire right, title
and interest of any Debtor in and to each of the Marks and the good will of the
business associated therewith, together with all trademark rights and rights of
protection to the same, vested, in which event such rights, title and interest
shall immediately vest, in the Agent for the benefit of the Banks and the
Issuing Banks, in which case the Agent shall be entitled to exercise the power
of attorney referred to in Section 4.1 to execute, cause to be acknowledged and
notarized and record said absolute assignment with the applicable agency; (ii)
take and use or sell the Marks and the goodwill of any Debtor's businesses
symbolized by the Marks and the right to carry on the businesses and use the
assets of any Debtor in connection with which the Marks have been used; and
(iii) direct any Debtor to refrain, in which event such Debtor shall refrain,
from using the Marks in any manner whatsoever, directly or indirectly, and
execute such other and further documents that the Agent may request to further
confirm this and to transfer ownership of the Marks and registrations and any
pending trademark application in the United States Patent and Trademark Office
or any equivalent government agency or office in any foreign jurisdiction to
the Agent.
ARTICLE V
Special Provisions
Concerning Patents
Section 5.1 Additional Representations and Warranties. Each
Debtor represents and warrants that it is the true and lawful exclusive owner
of all rights in the Patents listed as being owned by it in Schedule III hereto
that, as of the date hereof, said Patents include all the United States patents
and applications for United States patents that such Debtor now owns which are
necessary for such Debtor's business as currently operated. Each Debtor
represents and warrants that it owns or is licensed to practice under all
Patents that it now uses or practices under. Each Debtor further warrants that
it is aware of no third party claim (which could have a material adverse effect
on the business condition (financial or otherwise), operations, prospects or
properties of such Debtor) that any aspect of such Debtor's present or
contemplated business
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operations infringes or will infringe any patent. Each Debtor hereby grants to
the Agent an absolute power of attorney to sign, upon the occurrence and during
the continuance of any Event of Default, any document which may be required by
the United States Patent and Trademark Office in order to effect an absolute
assignment of all right, title and interest in each Patent and record the same.
Section 5.2 Licenses and Assignments. Other than the license
agreements listed on Schedule III hereto and any extensions or renewals
thereof, each Debtor hereby agrees not to divest itself of any right under any
Patent except those Patents such Debtor reasonably determines are not necessary
for the conduct of its business.
Section 5.3 Infringements. Each Debtor agrees, promptly upon
learning thereof, to furnish the Agent in writing with all pertinent
information available to such Debtor with respect to any infringement or other
violation of such Debtor's rights in any Patent, or with respect to any claim
that practice of any Patent violates any property rights of that party, in each
case to the extent that such Debtor reasonably believes that such infringement
or violation is material to its business. Each Debtor further agrees,
consistent with good business practice and absent direction of the Agent to the
contrary (which direction shall only be given if an Event of Default shall have
occurred and be continuing, diligently to prosecute any Person infringing any
Patent to the extent that such Debtor reasonably believes that such
infringement is material to its business.
Section 5.4 Maintenance of Patents. At its own expense, each
Debtor shall make timely payment of all post-issuance fees required pursuant to
35 U.S.C. Section 41 to maintain in force rights under each Patent to the
extent such Debtor reasonably believes it to be consistent with good business
practice and failure to do so would cause a material adverse effect on the
business, condition (financial or otherwise), operations, prospects or
properties of such Debtor.
Section 5.5 Prosecution of Patent Application. At its own
expense, each Debtor shall diligently prosecute all applications for Patents
listed as being owned by it in Schedule III hereto and shall not abandon any
such application prior to exhaustion of all reasonable administrative and
judicial remedies, to the extent such Debtor reasonably believes it to be
consistent with good business practice and failure to do so would cause a
material adverse effect on the business, condition (financial or otherwise),
operations, prospects or properties of such Debtor.
Section 5.6 Other Patents. Within thirty (30) days of
acquisition of a Patent, or of filing of an application for a Patent, each
Debtor shall deliver to the Agent a copy of said Patent or such application, as
the case may be, with a grant of security as to such Patent, as the case may
be, confirming the grant thereof hereunder, the form of such confirmatory grant
to be satisfactory to the Agent.
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Section 5.7 Remedies. If an Event of Default shall occur and be
continuing, the Agent may after ten (10) days' written notice to the Debtors,
take any or all of the following actions: (i) declare the entire right, title,
and interest of any Debtor in each of the Patents vested, in which event such
right, title, and interest shall immediately vest in the Agent for the benefit
of the Banks and the Issuing Banks, in which case the Agent shall be entitled
to exercise the power of attorney referred to in Section 5.1 to execute, cause
to be acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and practice or sell the Patents; and (iii) direct
any Debtor to refrain, in which event such Debtor shall refrain, from
practicing the Patents directly or indirectly, and each Debtor shall execute
such other and further documents as the Agent may request further to confirm
this and to transfer ownership of the Patents to the Agent for the benefit of
the Banks and the Issuing Banks.
ARTICLE VI
Rights of the Agent
Section 6.1 Certain Covenants and Rights Regarding the
Collateral.
(a) Each Debtor shall from time to time at the request of
the Agent furnish the Agent with a schedule of each account included
in the Collateral and a list of all those liable on checks, notes,
drafts, and other instruments representing the proceeds of such
accounts. The Agent shall have the right to make test verifications
of the Collateral. If any part of the Collateral is or becomes
subject to the Federal Assignment of Claims Act, the Debtor whose
Collateral has been affected thereby will execute all instruments and
take all steps required by the Agent to comply with that act. If part
of the Collateral is evidenced by promissory notes, trade acceptances
or other instruments for the payment of money, each Debtor will, at
the request of the Agent, immediately deliver them to the Agent,
appropriately endorsed to the Agent's order, and regardless of the
form of endorsement, such Debtor waives presentment, demand, notice of
dishonor, protest, and notice of protest.
(b) If the validity or priority of this Agreement or of
any rights, titles, security interests or other interests created or
evidenced hereby shall be attacked, endangered, or questioned, or if
any legal proceedings are instituted with respect thereto, each Debtor
will give prompt written notice thereof to the Agent and, at the
Debtors' own cost and expense, will diligently endeavor to cure any
defect which may be developed or claimed, and will take all necessary
and proper steps for the defense of such legal proceedings, and the
Agent (whether or not named as a party to the legal proceedings with
respect thereto) is hereby authorized and empowered to take such
additional steps as in its judgment and discretion may be necessary or
proper for the defense of any such legal proceedings or the protection
of the validity or priority of this Agreement and the rights, titles,
security interests, and other interests created or evidenced hereby,
and all expenses so incurred of
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every kind and character shall be a demand obligation owing by the
Debtors and the party incurring such expenses shall be subrogated to
all rights of the Person receiving such payment.
(c) During the existence of an Event of Default, the
Agent is authorized to take possession peaceably of the Collateral and
of all books, records and accounts relating thereto, and to exercise
without interference from the Debtors any and all rights which any
such Debtor has with respect to the management, possession,
protection, or preservation of the Collateral. If necessary to obtain
the possession provided for above, the Agent may invoke any and all
legal remedies to dispossess any such Debtor, including specifically
one or more actions for forcible entry and detainer. In connection
with any action taken by the Agent pursuant to this Section, the Agent
shall not be liable for any loss sustained by any Debtor resulting
from any act or omission of the Agent unless such loss is caused by
the willful misconduct and bad faith of the Agent, nor shall the Agent
be obligated to perform or discharge any obligation, duty, or
liability under any sale or lease agreement covering the Collateral or
any part thereof, or under or by reason of this Agreement or exercise
of rights or remedies hereunder.
(d) At any time during the existence of a Default the
Agent may notify the account debtors or obligors of any accounts,
chattel paper, negotiable instruments, or other evidences of
indebtedness included in the Collateral to pay the Agent directly.
Until the Agent elects to exercise these rights, each Debtor is
authorized as agent of the Agent to collect and enforce such accounts.
The costs of collection and enforcement, including attorneys' fees and
expenses, shall be borne solely by the Debtors whether incurred by the
Agent or the Debtors.
Section 6.2 Performance by the Agent. If any of the Debtors
fails to perform or comply with any of its obligations or agreements contained
herein, the Agent itself may, at its sole discretion, cause or attempt to cause
performance or compliance with such agreement. In such event, the expenses of
the Agent shall be payable by the Debtors to the Agent on demand and together
with interest thereon at the Applicable Rate from and including the date the
Agent incurs such expenses to but excluding the date of such demand, and from
and including the date of such demand until such expenses are paid in full, at
the Default Rate, shall constitute Obligations secured by this Agreement. The
Agent, upon making such payment, shall be subrogated to all of the rights of
the Person receiving such payment. Notwithstanding the foregoing, it is
expressly agreed that the Agent shall not have any liability or responsibility
for the performance of any obligation of any Debtor under this Agreement.
Section 6.3 Setoff; Property Held by the Agent. If an Event of
Default shall have occurred and be continuing, the Agent shall have the right
to set off and apply against the Obligations, at any time and without notice to
any Debtor, any and all deposits (general or special, time or demand,
provisional or final) (other than trust fund accounts held by any Debtor
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for the benefit of non-Affiliates) or other sums at any time credited by or
owing from the Agent to any Debtor whether or not the Obligations are then due.
As additional security for the Obligations, each Debtor hereby grants the Agent
a security interest in all money, instruments, and other property of such
Debtor (other than trust fund accounts held by such Debtor for the benefit of
non-Affiliates) now or hereafter held by the Agent. In addition to the Agent's
right of setoff and as further security for the Obligations, each Debtor hereby
grants the Agent a security interest in all deposits (general or special, time
or demand, provisional or final) and other accounts of such Debtor (other than
trust fund accounts held by such Debtor for the benefit of non-Affiliates) now
or hereafter deposited with or held by the Agent and all other sums at any time
credited by or owing from the Agent to such Debtor. The rights and remedies of
the Agent hereunder are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Agent may have.
Section 6.4 Assignment by the Agent. Subject to Section 14.7 of
the Credit Agreement, the Agent, the Banks and the Issuing Banks may from time
to time assign the Obligations and any portion thereof, and/or the Collateral
and any portion thereof, and the assignee shall be entitled to all of the
rights and remedies of such Person under this Agreement in relation thereto.
ARTICLE VII
Default
Section 7.1 Rights and Remedies. During the existence of an
Event of Default, the Agent shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted
to the Agent in this Agreement and in any other instrument or
agreement securing, evidencing, or relating to the Obligations or any
part thereof, the Agent shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as adopted by the
State of Texas. Without limiting the generality of the foregoing, the
Agent may (A) without demand or notice to any Debtor, collect,
receive, or take possession of the Collateral or any part thereof and
for that purpose the Agent may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (B) sell, lease, or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Agent's offices or elsewhere, for cash,
on credit, or for future delivery. Upon the request of the Agent, each
Debtor shall assemble the Collateral and make it available to the
Agent at any place designated by the Agent that is reasonably
convenient to such Debtor and the Agent. Each Debtor agrees that the
Agent shall not be obligated to give more than ten (10) days prior
written notice of the time and place of any public sale or of the time
after which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. Each Debtor
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 14
<PAGE> 123
shall be jointly and severally liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys' fees,
legal expenses, and all other costs and expenses incurred by the Agent
in connection with the collection of the Obligations and the
enforcement of the Agent's rights under this Agreement. The Debtors
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay the Obligations
in full. Each Debtor waives all rights of marshalling in respect of
the Collateral.
(ii) The Agent may cause any or all of the Collateral held
by it to be transferred into the name of the Agent or the name or
names of the Agent's nominee or nominees.
Section 7.2 Application of Proceeds of Sale. The proceeds of any
sale of Collateral pursuant to Section 7.1 hereof, as well as any Collateral
consisting of cash, shall be applied by the Agent as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses incurred by the Agent in connection with such sale or
otherwise in connection with this Agreement or any of the Obligations,
including, but not limited to, all court costs and the reasonable fees
and expenses of its agents and one legal counsel, the repayment of all
advances made hereunder or under any other Loan Document by the Agent
on behalf of any Debtor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder;
SECOND, to the payment in full of all other Obligations that
are payable to the Agent, including, without limitation, all expense
reimbursements and indemnities;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses incurred by the Issuing Banks in connection with the
Credit Agreement, any Letter of Credit, or any of the Obligations,
including, but not limited to, all court costs and the reasonable fees
and expenses of their agents and one legal counsel;
FOURTH, to the payment in full of all other Obligations that
are payable to the Issuing Banks, including, without limitation, all
Letter of Credit disbursements and all accrued and unpaid interest
thereon and all Letter of Credit fees;
FIFTH, to the payment in full of the Obligations, pro rata
among the Banks in accordance with the amounts of the Loans held by
them, or, if no Loans shall be outstanding, in accordance with the
amounts of their Commitments;
SIXTH, if any Letter of Credit remains outstanding, the Agent,
after making the applications required by paragraphs "FIRST" through
"FIFTH" above,
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 15
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shall hold back and retain as Collateral for the Obligations an amount
equal to the aggregate face amounts of all outstanding Letters of
Credit; and
SEVENTH, provided that all of the Obligations have been paid
and performed in full and all Commitments and Letters of Credit have
terminated, to the Debtors or their successors or assigns, or to
whomsoever may lawfully be entitled to the same, or as a court of
competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation, a
sale pursuant to any applicable Uniform Commercial Code or under a judicial
proceeding), the receipt of the Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Agent or such
officer or be answerable in any way for the misapplication thereof.
ARTICLE VIII
Miscellaneous
Section 8.1 No Waiver; Cumulative Remedies. No failure on the
part of the Agent to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are
cumulative and not exclusive of any rights and remedies provided by law.
Section 8.2 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtors, the Agent, the Banks and
the Issuing Banks and their respective heirs, successors, and assigns, except
that no Debtor may assign any of its rights or obligations under this Agreement
without the prior written consent of the Agent. The provisions of this
Agreement shall apply to each Debtor, individually and collectively.
Section 8.3 AMENDMENT; ENTIRE AGREEMENT; CONTROLLING AGREEMENT.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING THE EXISTING BORROWER
SECURITY AGREEMENT AND THE EXISTING SUBSIDIARY SECURITY AGREEMENT) EMBODY THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto. In the
event any term or provision of this Agreement
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 16
<PAGE> 125
expressly conflicts with any term or provision of the Credit Agreement, the
terms and provisions of the Credit Agreement shall govern and control.
Section 8.4 Notices. All notices and other communications
provided for in this Agreement shall be given or made in writing and
telecopied, mailed by certified mail return receipt requested, or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof; or, as to any party at such other address as shall
be designated by such party in a notice to the other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid.
Section 8.5 Applicable Law; Venue; Service of Process. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS
AGREEMENT HAS BEEN ENTERED INTO IN DALLAS COUNTY, TEXAS, AND IT SHALL BE
PERFORMABLE FOR ALL PURPOSES IN DALLAS COUNTY, TEXAS. ANY ACTION OR PROCEEDING
AGAINST ANY DEBTOR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR
ANY PART THEREOF MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS COUNTY,
TEXAS. EACH DEBTOR HEREBY IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURTS, AND (II) WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH DEBTOR AGREES THAT
SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 8.4 OF THIS AGREEMENT. NOTHING IN THIS AGREEMENT OR
ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE
OBLIGATIONS OR ANY PART THEREOF SHALL AFFECT THE RIGHT OF THE AGENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY DEBTOR OR WITH RESPECT TO
ANY OF THE COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER JURISDICTION.
ANY ACTION OR PROCEEDING BY ANY DEBTOR AGAINST THE AGENT SHALL BE BROUGHT ONLY
IN A COURT LOCATED IN DALLAS COUNTY, TEXAS.
Section 8.6 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 17
<PAGE> 126
Section 8.7 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Agent, any Bank or Issuing Bank shall
affect the representations and warranties of any Debtor herein or the right of
the Agent, the Banks and the Issuing Banks to rely upon them.
Section 8.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 8.9 Waiver of Bond. In the event the Agent seeks to take
possession of any or all of the Collateral by judicial process, each Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.
Section 8.10 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
Section 8.11 Construction. Each Debtor and the Agent acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement with its legal
counsel and that this Agreement shall be construed as if jointly drafted by the
Debtors and the Agent.
Section 8.12 Obligations Absolute. The obligations of each Debtor
under this Agreement shall be absolute and unconditional and shall not be
released, discharged, reduced, or in any way impaired by any circumstance
whatsoever, including, without limitation, any amendment, modification,
extension, or renewal of this Agreement, the Obligations, or any document or
instrument evidencing, securing, or otherwise relating to the Obligations, or
any release or subordination of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
Section 8.13 Release of Security Interest. At such time as all of
the Obligations have been paid and performed in full, all obligations and
commitments of the Banks and the Issuing Banks to make advances, issue letters
of credit or otherwise extend credit under the Credit Agreement have expired or
terminated, and no Letters of Credit remain outstanding, the Agent shall
release the security interest granted hereby.
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 18
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTORS:
HEALTHCOR, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR OXYGEN AND MEDICAL
EQUIPMENT, INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HEALTHCOR REHABILITATION SERVICES,
INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address: 8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
Fax No.: (214) 692-4666
Tel. No.: (214) 692-4663
Attn: S. Wayne Bazzle
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 19
<PAGE> 128
THE AGENT:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as Agent
By:
----------------------------------------
Steven T. Prichett,
Vice President
Address: 2200 Ross Avenue
Post Office Box 660197
Dallas, Texas 75266-0197
Fax No.: (214) 965-2384
Tel. No.: (214) 965-3710
Attn: Steven T. Prichett
SECOND AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT - Page 20
<PAGE> 129
SCHEDULE 1
Locations of Collateral
[See Attached]
SCHEDULE I, Locations of Collateral
<PAGE> 130
EXHIBIT "E"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Second Amended and Restated Subsidiary Guaranty
<PAGE> 131
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY
This SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY (this
"Guaranty"), executed as of December 1, 1997, by the undersigned guarantors
(each, a "Guarantor" and collectively, the "Guarantors"), is a condition to the
extension of credit in the form of loans and letters of credit under the Credit
Agreement (hereinafter defined).
R E C I T A L S:
A. HealthCor, Inc., a Delaware corporation ("HealthCor"),
HealthCor Holdings, Inc., a Delaware corporation (the "Borrower"), certain
lenders (collectively, the "Existing Banks"), and the Existing Banks issuing
letters of credit thereunder (in such capacity, the "Existing Issuing Banks")
and Texas Commerce Bank National Association, a national banking association,
as agent for itself, the Existing Banks and the Existing Issuing Banks (in such
capacity, the "Agent") previously entered into that certain Amended and
Restated Credit Agreement dated as of October 31, 1996 (as amended, the
"Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, each of the
Guarantors (other than HealthCor and CareNetwork, Inc., an Arkansas corporation
("CareNetwork")) executed and delivered to the Agent an Amended and Restated
Subsidiary Guaranty dated as of October 31, 1996, which secured the obligations
of the Borrowers under the Existing Credit Agreement (the "Existing Subsidiary
Guaranty").
C. Pursuant to the Existing Credit Agreement, HealthCor and the
Borrower executed and delivered to the Agent an Amended and Restated Borrower
Guaranty dated as of October 31, 1996 which with respect to HealthCor, secured
the obligations of the Borrower under the Existing Credit Agreement and with
respect to Borrower, secured the obligations of HealthCor under the Existing
Credit Agreement (the "Existing Borrower Guaranty").
D. Concurrently herewith the Borrower, the Agent, certain lenders
(together with any other lenders that may from time to time become a party
thereto, the "Banks"), and the Banks issuing letters of credit thereunder (in
such capacity, the "Issuing Banks") are entering into that certain Second
Amended and Restated Credit Agreement of even date herewith (as the same may be
amended, supplemented or modified from time to time, being hereinafter referred
to as the "Credit Agreement").
E. In connection with the execution of the Credit Agreement,
HealthCor shall continue to guarantee the obligations of the Borrower under the
Credit Agreement and has hereby agreed to ratify, reaffirm and continue its
obligations under the Existing Borrower Guaranty.
F. HealthCor desires to amend and restate its obligations under
the Existing Borrower Guaranty, as hereinafter provided, and has agreed, for
purposes of clarity and ease of administration, to carry out the agreed upon
amendments by amending the pertinent provisions
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 1
<PAGE> 132
of the Existing Borrower Guaranty and consolidating and restating HealthCor's
obligations under the Existing Borrower Guaranty in their entirety by means of
this Guaranty.
G. The remaining parties hereto now also desire to amend and
restate the Existing Subsidiary Guaranty as hereinafter provided and have
agreed, for purposes of clarity and ease of administration, to carry out the
agreed upon amendments by amending the pertinent provisions of the Existing
Subsidiary Guaranty and restating the Existing Subsidiary Guaranty in its
entirety by means of this Guaranty.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Guarantors hereby jointly and severally,
and irrevocably and unconditionally, guarantee to the Agent, the Banks and the
Issuing Banks the full and prompt payment and performance of the Guaranteed
Indebtedness (hereinafter defined) on the following terms and the Existing
Subsidiary Guaranty and HealthCor's obligations under the Existing Borrower
Guaranty are hereby amended and restated in their entirety as follows:
1. The term "Guaranteed Indebtedness", as used herein, means all
of the "Obligations", as defined in the Credit Agreement. The term "Guaranteed
Indebtedness" shall include any and all post-petition interest and expenses
(including reasonable attorneys' fees) whether or not allowed under any
bankruptcy, insolvency, or other similar law. All other capitalized terms used
and not otherwise defined herein shall have their respective meanings as set
forth in the Credit Agreement.
2. The parties hereto acknowledge and agree that (i) the
Revolving Credit Notes renew, extend and modify, but do not extinguish the
existing indebtedness of the Borrower and HealthCor under the Existing Credit
Agreement, and (ii) such existing indebtedness is guaranteed by the Guarantors
(other than HealthCor and CareNetwork) pursuant to the Existing Subsidiary
Guaranty and, with respect to HealthCor, pursuant to the Existing Borrower
Guaranty, which Existing Subsidiary Guaranty and HealthCor's obligations under
the Existing Borrower Guaranty are hereby amended, restated and consolidated in
accordance with the terms of this Guaranty.
3. This instrument shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment and performance, and not a guaranty of
collection, and each Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which the Borrower may have against the
Agent or any Bank or Issuing Bank, or any other party, or which any Guarantor
may have against the Borrower, the Agent, or any Bank or Issuing Bank, or any
other party, shall be available to, or shall be asserted by, any Guarantor
against the Agent, or any Bank or Issuing Bank, or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
4. The obligations of each Guarantor hereunder shall be limited
to an aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or to being set aside, avoided,
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 2
<PAGE> 133
or annulled under any applicable state law relating to fraudulent transfers or
fraudulent obligations.
5. If any Guarantor becomes liable for any indebtedness owing by
the Borrower to the Agent or any Bank or Issuing Bank by endorsement or
otherwise, other than under this Guaranty, such liability shall not be in any
manner impaired or affected hereby, and the rights of the Agent, the Banks and
the Issuing Banks hereunder shall be cumulative of any and all other rights
that the Agent, the Banks and the Issuing Banks may ever have against any
Guarantor. The exercise by the Agent or any Bank or Issuing Bank of any right
or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy.
6. In the event of default by the Borrower in payment or
performance of the Guaranteed Indebtedness, or any part thereof, when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration, or
otherwise, each Guarantor jointly and severally agrees to promptly pay the
amount due thereon to the Agent, for the pro rata benefit of the Banks and the
Issuing Banks, without notice or demand in lawful currency of the United States
of America and it shall not be necessary for the Agent or any Bank or Issuing
Bank, in order to enforce such payment by any Guarantor, first to institute
suit or exhaust its remedies against the Borrower, any Guarantor or other
Person liable on such Guaranteed Indebtedness, or to enforce any rights against
any collateral which shall ever have been given to secure such Guaranteed
Indebtedness. Notwithstanding anything to the contrary contained in this
Guaranty, each Guarantor hereby irrevocably subordinates to the prior
indefeasible payment in full of the Guaranteed Indebtedness any and all rights
such Guarantor may now or hereafter have under any agreement or at law or in
equity (including, without limitation, any law subrogating such Guarantor to
the rights of the Agent, the Banks and the Issuing Banks) to assert any claim
against or seek contribution, indemnification or any other form of
reimbursement from the Borrower or any other party liable for payment of any or
all of the Guaranteed Indebtedness pursuant to any payment made by such
Guarantor under or in connection with this Guaranty or otherwise.
7. If acceleration of the time for payment of any amount payable
by the Borrower under the Guaranteed Indebtedness is stayed upon the
insolvency, bankruptcy, or reorganization of the Borrower, all such amounts
otherwise subject to acceleration under the terms of the Guaranteed
Indebtedness shall nonetheless be jointly and severally payable by the
Guarantors hereunder forthwith on demand by the Agent.
8. Each Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of any Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of any Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of the Borrower, or the dissolution, insolvency, or
bankruptcy of
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 3
<PAGE> 134
the Borrower, any Guarantor, or any other party at any time liable for the
payment of any or all of the Guaranteed Indebtedness; (d) any renewal,
extension, modification, waiver, amendment, or rearrangement of any or all of
the Guaranteed Indebtedness or any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (e) any adjustment, indulgence, forbearance, waiver, or
compromise that may be granted or given by the Agent or any Bank or Issuing
Bank to the Borrower, any Guarantor, or any other Person ever liable for any or
all of the Guaranteed Indebtedness; (f) any neglect, delay, omission, failure,
or refusal of the Agent or any Bank or Issuing Bank to take or prosecute any
action for the collection of any of the Guaranteed Indebtedness or to foreclose
or take or prosecute any action in connection with any instrument, document, or
agreement evidencing, securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (g) the unenforceability or invalidity of any or all
of the Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (h) any payment by the Borrower or any other party to the Agent
or any Bank or Issuing Bank is held to constitute a preference under applicable
bankruptcy or insolvency law or if for any other reason the Agent or any Bank
or Issuing Bank is required to refund any payment or pay the amount thereof to
someone else; (i) the settlement or compromise of any of the Guaranteed
Indebtedness; (j) the non-perfection of any security interest or lien securing
any or all of the Guaranteed Indebtedness; (k) any impairment of any collateral
securing any or all of the Guaranteed Indebtedness; (l) the failure of the
Agent or any Bank or Issuing Bank to sell any collateral securing any or all of
the Guaranteed Indebtedness in a commercially reasonable manner or as otherwise
required by law; (m) any change in the corporate existence, structure or
ownership of the Borrower; or (n) any other circumstance which might otherwise
constitute a defense available to, or discharge of, the Borrower or any
Guarantor.
9. Each Guarantor represents and warrants to the Agent, the Banks
and the Issuing Banks that:
(a) All individual representations and warranties
contained in the Credit Agreement, to the extent that they relate to
the Guarantors, are true and correct in all respects.
(b) The value of the consideration received and to be
received by such Guarantor as a result of the Borrower, the Banks, the
Issuing Banks and the Agent entering into the Credit Agreement, the
extensions of credit thereunder, and such Guarantor executing and
delivering this Guaranty is reasonably equivalent to or greater than
the liability and obligation of such Guarantor hereunder, and such
liability and obligation, the Borrower's entering into the Credit
Agreement, and the extensions of credit thereunder have benefited and
may reasonably be expected to benefit such Guarantor directly or
indirectly.
(c) Such Guarantor has, independently and without
reliance upon the Agent or any Bank or Issuing Bank and based upon
such documents and information as such Guarantor has deemed
appropriate, made its own analysis and decision to enter into this
Guaranty.
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 4
<PAGE> 135
(d) The ability of the Borrower to borrow and obtain
letters of credit from time to time under the Credit Agreement will
enable such Guarantor to obtain credit, will benefit such Guarantor
and the consolidated corporate group of which such Guarantor is a part
and is necessary and convenient to the conduct, promotion and
attainment of the business of such Guarantor.
(e) As additional consideration for entering into this
Guaranty, such Guarantor has obtained certain rights under that
certain Contribution and Indemnification Agreement of even date
herewith, among such Guarantor and the other Companies.
(f) Such Guarantor has adequate capital to conduct its
business as a going concern, as presently conducted and as proposed to
be conducted; such Guarantor will be able to meet its obligations
hereunder and in respect of its other existing and future indebtedness
and liabilities as and when the same shall be due and payable; such
Guarantor is not insolvent (as that term is defined in 11 U.S.C.
Section 101 or under other applicable law) and will not be rendered
insolvent by its obligations hereunder, and the foregoing
representations are supported by such Guarantor's internal projections
and forecasts.
(g) Such Guarantor has determined that the execution and
delivery of this Guaranty is to its advantage and benefit, taking into
account all relevant facts and circumstances.
10. Each Guarantor covenants and agrees that, as long as the
Guaranteed Indebtedness or any part thereof is outstanding or any Bank or
Issuing Bank has any commitment under the Credit Agreement:
(a) Such Guarantor will furnish promptly to the Agent
written notice of the occurrence of any default under this Guaranty or
any Default under the Credit Agreement.
(b) Such Guarantor will furnish promptly to the Agent
such additional information concerning such Guarantor as the Agent,
any Bank or Issuing Bank may reasonably request.
(c) Such Guarantor will obtain at any time and from time
to time all authorizations, licenses, consents or approvals as shall
now or hereafter be necessary or desirable under all applicable laws
or regulations to conduct its business substantially as now conducted
and as presently proposed to be conducted or otherwise in connection
with the execution, delivery and performance of this Guaranty and will
promptly furnish copies thereof to the Agent.
11. If an Event of Default shall have occurred and be continuing,
the Agent, the Banks and the Issuing Banks shall each have the right to set off
and apply against this Guaranty or the Guaranteed Indebtedness or both, at any
time and without notice to any Guarantor, any and all deposits (general or
special, time or demand, provisional or final) (other than trust fund accounts
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 5
<PAGE> 136
held by any Guarantor for the benefit of non-Affiliates) or other sums at any
time credited by or owing from the Agent or any Bank or Issuing Bank to any
Guarantor whether or not the Guaranteed Indebtedness is then due and
irrespective of whether or not the Agent or any Bank or Issuing Bank shall have
made any demand under this Guaranty. As security for this Guaranty and the
Guaranteed Indebtedness, each Guarantor hereby grants the Agent, the Banks and
the Issuing Banks a security interest in all money, instruments, certificates
of deposit, and other property of such Guarantor (other than trust fund
accounts held by such Guarantor for the benefit of non-Affiliates) now or
hereafter held by the Agent or any Bank or Issuing Bank, including, without
limitation, property held in safekeeping. In addition to the rights of setoff
of the Agent, the Banks and the Issuing Banks and as further security for this
Guaranty and the Guaranteed Indebtedness, each Guarantor hereby grants the
Agent, the Banks and the Issuing Banks a security interest in all deposits
(general or special, time or demand, provisional or final) and all other
accounts of such Guarantor (other than trust fund accounts held by such
Guarantor for the benefit of non-Affiliates) now or hereafter on deposit with
or held by the Agent or any Bank or Issuing Bank and all other sums at any time
credited by or owing from the Agent or any Bank or Issuing Bank to such
Guarantor. The rights and remedies of the Agent, the Banks and the Issuing
Banks hereunder are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Agent, the Banks and the
Issuing Banks may have.
12. (a) Each Guarantor hereby agrees that the Subordinated
Indebtedness (hereinafter defined) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness, and each
Guarantor hereby assigns the Subordinated Indebtedness to the Agent, for the
pro rata benefit of the Banks and the Issuing Banks, as security for the
Guaranteed Indebtedness. If any sums shall be paid to any Guarantor by the
Borrower or any other Person on account of the Subordinated Indebtedness, such
sums shall be held in trust by such Guarantor for the benefit of the Agent and
shall forthwith be paid to the Agent, for the pro rata benefit of the Banks and
the Issuing Banks, without affecting the liability of any Guarantor under this
Guaranty and may be applied by the Agent, the Banks and the Issuing Banks
against the Guaranteed Indebtedness in such order and manner as they may
determine in their absolute discretion; provided, however, that so long as no
Event of Default shall have occurred, the Borrower shall be permitted to pay to
any Guarantor, and each Guarantor shall be permitted to receive and retain,
payments on account of Subordinated Indebtedness consisting of trade payables
owing by the Borrower to any Guarantor. Upon the request of the Agent, each
Guarantor shall execute, deliver, and endorse to the Agent, for the pro rata
benefit of the Banks and the Issuing Banks, such documents and instruments as
the Agent may request to perfect, preserve and enforce the rights of the Agent,
the Banks and the Issuing Banks hereunder. For purposes of this Guaranty, the
term "Subordinated Indebtedness" means all indebtedness, liabilities and
obligations of the Borrower and the Subsidiaries, or any of them, to any
Guarantor, whether such indebtedness, liabilities, and obligations now exist or
are hereafter incurred or arise, or whether the obligations of the Borrower or
any Subsidiary thereon are direct, indirect, contingent, primary, secondary,
several, joint, joint and several, or otherwise, and irrespective of whether
such indebtedness, liabilities or obligations are evidenced by a note,
contract, open account or otherwise, and irrespective of the Person or Persons
in whose favor such indebtedness, obligations or liabilities may, at their
inception, have been, or may hereafter be, created, or the manner in which they
have been or may hereafter be acquired by any Guarantor.
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 6
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(b) Each Guarantor agrees that any and all liens,
security interests, judgment liens, charges, or other encumbrances upon the
assets of the Borrower and the Subsidiaries, or any of them, securing payment
of any Subordinated Indebtedness shall be and remain inferior and subordinate
to any and all liens, security interests, judgment liens, charges or other
encumbrances upon such assets securing payment of the Guaranteed Indebtedness
or any part thereof, regardless of whether such encumbrances in favor of any
Guarantor or the Agent presently exist or are hereafter created or attached.
No Guarantor shall (i) file suit against the Borrower or any Subsidiary or
exercise or enforce any other creditor's right it may have against the Borrower
or any Subsidiary, or (ii) foreclose, repossess, sequester, or otherwise take
steps or institute any action or proceedings (judicial or otherwise, including
without limitation the commencement of, or joinder in, any liquidation,
bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce
any liens, security interests, collateral rights, judgments or other
encumbrances held by any Guarantor on assets of the Borrower or any other
Company unless and until the Guaranteed Indebtedness shall have been paid in
full, no Letters of Credit are outstanding, and the Commitments have expired or
terminated.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency proceeding
involving the Borrower or any Subsidiary as debtor, the Agent shall have the
right to prove and vote any claim under the Subordinated Indebtedness and to
receive, for the benefit of the Banks and the Issuing Banks, directly from the
receiver, trustee or other court custodian, all dividends, distributions and
payments made in respect of the Subordinated Indebtedness. The Agent, the Banks
and the Issuing Banks may apply any such dividends, distributions and payments
against the Guaranteed Indebtedness in such order and manner as they may
determine in their absolute discretion.
(d) Each Guarantor agrees that all promissory notes,
accounts receivable, ledgers, records or any other evidence of Subordinated
Indebtedness shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this
Guaranty.
13. No Guarantor shall prepay any of its Funded Debt, except the
Guaranteed Indebtedness.
14. No amendment or waiver of any provision of this Guaranty or
consent to any departure by any Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by the Agent and the
Required Banks. No failure on the part of the Agent or any Bank or Issuing
Bank to exercise, and no delay in exercising, any right, power, or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
15. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by the Borrower or other Person,
including any Guarantor, with respect to any of the Guaranteed Indebtedness
shall, if the statute of limitations in favor of any Guarantor
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 7
<PAGE> 138
against the Agent, the Banks or the Issuing Banks shall have commenced to run,
toll the running of such statute of limitations and, if the period of such
statute of limitations shall have expired, prevent the operation of such
statute of limitations.
16. This Guaranty is for the benefit of the Agent, the Banks and
the Issuing Banks, and their respective successors and assigns, and in the
event of an assignment of the Guaranteed Indebtedness, or any part thereof, the
rights and benefits hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty is binding
not only on each Guarantor, but on each Guarantor's successors and assigns.
The Guarantors' obligations and agreements hereunder are joint and several.
The provisions of this Guaranty shall apply to each Guarantor individually and
collectively.
17. Each Guarantor recognizes that the Agent, the Banks and the
Issuing Banks are relying upon this Guaranty and the undertakings of each
Guarantor hereunder in making extensions of credit to the Borrower under the
Credit Agreement and further recognizes that the execution and delivery of this
Guaranty is a material inducement to the Agent, the Banks and the Issuing Banks
in entering into the Credit Agreement. Each Guarantor hereby acknowledges that
there are no conditions to the full effectiveness of this Guaranty.
18. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A
LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN DALLAS COUNTY,
TEXAS, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS. ANY ACTION OR PROCEEDING AGAINST ANY GUARANTOR UNDER OR IN
CONNECTION WITH THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN
DALLAS COUNTY, TEXAS. EACH GUARANTOR HEREBY IRREVOCABLY (I) SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (II) WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT
IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH GUARANTOR
AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK OR ISSUING BANK TO SERVE
PROCESS IN ANY OTHER MATTER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY BANK OR ISSUING BANK TO BRING ANY ACTION OR PROCEEDING AGAINST ANY
GUARANTOR OR WITH RESPECT TO ANY OF SUCH GUARANTOR'S PROPERTY IN COURTS IN
OTHER JURISDICTIONS TO THE EXTENT SUCH JURISDICTION IS PROPER. ANY ACTION OR
PROCEEDING BY ANY GUARANTOR AGAINST THE AGENT, ANY BANK OR ISSUING BANK SHALL
BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS COUNTY, TEXAS.
19. Each Guarantor jointly and severally agrees to pay on demand
all reasonable attorneys' fees and all other costs and expenses incurred by the
Agent, the Banks and the Issuing Banks in connection with the preparation,
administration, enforcement, or collection of this Guaranty.
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 8
<PAGE> 139
20. Each Guarantor hereby waives promptness, diligence, notice of
any default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty, presentment, notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate, notice of the
incurring by the Borrower of additional indebtedness, and all other notices and
demands with respect to the Guaranteed Indebtedness and this Guaranty.
21. The Credit Agreement, and all of the terms thereof, are
incorporated herein by reference, the same as if stated verbatim herein, and
each Guarantor agrees that the Agent, the Banks and the Issuing Banks may
exercise any and all rights granted to them under the Credit Agreement and the
other Loan Documents (as defined in the Credit Agreement) without affecting the
validity or enforceability of this Guaranty.
22.(a) Each Guarantor hereby represents and warrants to the Agent,
the Banks and the Issuing Banks that such Guarantor (i) has adequate means to
obtain from the Borrower on a continuing basis information concerning the
financial condition and assets of the Borrower and (ii) is not relying upon the
Agent or any Bank or Issuing Bank to provide (and the Agent, the Banks and the
Issuing Banks shall have no duty to provide) any such information to such
Guarantor either now or in the future.
(b) THIS GUARANTY AND THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT
LIMITATION, THE EXISTING BORROWER GUARANTY AND THE EXISTING SUBSIDIARY
GUARANTY) EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Guaranty may
be amended or waived only by an instrument in writing signed by the parties
hereto. In the event any term or provision of this Guaranty expressly
conflicts with any term or provision of the Credit Agreement, the terms and
provisions of the Credit Agreement shall govern and control.
23. Each Guarantor acknowledges that it has had the benefit of
legal counsel of its own choice and has been afforded an opportunity to review
this Guaranty with its legal counsel and that this Guaranty shall be construed
as if jointly drafted by the Guarantors and the Agent.
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 9
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EXECUTED as of the day and year first written above.
GUARANTORS:
HEALTHCOR, INC.
HEALTHCOR PHARMACY, INC.
HEALTHCOR OXYGEN AND MEDICAL
EQUIPMENT, INC.
HEALTHCOR REHABILITATION SERVICES,
INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
HC PERSONNEL RESOURCES, INC.
CARENETWORK, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Address: 8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
Attn: S. Wayne Bazzle
SECOND AMENDED AND RESTATED SUBSIDIARY GUARANTY - Page 10
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EXHIBIT "F"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Second Amended and Restated Pledge Agreement
<PAGE> 142
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
This SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement"),
dated as of December 1, 1997, is by and among the corporations signatory hereto
under the heading "Pledgors" on the signature pages hereof (whether one or
more, collectively referred to as the "Pledgors" and individually as a
"Pledgor") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association, as agent (in such capacity, the "Agent") for itself, the other
Issuing Banks (hereinafter defined) and the other lenders (collectively, the
"Banks") from time to time party to that certain Second Amended and Restated
Credit Agreement dated of even date herewith among Healthcor Holdings, Inc., a
Delaware corporation (the "Borrower"), the Agent, Texas Commerce Bank National
Association and each of the other Banks issuing letters of credit from time to
time thereunder (in such capacity, collectively, the "Issuing Banks"), and the
Banks, as the same may be amended or modified from time to time (the "Credit
Agreement").
R E C I T A L S:
A. The Borrower, HealthCor, Inc., a Delaware corporation
("HealthCor"), the Agent, certain lenders (collectively, the "Existing Banks"),
and the Existing Banks issuing letters of credit thereunder (in such capacity,
the "Existing Issuing Banks") previously entered into that certain Amended and
Restated Credit Agreement dated as of October 31, 1996 (as amended, the
"Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, Pledgors executed and
delivered to the Agent an Amended and Restated Pledge Agreement dated as of
October 31, 1996, which secured the obligations of the Borrower and HealthCor
under the Existing Credit Agreement (the "Existing Pledge Agreement").
C. Concurrently herewith the Borrower, the Agent, the Banks and the
Issuing Banks are amending and restating the Existing Credit Agreement pursuant
to the Credit Agreement and in connection therewith, the parties hereto now
desire to amend and restate the Existing Pledge Agreement, as hereinafter
provided, and have agreed, for purposes of clarity and ease of administration,
to carry out the agreed upon amendments by amending the pertinent provisions of
the Existing Pledge Agreement and then restating the Existing Pledge Agreement
in its entirety by means of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows and the Existing Pledge
Agreement is hereby amended and restated in its entirety as follows:
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 1
<PAGE> 143
ARTICLE I
Definition; Security Interest and Pledge
Section 1.1 Definitions. All capitalized terms used and not otherwise
defined herein shall have their respective meanings as set forth in the Credit
Agreement.
Section 1.2 Security Interest and Pledge. Each Pledgor hereby pledges
and grants to the Agent, for the benefit of itself, the Banks and the Issuing
Banks, and ratifies and confirms that the Agent has been previously granted and
now possesses a security interest in the following property (such property
being hereinafter sometimes called the "Collateral"):
(a) all present and future issued and outstanding shares of
capital stock or other equity or investment securities now owned or
hereafter acquired by such Pledgor, including without limitation, the
shares of stock more fully described on Schedule I attached hereto;
(b) all present and future increases, profits, combinations,
reclassifications of, and substitutes and replacements for, all or part
of the foregoing, and all present and future accounts, contract rights,
general intangibles, chattel paper, documents, instruments, cash and
noncash proceeds, and other rights arising from or by virtue of, or from
the voluntary or involuntary sale, lease, or other disposition of, or
collections with respect to, or proceeds payable by virtue of claims
against any Person with respect to, all or any part of the foregoing;
(c) all investment property, including, without limitation,
all securities, whether certificated or uncertificated, investment
accounts or securities accounts and security entitlements which may be
carried in a securities account now owned by each Pledgor or hereafter
from time to time existing or acquired, and all proceeds of any of the
foregoing Collateral (including, but not limited to, all insurance
claims for insurance in respect of any of the foregoing Collateral); and
(d) all products, proceeds, revenues, distributions,
dividends, stock dividends, securities, and other property, rights, and
interests any Pledgor receives or is at any time entitled to receive on
account of any of the foregoing.
Section 1.3 Obligations. The Collateral shall secure the following
obligations, indebtedness, and liabilities (all such obligations, indebtedness,
and liabilities being hereinafter sometimes called the "Obligations"): (a) the
obligations, indebtedness, and liabilities of Borrower to the Banks and the
Issuing Banks evidenced by the Revolving Credit Notes (herein so called)
executed by Borrower pursuant to the Credit Agreement; (b) the respective
obligations, indebtedness, and liabilities of the Borrower to the Agent, the
Banks and the Issuing Banks under the Credit Agreement; (c) the respective
obligations, indebtedness and liabilities of the Pledgors, other than the
Borrower, under that certain Subsidiary Guaranty of even date herewith executed
by such Pledgors in favor of the Agent, the Banks and the Issuing Banks
pursuant to the Credit
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 2
<PAGE> 144
Agreement; (d) all future advances by the Banks and the Issuing Banks to the
Borrower; (e) all costs and expenses, including without limitation attorneys'
fees and legal expenses incurred by the Agent, the Banks and the Issuing Banks
to preserve and maintain the Collateral, collect the obligations herein
described, and enforce this Agreement; (f) all other Obligations (as such term
is defined in the Credit Agreement); and (g) all extensions, renewals and
modifications of any of the foregoing.
Section 1.4 Renewal of Obligations and Liens. The parties hereto
acknowledge and agree that (i) the Revolving Credit Notes are in renewal,
extension and modification, but not in extinguishment of, the existing
indebtedness of the Borrower and HealthCor under the Existing Credit Agreement,
and (ii) such existing indebtedness is secured by liens and security interests
granted by the Pledgors pursuant to the Existing Pledge Agreement, which liens
and security interests are not extinguished or released, but instead are hereby
renewed, extended, carried forward and continued in accordance with the terms
of this Agreement.
ARTICLE II
Representations and Warranties
Each Pledgor represents and warrants to the Agent, the Banks and the
Issuing Banks that:
Section 2.1 Title. Such Pledgor owns, and with respect to Collateral
acquired after the date hereof, such Pledgor will own, legally and
beneficially, the Collateral free and clear of any Lien, or any right or option
on the part of any Person to purchase or otherwise acquire the Collateral or
any part thereof, except for the security interest granted hereunder. The
Collateral is not subject to any restriction on transfer or assignment except
for compliance with applicable federal and state securities laws and
regulations promulgated thereunder. Such Pledgor has the unrestricted right to
pledge the Collateral as contemplated hereby. All of the Collateral has been
duly and validly issued and is fully paid and nonassessable.
Section 2.2 Organization and Authority. Each Pledgor is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of its incorporation. Each Pledgor has the corporate power and authority
to execute, deliver, and perform this Agreement, and the execution, delivery,
and performance of this Agreement by such Pledgor (a) have been duly authorized
by all necessary corporate action on the part of such Pledgor, (b) do not and
will not violate or conflict with (i) any law, rule, or regulation or any
order, writ, injunction, or decree of any Governmental Authority or arbitrator,
which violation would have a material adverse effect on the business, condition
(financial or otherwise), operations, prospects, or properties of such Pledgor,
the Collateral taken as a whole, or the ability of the Companies to pay and
perform the Obligations, or (ii) the articles/certificate of incorporation or
bylaws of such Pledgor, and (c) do not and will not conflict with, result in a
breach of, or constitute a default under the provisions of any material
indenture, mortgage, deed of trust, security agreement, instrument or agreement
binding on such Pledgor or any of its property.
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 3
<PAGE> 145
Section 2.3 Principal Place of Business. The principal place of
business and chief executive office of each Pledgor, and the office where each
Pledgor keeps its books and records, is located at the address of such Pledgor
shown on the signature pages hereof.
Section 2.4 Percentage of Stock. The Collateral constitutes one
hundred percent (100%) of the issued and outstanding shares of capital stock of
each issuer thereof.
Section 2.5 First Priority Perfected Security Interest. This
Agreement creates and continues in favor of the Agent for the benefit of
itself, the Banks and the Issuing Banks, a first priority perfected security
interest in the Collateral. There are no conditions precedent to the
effectiveness of this Agreement that have not been fully and permanently
satisfied.
ARTICLE III
Affirmative and Negative Covenants
Each Pledgor covenants and agrees with the Agent, the Banks and the
Issuing Banks that:
Section 3.1 Encumbrances. Such Pledgor shall not create, permit, or
suffer to exist, and shall defend the Collateral against, any Lien on the
Collateral except the pledge and security interest of the Agent hereunder and
the Permitted Liens, and shall defend such Pledgor's rights in the Collateral
and the Agent's security interest in the Collateral against the claims of all
Persons.
Section 3.2 Sale of Collateral. Except as permitted under Section
10.3(b) of the Credit Agreement, such Pledgor shall not sell, assign, or
otherwise dispose of the Collateral or any part thereof without the prior
written consent of the Agent.
Section 3.3 Distributions. If such Pledgor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase, or reduction of capital or issued in
connection with any reorganization), option or rights, whether as an addition
to, in substitution of, or in exchange for any Collateral or otherwise, such
Pledgor agrees to accept the same as the Agent's agent and to hold the same in
trust for the Agent, and to deliver the same forthwith to the Agent in the
exact form received, with the appropriate endorsement of such Pledgor, when
necessary, and/or appropriate undated stock powers duly executed in blank, to
be held by the Agent as additional Collateral for the Obligations, subject to
the terms hereof. Any sums paid upon or in respect of the Collateral upon the
liquidation or dissolution of the issuer thereof shall be paid over to the
Agent to be held by it as additional Collateral for the Obligations subject to
the terms hereof; and in case any distribution of capital shall be made on or
in respect of the Collateral or any property shall be distributed upon or with
respect to the Collateral pursuant to any recapitalization or reclassification
of the capital of the issuer thereof or pursuant to any reorganization of the
issuer thereof, the property so distributed shall be delivered to the Agent to
be held by it, as additional Collateral for the Obligations, subject to the
terms hereof. All sums of money and property so paid or distributed in respect
of the Collateral
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 4
<PAGE> 146
that are received by such Pledgor shall, until paid or delivered to the Agent,
be held by such Pledgor in trust as additional security for the Obligations.
Section 3.4 Further Assurances. At any time and from time to time,
upon the request of the Agent, and at the sole expense of such Pledgor, such
Pledgor shall promptly execute and deliver all such further instruments and
documents and take such further action as the Agent may deem necessary or
desirable to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement, including, without
limitation, the execution and filing of such financing statements, continuation
statements and other documents in such offices as the Agent may require. A
carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Subject to the right of such Pledgor to receive cash dividends under Section
4.3 hereof, in the event any Collateral is ever received by such Pledgor, such
Pledgor shall promptly transfer and deliver to the Agent such Collateral so
received by such Pledgor (together with any necessary endorsements in blank or
undated stock powers duly executed in blank), which Collateral shall thereafter
be held by the Agent pursuant to the terms of this Agreement. The Agent shall
at all times have the right to exchange any certificates representing
Collateral for certificates of smaller or larger denominations for any purpose
consistent with this Agreement.
Section 3.5 Inspection Rights. Such Pledgor shall permit the Agent,
the Banks, the Issuing Banks and their representatives, upon one (1) Business
Day's prior notice, to examine, inspect, and copy such Pledgor's books and
records at any reasonable time and as often as they may desire.
Section 3.6 Notification. Such Pledgor shall promptly notify the
Agent of (i) any Lien or material claim made or threatened against the
Collateral, (ii) any material change in the Collateral, including, without
limitation, any material decrease in the value of the Collateral, and (iii) the
occurrence or existence of any Default.
Section 3.7 Books and Records; Information. Such Pledgor shall keep
books and records of the Collateral and such Pledgor's business and financial
condition in accordance with GAAP (subject to year-end adjustments and
disclosures). Such Pledgor shall from time to time at the request of the Agent
deliver to the Agent such information regarding the Collateral and such Pledgor
as the Agent may request. Upon the request of Agent, such Pledgor shall mark
its books and records to reflect the security interest of the Agent under this
Agreement.
Section 3.8 Additional Securities. Such Pledgor shall not consent to
or approve the issuance of any additional shares of any class of capital stock
of the issuer of the Collateral, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
Section 3.9 Provide Information. Such Pledgor shall fully cooperate,
to the extent requested by the Agent, in the completion of any notice, form,
schedule, or other document filed
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 5
<PAGE> 147
by the Agent on its own behalf or on behalf of such Pledgor, including, without
limitation, any required notice or statement of beneficial ownership or of the
acquisition of beneficial ownership of equity securities constituting part of
the Collateral and any notice of proposed sale of any such securities pursuant
to Rule 144 as promulgated by the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933, as amended. Without limiting the generality
of the foregoing, such Pledgor shall furnish to the Agent any and all
information which the Agent may reasonably request for purposes of any such
filing, regarding such Pledgor, the Collateral, and any issuer of any of the
Collateral, and such Pledgor shall disclose to the Agent all material adverse
information known by such Pledgor with respect to the operations of any issuer
of any of the Collateral.
ARTICLE IV
Rights of the Agent and Pledgors
Section 4.1 Certain Covenants and Rights Regarding Collateral.
(a) Each Pledgor shall from time to time at the request of the
Agent furnish the Agent with a schedule of each account included in the
Collateral and a list of all those liable on checks, notes, drafts, and
other instruments representing the proceeds of such accounts. The Agent
shall have the right to make test verifications of the Collateral. If
any part of the Collateral is or becomes subject to the Federal
Assignment of Claims Act, the Pledgor whose Collateral is or becomes
affected thereby will execute all instruments and take all steps
required by the Agent to comply with that act. If part of the
Collateral is evidenced by promissory notes, trade acceptances or other
instruments for the payment of money, each Pledgor will, at the request
of the Agent, immediately deliver them to the Agent, appropriately
endorsed to the Agent's order, and regardless of the form of
endorsement, each Pledgor waives presentment, demand, notice of
dishonor, protest, and notice of protest.
(b) If the validity or priority of this Agreement or of any
rights, titles, security interests or other interests created or
evidenced hereby shall be attacked, endangered, or questioned, or if any
legal proceedings are instituted with respect thereto, the Pledgors will
give prompt written notice thereof to the Agent and, at the Pledgors'
own cost and expense, will diligently endeavor to cure any defect which
may be developed or claimed, and will take all necessary and proper
steps for the defense of such legal proceedings, and the Agent (whether
or not named as a party to the legal proceedings with respect thereto)
is hereby authorized and empowered to take such additional steps as in
its judgment and discretion may be necessary or proper for the defense
of any such legal proceedings or the protection of the validity or
priority of this Agreement and the rights, titles, security interests,
and other interests created or evidenced hereby, and all expenses so
incurred of every kind and character shall be a demand obligation owing
by the Pledgors and the party incurring such expenses shall be
subrogated to all rights of the Person receiving such payment.
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 6
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(c) Upon the occurrence of an Event of Default or if the Agent
shall deem payment of the Obligations to be insecure, and at any time
thereafter, the Agent is authorized to take possession peaceably of the
Collateral and of all books, records and accounts relating thereto, and
to exercise without interference from the Pledgors any and all rights
which such Pledgors have with respect to the management, possession,
protection, or preservation of the Collateral. If necessary to obtain
the possession provided for above, the Agent may invoke any and all
legal remedies to dispossess the Pledgors, including specifically one or
more actions for forcible entry and detainer. In connection with any
action taken by the Agent pursuant to this Section, the Agent shall not
be liable for any loss sustained by the Pledgors resulting from any act
or omission of the Agent unless such loss is caused by the willful
misconduct and bad faith of the Agent, nor shall the Agent be obligated
to perform or discharge any obligation, duty, or liability under any
sale or lease agreement covering the Collateral or any part thereof, or
under or by reason of this Agreement or exercise of rights or remedies
hereunder.
(d) At any time prior to the termination of this Agreement the
Agent may notify the account debtors or obligors of any accounts,
chattel paper, negotiable instruments, or other evidences of
indebtedness included in the Collateral to pay the Agent directly.
Until the Agent elects to exercise these rights, each Pledgor is
authorized as agent of the Agent to collect and enforce such accounts.
The costs of collection and enforcement, including attorneys' fees and
expenses, shall be borne solely by the Pledgors whether incurred by the
Agent or the Pledgors.
Section 4.2 Voting Rights. Except when an Event of Default shall be
continuing, each Pledgor shall be entitled to exercise any and all voting
rights pertaining to the Collateral owned by such Pledgor or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the Credit
Agreement. The Agent shall execute and deliver to each Pledgor all such
proxies and other instruments as each Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting rights which it is
entitled to exercise pursuant to this Section.
Section 4.3 Dividends. Except when an Event of Default shall be
continuing, each Pledgor shall be entitled to receive and retain any dividends
on the Collateral, owned by such Pledgor paid in cash out of earned surplus to
the extent and only to the extent that such dividends are permitted by the
Credit Agreement.
Section 4.4 Performance by the Agent. If any Pledgor fails to perform
or comply with any of its agreements contained herein, the Agent itself may, at
its sole discretion, cause or attempt to cause performance or compliance with
such agreement. In such event, the expenses of the Agent shall be payable by
such Pledgor to the Agent on demand and together with interest thereon at the
Applicable Rate from and including the date the Agent incurs such expenses to
but excluding the date of such demand, and from and including the date of such
demand until such expenses are paid in full, at the Default Rate, shall
constitute Obligations secured by this Agreement. The Agent, upon making such
payment, shall be subrogated to all of the rights of
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 7
<PAGE> 149
the Person receiving such payment. Notwithstanding the foregoing, it is
expressly agreed that the Agent shall not have any liability or responsibility
for the performance of any obligation of any Pledgor under this Agreement.
Section 4.5 Setoff; Property Held by the Agent. If an Event of
Default shall have occurred and be continuing, the Agent shall have the right
to set off and apply against the Obligations, at any time and without notice to
the Pledgors, any and all deposits (general or special, time or demand,
provisional or final) (other than trust fund accoundts held by any Pledgor for
the benefit of non-Affiliates) or other sums at any time credited by or owing
from the Agent to any Pledgor whether or not the Obligations are then due. As
additional security for the Obligations, each Pledgor hereby grants the Agent a
security interest in all money, instruments, and other property of such Pledgor
(other than trust fund accounts held by such Pledgor for the benefit of non-
Affiliates) now or hereafter held by the Agent. In addition to the Agent's
right of setoff and as further security for the Obligations, each Pledgor
hereby grants the Agent a security interest in all deposits (general or
special, time or demand, provisional or final) and other accounts of such
Pledgor (other than trust fund accounts held by such Pledgor for the benefit of
non-Affiliates) now or hereafter maintained with the Agent and all other sums
at any time credited by or owing from the Agent to such Pledgor. The rights
and remedies of the Agent hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the
Agent may have.
Section 4.6 The Agent's Duty of Care. Other than the exercise of
reasonable care in the physical custody of the Collateral while held by the
Agent hereunder, the Agent shall have no responsibility for or obligation or
duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that each Pledgor shall be responsible
for preservation of all rights in the Collateral owned by such Pledgor.
Without limiting the generality of the foregoing, the Agent shall be
conclusively deemed to have exercised reasonable care in the custody of the
Collateral if the Agent takes such action, for purposes of preserving rights in
the Collateral, as such Pledgor may reasonably request in writing, but no
failure or omission or delay by the Agent in complying with any such request by
any Pledgor, and no refusal by the Agent to comply with any such request by any
Pledgor, shall be deemed to be a failure to exercise reasonable care. The
Agent shall not be responsible for any decline in the value of the Collateral
and shall not be required to take any steps to preserve rights against prior
parties or to protect, preserve, or maintain any Lien given to secure the
Collateral.
Section 4.7 Assignment by the Agent. Subject to Section 14.7 of the
Credit Agreement, the Agent, the Banks and the Issuing Banks may at any time
and from time to time assign the Obligations and any portion thereof and/or the
Collateral and any portion thereof, and the assignee shall be entitled to all
of the rights and remedies of the Agent, the Banks and the Issuing Banks under
this Agreement in relation thereto.
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 8
<PAGE> 150
ARTICLE V
Default
Section 5.1 Rights and Remedies. During the existence of an Event of
Default, the Agent shall have the following rights and remedies:
(i) In addition to all other rights and remedies granted to
the Agent in this Agreement and in any other instrument or agreement
securing, evidencing, or relating to the Obligations, the Agent shall
have all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted by the State of Texas. Without limiting the
generality of the foregoing, the Agent may (A) without demand or notice
to any Pledgor, collect, receive, or take possession of the Collateral
or any part thereof, (B) sell or otherwise dispose of the Collateral, or
any part thereof, in one or more parcels at public or private sale or
sales, at the Agent's offices or elsewhere, for cash, on credit, or for
future delivery, and/or (C) bid and become a purchaser at any sale free
of any right or equity of redemption in any Pledgor, which right or
equity is hereby expressly waived and released by each Pledgor. Upon
the request of the Agent, each Pledgor shall assemble the Collateral
owned by such Pledgor and make it available to the Agent at any place
designated by the Agent that is reasonably convenient to such Pledgor
and the Agent. Each Pledgor agrees that the Agent shall not be
obligated to give more than ten (10) days prior written notice of the
time and place of any public sale or of the time after which any private
sale may take place and that such notice shall constitute reasonable
notice of such matters. The Agent shall not be obligated to make any
sale of the Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor shall be liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys' fees and
other expenses incurred by the Agent in connection with the collection
of the Obligations and the enforcement of the Agent's rights under this
Agreement, all of which expenses and fees shall constitute additional
Obligations secured by this Agreement. Each Pledgor shall remain liable
for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay the Obligations. Each Pledgor waives
all rights of marshalling in respect of the Collateral.
(ii) The Agent may cause any or all of the Collateral held by
it to be transferred into the name of the Agent or the name or names of
the Agent's nominee or nominees.
(iii) The Agent may collect or receive all money or property at
any time payable or receivable on account of or in exchange for any of
the Collateral, but shall be under no obligation to do so.
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 9
<PAGE> 151
(iv) The Agent shall have the right, but shall not be obligated
to, exercise or cause to be exercised all voting, consensual, and other
powers of ownership pertaining to the Collateral, and each Pledgor shall
deliver to the Agent, if requested by the Agent, irrevocable proxies
with respect to the Collateral in form satisfactory to the Agent.
(v) Each Pledgor hereby acknowledges and confirms that the
Agent may be unable to effect a public sale of any or all of the
Collateral by reason of certain prohibitions contained in the Securities
Act of 1933, as amended, and applicable state securities laws and may be
compelled to resort to one or more private sales thereof to a restricted
group of purchasers who will be obligated to agree, among other things,
to acquire any shares of the Collateral for their own respective
accounts for investment and not with a view to distribution or resale
thereof. Each Pledgor further acknowledges and confirms that any such
private sale may result in prices or other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner, and the Agent shall be
under no obligation to take any steps in order to permit the Collateral
to be sold at a public sale. The Agent shall be under no obligation to
delay a sale of any of the Collateral for any period of time necessary
to permit any issuer thereof to register such Collateral for public sale
under the Securities Act of 1933, as amended, or under applicable state
securities laws.
(vi) On any sale of the Collateral, the Agent is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of the Agent's counsel, in order to
avoid any violation of applicable law or in order to obtain any required
approval of the purchaser or purchasers by any applicable governmental
authority.
Section 5.2 Application of Proceeds of Sale. The proceeds of any sale
of Collateral pursuant to Section 5.1 hereof, as well as any Collateral
consisting of cash, shall be applied by the Agent as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses incurred by the Agent in connection with such sale or otherwise
in connection with this Agreement or any of the Obligations, including,
but not limited to, all court costs and the reasonable fees and expenses
of its agents and one legal counsel, the repayment of all advances made
hereunder or under any other Loan Document by the Agent on behalf of any
Pledgor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder;
SECOND, to the payment in full of all other Obligations that are
payable to the Agent including, without limitation, all expense
reimbursements and indemnities;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses incurred by the Issuing Banks in connection with the Credit
Agreement, any Letter
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 10
<PAGE> 152
of Credit, or any of the Obligations, including, but not limited to, all
court costs and the reasonable fees and expenses of their agents and one
legal counsel;
FOURTH, to the payment in full of all other Obligations that are
payable to the Issuing Banks, including, without limitation, all Letter
of Credit disbursements and all accrued and unpaid interest thereon and
all Letter of Credit fees;
FIFTH, to the payment in full of the Obligations, pro rata among
the Banks in accordance with the amounts of the Loans held by them, or,
if no Loans shall be outstanding, in accordance with the amounts of
their Commitments;
SIXTH, if any Letter of Credit remains outstanding, the Agent,
after making the applications required by paragraphs "FIRST" through
"FIFTH" above, shall hold back and retain as Collateral for the
Obligations an amount equal to the aggregate face amounts of all
outstanding Letters of Credit; and
SEVENTH, provided that all of the Obligations have been paid and
performed in full and all Commitments and Letters of Credit have
terminated, to the Pledgors, or their respective successors or assigns,
or to whomsoever may lawfully be entitled to the same, or as a court of
competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation, a
sale pursuant to any applicable Uniform Commercial Code or under a judicial
proceeding), the receipt of the Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Agent or such
officer or be answerable in any way for the misapplication thereof.
ARTICLE VI
Miscellaneous
Section 6.1 No Waiver; Cumulative Remedies. No failure on the part of
the Agent to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power, or privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. The rights
and remedies provided for in this Agreement are cumulative and not exclusive of
any rights and remedies provided by law.
Section 6.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Pledgors, the Agent, the Banks, the
Issuing Banks, and their respective heirs,
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 11
<PAGE> 153
successors, and assigns, except that no Pledgor may assign any of its rights or
obligations under this Agreement without the prior written consent of the
Agent.
Section 6.3 AMENDMENT; ENTIRE AGREEMENT; CONTROLLING AGREEMENT. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, THE
EXISTING PLEDGE AGREEMENT) EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The
provisions of this Agreement may be amended or waived only by an instrument in
writing signed by the parties hereto. In the event any term or provision of
this Agreement expressly conflicts with any term or provision of the Credit
Agreement, the terms and provisions of the Credit Agreement shall govern and
control.
Section 6.4 Notices. All notices and other communications provided
for in this Agreement shall be given or made in writing and telecopied, mailed
by certified mail return receipt requested, or delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof; or, as to any party, at such other address as shall be
designated by such party in a notice to any other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid.
Section 6.5 APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN DALLAS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN DALLAS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST ANY
PLEDGOR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT OR
AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART
THEREOF MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS.
EACH PLEDGOR HEREBY IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURTS, AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH
COURT IS AN INCONVENIENT FORUM. EACH PLEDGOR AGREES THAT SERVICE OF PROCESS
UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 6.4 OF THIS AGREEMENT.
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 12
<PAGE> 154
NOTHING IN THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT SECURING,
EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF SHALL AFFECT THE
RIGHT OF THE AGENT, THE BANKS, AND THE ISSUING BANKS TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO BRING
ANY ACTION OR PROCEEDING AGAINST ANY PLEDGOR OR WITH RESPECT TO ANY OF ITS
PROPERTY IN COURTS IN OTHER JURISDICTIONS. ANY ACTION OR PROCEEDING BY ANY
PLEDGOR AGAINST THE AGENT, THE DOCUMENTATION AGENT, THE BANKS, AND THE ISSUING
BANKS SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS COUNTY, TEXAS.
Section 6.6 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 6.7 Survival. All representations and warranties made in this
Agreement shall survive the execution and delivery of this Agreement, and no
investigation by the Agent or any Bank or Issuing Bank shall affect the
representations and warranties of any Pledgor herein or the right of the Agent,
the Banks and the Issuing Banks to rely upon them.
Section 6.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 6.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6.10 Construction. Each Pledgor and the Agent acknowledge that
each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel
and that this Agreement shall be construed as if jointly drafted by such
Pledgor and the Agent.
Section 6.11 Obligations Absolute. The obligations of each Pledgor
under this Agreement shall be absolute and unconditional and shall not be
released, discharged, reduced, or in any way impaired by any circumstance
whatsoever, including, without limitation, any amendment, modification,
extension, or renewal of this Agreement, the Obligations, or any document or
instrument evidencing, securing, or otherwise relating to the Obligations, or
any release, subordination, or impairment of collateral, or any waiver,
consent, extension, indulgence, compromise, settlement, or other action or
inaction in respect of this Agreement, the Obligations, or any document or
instrument evidencing, securing, or otherwise relating to the Obligations, or
any exercise or failure to exercise any right, remedy, power, or privilege in
respect of the Obligations.
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 13
<PAGE> 155
Section 6.12 Release of Security Interest. At such time as all of the
Obligations have been paid and performed in full, all obligations and
commitments of the Banks and the Issuing Banks to make advances, issue letters
of credit or otherwise extend credit under the Credit Agreement have expired or
terminated, and no Letters of Credit remain outstanding, the Agent shall
release the security interest granted hereby.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first written above.
PLEDGORS:
HEALTHCOR HOLDINGS, INC.
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
Address for Notices:
8150 North Central Expressway
Suite M-2000
Dallas, Texas 75206
Fax No.: (214) 692-4666
Telephone No.: (214) 692-4663
Attention: S. Wayne Bazzle
AGENT:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as Agent
By:
---------------------------
Steven T. Prichett
Vice President
Address for Notices:
2200 Ross Avenue
Post Office Box 660197
Dallas, Texas 75266-0197
Fax No.: (214) 965-2384
Telephone No.: (214) 965-3710
Attention: Steven T. Prichett
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT - Page 14
<PAGE> 156
SCHEDULE I
<TABLE>
<CAPTION>
Type of Number of Certificate
Pledgor Company Stock Shares Number(s)
------- ------- ----- ------ ---------
<S> <C> <C> <C> <C>
HealthCor Holdings, Inc. HealthCor, Inc. Common 1,000 001
HealthCor Pharmacy, Inc. Common 1,000 1
Physicians Home Health
Network, Inc. Common 1,000 05
HealthCor Oxygen and
Medical Equipment, Inc. Common 400 1
HealthCor Rehabilitation
Services, Inc. Common 100 1
HC Personnel
Resources, Inc. Common 1,000 01
CareNetwork, Inc. Common 1,000 01
</TABLE>
SCHEDULE I TO AMENDED AND RESTATED PLEDGE AGREEMENT - Solo Page
<PAGE> 157
EXHIBIT "G"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED ASSIGNMENT OF DEPOSIT ACCOUNTS
<PAGE> 158
AMENDED AND RESTATED ASSIGNMENT OF DEPOSIT ACCOUNTS
THIS AMENDED AND RESTATED ASSIGNMENT OF DEPOSIT ACCOUNTS (this
"Assignment") is executed as of December 1, 1997 by the parties signatory
hereto (although more than one, "Assignor") to TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association, as Agent ("Assignee"), whose
address is 2200 Ross Avenue, Post Office Box 660197, Dallas, Dallas County,
Texas 75266-0197 pursuant to that certain Second Amended and Restated Credit
Agreement dated of even date herewith among HealthCor Holdings, Inc. (the
"Borrower"), the lenders from time to time party thereto (collectively, the
"Banks"), the Banks that from time to time issue letters of credit thereunder
(in such capacity, the "Issuing Banks"), and Assignee, as agent for itself, the
Banks and the Issuing Banks (such credit agreement as the same may be amended
or otherwise modified is referred to as the "Credit Agreement"). In
consideration of the extensions of credit made or to be made or other financial
accommodations afforded or to be afforded to the Borrower by the Banks and the
Issuing Banks pursuant to the Credit Agreement, Assignor does hereby assign and
transfer to and pledge with Assignee all right, title, and interest of Assignor
in and to the following accounts:
<TABLE>
<CAPTION>
ASSIGNOR LOCKBOX NO. ACCOUNT NO. INSTITUTION
-------- ----------- ----------- -----------
<S> <C> <C> <C>
HealthCor Oxygen Medical Texas Commerce Bank
Equipment, Inc. 911437 088 05 129 721 National Association
HealthCor, Inc. 911556 074 019 132 35 Texas Commerce Bank
National Association
</TABLE>
together with all instruments, documents, and other writings evidencing the same
and all sums now or at any time hereafter on deposit therein, all sums due or to
become due thereon, and all extensions or renewals thereof, if the account or
accounts may be extended or renewed (collectively, the "Account"), and Assignor
does also hereby grant to Assignee for the benefit of itself, the Banks and the
Issuing Banks, a security interest in the Account, which security interest may
also be evidenced by one or more other security agreements between Assignor and
Assignee, and in the event of any conflict between the terms hereof and the
terms thereof, the terms thereof will apply. Such security interest extends to
any payment, renewal, or other proceeds of the Account.
This assignment is made as and shall constitute collateral security for
any and all indebtedness and liabilities of any kind and nature of the Borrower
and/or Assignor to Assignee, the Banks and the Issuing Banks under the Credit
Agreement, howsoever evidenced, whether now existing or hereafter arising,
director or indirect, absolute, contingent, joint, several, or joint and several
(the "Obligation").
AMENDED AND RESTATED ASSIGNMENT OF DEPOSIT ACCOUNTS - Page 1
<PAGE> 159
During the existence of an Event of Default, Assignee is hereby authorized
to apply all or any portion of the funds represented by the Account to the
payment of the Obligation and to withdraw funds for such purpose at such times
and in such amounts as it shall in its discretion determine.
Assignor hereby constitutes and appoints Assignee the true and lawful
attorney of Assignor, with full power of substitution, during the existence of
an Event of Default, to ask, demand, collect, receive, receipt for, sue for,
compound, and give acquittance for any and all amounts which may be or become
due or payable under the Account, to execute any and all withdrawal receipts or
other orders for the payment of money drawn on the Account, to endorse the name
of Assignor on all commercial paper given in payment or in part payment
thereof, and, in its discretion, to file any claim or take any other action or
proceeding, either in its own name or in the name of Assignor or otherwise,
which Assignee may deem necessary or appropriate to protect and preserve the
right, title and interest of Assignee, the Banks and the Issuing Banks
hereunder, and without limiting the foregoing, Assignee shall have and is
hereby given full power and authority to transfer the Account into the name of
the Assignee or its nominee.
Assignor represents and warrants that (a) the Account is genuine and
represents in all respects what it purports to be, (b) Assignor is the owner
thereof free and clear of all liens and encumbrances of any nature whatsoever,
(c) Assignor will not create any other security interest in, mortgage, or
otherwise assign the Account or any part thereof, (d) that any funds payable
with respect to the Account that are received by Assignor shall immediately
upon such receipt become subject to the lien hereof and be segregated from all
other funds of Assignor and be held in trust for Assignee, the Banks and the
Issuing Banks and be immediately paid into the Account, and (e) Assignor has
full powers, right and authority to execute and deliver this assignment.
This Assignment is an amendment and restatement (and not extinguishment or
novation) of that certain Assignment of Deposit Accounts dated as of October
31, 1996 executed by Assignor (other than CareNetwork, Inc., an Arkansas
corporation) in favor of Assignee.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO.
AMENDED AND RESTATED ASSIGNMENT OF DEPOSIT ACCOUNTS - Page 2
<PAGE> 160
EXECUTED as of the date first above written.
ASSIGNOR:
HEALTHCOR, INC.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR OXYGEN AND
MEDICAL EQUIPMENT, INC.
HEALTHCOR REHABILITATION
SERVICES, INC.
HC PERSONNEL RESOURCES, INC.
HEALTHCOR PHARMACY, INC.
PHYSICIANS HOME HEALTH NETWORK,
INC.
CARENETWORK, INC.
By:
--------------------------
Name:
---------------------
Title:
--------------------
AMENDED AND RESTATED ASSIGNMENT OF DEPOSIT ACCOUNTS - Page 3
<PAGE> 161
EXHIBIT "H"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Amended and Restated Contribution and Indemnification Agreement
<PAGE> 162
AMENDED AND RESTATED
CONTRIBUTION AND INDEMNIFICATION AGREEMENT
THIS AMENDED AND RESTATED CONTRIBUTION AND INDEMNIFICATION AGREEMENT
(this "Agreement") dated as of December 1, 1997, among HEALTHCOR HOLDINGS,
INC., a Delaware corporation (the "Borrower"), and the other parties signatory
hereto (such other parties being herein each called an "Affiliate" and
collectively called the "Affiliates", and together with Borrower, each a
"Company" and collectively the "Companies").
R E C I T A L S:
A. Borrower, HealthCor, Inc., a Delaware corporation
("HealthCor"), Texas Commerce Bank National Association, a national banking
association, as agent (in such capacity, the "Agent"), certain banks
(collectively, the "Existing Banks") and certain Existing Banks issuing letters
of credit thereunder (in such capacity, the "Existing Issuing Banks")
previously entered into an Amended and Restated Credit Agreement dated October
31, 1996 (as amended, the "Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, each Company (other
than CareNetwork, Inc., an Arkansas corporation ("CareNetwork")) executed and
delivered to the Agent a Contribution and Indemnification Agreement dated as of
October 31, 1996 (the "Existing Contribution Agreement").
C. Concurrently herewith the Borrower, the Agent and certain
lenders (together with any other lenders that may from time to time become a
party thereto, the "Banks"), and the Banks issuing letters of credit thereunder
(in such capacity, the "Issuing Banks") are entering into that certain Second
Amended and Restated Credit Agreement of even date herewith (as the same may be
amended, supplemented or modified from time to time, being hereinafter referred
to as the "Credit Agreement").
D. Each Affiliate has executed and delivered to the Agent a
Second Amended and Restated Subsidiary Guaranty, pursuant to which such
Affiliate has jointly and severally guaranteed the full and prompt payment and
performance of the Guaranteed Indebtedness (as defined in such Second Amended
and Restated Subsidiary Guaranty).
E. The parties hereto desire to continue their agreement relating
to the equitable sharing of the Affiliates' risk in guaranteeing the Guaranteed
Indebtedness and now desire to amend and restate the Existing Contribution
Agreement, as hereinafter provided, and have agreed, for purposes of clarity
and ease of administration, to carry out the agreed upon amendments by amending
the pertinent provisions of the Existing Contribution Agreement and restating
the Existing Contribution Agreement in its entirety by means of this Agreement.
AMENDED AND RESTATED CONTRIBUTION AND
INDEMNIFICATION AGREEMENT - Page 1
<PAGE> 163
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows and the Existing Contribution
Agreement is hereby amended and restated in its entirety as follows:
1. If any Affiliate makes a payment in respect of the Guaranteed
Indebtedness, it shall have the rights of contribution and reimbursement set
forth below against the other Companies and the Borrower and shall be
indemnified as set forth below; provided that no Affiliate shall enforce its
rights to any payment by exercising its rights of contribution, reimbursement
or indemnification until all the Guaranteed Indebtedness shall have been paid
in full.
2. If any Affiliate makes a payment in respect of the Guaranteed
Indebtedness that is greater than its Pro Rata Percentage (hereinafter defined)
of the Guaranteed Indebtedness, calculated as of the date such payment is made,
the Affiliate making such payment shall have the right to receive from each of
the other Companies, and the other Companies jointly and severally agree to
pay to such Affiliate, when permitted by paragraph 1 hereof, an amount such
that the net payments made by the Companies in respect of the Guaranteed
Indebtedness shall be shared among the Companies pro rata in proportion to
their respective Pro Rata Percentage of the Guaranteed Indebtedness. The
Companies hereby jointly and severally indemnify each of the Affiliates and
jointly and severally agree to hold each of them harmless from and against any
and all amounts which any such Affiliate shall ever be required to pay in
respect of the Guaranteed Indebtedness in excess of such Affiliate's respective
Pro Rata Percentage of the Guaranteed Indebtedness. Notwithstanding anything
to the contrary contained in this paragraph or in this Agreement, no liability
or obligation of any Company that shall accrue pursuant to this Agreement shall
be paid nor shall it be deemed owed pursuant to this Agreement or any Loan
Documents (as defined in the Credit Agreement) until all of the Guaranteed
Indebtedness shall be paid in full. As used herein, the term "Pro Rata
Percentage" shall mean, for each Company, the percentage derived by dividing
(a) the aggregate amount of all accounts receivable of such Company, by (b) the
total aggregate amount of all accounts receivable of all of the Companies.
3. If any Affiliate makes any payment in respect of the
Guaranteed Indebtedness, the Affiliate making such payment shall have the right
to receive from the Borrower, and the Borrower agrees to pay to such Affiliate,
when permitted by paragraph 1 hereof, an amount equal to such payment. The
Borrower hereby indemnifies each of the Affiliates and agrees to hold each of
them harmless from and against any and all amounts that any such Affiliate
shall ever be required to pay in respect of the Guaranteed Indebtedness.
Notwithstanding anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of the Borrower that shall accrue
pursuant to this Agreement shall be paid or shall be deemed owed pursuant to
this Agreement or any Loan Documents until all of the Guaranteed Indebtedness
shall be paid in full.
AMENDED AND RESTATED CONTRIBUTION AND
INDEMNIFICATION AGREEMENT - Page 2
<PAGE> 164
4. Each party hereto represents and warrants to each other party
hereto and to their respective successors and assigns that:
(a) the execution, delivery and performance by each party
hereto of this Agreement are within such party's corporate or
partnership powers, have been duly authorized by all necessary
corporate or partnership action, as the case may be, require no action
by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of
incorporation or bylaws or other organizing document of such party or
of any agreement, judgment, injunction, order, decree or other
instrument binding upon such party or result in the creation or
imposition of any lien, security interest or other charge or
encumbrance on any asset of such party; and
(b) this Agreement constitutes a legal, valid and binding
agreement of each party hereto, enforceable against such party in
accordance with its terms.
5. No failure or delay by any Company in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and non-exclusive of any rights or
remedies provided by law.
6. Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
parties hereto and consented to by the Agent and the Required Banks.
7. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
9. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective when a counterpart hereof shall have been signed by all the parties
hereto.
AMENDED AND RESTATED CONTRIBUTION AND
INDEMNIFICATION AGREEMENT - Page 3
<PAGE> 165
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
HEALTHCOR HOLDINGS, INC.
HEALTHCOR, INC.
HEALTHCOR OXYGEN AND MEDICAL
EQUIPMENT, INC.
HEALTHCOR REHABILITATION SERVICES,
INC.
HC PERSONNEL RESOURCES, INC.
HEALTHCOR PHARMACY, INC.
PHYSICIANS HOME HEALTH NETWORK, INC.
CARENETWORK, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
AMENDED AND RESTATED CONTRIBUTION AND
INDEMNIFICATION AGREEMENT - Page 4
<PAGE> 166
EXHIBIT "I"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Matters to be Addressed in Opinion of Counsel
<PAGE> 167
Matters to be Addressed in Opinion of Counsel
All capitalized terms used and not otherwise defined herein shall have
their respective meanings as set forth in the Second Amended and Restated
Credit Agreement to which this is an Exhibit (the "Credit Agreement").
1. Each Company (other than Physicians Home Health
Network, Inc.) is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation.
Except where failure would not have a material adverse effect on its
business, condition (financial or otherwise), operations, prospects,
or properties, each Company is duly qualified to transact business as
a foreign corporation in each jurisdiction where such Company conducts
any substantial business or has any property, which includes, without
limitation, those jurisdictions named for each Company on Schedule 1
to the Credit Agreement.
2. The Borrower has the corporate power and authority to
execute, deliver, and perform the Credit Agreement, the Notes, the
other Loan Documents and the Senior Notes Documents to which such
Borrower is a party. The execution, delivery, and performance by the
Borrower of the Credit Agreement, the Notes, the other Loan Documents
and the Senior Notes Documents to which such Borrower is a party and
compliance with the terms and provisions thereof have been duly
authorized by all requisite corporate action on the part of the
Borrower and do not and will not (a) violate or conflict with, or
result in a breach of, or require any consent under (i) the
certificate of incorporation or bylaws of the Borrower, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator, or (iii) any
agreement or instrument to which the Borrower is a party or by which
the Borrower or any of its properties is bound or subject, or (b)
constitute a default under any such agreement or instrument, or result
in the creation or imposition of any Lien (except Liens created in
favor of the Agent for the benefit of itself, the Banks, and the
Issuing Banks pursuant to the Loan Documents) upon any of the revenues
or assets of the Borrower.
3. Each Guarantor has the corporate power and authority
to execute, deliver, and perform the Guaranty (the "Subsidiary
Guaranty"), each of the other Loan Documents and Senior Notes
Documents to which such Guarantor is a party. The execution,
delivery, and performance by the Guarantors of the Subsidiary
Guaranty, each of the other Loan Documents and the Senior Notes
Documents to which such Guarantor is a party and compliance with the
terms and provisions thereof have been duly authorized by all
requisite corporate action on the part of such Guarantor and do not
and will not (a) violate or conflict with, or result in a breach of,
or require any consent under (i) the articles or certificate of
incorporation or bylaws of such Guarantor, (ii) any applicable law,
rule, or regulation or any order, writ, injunction, or decree of any
Governmental Authority or arbitrator, or (iii) any agreement or
instrument to which such Guarantor is a party or by which it or any of
its property is bound or subject, or (b) constitute a default under
any such agreement or instrument, or result in the creation or
imposition of any Lien (except Liens created in favor of the Agent for
the benefit of itself, the Banks and
MATTERS TO BE ADDRESSED IN OPINION OF COUNSEL - Page 1
<PAGE> 168
the Issuing Banks pursuant to the Loan Documents) upon any of the
revenues or assets of such Guarantor.
4. The Credit Agreement, the Notes, the other Loan
Documents and the Senior Notes Documents to which the Borrower is a
party have been duly executed and delivered by the Borrower and
constitute the legal, valid, and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally.
5. The Subsidiary Guaranty, each of the other Loan
Documents and the Senior Notes Documents to which each Guarantor is a
party have been duly executed and delivered by each Guarantor and
constitute the legal, valid, and binding obligations of each Guarantor
enforceable against such Guarantor in accordance with their respective
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally.
6. There are no legal or arbitral proceedings and no
proceedings by or before any Governmental Authority, pending or, to
our knowledge, threatened against or affecting the Borrower, any
Guarantor or any properties or rights of the Borrower or any
Guarantor, which if adversely determined, would have a material
adverse effect on the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower or any Guarantor.
7. No authorization, consent, or approval of, or filing
or registration with (except as have been obtained or made on or prior
to the Closing Date and which remain in full force and effect on the
Closing Date), or exemption by any Governmental Authority is required
for the execution, delivery, and performance by the Borrower of the
Credit Agreement, the Notes, any other Loan Document or any Senior
Notes Document to which the Borrower is a party, or the execution,
delivery, and performance by any Guarantor of the Subsidiary Guaranty,
any other Loan Document or any Senior Notes Document to which such
Guarantor is a party.
8. All of the shares of capital stock of each issuer of
stock pledged pursuant to the Pledge Agreement (the "Pledged Stock")
have been duly authorized and validly issued and are fully paid and
nonassessable. None of the shares of capital stock of any issuer of
the Pledged Stock are subject to any restriction on transfer or
assignment, except compliance with applicable securities laws and
regulations.
9. None of the Companies is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
10. The issuance of the Senior Notes has been consummated
in accordance with the terms of the Senior Notes Documents and all
applicable laws. All consents and approvals of, and filings and
registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required in
order to make or
MATTERS TO BE ADDRESSED IN OPINION OF COUNSEL - Page 2
<PAGE> 169
consummate the issuance of the Senior Notes have been obtained, given,
filed or taken and are in full force and effect (or effective judicial
relief with respect thereto has been obtained). All applicable
waiting periods with respect thereto have expired without, in all such
cases, any action being taken by any competent authority which
restrains, prevents, or imposes material adverse conditions upon the
issuance of the Senior Notes. Additionally, there does not exist any
judgment, order, or injunction prohibiting or imposing material
adverse conditions upon the issuance of the Senior Notes, and there
does not exist any judgment, order or injunction prohibiting or
imposing material adverse conditions upon the performance of the
Borrower or any of its Subsidiaries of their obligations under the
Senior Notes Documents. All actions taken by the Borrower or any of
its Subsidiaries, as the case may be, pursuant to or in furtherance of
the issuance of the Senior Notes have been taken in compliance with
the Senior Notes Documents and all applicable laws. The Credit
Agreement (and only the Credit Agreement) constitutes the "New Credit
Facility" under, and as defined in, the Senior Notes Indenture.
MATTERS TO BE ADDRESSED IN OPINION OF COUNSEL - Page 3
<PAGE> 170
EXHIBIT "J"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Form of Assignment and Acceptance
<PAGE> 171
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19__
Reference is hereby made to the Second Amended and Restated Credit
Agreement dated as of December 1, 1997 (as the same may be amended and in
effect from time to time, the "Credit Agreement"), among HEALTHCOR HOLDINGS,
INC., a Delaware corporation (the "Borrower"), the lenders from time to time
party thereto (the "Banks"), Texas Commerce Bank National Association, as an
issuing bank (in such capacity, an "Issuing Bank"), and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as agent for itself, the Issuing Banks and the other
Banks (in such capacity, the "Agent"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Credit
Agreement.
________________________ (the "Assignor") and _________________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a
_________% interest in and to all the Assignor's rights and
obligations under the Credit Agreement and the other Loan
Documents as of the Effective Date (as defined below)
(including, without limitation, such percentage interest in
the Revolving Credit Commitment of the Assignor on the
Effective Date and such percentage interest in Assignor's pro
rata interest in the Revolving Credit Loans and pro rata
participation interests in the Letter of Credit Liabilities
outstanding on the Effective Date together with such
percentage interest in all unpaid interest and fees accrued
from the Effective Date). This Assignment and Acceptance is
made by Assignor without recourse.
2. The Assignor (i) represents that as of the date hereof its
Revolving Credit Commitment is equal to $_______________, the
outstanding principal balance of its Revolving Credit Loans is
$______________, and its participation in outstanding Letters
of Credit is $______________ (all as unreduced by any
assignments which have not yet become effective); (ii) makes
no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any
other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement or any other Loan Document, other than that
it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and
clear of any adverse claim; (iii) makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any Obligated Party or
the performance or observance by the Borrower or any other
Obligated Party of any of their obligations under the
Agreement or any other Loan Document; and
ASSIGNMENT AND ACCEPTANCE - Page 1
<PAGE> 172
(iv) attaches the Note held by Assignor and requests that the
Agent exchange such Note for a new Note payable to the order
of (a) the Assignee in an amount equal to the Revolving Credit
Commitment assumed by the Assignee pursuant hereto, and (b)
the Assignor in an amount equal to the Revolving Credit
Commitment retained by the Assignor under the Credit
Agreement, retained thereby as specified above.
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b)
confirms that it has received a copy of the Credit Agreement,
together with copies of the most recent financial statements
delivered pursuant to Section 9.1(a) thereof and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this
Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Agent, the
Assignor, any Issuing Bank, or any other Bank and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking
or not taking action under the Credit Agreement and the other
Loan Documents; (d) confirms that it is eligible to be an
Assignee; (e) appoints and authorizes Texas Commerce Bank
National Association to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as
are delegated to the agent by the terms thereof, together with
such powers as are reasonably incidental thereto; (f) agrees
that it will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement and the
other Loan Documents are required to be performed by it as a
Bank; [and] (g) agrees that it will keep confidential all
information with respect to the Borrower or any Obligated
Party furnished to it by the Borrower or any Obligated Party
or the Assignor (other than information generally available to
the public or otherwise available to the Assignor on a
nonconfidential basis) [; and (h) attaches the forms
prescribed by the Internal Revenue Service of the United
States certifying as to the Assignee's exemption from United
States withholding taxes with respect to all payments to be
made to the Assignee under the Loan Documents or such other
documents as are necessary to indicate that all such payments
are subject to such tax at a rate reduced by an applicable tax
treaty].1
4. The effective date for this Assignment and Acceptance shall be
______________, 19__ (the "Effective Date").2 Following the
execution of this Assignment and Acceptance, it will be
delivered to the Agent for its acceptance and recording.
- --------------------
1 If the Assignee is organized under the laws of a
jurisdiction outside the United States.
2 Such date shall be at least ten (10) Business
Days after the execution of this Assignment and
Acceptance and delivery thereof to the Agent.
ASSIGNMENT AND ACCEPTANCE - Page 2
<PAGE> 173
5. Upon such acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this
Assignment and Acceptance, shall have the rights and
obligations of a Bank thereunder and under the other Loan
Documents and (ii) the Assignor shall, to the extent provided
in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Credit Agreement
and the other Loan Documents other than its obligations under
Section 14.19 of the Credit Agreement.
6. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments in respect
of the interest assigned hereby (including payments of
principal, interest, fees, and other amounts) to the Assignee.
The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective
Date by the Agent or with respect to the making of this
assignment directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Texas
and applicable laws of the United States of America.
[NAME OF ASSIGNOR],
Original
Revolving Credit Commitment: By:
-----------------------------------
Name:
$ Title:
---------------------------------
Effective Date
Revolving Credit Commitment:
$
---------------------------------
ASSIGNMENT AND ACCEPTANCE - Page 3
<PAGE> 174
[NAME OF ASSIGNEE],
Revolving Credit Commitment: By:
-----------------------------------
Name:
-----------------------------
$ Title:
--------------------------------- ----------------------------
Accepted on the _____ day
of __________, 19__.
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as agent for itself, the other
Issuing Banks and the other
Banks
By:
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ASSIGNMENT AND ACCEPTANCE - Page 4
<PAGE> 175
EXHIBIT "K"
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Compliance Certificate
<PAGE> 176
HEALTHCOR HOLDINGS, INC.
COMPLIANCE CERTIFICATE
FOR THE PERIOD ENDING ___________________
The undersigned officer of HealthCor Holdings, Inc. does hereby certify that
the following covenants and financial tests, as set forth in the Second Amended
and Restated Credit Agreement dated as of December 1, 1997 (the "Agreement"),
among HealthCor Holdings, Inc., Texas Commerce Bank National Association, as
agent (in such capacity, the "Agent"), the lenders from time to time party
thereto (the "Banks") and the Issuing Banks (as defined therein) are as follows
on a consolidated basis for HealthCor Holdings, Inc., and its subsidiaries:
<TABLE>
<CAPTION>
In Compliance
(Please indicate)
-----------------
<S> <C> <C> <C>
1. Financial Statements and Reports
--------------------------------
(i) Annual CPA audited consolidated and consolidating FYE
financial statements together with a Compliance Certificate
within 90 days after the end of each fiscal year. Yes No
(ii) Monthly unaudited consolidated and consolidating
financial statements within 45 days of each month end.
Such financial statements have been prepared in accordance with
GAAP and fairly and accurately present (subject to year-end audit
adjustments and disclosure) the financial condition and results
of operations of the Companies, on a consolidated and
consolidating basis, at the date and for the periods indicated therein. Yes No
(iii) Quarterly Compliance Certificate within 45 days of each fiscal quarter
end and concurrently with the delivery of the financial statements
referred to in (i) above. Yes No
</TABLE>
2. Funded Debt to EBITDAA Ratio (To be calculated as of the last day of
each fiscal quarter.) Maximum allowed at all times is as follows
provided, Borrower will not permit the Funded Debt to EBITDAA Ratio
for any four quarter period to exceed 3.50 to 1.00 at any time after
the Borrower's Funded Debt to Pre-Compliance EBITDAA is less than 3.50
to 1.00:
<TABLE>
<CAPTION>
Period: Ratio:
------ -----
<S> <C>
December 1, 1997 until March 31, 1997 4.25 to 1.00
April 1, 1998 until December 31, 1998 4.00 to 1.00
January 1, 1999 until December 31, 1999 3.75 to 1.00
Thereafter 3.50 to 1.00
As of the quarter ending _________________:
$ / $ = Yes No
--------------------- ---------- ----------------
Funded Debt1 EBITDAA Ratio
</TABLE>
3. Consolidated Net Worth
Minimum Consolidated Net Worth maintained at all times of not less
than 80% of Consolidated Net Worth as of December 31, 1996 plus 50% of
consolidated net income (if positive) for each fiscal year after
December 31, 1996, plus 100% of the net proceeds of any equity issued.
<TABLE>
<S> <C>
Consolidated Net Worth $
----------------
80% of Consolidated Net Worth as of December 31, 1996 $
----------------
Plus: 50% of consolidated net income (if positive)
after December 31, 1996 $
----------------
Plus: 100% of the net proceeds of any equity issued $
----------------
Minimum Consolidated Net Worth Amount = $
----------------
Consolidated Net Worth greater than or equal to Minimum Consolidated Net Worth Amount Yes No
</TABLE>
- -----------------------------------
1 Attached hereto as Schedule 1 is an itemization by
category of all Funded Debt of the Companies.
Page 1 of 2
<PAGE> 177
4. Interest Coverage Ratio (To be calculated on a consolidated basis as
of the last day of each fiscal quarter.) Minimum allowed required at
end of each fiscal quarter.
<TABLE>
<CAPTION>
Period: Ratio:
------ -----
<S> <C>
December 31, 1997 until December 31, 1998 1.50 to 1.00
January 1, 1999 until December 31, 1999 2.00 to 1.00
Thereafter 2.25 to 1.00
EBITDA $
-----------------
Plus: Historical Acquired EBITDA $
-----------------
Minus: Total capital expenditures of the Companies $
-----------------
Total Available Cash Flow $
-----------------
Interest Expense of the Companies = $
-----------------
$ / $ = Yes No
------------------- ------------------------ -----------------
Total Available Interest Expense Ratio
Cash Flow
</TABLE>
5. Funded Debt to Capitalization Ratio (To be calculated as of the last
day of each fiscal quarter.) Maximum allowed at all times is:
<TABLE>
<CAPTION>
Period: Ratio:
------ -----
<S> <C>
December 1, 1997 until June 29, 1998 0.70 to 1.00
Thereafter 0.65 to 1.00
Funded Debt of the Companies = $
--------------
Funded Debt of the Companies $
-------------
Plus: Consolidated Net Worth $
-------------
Total Capitalization = $
-------------
$ / $ = Yes No
---------------------- ----------------------- --------------------------
Funded Debt Total Capitalization Ratio
</TABLE>
THE ABOVE SUMMARY REPRESENTS ONLY A SMALL PORTION OF THE COVENANTS AND
AGREEMENTS CONTAINED IN THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR
MODIFY THE TERMS AND CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN
THIS CERTIFICATE AND THE AGREEMENT, THE AGREEMENT SHALL CONTROL.
All capitalized terms used and not defined herein shall have their respective
meanings as set forth in the Agreement.
The undersigned hereby certifies that the above information and computations
are true and correct and not misleading as of the date hereof, and that no
Default exists. The undersigned hereby further certifies that the
representations and warranties contained in Article VIII of the Credit
Agreement and in each of the other Loan Documents are true and correct on and
as of the date hereof with the same force and effect as if made on and as of
such date.
Executed this ________ day of ______________________, 19___.
HEALTHCOR HOLDINGS, INC.
NAME:
------------------------------------------------
TITLE:
-----------------------------------------------
ADDRESS:
---------------------------------------------
Page 2 of 2
<PAGE> 178
SCHEDULE I
Itemization of Funded Debt
<PAGE> 179
SCHEDULE 1
List of Subsidiaries
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF JURISDICTION OF VOTING STOCK OWNED QUALIFIED TO DO BUSINESS IN
SUBSIDIARY INCORPORATION BY BORROWER
<S> <C> <C> <C>
HealthCor, Inc. Delaware 100% Arizona, Arkansas, Kansas,
Missouri, New Mexico,
Oklahoma, Texas
HealthCor Pharmacy, Inc. Texas 100% Arkansas, Colorado, Kansas,
Missouri, Oklahoma, Arizona
HealthCor Oxygen and Medical Texas 100% Arkansas, Colorado, Kansas,
Equipment, Inc. Missouri, New Mexico,
Oklahoma, Louisiana, Arizona
HealthCor Rehabilitation Texas 100% None
Services, Inc.
Physicians Home Health Network, Missouri 100% None
Inc.
HC Personnel Resources, Inc. Texas 100% None
CareNetwork, Inc. Arkansas 100% Arkansas
</TABLE>
<PAGE> 180
SCHEDULE 2
Existing Litigation
None
<PAGE> 181
SCHEDULE 3
Existing Debt
[omitted]
<PAGE> 182
SCHEDULE 4
Existing Liens
Bankers Leasing Association, Inc.
4201 Lake Cook Road
Northbrook, Illinois 60062
(800) 477-2000
<PAGE> 183
SCHEDULE 5
Historical Acquired EBITDA
HEALTHCOR HOLDINGS, INC.
Summary of Historical EBITDA
<TABLE>
<CAPTION>
Quarter Historical
Ended EBITDA
------- ----------
<S> <C>
9/30/97 $ 814,352
12/31/97 $ 778,192
3/31/96 $ 225,020
</TABLE>
Calculation of Historical EBITDA
- --------------------------------
<TABLE>
<CAPTION>
September 1997 December 1997 March 1998
------------------- ------------------- ---------------------
Date Historical
Company Acquired EBITDA EBITDA Factor EBITDA Factor EBITDA Factor
- ---------- -------- ---------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Falmont 11/1/96 $ 66,261 $ 5,522 0.083
Guardian 12/1/96 183,825 30,638 0.167
VNS 4/1/97 144,265 48,088 0.333 $ 48,088 0.333 $ 12,022 0.083
Carenetwork 4/19/97 1,580,877 526,959 0.333 526,959 0.333 131,740 0.083
American Medical 6/1/97 487,548 203,145 0.417 203,145 0.417 81,258 0.167
Total ---------- --------- ---------
$ 814,352 $ 778,192 $ 225,020
</TABLE>
<PAGE> 1
EXHIBIT 10.10
CHANGE OF CONTROL AGREEMENT
This Agreement is entered into as of December 5, 1997, by and between
HealthCor Holdings, Inc. (the "Company") and ______________ (the "Key
Executive").
PRELIMINARY STATEMENTS
A. The Company has determined that it is appropriate to reinforce
and encourage the continued attention and dedication of members of the
Company's management, including the Key Executive, to their assigned duties
without distraction in potentially disturbing circumstances arising from the
possibility of a Change in Control (as defined below); and
B. This Agreement sets forth the compensation which the Company
agrees it will pay to the Key Executive if the Key Executive's employment with
the Company terminates under the circumstances described herein.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants and agreements contained herein and to induce the Key Executive to
continue to exert his best efforts on behalf of the Company, the parties agree
as follows:
STATEMENT OF AGREEMENT
1. Severance Compensation upon Termination Following Change in
Control.
The Company shall pay to the Key Executive the Severance
Payment (defined below) under the following circumstances: (i) if within 360
days following a Change in Control the Key Executive terminates his employment
with the Company for Good Reason (as defined in Section 2(c) below), or (ii)
if within 360 days following a Change of Control or during the 60 day period
immediately preceding a Change of Control, the Company terminates the Key
Executive without Cause (as defined in Section 2(d) below). The Severance
Payment shall be
<PAGE> 2
payable in equal biweekly payments during the 12 month period immediately
following such termination.
2. Definitions.
(a) SEVERANCE PAYMENT. Severance Payment" shall mean an
amount equal to the Key Executive's biweekly salary as of the day
immediately preceding the date of the Change of Control (or as of the
date on which the Key Executive was terminated without Cause within 90
days prior to a Change of Control) multiplied by 26.
(b) CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" of the Company shall be deemed to have occurred if
(i) any "person", as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), shall become a beneficial owner, other than any currently
existing beneficial owner of common stock as of the date of this
Agreement, (within the meaning of Rule 13d-3 under the Exchange Act)
of 50 percent or more of the Company's outstanding common stock; (ii)
both of S. Wayne Bazzle and Cheryl C. Bazzle are no longer employed by
the Company; or (iii) the Company sells substantially all of its
assets.
(c) GOOD REASON. For purposes of this Agreement, "Good
Reason" for the Key Executive to terminate his employment after a Change in
Control shall mean any of the following events which take place after a Change
of Control or within the 60 day period immediately preceding a Change of
Control:
(i) any reduction of the Key Executive's base
salary in effect on the date hereof or as increased from time
to time during the term of this Agreement;
2
<PAGE> 3
(ii) a relocation of the place of Key Executive's
employment to a location which is more than 50 miles from the
place of his employment immediately prior to the Change in
Control; or
(iii) a change in the assignment of duties to the
Key Executive which are not commensurate with the duties
normally performed by the Key Executive.
(d) CAUSE. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Key Executive's employment and shall not be
obligated to make any payments hereunder in the event the Key Executive has:
(i) committed an act of deceit or breach of fiduciary duty in the performance of
Key Executive's duties as an employee of the Company; (ii) grossly neglected or
willfully failed in any way to perform substantially the duties of such
employment; or (iii) acted or failed to act in any other way that reflects
materially and adversely upon the Company. In the event of a termination of
Key Executive's employment by the Company for Cause, the Company shall deliver
to Key Executive at the time the Key Executive is notified of the termination
of his employment a written statement setting forth in reasonable detail the
facts and circumstances claimed by the Company to provide a basis for the
termination of the Key Executive's employment for Cause.
(e) TERMINATION DATE. For the purposes of this
Agreement, "Termination Date" shall mean the date on which the Key Executive's
employment with the Company is terminated.
3. Term. This Agreement shall remain in full force and effect
until October 31, 2000.
4. Successor to the Company.
3
<PAGE> 4
(a) The Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company, by
written agreement with the Key Executive, to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform this Agreement if no such succession or assignment had
taken place. Any failure of the Company to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material breach
of this Agreement and shall entitle the Key Executive to terminate the Key
Executive's employment for Good Reason irrespective of whether or not a Change
in Control has occurred. As used in this Agreement, "Company" include any
successor or assign to its business and/or assets as described above.
(b) If the Key Executive should die while any amounts are
still payable to him hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the Key
Executive's devisee, legatee or other designee or, if there be no such
designee, to the Key Executive's estate. This Agreement shall, therefore,
inure to the benefit of and be enforceable by the Key Executive's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
5. Applicable Law . Any and all disputes, controversies or claims
arising under or in connection with this Agreement, including without
limitation, the general validity or enforceability of this Agreement, shall be
governed by the laws of the State of Texas, without giving effect to its
conflict of laws provisions and shall be submitted to binding arbitration
before one arbitrator of the American Arbitration Association conducted in
Dallas County under the laws of the State of Texas. All fees and expenses of
any arbitration, including the Key Executive's reasonable legal fees and costs,
shall be paid by the Company. The award of the
4
<PAGE> 5
arbitrator shall be final and enforceable in the courts of Texas. All costs of
enforcement shall be borne by the Company.
6. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
8. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Key Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior to subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
[Signature Page Follows]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
HEALTHCOR HOLDINGS, INC.
By:
----------------------------------------
S. Wayne Bazzle
Chairman and Chief Executive Officer
-------------------------------------------
Name:
6
<PAGE> 7
Schedule of HealthCor Officers with Change of Control Agreement
Joel Williams
Judith Kremers
Mary Barton
Philip Dowling
Deryl Jay
M. Sue Collins
Stephen Cohen
Sandra Lloyd
Mollie Mouton
Sandi Murray
7
<PAGE> 1
EXHIBIT 12.1
HEALTHCOR HOLDINGS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, ---------- ---------- ----------- ----------
1992 1993 1994 1995 1996
----------- ---------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
EARNINGS
Income before income taxes 1,872 2,662 3,386 5,786 8,750
FIXED CHARGES
Interest expense and amortization of
debt discount on all indebtedness 244 427 244 987 2,144
Portion of rent under long term
operating leases representative of
an interest factor 203 384 476 757 1,017
---------- ---------- ---------- ---------- ----------
TOTAL FIXED CHARGES 447 811 720 1,744 3,161
---------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND FIXED CHARGES 2,319 3,473 4,106 7,530 11,911
========== ========== ========== ========== ==========
RATIO OF EARNINGS TO FIXED CHARGES 5.2X 4.3X 5.7X 4.3X 3.8X
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
------------------------
1996 1997
----------- ----------
(UNAUDITED)
<S> <C> <C>
EARNINGS
Income before income taxes 5,871 (17)
FIXED CHARGES
Interest expense and amortization of
debt discount on all indebtedness 1,663 3,215
Portion of rent under long term
operating leases representative of
an interest factor 545 910
---------- ----------
TOTAL FIXED CHARGES 2,208 4,125
---------- ----------
INCOME BEFORE INCOME TAXES AND FIXED CHARGES 8,079 4,108
========== ==========
RATIO OF EARNINGS TO FIXED CHARGES 3.7X 1.0X
========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1. HealthCor, Inc.
2. Physicians Home Health Network, Inc.
3. HealthCor Oxygen and Medical Equipment, Inc.
4. HealthCor Rehabilitation Services, Inc.
5. HealthCor Pharmacy, Inc.
6. HealthCor Foundation
7. HC Personnel Resources, Inc.
8. CareNetwork, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
January 12, 1998
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
_____ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
HEALTHCOR HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 75-2294072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8150 NORTH CENTRAL EXPRESSWAY, SUITE M-2000
DALLAS, TX 75206
(Address of principal executive offices) (Zip code)
-----------------------------
11% SENIOR NOTES DUE 2004
(Title of the indenture securities)
================================================================================
<PAGE> 2
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor
is not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to
The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis and
The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE> 3
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33- 66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-43005.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 7th day of January, 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ CURTIS D. SCHWEGMAN
---------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE> 5
EXHIBIT 6
January 7, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ CURTIS D. SCHWEGMAN
-----------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE> 1
LETTER OF TRANSMITTAL
HEALTHCOR HOLDINGS, INC.
OFFER TO EXCHANGE 11% SENIOR NOTES DUE 2004,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
FOR
11% SENIOR NOTES DUE 2004
PURSUANT TO THE PROSPECTUS DATED
, 1998
---------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., E.S.T., ON , 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED
---------------------
DELIVER TO NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
<TABLE>
<C> <C>
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
P.O. Box 1517 Northstar East 12th Floor
Minneapolis, Minnesota 55480-1517 608 2nd Avenue
Minneapolis, Minnesota 55479-0113
BY OVERNIGHT DELIVERY: BY FACSIMILE TRANSMISSION
Norwest Bank Minnesota, National Association (FOR ELIGIBLE INSTITUTIONS ONLY):
Norwest Center (612) 667-4927
6th and Marquette Avenue Confirm by Telephone: (612) 667-9764
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Operations
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of HealthCor Holdings, Inc., a Delaware
corporation (the "Company"), and this Letter of Transmittal, which together
constitute the Company's offer (the "Exchange Offer") to exchange up to an
aggregate principal amount of $80,000,000 of its 11% Senior Notes due 2004 (the
"Exchange Notes," which have been registered under the Securities Act, pursuant
to a Registration Statement of which the Prospectus is a part), for a like
principal amount of its outstanding 11% Senior Notes due 2004 (the "Outstanding
Notes" and together with the Exchange Notes, the "Notes"). Capitalized terms
used but not defined herein have the meanings given to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS RELATING TO THE PROCEDURE FOR TENDERING AND REQUESTS FOR ADDITIONAL
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT. QUESTIONS RELATING TO THE EXCHANGE OFFER AND REQUESTS FOR
ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF
TRANSMITTAL MAY BE DIRECTED TO THE COMPANY.
<PAGE> 2
This Letter of Transmittal is to be completed by a holder of Outstanding
Notes if (i) certificates are to be forwarded herewith, (ii) delivery of
Outstanding Notes is to be made by book-entry transfer to an account maintained
by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility"), pursuant to the procedures set forth in "The Exchange
Offer -- Procedures for Tendering" in the Prospectus or (iii) tender of the
Outstanding Notes is to be made according to the guaranteed delivery procedures
described in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 2. Delivery of documents to a book-entry
transfer facility does not constitute delivery to the Exchange Agent. It is
understood that participants in the Book-Entry Transfer Facility's book-entry
system will, in accordance with the Book-Entry Transfer Facility's Automated
Tender Offer Program procedures and in lieu of physical delivery to the Exchange
Agent of a Letter of Transmittal, electronically acknowledge receipt of, and
agreement to be bound by, the terms of this Letter of Transmittal.
Unless the context otherwise requires, the term "Holder" as used herein
with respect to the Exchange Offer means any person in whose name Outstanding
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer. Holders who wish to tender their Outstanding Notes must complete this
Letter of Transmittal in its entirety.
Listed below are the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers and
principal amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREBY
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) PRINCIPAL AMOUNT PRINCIPAL
EXACTLY AS NAME(S) APPEAR(S) ON NOTES CERTIFICATE REPRESENTED BY AMOUNT
(PLEASE FILL IN) NUMBERS* OUTSTANDING NOTES TENDERED**
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed if Outstanding Notes are being tendered by book-entry transfer.
** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount
represented by such Outstanding Notes. All tenders must be in integral multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ]CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
2
<PAGE> 3
[ ]CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
- -----------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
- -----------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
3
<PAGE> 4
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the Exchange Notes and/or Outstanding Notes not
exchanged are to be issued in the name of and sent to someone other than the
undersigned, or if Outstanding Notes delivered by book-entry transfer which are
not accepted for exchange or Exchange Notes are to be returned by credit to an
account maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue Exchange Notes and/or Outstanding Notes to:
Name(s):
- ---------------------------------------------
(Please Type or Print)
- ---------------------------------------------------------
(Please Type or Print)
Address:
- -----------------------------------------------
- ---------------------------------------------------------
(Including Zip Code)
- ---------------------------------------------------------
(Tax Identification or Social Security No.)
<TABLE>
<S> <C>
[ ] Credit unexchanged Outstanding Notes
and/or Exchange Notes delivered by
book-entry transfer to the Book-Entry
Transfer Facility account set forth
below.
</TABLE>
- ---------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the Exchange Notes
and/or Outstanding Notes not exchanged are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown under
"Description of Outstanding Notes Tendered Hereby."
Mail Exchange Notes and/or Outstanding Notes to:
Name(s):
- ---------------------------------------------
(Please Type or Print)
- ---------------------------------------------------------
(Please Type or Print)
Address:
- -----------------------------------------------
- ---------------------------------------------------------
(Including Zip Code)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OUTSTANDING NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS
OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO 5:00 P.M., E.S.T., ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
4
<PAGE> 5
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the
Outstanding Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of such Outstanding Notes tendered hereby, the
undersigned hereby exchanges, sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to such Outstanding Notes
as are being tendered hereby, including all rights to accrued and unpaid
interest thereon. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent its true and lawful agent and attorney-in-fact with full
power of substitution (with full knowledge that said Exchange Agent acts as the
agent of the Company in connection with the Exchange Offer) to cause the
Outstanding Notes to be assigned, sold, transferred and exchanged. The Power of
Attorney granted in this paragraph shall be deemed irrevocable from and after
the Expiration Date and coupled with an interest.
The undersigned represents and warrants that it has full power and
authority to tender, sell, exchange, assign and transfer the Outstanding Notes
and to acquire Exchange Notes issuable upon the exchange of such tendered
Outstanding Notes, and that when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Outstanding Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person is engaged in, or intends to engage in, or has an arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such Exchange Notes. If the undersigned or the
person receiving the Exchange Notes covered hereby is a broker-dealer that is
receiving the Exchange Notes for its own account in exchange for Outstanding
Notes that were acquired as a result of market-making activities or other
trading activities, the undersigned acknowledges that it or such other person
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The undersigned and any such
other person acknowledge that, if they are participating in the Exchange Offer
for the purpose of distributing the Exchange Notes, (i) they cannot rely on the
position of the staff of the Securities and Exchange Commission enunciated in
Exxon Capital Holdings Corporation (available April 13, 1989) or similar
no-action letters and, in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with the resale transaction and (ii) failure to comply with such
requirements in such instance could result in the undersigned or any such other
person incurring liability under the Securities Act for which such persons are
not indemnified by the Company. If the undersigned or the person receiving the
Exchange Notes covered by this letter is an affiliate (as defined under Rule 405
of the Securities Act) of the Company, the undersigned represents to the Company
that the undersigned understands and acknowledges that such Exchange Notes may
not be offered for resale, resold or otherwise transferred by the undersigned or
such other person without registration under the Securities Act or an exemption
therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, sale, assignment and
transfer of tendered Outstanding Notes or transfer ownership of such Outstanding
Notes on the account books maintained by a Book-Entry Transfer Facility. The
undersigned further agrees that acceptance of any tendered Outstanding Notes by
the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder for the registration of the Outstanding
Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions, including those set
forth in the Prospectus under the caption "The Exchange Offer." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Outstanding Notes
tendered hereby and, in such event, the Outstanding Notes not exchanged will be
returned to the undersigned at the address shown below the signature of the
undersigned.
5
<PAGE> 6
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors,
assigns, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned. Tendered Outstanding Notes may be withdrawn
at any time prior to the Expiration Date only in accordance with the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders."
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" above, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding Notes
not exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Outstanding Notes, please credit the account indicated above
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" above, please
send the Exchange Notes (and, if applicable, substitute certificates
representing Outstanding Notes for any Outstanding Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of
Outstanding Notes Tendered Hereby."
IF OUTSTANDING NOTES ARE SURRENDERED BY HOLDER(S) THAT HAVE COMPLETED
EITHER THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR THE BOX ENTITLED
"SPECIAL DELIVERY INSTRUCTIONS" IN THIS LETTER OF TRANSMITTAL, SIGNATURE(S) ON
THIS LETTER OF TRANSMITTAL MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION (SEE
INSTRUCTION 4).
6
<PAGE> 7
REGISTERED HOLDER(S) OF NOTES SIGN HERE
(In addition complete Substitute Form W-9 Below)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s))
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. If signature is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information (please
print or type):
Name and Capacity (full title):
- --------------------------------------------------------------------------------
Address (including zip):
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ---------------------
SIGNATURE GUARANTEE
(If required -- See Instruction 4)
Authorized Signature:
- --------------------------------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
(Please print or type)
Dated:
- ---------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Outstanding Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at a Book-Entry Transfer
Facility of Outstanding Notes tendered by book-entry transfer, as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OUTSTANDING NOTES AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Outstanding Notes for exchange.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR INSTRUCTIONS VIA
FACSIMILE OTHER THAN AS SET FORTH HEREIN, WILL NOT CONSTITUTE A VALID DELIVERY.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Outstanding Notes, but whose Outstanding
Notes are not immediately available and thus cannot deliver their Outstanding
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent (or comply with the procedures for book-entry transfer) prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Outstanding Notes and the principal amount of Outstanding
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five Nasdaq Stock Market trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), together
with the Outstanding Notes (or a confirmation of book-entry transfer of
such Outstanding Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility) and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Outstanding Notes in proper
form for transfer (or a confirmation of book-entry transfer of such
Outstanding Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility) and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five Nasdaq Stock
Market trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above. Any holder who wishes to tender
Outstanding Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such Outstanding Notes prior to the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of itself,
affect the validity or effect a revocation of any Letter of Transmittal form
properly completed and executed by a Holder who attempted to use the guaranteed
delivery procedures.
8
<PAGE> 9
3. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER); WITHDRAWALS.
If less than the entire principal amount of Outstanding Notes evidenced by
a submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the column entitled "Principal Amount Tendered" of
the box entitled "Description of Outstanding Notes Tendered Hereby." A newly
issued Outstanding Note for the principal amount of Outstanding Notes submitted
but not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Outstanding Notes delivered to the Exchange Agent will be
deemed to have been tendered in full unless otherwise indicated. Tenders of
Outstanding Notes will be accepted only in integral multiples of $1,000.
Outstanding Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date, after which tenders of Outstanding
Notes are irrevocable. To be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Outstanding Notes to be withdrawn (the "Depositor"), (ii) identify
the Outstanding Notes to be withdrawn (including the registration number(s) and
principal amount of such Outstanding Notes, or, in the case of Outstanding Notes
transferred by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited), (iii) be signed by the Holder in
the same manner as the original signature on this Letter of Transmittal
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Outstanding Notes
register the transfer of such Outstanding Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Outstanding
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Outstanding Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no Exchange Notes will be issued with respect thereto unless the Outstanding
Notes so withdrawn are validly retendered. Any Outstanding Notes that have been
tendered but not accepted for exchange will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder(s) of the Outstanding Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the certificates
without alteration or enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the Holder of the Outstanding Notes.
If any of the Outstanding Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Outstanding Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Outstanding Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the
Outstanding Notes tendered hereby are tendered (i) by a registered holder who
has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If this Letter of Transmittal is signed by the registered holder or holders
of Outstanding Notes (which term, for the purposes described herein, shall
include a participant in the Book-Entry Transfer Facility whose name appears on
a security listing as the holder of the Outstanding Notes) listed and tendered
hereby, no endorsements of the tendered Outstanding Notes or separate written
instruments of transfer or exchange are required. In any other case, the
registered holder (or acting Holder) must either properly endorse the
Outstanding Notes or transmit properly completed bond powers with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
holder(s) appear(s) on the Outstanding Notes, and, with respect to a participant
in the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Outstanding Notes, exactly as the name of the
participant appears on such security position listing), with the signature on
the Outstanding Notes or bond power guaranteed by an Eligible Institution
(except where the Outstanding Notes are tendered for the account of an Eligible
Institution).
9
<PAGE> 10
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Book-Entry Transfer Facility) in which the Exchange
Notes or substitute Outstanding Notes for principal amounts not tendered or not
accepted for exchange are to be issued (or deposited), if different from the
names and addresses or accounts of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the employer
identification number or social security number of the person named must also be
indicated and the tendering Holder should complete the applicable box.
If no instructions are given, the Exchange Notes (and any Outstanding Notes
not tendered or not accepted) will be issued in the name of and sent to the
acting Holder of the Outstanding Notes or deposited at such Holder's account at
the Book-Entry Transfer Facility.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Outstanding Notes to it or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any other reason other than the
transfer and exchange of Outstanding Notes to the Company or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered Holder or any other person) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Outstanding Notes listed in this Letter of
Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any Holder whose Outstanding Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering as well as requests for
additional copies of the Prospectus and this Letter of Transmittal may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Company at 8150 North Central Expressway,
Suite M-2000, Dallas, Texas 75206, Attention: Stephen L. Cohen (telephone: (214)
692-4663).
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Outstanding Notes not properly tendered or any
Outstanding Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular
Outstanding Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in this Letter of Transmittal)
will be final and binding on all parties. Unless waived, any
10
<PAGE> 11
defects or irregularities in connection with tenders of Outstanding Notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify Holders of defects or irregularities with respect to tenders
of Outstanding Notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Outstanding Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders as soon as practicable following the Expiration
Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Outstanding Notes is
required to provide the Exchange Agent with such Holder's correct TIN on
Substitute Form W-9 below. If such Holder is an individual, the TIN is the
Holder's social security number. The Certificate of Awaiting Taxpayer
Identification Number should be completed if the tendering Holder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future. If the Exchange Agent is not provided with the correct TIN, the
Holder may be subject to a $50 penalty imposed by the Internal Revenue Service.
In addition, payments that are made to such Holder with respect to tendered
Outstanding Notes may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign individuals and foreign entities) are not subject to these backup
withholding and reporting requirements. In order for such a Holder to qualify as
an exempt recipient, that holder must submit to the Exchange Agent a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Holder's exempt status. Such forms can be obtained from the
Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to Outstanding Notes tendered for exchange, the Holder is required to
notify the Exchange Agent of his or her correct TIN by completing the form
herein certifying that the TIN provided on Substitute Form W-9 is correct (or
that such Holder is awaiting a TIN) and that (i) such Holder has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the Internal Revenue Service has notified such Holder that he or she is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the
Outstanding Notes. If Outstanding Notes are in more than one name or are not in
the name of the actual Holder, consult the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 included herewith for
additional guidance on which number to report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
11
<PAGE> 12
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
12
<PAGE> 13
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the
person or entity whose number you enter in Part 1 below. See
SUBSTITUTE instructions if your name has changed.)
FORM W-9 --------------------------------------------------------------
Address
--------------------------------------------------------------
City, State and Zip Code
--------------------------------------------------------------
List account number(s) here (optional)
--------------------------------------------------------------
Department of the Treasury PART 1 -- PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER
Internal Revenue Service ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING
BELOW
--------------------------------------------------------------
PART 2 -- Check the box if you are NOT subject to backup
withholding under the provisions of section 3408(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
PAYER'S REQUEST FOR notified that you are subject to backup withholding as a
TAXPAYER IDENTIFICATION result of failure to report all interest of dividends or (2)
NUMBER (TIN) the Internal Revenue Service has notified you that you are no
longer subject to backup withholding. [ ]
--------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
SIGNATURE --------------------------- Date------------
- -------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
Name (if joint names, list first an
person or entity whose number you enter in Part 1 below. See
SUBSTITUTE instructions if your name has changed.)
FORM W-9 --------------------------------------------------------------
Address
--------------------------------------------------------------
City, State and Zip Code
--------------------------------------------------------------
List account number(s) here (optional)
--------------------------------------------------------------
Department of the Treasury Social Security Number
Internal Revenue Service or TIN
--------------------------------------------------------------
PART 2 -- Check the box if you are NOT subject to backup
withholding under the provisions of section 3408(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
PAYER'S REQUEST FOR notified that you are subject to backup withholding as a
TAXPAYER IDENTIFICATION result of failure to report all interest of dividends or (2)
NUMBER (TIN) the Internal Revenue Service has notified you that you are no
longer subject to backup withholding. [ ]
--------------------------------------------------------------
PART 3 --
Awaiting TIN [ ]
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9:
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the Exchange Agent
within 60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number to the Exchange Agent.
Signature
- -------------------------------------------------
Date
- ------------------------------------------------------
13
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
- ---------------------------------------------------------
---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL
SECURITY
NUMBER OF --
- ---------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF --
- ---------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a The usual revocable The grantor- trustee(1)
savings trust account
(grantor is also trustee)
b So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
- ---------------------------------------------------------
---------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 15
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 510(a), or an individual
retirement plan, or a custodial account under section 403(6)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a)
- An exempt charitable remainder trust under section 664, or a non-exempt trust
described in section 4947.
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A future commission merchant registered with the Commodity Futures Trading
Commission.
- A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc. Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to the payer.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see section 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N and their regulations.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of your return. Payers must be given
the numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 16
FORM OF GUARANTEED DELIVERY
NOTICE OF GUARANTEED DELIVERY FOR
HEALTHCOR HOLDINGS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of HealthCor Holdings, Inc., a Delaware corporation (the
"Company"), made pursuant to the Prospectus, dated , 1998 (the
"Prospectus"), if certificates for Outstanding Notes of the Company are not
immediately available or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Company prior to 5:00 p.m., E.S.T., on the Expiration Date of the
Exchange Offer. Such form may be delivered or transmitted by facsimile
transmission, mail or hand delivery to Norwest Bank Minnesota, National
Association (the "Exchange Agent") as set forth below. Capitalized terms used
but not defined herein have the meanings given to them in the Prospectus.
Deliver To: Norwest Bank Minnesota, National Association, Exchange Agent
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
P.O. Box 1517
Minneapolis, Minnesota 55480-1515
Attention: Corporate Trust Operations
By Overnight Delivery:
Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Operations
By Hand Delivery:
Norwest Bank Minnesota, National Association
Northstar East 12th Floor
608 2nd Avenue
Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Operations
By Facsimile:
(612) 667-4927
Confirm by Telephone:
(612) 667-9764
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 17
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Outstanding Notes set forth below, pursuant to
the guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Outstanding Notes Tendered:*
<TABLE>
<S> <C>
$ If the Outstanding Notes will be delivered by book- entry
- ------------------------------------------------------- transfer to the Depository Trust Company, provide
Certificate Nos. (if available): account number.
- --------------------------------------------------------
Total Principal Amount Represented by Outstanding Notes:
$ Account Number -------------------------------------
- -------------------------------------------------------
</TABLE>
- ---------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
<TABLE>
<S> <C>
X
- ------------------------------------------------------------ ------------------------------------
X
- ------------------------------------------------------------ ------------------------------------
Signature(s) of Owner(s) Date
or Authorized Signatory
</TABLE>
Area Code and Telephone Number:
- ------------------------------------------------------
Must be signed by the holder(s) of Outstanding Notes as their name(s)
appear(s) on certificates for Outstanding Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or the person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
<PAGE> 18
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States, hereby guarantees that the certificates representing the principal
amount of Outstanding Notes tendered hereby in proper form for transfer, or
timely confirmation of the book-entry transfer of such Outstanding Notes into
the Exchange Agent's account at the Depository Trust Company pursuant to the
procedures set forth in the "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus, together with a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof)
with any required signature guarantee and any other documents required by the
Letter of Transmittal, will be received by the Exchange Agent at the address set
forth above, no later than five Nasdaq Stock Market trading days after the
Expiration Date.
<TABLE>
<S> <C>
- -------------------------------------------------------- --------------------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------------------- --------------------------------------------------------
Address Title
Name: -------------------------------------------------
- --------------------------------------------------------
(Please Type or Print)
Area Code and Tel. No.: ------------------------------ Dated: -------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
